[Federal Register Volume 85, Number 182 (Friday, September 18, 2020)]
[Rules and Regulations]
[Pages 58432-59107]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19637]



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Vol. 85

Friday,

No. 182

September 18, 2020

Part II

Book 2 of 2 Books

Pages 58431-59172





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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



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

  Federal Register / Vol. 85 , No. 182 / Friday, September 18, 2020 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

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

[CMS-1735-F]
RIN 0938-AU11


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

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

ACTION: Final rule.

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SUMMARY: We are revising the Medicare hospital inpatient prospective 
payment systems (IPPS) for operating and capital-related costs of acute 
care hospitals to implement changes arising from our continuing 
experience with these systems for FY 2021 and to implement certain 
recent legislation. We are also making changes relating to Medicare 
graduate medical education (GME) for teaching hospitals. In addition, 
we are providing the market basket update that will apply to the rate-
of-increase limits for certain hospitals excluded from the IPPS that 
are paid on a reasonable cost basis, subject to these limits for FY 
2021. We are updating the payment policies and the annual payment rates 
for the Medicare prospective payment system (PPS) for inpatient 
hospital services provided by long-term care hospitals (LTCHs) for FY 
2021. In this FY 2021 IPPS/LTCH PPS final rule, we are finalizing 
changes to the new technology add-on payment pathway for certain 
antimicrobial products and other changes to new technology add-on 
payment policies, and the collection of market-based rate information 
on the Medicare cost report for cost reporting periods ending on or 
after January 1, 2021 and finalizing the adoption of a market-based MS-
DRG relative weight methodology beginning in FY 2024. We are 
establishing new requirements or revising existing requirements for 
quality reporting by acute care hospitals and PPS-exempt cancer 
hospitals. We also established new requirements and revised existing 
requirements for eligible hospitals and critical access hospitals 
(CAHs) participating in the Medicare and Medicaid Promoting 
Interoperability Programs. We are also establishing performance 
standards for the Hospital Value-Based Purchasing (VBP) Program, and 
updating policies for the Hospital Readmissions Reduction Program and 
the Hospital-Acquired Condition (HAC) Reduction Program.

DATES: 
    Effective date: This final rule is effective October 1, 2020.
    Applicability dates: The amendments at Sec.  413.89(b)(1)(i), 
(c)(1), (e)(2)(i)(A)(2) are applicable to cost reporting periods before 
October 1, 2020. The amendments at Sec.  413.89(e)(2)(i)(A)(1), (4) 
through (6), (i)(B), (iii), and (f) are applicable to cost reporting 
periods before, on, and after October 1, 2020. The amendments at Sec.  
413.89(b)(1)(ii), (c)(2), (e)(2)(i)(A)(3) and (e)(2)(ii) are applicable 
to cost reporting periods beginning on or after October 1, 2020.

FOR FURTHER INFORMATION CONTACT: Donald Thompson, (410) 786-4487, and 
Michele Hudson, (410) 786-4487, Operating Prospective Payment, MS-DRGs, 
Wage Index, New Medical Service and Technology Add-On Payments, 
Hospital Geographic Reclassifications, Graduate Medical Education, 
Capital Prospective Payment, Excluded Hospitals, Medicare 
Disproportionate Share Hospital (DSH) Payment Adjustment, Medicare-
Dependent Small Rural Hospital (MDH) Program, Low-Volume Hospital 
Payment Adjustment, and Critical Access Hospital (CAH) Issues. Michele 
Hudson, (410) 786-4487 and Emily Lipkin, (410) 786-3633, Long-Term Care 
Hospital Prospective Payment System and MS-LTC-DRG Relative Weights 
Issues. Emily Forrest, (202) 205-1922, Market-Based Data Collection and 
Market-Based MS-DRG Relative Weight Methodology Issues.
    Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital 
Demonstration Program Issues.
    Jeris Smith, (410) 786-0110, Frontier Community Health Integration 
Project Demonstration Issues.
    Erin Patton, (410) 786-2437, Hospital Readmissions Reduction 
Program--Administration Issues.
    Vinitha Meyyur, (410) 786-8819, Hospital Readmissions Reduction 
Program--Readmissions--Measures Issues.
    Lang Le, (410) 786-5693, Hospital-Acquired Condition Reduction 
Program--Administration Issues.
    Annese Abdullah-Mclaughlin, (410) 786-2995, Hospital-Acquired 
Condition Reduction Program--Measures Issues.
    Julia Venanzi, (410) 786-1471, Hospital Inpatient Quality Reporting 
Program--Administration Issues Mihir Patel, (410) 786-2815 and Grace 
Snyder, (410) 786-0700, Hospital Quality Reporting Program Validation 
and Reconsideration Issues.
    Julia Venanzi, (410) 786-1471and Pamela Brown (410) 786-3940, 
Hospital Value-Based Purchasing Program--Administration Issues
    Katrina Hoadley, (410) 786-8490, Hospital Inpatient Quality 
Reporting and Hospital Value-Based Purchasing--Measures Issues Except 
Hospital Consumer Assessment of Healthcare Providers and Systems 
Issues.
    Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality 
Reporting and Hospital Value-Based Purchasing--Hospital Consumer 
Assessment of Healthcare Providers and Systems Measures Issues.
    Erin Patton, (410) 786-2437 and Katrina Hoadley, (410) 786-8490, 
PPS-Exempt Cancer Hospital Quality Reporting Issues.
    Mary Pratt, (410) 786-6867, Long-Term Care Hospital Quality Data 
Reporting Issues.
    Dylan Podson (410) 786-5031, Jessica Warren (410) 786-7519, and 
Elizabeth Holland, (410) 786-1309, Promoting Interoperability Programs.
    Steve Rubio, (410) 786-1782, Reimbursement for Submission of 
Patient Records to Beneficiary and Family Centered Care Quality 
Improvement Organizations (BFCC-QIOs) in Electronic Format.
    Maude Shepard, (410) 786-5598, Provider Reimbursement Review Board 
Electronic Filing.
    Kellie Shannon, (410) 786-0416 and Bob Kuhl, (443) 896-8410, 
Medicare Bad Debt.

SUPPLEMENTARY INFORMATION:

Electronic Access

    This Federal Register document is available from the Federal 
Register online database through Federal Digital System (FDsys), a 
service of the U.S. Government Printing Office. This database can be 
accessed via the internet at: http://www.gpo.gov/fdsys.

Tables Available Through the Internet on the CMS Website

    The IPPS tables for this FY 2021 final rule are available through 
the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on 
the link on the left side of the screen titled, ``FY 2021 IPPS Final 
rule Home Page'' or ``Acute Inpatient--Files for Download.'' The LTCH 
PPS tables for

[[Page 58433]]

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

Table of Contents

I. Executive Summary and Background
    A. Executive Summary
    B. Background Summary
    C. Summary of Provisions of Recent Legislation Implemented in 
This Final Rule
    D. Issuance of Notice of Proposed Rulemaking
    E. Advancing Health Information Exchange
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG) 
Classifications and Relative Weights
    A. Background
    B. Adoption of the MS-DRGs and MS-DRG Reclassifications
    C. FY 2021 MS-DRG Documentation and Coding Adjustment
    D. Changes to Specific MS-DRG Classifications
    E. Recalibration of the FY 2021 MS-DRG Relative Weights
    F. Add-On Payments for New Services and Technologies for FY 2021
III. Changes to the Hospital Wage Index for Acute Care Hospitals
    A. Background
    B. Worksheet S-3 Wage Data for the FY 2021 Wage Index
    C. Verification of Worksheet S-3 Wage Data
    D. Method for Computing the FY 2021 Unadjusted Wage Index
    E. Occupational Mix Adjustment to the FY 2021 Wage Index
    F. Analysis and Implementation of the Occupational Mix 
Adjustment and the FY 2021 Occupational Mix Adjusted Wage Index
    G. Application of the Rural Floor, Application of the State 
Frontier Floor, and Continuation of the Low Wage Index Hospital 
Policy
    H. FY 2021 Wage Index Tables
    I. Revisions to the Wage Index Based on Hospital Redesignations 
and Reclassifications
    J. Out-Migration Adjustment Based on Commuting Patterns of 
Hospital Employees
    K. Reclassification From Urban to Rural Under Section 
1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103
    L. Process for Requests for Wage Index Data Corrections
    M. Labor-Related Share for the FY 2021 Wage Index
IV. Other Decisions and Changes to the IPPS for Operating System
    A. Changes to MS-DRGs Subject to Postacute Care Transfer Policy 
and MS-DRG Special Payments Policies (Sec.  412.4)
    B. Changes in the Inpatient Hospital Updates for FY 2021 (Sec.  
412.64(d))
    C. Amendment To Address Short Cost Reporting Periods During 
Applicable Timeframe for Establishment of Service Area for Sole 
Community Hospitals Under Sec.  412.92(c)(3)
    D. Rural Referral Centers (RRCs)--Annual Updates to Case-Mix 
Index and Discharge Criteria (Sec.  412.96)
    E. Payment Adjustment for Low-Volume Hospitals (Sec.  412.101)
    F. Indirect Medical Education (IME) Payment Adjustment Factor 
(Sec.  412.105)
    G. Payment Adjustment for Medicare Disproportionate Share 
Hospitals (DSHs) for FY 2021 (Sec.  412.106)
    H. Payment for Allogeneic Hematopoietic Stem Cell Acquisition 
Costs (Sec.  412.113)
    I. Payment Adjustment for CAR T-cell Clinical Trial Cases 
(Sec. Sec.  412.85 and 412.312)
    J. Changes for Hospitals With High Percentage of End Stage Renal 
Disease (ESRD) Discharges (Sec.  412.104)
    K. Hospital Readmissions Reduction Program: Updates and Changes 
(Sec. Sec.  [thinsp]412.150 Through 412.154)
    L. Hospital Value-Based Purchasing (VBP) Program: Updates
    M. Hospital-Acquired Conditions (HAC) Reduction Program: Updates 
and Changes (Sec.  412.170)
    N. Payments for Indirect and Direct Graduate Medical Education 
Costs (Sec. Sec.  412.105 and 413.75 Through 413.83)
    O. Rural Commuity Hospital Demonstration Program
    P. Market-Based MS-DRG Relative Weight Data Collection and 
Potential Change in Methodology for Calculating MS-DRG Relative 
Weights
V. Changes to the IPPS for Capital-Related Costs
    A. Overview
    B. Additional Provisions
    C. Annual Update for FY 2021
VI. Changes for Hospitals Excluded From the IPPS
    A. Rate-of-Increase in Payments to Excluded Hospitals for FY 
2021
    B. Report on Adjustment (Exception) Payment
    C. Critical Access Hospitals (CAHs)
VII. Changes to the Long-Term Care Hospital Prospective Payment 
System (LTCH PPS) for FY 2021
    A. Background of the LTCH PPS
    B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights for FY 2021
    C. Changes to the LTCH PPS Payment Rates and Other Changes to 
the LTCH PPS for FY 2021
    D. Rebasing and Revising of the LTCH Market Basket
VIII. Quality Data Reporting Requirements for Specific Providers and 
Suppliers
    A. Hospital Inpatient Quality Reporting (IQR) Program
    B. Changes to the PPS-Exempt Cancer Hospital Quality Reporting 
(PCHQR) Program
    C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    D. Changes to the Medicare and Medicaid Promoting 
Interoperability Programs
IX. Changes for Hospitals and Other Providers
    A. Changes in the Submission of Electronic Patient Records to 
Beneficiary and Family Centered Care Quality Improvement 
Organizations (BFCC-QIOs)
    B. Revised Regulations To Prepare for Implementation of 
Mandatory PRRB Electronic Filing (42 CFR Part 405, Subpart R)
    C. Revisions of Medicare Bad Debt Policy
X. MedPAC Recommendations
XI. Other Required Information
    A. Publicly Available Data
    B. Collection of Information Requirements
    C. Waiver of the 60-day Delay in Effective Date for the Final 
Rule

Regulation Text

Addendum--Schedule of Standardized Amounts, Update Factors, and Rate-
of-Increase Percentages Effective With Cost Reporting Periods Beginning 
on or after October 1, 2020 and Payment Rates for LTCHs Effective for 
Discharges Occurring on or after October 1, 2020

I. Summary and Background
II. Changes to Prospective Payment Rates for Hospital Inpatient 
Operating Costs for Acute Care Hospitals for FY 2021
    A. Calculation of the Adjusted Standardized Amount
    B. Adjustments for Area Wage Levels and Cost-of-Living
    C. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient 
Capital-Related Costs for FY 2021
    A. Determination of the Federal Hospital Inpatient Capital-
Related Prospective Payment Rate Update for FY 2021
    B. Calculation of the Inpatient Capital-Related Prospective 
Payments for FY 2021
    C. Capital Input Price Index
IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2021
V. Changes to the Payment Rates for the LTCH PPS for FY 2021
    A. LTCH PPS Standard Federal Payment Rate for FY 2021
    B. Adjustment for Area Wage Levels Under the LTCH PPS for FY 
2021
    C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located 
in Alaska and Hawaii
    D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
    E. Update to the IPPS Comparable/Equivalent Amounts To Reflect 
the Statutory Changes to the IPPS DSH Payment Adjustment Methodology
    F. Computing the Adjusted LTCH PPS Federal Prospective Payments 
for FY 2021

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VI. Tables Referenced in This Final Rule Generally Available Through 
the Internet on the CMS Website

Appendix A--Economic Analyses

I. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Objectives of the IPPS and the LTCH PPS
    D. Limitations of Our Analysis
    E. Hospitals Included in and Excluded From the IPPS
    F. Effects on Hospitals and Hospital Units Excluded From the 
IPPS
    G. Quantitative Effects of the Policy Changes Under the IPPS for 
Operating Costs
    H. Effects of Other Policy Changes
    I. Effects of Changes in the Capital IPPS
    J. Effects of Payment Rate Changes and Policy Changes Under the 
LTCH PPS
    K. Effects of Requirements for Hospital Inpatient Quality 
Reporting (IQR) Program
    L. Effects of Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program
    M. Effects of Requirements for the Long-Term Care Hospital 
Quality Reporting Program (LTCH QRP)
    N. Effects of Requirements Regarding the Promoting 
Interoperability Program
    O. Alternatives Considered
    P. Reducing Regulation and Controlling Regulatory Costs
    Q. Overall Conclusion
    R. Regulatory Review Costs
II. Accounting Statements and Tables
    A. Acute Care Hospitals
    B. LTCHs
III. Regulatory Flexibility Act (RFA) Analysis
IV. Impact on Small Rural Hospitals
V. Unfunded Mandate Reform Act (UMRA) Analysis
VI. Executive Order 13175
VII. Executive Order 12866

Appendix B: Recommendation of Update Factors for Operating Cost Rates 
of Payment for Inpatient Hospital Services

I. Background
II. Inpatient Hospital Update for FY 2021
    A. FY 2021 Inpatient Hospital Update
    B. Update for SCHs and MDHs for FY 2021
    C. FY 2021 Puerto Rico Hospital Update
    D. Update for Hospitals Excluded From the IPPS for FY 2021
    E. Update for LTCHs for FY 2021
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and 
Updating Payments in Traditional Medicare

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    This FY 2021 IPPS/LTCH PPS final rule makes payment and policy 
changes under the Medicare inpatient prospective payment systems (IPPS) 
for operating and capital-related costs of acute care hospitals as well 
as for certain hospitals and hospital units excluded from the IPPS. In 
addition, it makes payment and policy changes for inpatient hospital 
services provided by long-term care hospitals (LTCHs) under the long-
term care hospital prospective payment system (LTCH PPS). This final 
rule also makes policy changes to programs associated with Medicare 
IPPS hospitals, IPPS-excluded hospitals, and LTCHs. In this FY 2021 
final rule, we are continuing policies to address wage index 
disparities impacting low wage index hospitals; and including policies 
related to new technology add-on payments for certain antimicrobial 
products, other policies related to new technology add-on payments, 
collecting market-based rate information on the Medicare cost report 
for cost reporting periods ending on or after January 1, 2021, and 
finalizing the adoption of a market-based MS-DRG relative weight 
methodology beginning in FY 2024.
    We are establishing new requirements and revising existing 
requirements for quality reporting by acute care hospitals and PPS-
exempt cancer hospitals that participate in Medicare. We are also 
establishing new requirements and revising existing requirements for 
eligible hospitals and CAHs participating in the Medicare and Medicaid 
Promoting Interoperability Programs.
    We are establishing performance standards for the Hospital Value-
Based Purchasing (VBP) Program and updating policies for the Hospital 
Readmissions Reduction Program and the Hospital-Acquired Condition 
(HAC) Reduction Program.
    Under various statutory authorities, we either discuss continued 
program implementation or are making changes to the Medicare IPPS, to 
the LTCH PPS, and to other related payment methodologies and programs 
for FY 2021 and subsequent fiscal years. These statutory authorities 
include, but are not limited to, the following:
     Section 1886(d) of the Social Security Act (the Act), 
which sets forth a system of payment for the operating costs of acute 
care hospital inpatient stays under Medicare Part A (Hospital 
Insurance) based on prospectively set rates. Section 1886(g) of the Act 
requires that, instead of paying for capital-related costs of inpatient 
hospital services on a reasonable cost basis, the Secretary use a 
prospective payment system (PPS).
     Section 1886(d)(1)(B) of the Act, which specifies that 
certain hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Rehabilitation hospitals and units; LTCHs; 
psychiatric hospitals and units; children's hospitals; cancer 
hospitals; extended neoplastic disease care hospitals, and hospitals 
located outside the 50 States, the District of Columbia, and Puerto 
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa). Religious nonmedical 
health care institutions (RNHCIs) are also excluded from the IPPS.
     Sections 123(a) and (c) of the BBRA (Public Law (Pub. L.) 
106-113) and section 307(b)(1) of the BIPA (Pub. L. 106-554) (as 
codified under section 1886(m)(1) of the Act), which provide for the 
development and implementation of a prospective payment system for 
payment for inpatient hospital services of LTCHs described in section 
1886(d)(1)(B)(iv) of the Act.
     Sections 1814(l), 1820, and 1834(g) of the Act, which 
specify that payments are made to critical access hospitals (CAHs) 
(that is, rural hospitals or facilities that meet certain statutory 
requirements) for inpatient and outpatient services and that these 
payments are generally based on 101 percent of reasonable cost.
     Section 1866(k) of the Act, which provides for the 
establishment of a quality reporting program for hospitals described in 
section 1886(d)(1)(B)(v) of the Act, referred to as ``PPS-exempt cancer 
hospitals.''
     Section 1886(a)(4) of the Act, which specifies that costs 
of approved educational activities are excluded from the operating 
costs of inpatient hospital services. Hospitals with approved graduate 
medical education (GME) programs are paid for the direct costs of GME 
in accordance with section 1886(h) of the Act.
     Section 1886(b)(3)(B)(viii) of the Act, which requires the 
Secretary to reduce the applicable percentage increase that would 
otherwise apply to the standardized amount applicable to a subsection 
(d) hospital for discharges occurring in a fiscal year if the hospital 
does not submit data on measures in a form and manner, and at a time, 
specified by the Secretary.
     Section 1886(o) of the Act, which requires the Secretary 
to establish a Hospital Value-Based Purchasing (VBP) Program, under 
which value-based incentive payments are made in a fiscal year to 
hospitals meeting performance standards established for a performance 
period for such fiscal year.
     Section 1886(p) of the Act, which establishes a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to 
applicable hospitals are adjusted to provide an incentive to reduce 
hospital-acquired conditions.

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     Section 1886(q) of the Act, as amended by section 15002 of 
the 21st Century Cures Act, which establishes the Hospital Readmissions 
Reduction Program. Under the program, payments for discharges from an 
applicable hospital as defined under section 1886(d) of the Act will be 
reduced to account for certain excess readmissions. Section 15002 of 
the 21st Century Cures Act directs the Secretary to compare hospitals 
with respect to the number of their Medicare-Medicaid dual-eligible 
beneficiaries (dual-eligibles) in determining the extent of excess 
readmissions.
     Section 1886(r) of the Act, as added by section 3133 of 
the Affordable Care Act, which provides for a reduction to 
disproportionate share hospital (DSH) payments under section 
1886(d)(5)(F) of the Act and for a new uncompensated care payment to 
eligible hospitals. Specifically, section 1886(r) of the Act requires 
that, for fiscal year 2014 and each subsequent fiscal year, subsection 
(d) hospitals that would otherwise receive a DSH payment made under 
section 1886(d)(5)(F) of the Act will receive two separate payments: 
(1) 25 percent of the amount they previously would have received under 
section 1886(d)(5)(F) of the Act for DSH (``the empirically justified 
amount''), and (2) an additional payment for the DSH hospital's 
proportion of uncompensated care, determined as the product of three 
factors. These three factors are: (1) 75 percent of the payments that 
would otherwise be made under section 1886(d)(5)(F) of the Act; (2) 1 
minus the percent change in the percent of individuals who are 
uninsured; and (3) a hospital's uncompensated care amount relative to 
the uncompensated care amount of all DSH hospitals expressed as a 
percentage.
     Section 1886(m)(6) of the Act, as added by section 
1206(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act 
of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the 
Bipartisan Budget Act of 2018 (Pub. L. 115-123), which provided for the 
establishment of site neutral payment rate criteria under the LTCH PPS, 
with implementation beginning in FY 2016. Section 51005(b) of the 
Bipartisan Budget Act of 2018 amended section 1886(m)(6)(B) by adding 
new clause (iv), which specifies that the IPPS comparable amount 
defined in clause (ii)(I) shall be reduced by 4.6 percent for FYs 2018 
through 2026.
     Section 1899B of the Act, as added by section 2(a) of the 
Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT 
Act) (Pub. L. 113-185), which provides for the establishment of 
standardized data reporting for certain post-acute care providers, 
including LTCHs.
2. Waiver of the 60-day Delayed Effective Date for the Final Rule
    The United States is responding to an outbreak of respiratory 
disease caused by a novel (new) coronavirus that has now been detected 
in more than 190 locations internationally, including in all 50 States 
and the District of Columbia. The virus has been named ``SARS-CoV-2'' 
and the disease it causes has been named ``coronavirus disease 2019'' 
(abbreviated ``COVID-19'').
    Due to the significant devotion of resources to the COVID-19 
response, for the reasons discussed in the FY 2021 IPPS/LTCH PPS 
proposed rule (85 FR 32889 through 32890) and as also discussed in 
section XI.D. of the preamble of this final rule, we are hereby waiving 
the 60-day delay in the effective date of the final rule.
3. Summary of the Major Provisions
    The following is a summary of the major provisions in this final 
rule. In general, these major provisions are part of the annual update 
to the payment policies and payment rates, consistent with the 
applicable statutory provisions. A general summary of the proposed 
changes that were included in the FY 2021 IPPS/LTCH PPS proposed rule 
is presented in section I.D. of the preamble of this final rule.
a. MS-DRG Documentation and Coding Adjustment
    Section 631 of the American Taxpayer Relief Act of 2012 (ATRA, Pub. 
L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to require 
the Secretary to make a recoupment adjustment to the standardized 
amount of Medicare payments to acute care hospitals to account for 
changes in MS- DRG documentation and coding that do not reflect real 
changes in case-mix, totaling $11 billion over a 4-year period of FYs 
2014, 2015, 2016, and 2017. The FY 2014 through FY 2017 adjustments 
represented the amount of the increase in aggregate payments as a 
result of not completing the prospective adjustment authorized under 
section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the 
ATRA, this amount could not have been recovered under Public Law 110 
90. Section 414 of the Medicare Access and CHIP Reauthorization Act of 
2015 (MACRA) (Pub. L. 114-10) replaced the single positive adjustment 
we intended to make in FY 2018 with a 0.5 percent positive adjustment 
to the standardized amount of Medicare payments to acute care hospitals 
for FYs 2018 through 2023. (The FY 2018 adjustment was subsequently 
adjusted to 0.4588 percent by section 15005 of the 21st Century Cures 
Act.) Therefore, for FY 2021, we are making an adjustment of + 0.5 
percent to the standardized amount.
b. Changes to the New Technology Add-On Payment Policy for Certain 
Antimicrobial Products
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 
42297), we established an alternative inpatient new technology add-on 
payment pathway for certain antimicrobial products in light of the 
significant concerns related to the ongoing public health crisis 
represented by antimicrobial resistance. Under this alternative 
pathway, if a medical product receives the FDA's Qualified Infectious 
Disease Product (QIDP) designation and received FDA marketing 
authorization, such a product will be considered new and not 
substantially similar to an existing technology for purposes of new 
technology add-on payment under the IPPS and will not need to meet the 
requirement that it represent an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries.
    In the proposed rule, in light of recent information that continues 
to highlight the significant concerns and impacts related to 
antimicrobial resistance and emphasizes the continued importance of 
this issue both with respect to Medicare beneficiaries and public 
health overall, we proposed changes to the new technology add-on 
payment policy for certain antimicrobials for FY 2021.
    As discussed in section II.G.9.b. of the preamble of this final 
rule, after consideration of public comments, we are finalizing our 
proposal to expand our alternative new technology add-on payment 
pathway for QIDPs to include products approved through FDA's Limited 
Population Pathway for Antibacterial and Antifungal Drugs (LPAD 
pathway). Under this policy, for applications received for new 
technology add-on payments for FY 2022 and subsequent fiscal years, if 
an antimicrobial product is approved through FDA's LPAD pathway, it 
will be considered new and not substantially similar to an existing 
technology for purposes of the new technology add-on payment under the 
IPPS, and will not need to meet the requirement that it represent an 
advance that substantially improves, relative to technologies 
previously available, the diagnosis or treatment of Medicare 
beneficiaries.

[[Page 58436]]

    Under current policy, a new technology must receive FDA marketing 
authorization (for example, approval or clearance) by July 1 to be 
considered in the final rule in order to allow complete review and 
consideration of all the information to determine if the technology 
meets the new technology add-on payment criteria. For the reasons 
discussed in section II.G.9.c. of the preamble of this final rule, 
after consideration of public comments, we are finalizing our proposal 
to provide for conditional new technology add-on payment approval for 
products designated as QIDPs that do not receive FDA approval by July 1 
and products that do not receive approval through FDA's LPAD pathway by 
July 1 but otherwise meet the applicable add-on payment criteria. Under 
this policy, cases involving eligible antimicrobial products would 
begin receiving the new technology add-on payment sooner, effective for 
discharges the quarter after the date of FDA marketing authorization 
provided that the technology receives FDA marketing authorization by 
July 1 of the particular fiscal year for which the applicant applied 
for new technology add-on payments.
c. Continuation of the Low Wage Index Hospital Policy
    To help mitigate wage index disparities between high wage and low 
hospitals, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 through 
42332), we adopted a policy to provide an opportunity for certain low 
wage index hospitals to increase employee compensation by increasing 
the wage index values for certain hospitals with low wage index values 
(the low wage index hospital policy). This policy was adopted in a 
budget neutral manner through an adjustment applied to the standardized 
amounts for all hospitals. We also indicated that this policy would be 
effective for at least 4 years, beginning in FY 2020, in order to allow 
employee compensation increases implemented by these hospitals 
sufficient time to be reflected in the wage index calculation. 
Therefore, for FY 2021, we are continuing the low wage index hospital 
policy, and also applying this policy in a budget neutral manner by 
applying an adjustment to the standardized amounts.
d. DSH Payment Adjustment and Additional Payment for Uncompensated Care
    Section 3133 of the Affordable Care Act modified the Medicare 
disproportionate share hospital (DSH) payment methodology beginning in 
FY 2014. Under section 1886(r) of the Act, which was added by section 
3133 of the Affordable Care Act, starting in FY 2014, DSHs receive 25 
percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of 
the Act. The remaining amount, equal to 75 percent of the amount that 
otherwise would have been paid as Medicare DSH payments, is paid as 
additional payments after the amount is reduced for changes in the 
percentage of individuals that are uninsured. Each Medicare DSH will 
receive an additional payment based on its share of the total amount of 
uncompensated care for all Medicare DSHs for a given time period.
    In this final rule, we have updated our estimates of the three 
factors used to determine uncompensated care payments for FY 2021. We 
continue to use uninsured estimates produced by CMS' Office of the 
Actuary (OACT) as part of the development of the National Health 
Expenditure Accounts (NHEA) in the calculation of Factor 2; however, 
given the unprecedented effects on health insurance enrollment as a 
result of the public health emergency for the COVID-19 pandemic, OACT 
has updated the NHEA-based projection of the FY 2021 rate of 
uninsurance using more recently available unemployment data. In 
addition, we are using a single year of data on uncompensated care 
costs from Worksheet S-10 of the FY 2017 cost reports to calculate 
Factor 3 in the FY 2021 methodology for all eligible hospitals with the 
exception of Indian Health Service (IHS) and Tribal hospitals and 
Puerto Rico hospitals. For IHS and Tribal hospitals and Puerto Rico 
hospitals we are continuing to use the low-income insured days proxy to 
calculate Factor 3 for these hospitals. Furthermore, we are 
establishing that to calculate Factor 3 for FY 2022 and all subsequent 
fiscal years for all eligible hospitals, except IHS and Tribal 
hospitals and Puerto Rico hospitals, we will use the most recent 
available single year of audited Worksheet S-10 data. We are also 
making other methodological changes for purposes of calculating Factor 
3.
e. Reduction of Hospital Payments for Excess Readmissions
    We are finalizing our proposal to make changes to policies for the 
Hospital Readmissions Reduction Program, which was established under 
section 1886(q) of the Act, as amended by section 15002 of the 21st 
Century Cures Act. The Hospital Readmissions Reduction Program requires 
a reduction to a hospital's base operating DRG payment to account for 
excess readmissions of selected applicable conditions. For FY 2017 and 
subsequent years, the reduction is based on a hospital's risk-adjusted 
readmission rate during a 3-year period for acute myocardial infarction 
(AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary 
disease (COPD), elective primary total hip arthroplasty/total knee 
arthroplasty (THA/TKA), and coronary artery bypass graft (CABG) 
surgery. In this FY 2021 IPPS/LTCH PPS final rule, we are finalizing 
the following policies: (1) To automatically adopt applicable periods 
beginning with the FY 2023 program year and all subsequent program 
years, unless otherwise specified by the Secretary; and (2) to update 
the definition of applicable period at 42 CFR 412.152 to align with 
this policy.
f. Hospital Value-Based Purchasing (VBP) Program
    Section 1886(o) of the Act requires the Secretary to establish a 
Hospital VBP Program under which value-based incentive payments are 
made in a fiscal year to hospitals based on their performance on 
measures established for a performance period for such fiscal year. In 
this FY 2021 IPPS/LTCH PPS final rule, we are providing newly 
established performance standards for certain measures for the FY 2023 
program year, the FY 2024 program year, the FY 2025 program year, and 
the FY 2026 program year.
h. Hospital-Acquired Condition (HAC) Reduction Program
    Section 1886(p) of the Act establishes an incentive to hospitals to 
reduce the incidence of hospital-acquired conditions by requiring the 
Secretary to make an adjustment to payments to applicable hospitals, 
effective for discharges beginning on October 1, 2014. This 1-percent 
payment reduction applies to hospitals that rank in the worst-
performing quartile (25 percent) of all applicable hospitals, relative 
to the national average, of conditions acquired during the applicable 
period and on all of the hospital's discharges for the specified fiscal 
year. In this FY 2021 IPPS/LTCH PPS final rule, we are finalizing the 
following policies: (1) To automatically adopt applicable periods 
beginning with the FY 2023 program year and all subsequent program 
years, unless otherwise specified by the secretary, (2) to make 
refinements to the process for validation of HAC Reduction Program 
measure data in alignment with the Hospital IQR Program measure 
validation policies finalized in this rule; and (3) to update the 
definition of applicable period at 42 CFR 412.170 to

[[Page 58437]]

align with the policy to automatically adopt applicable periods.
g. Hospital Inpatient Quality Reporting (IQR) Program
    Under section 1886(b)(3)(B)(viii) of the Act, subsection (d) 
hospitals are required to report data on measures selected by the 
Secretary for a fiscal year in order to receive the full annual 
percentage increase that would otherwise apply to the standardized 
amount applicable to discharges occurring in that fiscal year.
    In this FY 2021 IPPS/LTCH PPS final rule, we are finalizing 
proposals related to the reporting, submission, and public display 
requirements for eCQMs. These policies are: (1) Progressively 
increasing the numbers of quarters of eCQM data reported, from one 
self-selected quarter of data to four quarters of data over a three-
year period, by requiring hospitals to report: (a) Two quarters of data 
for the CY 2021 reporting period/FY 2023 payment determination; (b) 
three quarters of data for the CY 2022 reporting period/FY 2024 payment 
determination; and (c) four quarters of data beginning with the CY 2023 
reporting period/FY 2025 payment determination and for subsequent 
years, while continuing to allow hospitals to report: (i) Three self-
selected eCQMs, and (ii) the Safe Use of Opioids eCQM; and (2) 
beginning public display of eCQM data starting with data reported by 
hospitals for the CY 2021 reporting period/FY 2023 payment 
determination and for subsequent years. The eCQM-related policies are 
in alignment with proposals under the Promoting Interoperability 
Program. We also are finalizing our proposal to expand the requirement 
to use EHR technology certified to the 2015 Edition for submitting data 
on not only the previously finalized Hybrid Hospital-Wide Readmission 
measure, but all hybrid measures in the Hospital IQR Program.
    We also are finalizing proposals to streamline the validation 
processes under the Hospital IQR Program. We are finalizing proposals 
to: (1) Update the quarters of data required for validation for both 
chart-abstracted measures and eCQMs; (2) expand targeting criteria to 
include hospital selection for eCQMs; (3) change the validation pool 
from 800 hospitals to 400 hospitals; (4) remove the current exclusions 
for eCQM validation selection, (5) require electronic file submissions 
for chart-abstracted measure data; (6) align the eCQM and chart-
abstracted measure scoring processes; and (7) update the educational 
review process to address eCQM validation results.
h. PPS-Exempt Cancer Hospital Quality Reporting Program
    Section 1866(k)(1) of the Act requires, for purposes of FY 2014 and 
each subsequent fiscal year, that a hospital described in section 
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) 
submit data in accordance with section 1866(k)(2) of the Act with 
respect to such fiscal year. There is no financial impact to PCH 
Medicare payment if a PCH does not participate.
    In this FY 2021 IPPS/LTCH PPS final rule, we are finalizing our 
proposal to refine two existing program measures, Catheter-associated 
Urinary Tract Infection (CAUTI) (NQF #0138) and Central Line-associated 
Bloodstream Infection (CLABSI) (NQF #0139), to adopt the updated SIR 
calculation methodology developed by the Center for Disease Control and 
Prevention's (CDC) that calculates rates using updated HAI baseline 
data that are further stratified by patient location.
i. Medicare and Medicaid Promoting Interoperability Programs
    For purposes of an increased level of stability, reducing the 
burden on eligible hospitals and CAHs, and clarifying certain existing 
policies, we are finalizing several changes to the Medicare Promoting 
Interoperability Program. Specifically, these policies include: (1) An 
EHR reporting period of a minimum of any continuous 90-day period in CY 
2022 for new and returning participants (eligible hospitals and CAHs); 
(2) to maintain the Electronic Prescribing Objective's Query of PDMP 
measure as optional and worth 5 bonus points in CY 2021; (3) to modify 
the name of the Support Electronic Referral Loops by Receiving and 
Incorporating Health Information measure; (4) to progressively increase 
the number of quarters for which hospitals are required to report eCQM 
data, from the current requirement of one self-selected calendar 
quarter of data, to four calendar quarters of data, over a three year 
period. Specifically, we finalized proposals to require: (a) Two self-
selected calendar quarters of data for the CY 2021 reporting period; 
(b) three self-selected calendar quarters of data for the CY 2022 
reporting period; and (c) four calendar quarters of data beginning with 
the CY 2023 reporting period, where the submission period for the 
Medicare Promoting Interoperability Program will be the 2 months 
following the close of the respective calendar year; (5) to begin 
publicly reporting eCQM performance data beginning with the eCQM data 
reported by eligible hospitals and CAHs for the reporting period in CY 
2021 on the Hospital Compare and/or data.medicare.gov websites or 
successor websites; (6) to correct errors and amend regulation text 
under Sec.  495.104(c)(5)(viii)(B) through (D) regarding transition 
factors under section 1886(n)(2)(E)(i) for the incentive payments for 
Puerto Rico eligible hospitals; and (7) to correct errors and amend 
regulation text under Sec. Sec.  495.20(e)(5)(iii) and 
(l)(11)(ii)(C)(1) for regulatory citations for the Office of the 
National Coordinator for Health Information Technology (ONC) 
certification criteria. We are amending our regulation texts as 
necessary to incorporate these finalized changes.
j. Market-Based MS-DRG Relative Weight Data Collection and Change in 
Methodology for Calculating MS-DRG Relative Weights
    As discussed in section IV.P. of the preamble of this final rule, 
in order to reduce the Medicare program's reliance on the hospital 
chargemaster and to support the development of a market-based approach 
to payment under the Medicare FFS system, we are finalizing our 
proposal, with modification, to require that hospitals report certain 
market-based payment rate information on their Medicare cost report for 
cost reporting periods ending on or after January 1, 2021.
    Specifically, we are finalizing that hospitals would report on the 
Medicare cost report the median payer-specific negotiated charge that 
the hospital has negotiated with all of its Medicare Advantage (MA) 
organizations (also referred to as MA organizations) payers, by MS-DRG. 
The market-based rate information we are finalizing for collection on 
the Medicare cost report would be the median of the payer-specific 
negotiated charges by MS-DRG, as described previously, for a hospital's 
MA organization payers. The payer-specific negotiated charges used by 
hospitals to calculate these medians would be the payer-specific 
negotiated charges for service packages that hospitals are required to 
make public under the requirements we finalized in the Hospital Price 
Transparency Final Rule (84 FR 65524) that can be cross-walked to an 
MS-DRG. We believe that because hospitals are already required to 
publically report payer-specific negotiated charges, in accordance with 
the Hospital Price Transparency Final Rule, that the additional 
calculation and reporting of the median payer-specific negotiated 
charge will be less burdensome for hospitals.
    We are also finalizing the market-based MS-DRG relative weight 
methodology as described in the FY

[[Page 58438]]

2021 IPPS/LTCH PPS proposed rule, which would incorporate this market-
based rate information, beginning in FY 2024.
4. Summary of Costs and Benefits
     Adjustment for MS-DRG Documentation and Coding Changes. 
Section 414 of the MACRA replaced the single positive adjustment we 
intended to make in FY 2018 once the recoupment required by section 631 
of the ATRA was complete with a 0.5 percentage point positive 
adjustment to the standardized amount of Medicare payments to acute 
care hospitals for FYs 2018 through 2023. (The FY 2018 adjustment was 
subsequently adjusted to 0.4588 percentage point by section 15005 of 
the 21st Century Cures Act.) For FY 2021, we are making an adjustment 
of +0.5 percentage point to the standardized amount consistent with the 
MACRA.
     Changes to the New Technology Add-On Payment Policy for 
Certain Antimicrobial Products. In light of recent information that 
continues to highlight the significant concerns and impacts related to 
antimicrobial resistance and emphasizes the continued importance of 
this issue both with respect to Medicare beneficiaries and public 
health overall, in this final rule we are making changes to the new 
technology add-on payment policy for certain antimicrobials for FY 
2021. We are expanding our alternative new technology add-on payment 
pathway for QIDPs to include products approved through FDA's Limited 
Population Pathway for Antibacterial and Antifungal Drugs (LPAD 
pathway). Under this policy, for applications received for new 
technology add-on payments for FY 2022 and subsequent fiscal years, if 
an antimicrobial product is approved through FDA's LPAD pathway, it 
will be considered new and not substantially similar to an existing 
technology for purposes of the new technology add-on payment under the 
IPPS, and will not need to meet the requirement that it represent an 
advance that substantially improves, relative to technologies 
previously available, the diagnosis or treatment of Medicare 
beneficiaries.
    We are also providing for conditional new technology add-on payment 
approval for products designated as QIDPs that do not receive FDA 
approval by July 1 and products that do not receive approval through 
FDA's LPAD pathway by July 1 (the current deadline for consideration in 
the final rule) but otherwise meet the applicable add-on payment 
criteria. Under this policy, cases involving eligible antimicrobial 
products would begin receiving the new technology add-on payment 
sooner, effective for discharges the quarter after the date of FDA 
marketing authorization provided that the technology receives FDA 
marketing authorization by July 1 of the particular fiscal year for 
which the applicant applied for new technology add-on payments.
    Given the relatively recent introduction of the FDA's LPAD pathway 
there have not been any drugs that were approved under the FDA's LPAD 
pathway that applied for a new technology add-on payment under the 
IPPS. If all of the future LPADs that would have applied for new 
technology add-on payments would have been approved under existing 
criteria, this finalized policy has no impact relative to current 
policy. To the extent that there are future LPADs that are the subject 
of applications for new technology add-on payments, and those 
applications would have been denied under the current new technology 
add-on payment criteria, this final policy is a cost, but that cost is 
not estimable. Therefore, it is not possible to quantify the impact of 
these policies.
     Wage Index Disparities Between High and Low Wage Index 
Hospitals. As discussed in section III.G.3. of the preamble of this 
final rule, we are continuing to reduce the disparity between high and 
low wage index hospitals by increasing the wage index values for 
certain hospitals with low wage index values and applying a budget 
neutrality adjustment to the standardized amount so that increase is 
implemented in a budget neutral manner.
     Medicare DSH Payment Adjustment and Additional Payment for 
Uncompensated Care. For FY 2021, we are updating our estimates of the 
three factors used to determine uncompensated care payments. To 
calculate Factor 2, we are using uninsured estimates produced by OACT 
as part of the development of the NHEA in conjunction with more 
recently available data that take into consideration the effects of 
COVID-19. We are using a single year of data on uncompensated care 
costs from Worksheet S-10 for FY 2017 to determine Factor 3 for FY 2021 
for all hospitals with the exception of Puerto Rico hospitals and 
Indian Health Service and Tribal hospitals. To determine the amount of 
uncompensated care for purposes of calculating Factor 3 for Puerto Rico 
hospitals and Indian Health Service and Tribal hospitals, we are 
continuing to use only data regarding low-income insured days for FY 
2013. We project that the amount available to distribute as payments 
for uncompensated care for FY 2021 will decrease by approximately $60 
million, as compared to our estimate of the uncompensated care payments 
that will be distributed in FY 2020. The uncompensated care payments 
have redistributive effects, based on a hospital's uncompensated care 
amount relative to the uncompensated care amount for all hospitals that 
are projected to be eligible to receive Medicare DSH payments, and the 
calculated payment amount is not directly tied to a hospital's number 
of discharges.
     Update to the LTCH PPS Payment Rates and Other Payment 
Policies. Based on the best available data for the 363 LTCHs in our 
database, we estimate that the changes to the payment rates and factors 
that we present in the preamble of and Addendum to this final rule, 
which reflect the end of the transition of the statutory application of 
the site neutral payment rate and the update to the LTCH PPS standard 
Federal payment rate for FY 2021, would result in an estimated decrease 
in payments in FY 2021 of approximately $40 million.
     Changes to the Hospital Readmissions Reduction Program. 
For FY 2021 and subsequent years, the reduction is based on a 
hospital's risk-adjusted readmission rate during a 3-year period for 
acute myocardial infarction (AMI), heart failure (HF), pneumonia, 
chronic obstructive pulmonary disease (COPD), elective primary total 
hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery 
bypass graft (CABG) surgery. We estimate that 2,545 hospitals will have 
their base operating DRG payments reduced by their FY 2021 hospital-
specific payment adjustment factors. As a result, we estimate that the 
Hospital Readmissions Reduction Program will save approximately $553 
million in FY 2021.
     Value-Based Incentive Payments under the Hospital VBP 
Program. We estimate that there will be no net financial impact to 
participating hospitals under the Hospital VBP Program for the FY 2021 
program year in the aggregate because, by law, the amount available for 
value-based incentive payments under the program in a given year must 
be equal to the total amount of base operating MS-DRG payment amount 
reductions for that year, as estimated by the Secretary. The estimated 
amount of base operating MS-DRG payment amount reductions for the FY 
2021 program year and, therefore, the estimated amount available for 
value-based incentive payments for FY

[[Page 58439]]

2021 discharges is approximately $1.9 billion.
     Changes to the HAC Reduction Program. A hospital's Total 
HAC Score and its ranking in comparison to other hospitals in any given 
year depend on several different factors. We are making no changes to 
the scoring methodology, which will continue to use the Winsorized z-
score and equal measure weights approaches to determine the worst-
performing quartile of hospitals. Any significant impact due to the HAC 
Reduction Program changes for FY 2021, including which hospitals will 
receive the adjustment, will depend on the actual experience of 
hospitals in the Program.
     Changes to the Hospital Inpatient Quality Reporting (IQR) 
Program. Across 3,300 IPPS hospitals, we estimate that our changes for 
the Hospital IQR Program in this final rule would result in a total 
information collection burden increase of 6,533 hours associated with 
our policies and updated burden estimates and a total cost increase of 
approximately $253,480, across a four-year period from the CY 2021 
reporting period/FY 2023 payment determination through the CY 2024 
reporting period/FY 2026 payment determination, compared to our 
previously approved information collection burden estimates.
     Changes to the Medicare and Medicaid Promoting 
Interoperability Programs. With these finalized proposals, we do not 
estimate any net change in burden hours or total cost for the Medicare 
Promoting Interoperability Program for CY 2021, given that there are no 
substantive change in current measures or data requirements for 
eligible hospitals and CAHs that would affect previously-approved 
burden. Unrelated to any of this rule's Promoting Interoperability 
changes, an alteration to the annual information collection's total 
cost is due to utilizing an updated hourly wage rate for the necessary 
hospital staff involved in attesting to the objectives and measures 
under 42 CFR 495.24(e). The Bureau of Labor Statistics (BLS) recently 
released a 2018 wage rate which, compared to the 2017 rates used in FY 
2020 IPPS/LTCH PPS final rule, result in an estimated increase of 
$24,073 for the annual information collection burden (total cost) in FY 
2021. Therefore, multiplying the total annual burden of 21,4950 hours 
by the 2018 BLS labor cost of $69.34, we estimate the Promoting 
Interoperability Program's total cost to be $1,487,343 for the CY 2021 
EHR reporting period (21,450 hours x $69.34).
     Market-Based MS-DRG Relative Weight Data Collection and 
Change in Methodology for Calculating MS-DRG Relative Weights. In 
section IV.P.4. of the preamble of this final rule, we are finalizing a 
methodology for estimating the MS-DRG relative weights beginning in FY 
2024 which utilizes the median payer-specific negotiated charge 
information we are finalizing to collect on the Medicare cost report. 
We estimate total annual burden hours for this data collection are as 
follows: 3,189 hospitals times 20 hours per hospital equals 63,780 
annual burden hours and $4,315,993. We refer readers to section 
XI.B.11. of the preamble of this final rule for further analysis of 
this assessment.

B. Background Summary

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

[[Page 58440]]

hospital inpatient services reasonably available to Medicare 
beneficiaries. In addition, certain rural hospitals previously 
designated by the Secretary as essential access community hospitals are 
considered SCHs.
    Under current law, the Medicare-dependent, small rural hospital 
(MDH) program is effective through FY 2022. For discharges occurring on 
or after October 1, 2007, but before October 1, 2022, an MDH receives 
the higher of the Federal rate or the Federal rate plus 75 percent of 
the amount by which the Federal rate is exceeded by the highest of its 
FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major 
source of care for Medicare beneficiaries in their areas. Section 
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is 
located in a rural area (or, as amended by the Bipartisan Budget Act of 
2018, a hospital located in a State with no rural area that meets 
certain statutory criteria), has not more than 100 beds, is not an SCH, 
and has a high percentage of Medicare discharges (not less than 60 
percent of its inpatient days or discharges in its cost reporting year 
beginning in FY 1987 or in two of its three most recently settled 
Medicare cost reporting years).
    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient hospital services in accordance with 
a prospective payment system established by the Secretary. The basic 
methodology for determining capital prospective payments is set forth 
in our regulations at 42 CFR 412.308 and 412.312. Under the capital 
IPPS, payments are adjusted by the same DRG for the case as they are 
under the operating IPPS. Capital IPPS payments are also adjusted for 
IME and DSH, similar to the adjustments made under the operating IPPS. 
In addition, hospitals may receive outlier payments for those cases 
that have unusually high costs.
    The existing regulations governing payments to hospitals under the 
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
    Under section 1886(d)(1)(B) of the Act, as amended, certain 
hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Inpatient rehabilitation facility (IRF) 
hospitals and units; long-term care hospitals (LTCHs); psychiatric 
hospitals and units; children's hospitals; cancer hospitals; extended 
neoplastic disease care hospitals, and hospitals located outside the 50 
States, the District of Columbia, and Puerto Rico (that is, hospitals 
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, 
and American Samoa). Religious nonmedical health care institutions 
(RNHCIs) are also excluded from the IPPS. Various sections of the 
Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare, 
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced 
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the 
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act 
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs 
for IRF hospitals and units, LTCHs, and psychiatric hospitals and units 
(referred to as inpatient psychiatric facilities (IPFs)). (We note that 
the annual updates to the LTCH PPS are included along with the IPPS 
annual update in this document. Updates to the IRF PPS and IPF PPS are 
issued as separate documents.) Children's hospitals, cancer hospitals, 
hospitals located outside the 50 States, the District of Columbia, and 
Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa), and RNHCIs 
continue to be paid solely under a reasonable cost-based system, 
subject to a rate-of-increase ceiling on inpatient operating costs. 
Similarly, extended neoplastic disease care hospitals are paid on a 
reasonable cost basis, subject to a rate-of-increase ceiling on 
inpatient operating costs.
    The existing regulations governing payments to excluded hospitals 
and hospital units are located in 42 CFR parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    The Medicare prospective payment system (PPS) for LTCHs applies to 
hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective 
for cost reporting periods beginning on or after October 1, 2002. The 
LTCH PPS was established under the authority of sections 123 of the 
BBRA and section 307(b) of the BIPA (as codified under section 
1886(m)(1) of the Act). Section 1206(a) of the Pathway for SGR Reform 
Act of 2013 (Pub. L. 113-67) established the site neutral payment rate 
under the LTCH PPS, which made the LTCH PPS a dual rate payment system 
beginning in FY 2016. Under this statute, effective for LTCH's cost 
reporting periods beginning in FY 2016 cost reporting period, LTCHs are 
generally paid for discharges at the site neutral payment rate unless 
the discharge meets the patient criteria for payment at the LTCH PPS 
standard Federal payment rate. The existing regulations governing 
payment under the LTCH PPS are located in 42 CFR part 412, subpart O. 
Beginning October 1, 2009, we issue the annual updates to the LTCH PPS 
in the same documents that update the IPPS.
4. Critical Access Hospitals (CAHs)
    Under sections 1814(l), 1820, and 1834(g) of the Act, payments made 
to critical access hospitals (CAHs) (that is, rural hospitals or 
facilities that meet certain statutory requirements) for inpatient and 
outpatient services are generally based on 101 percent of reasonable 
cost. Reasonable cost is determined under the provisions of section 
1861(v) of the Act and existing regulations under 42 CFR part 413.
5. Payments for Graduate Medical Education (GME)
    Under section 1886(a)(4) of the Act, costs of approved educational 
activities are excluded from the operating costs of inpatient hospital 
services. Hospitals with approved graduate medical education (GME) 
programs are paid for the direct costs of GME in accordance with 
section 1886(h) of the Act. The amount of payment for direct GME costs 
for a cost reporting period is based on the hospital's number of 
residents in that period and the hospital's costs per resident in a 
base year. The existing regulations governing payments to the various 
types of hospitals are located in 42 CFR part 413.

C. Summary of Provisions of Recent Legislation Implemented in This 
Final Rule

1. Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act) (Pub. L. 113-185)
    The Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act) (Pub. L. 113-185), enacted on October 6, 2014, made a 
number of changes that affect the Long-Term Care Hospital Quality 
Reporting Program (LTCH QRP). We did not make proposals or updates to 
the LTCH Quality Reporting Program. We are continuing to maintain 
portions of section 1899B of the Act, as added by section 2(a) of the 
IMPACT Act, which, in part, requires LTCHs, among other post-acute care 
providers, to report standardized patient assessment data, data on 
quality measures, and data on resource use and other measures.
2. The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 
114-10)
    Section 414 of the Medicare Access and CHIP Reauthorization Act of 
2015 (MACRA, Pub. L. 114-10) specifies a 0.5

[[Page 58441]]

percent positive adjustment to the standardized amount of Medicare 
payments to acute care hospitals for FYs 2018 through 2023. These 
adjustments follow the recoupment adjustment to the standardized 
amounts under section 1886(d) of the Act based upon the Secretary's 
estimates for discharges occurring from FYs 2014 through 2017 to fully 
offset $11 billion, in accordance with section 631 of the ATRA. The FY 
2018 adjustment was subsequently adjusted to 0.4588 percent by section 
15005 of the 21st Century Cures Act.
3. Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94)
    Section 108 of the Further Consolidated Appropriations Act, 2020 
(Pub. L. 116-94) provides that, effective for cost reporting periods 
beginning on or after October 1, 2020, payment to a subsection (d) 
hospital that furnishes an allogeneic hematopoietic stem cell 
transplant for hematopoietic stem cell acquisition shall be made on a 
reasonable cost basis, and that the Secretary shall specify the items 
included in such hematopoietic stem cell acquisition in rulemaking. 
This statutory provision also requires that, beginning in FY 2021, the 
payments made based on reasonable cost for the acquisition costs of 
allogeneic hematopoietic stem cells be made in a budget neutral manner.

D. Issuance of Notice of Proposed Rulemaking

    In the FY 2021 IPPS/LTCH PPS proposed rule that appeared in the May 
29, 2020 Federal Register (84 FR 32460), we set forth proposed payment 
and policy changes to the Medicare IPPS for FY 2021 operating costs and 
capital-related costs of acute care hospitals and certain hospitals and 
hospital units that are excluded from IPPS. In addition, we set forth 
proposed changes to the payment rates, factors, and other payment and 
policy-related changes to programs associated with payment rate 
policies under the LTCH PPS for FY 2021.
    The following is a general summary of the changes that we proposed 
to make.
1. Proposed Changes to MS-DRG Classifications and Recalibrations of 
Relative Weights
    In section II. of the preamble of the proposed rule, we included--
     Proposed changes to MS-DRG classifications based on our 
yearly review for FY 2021.
     Proposed adjustment to the standardized amounts under 
section 1886(d) of the Act for FY 2021 in accordance with the 
amendments made to section 7(b)(1)(B) of Public Law 110- 90 by section 
414 of the MACRA.
     Proposed recalibration of the MS-DRG relative weights.
     A discussion of the proposed FY 2021 status of new 
technologies approved for add-on payments for FY 2020, a presentation 
of our evaluation and analysis of the FY 2021 applicants for add-on 
payments for high-cost new medical services and technologies (including 
public input, as directed by Pub. L. 108-173, obtained in a town hall 
meeting) for applications not submitted under an alternative pathway, 
and a discussion of the proposed status of FY 2021 new technology 
applicants under the alternative pathways for certain medical devices 
and certain antimicrobial products.
     Proposed revision to the new technology add-on payment 
policy where the coding associated with an application for new 
technology add-on payments or a previously approved technology that may 
continue to receive new technology add-on payments is proposed to be 
assigned to a proposed new MS-DRG.
     Proposed changes to the timing of the IPPS new technology 
add-on payment for certain antimicrobial products, and proposed 
expansion of the alternative pathway for certain antimicrobial 
products.
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
    In section III. of the preamble of the proposed rule we proposed to 
make revisions to the wage index for acute care hospitals and the 
annual update of the wage data. Specific issues addressed included, but 
were not limited to, the following:
     Proposed changes in the labor market area delineations 
based on revisions to the OMB Core Based Statistical Area (CBSA) 
delineations and proposed policies related to the proposed changes in 
CBSAs.
     The proposed FY 2021 wage index update using wage data 
from cost reporting periods beginning in FY 2017.
     Calculation, analysis, and implementation of the proposed 
occupational mix adjustment to the wage index for acute care hospitals 
for FY 2021 based on the 2016 Occupational Mix Survey.
     Proposed application of the rural floor and the frontier 
State floor, and continuation of the low wage index hospital policy.
     Proposed revisions to the wage index for acute care 
hospitals, based on hospital redesignations and reclassifications under 
sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.
     Proposed change to Lugar county assignments.
     Proposed adjustment to the wage index for acute care 
hospitals for FY 2021 based on commuting patterns of hospital employees 
who reside in a county and work in a different area with a higher wage 
index.
     Proposed labor-related share for the proposed FY 2021 wage 
index.
3. Other Decisions and Proposed Changes to the IPPS for Operating Costs
    In section IV of the preamble of the proposed rule, we discuss 
proposed changes or clarifications of a number of the provisions of the 
regulations in 42 CFR parts 412 and 413, including the following:
     Proposed changes to MS-DRGs subject to the post-acute care 
transfer policy and special payment policy.
     Proposed inpatient hospital update for FY 2021.
     Proposed amendment to address short cost reporting periods 
during applicable timeframe for establishment of service area for SCHs.
     Proposed updated national and regional case-mix values and 
discharges for purposes of determining RRC status, and proposed 
amendment for hospital cost reporting periods that are longer or 
shorter than 12 months.
     The statutorily required IME adjustment factor for FY 
2021.
     Proposed changes to the methodology for determining 
Medicare DSH for uncompensated care payments.
     Proposed changes to payment for allogeneic hematopoietic 
stem cell acquisition costs.
     Proposed payment adjustment for chimeric antigen receptor 
(CAR) T-cell therapy clinical trial cases.
     Proposed requirements for payment adjustments under the 
Hospital Readmissions Reduction Program for FY 2021.
     The provision of estimated and newly established 
performance standards for the calculation of value-based incentive 
payments under the Hospital Value-Based Purchasing Program.
     Proposed requirements for payment adjustments to hospitals 
under the HAC Reduction Program for FY 2021.
     Proposed policy changes related to medical residents 
affected by residency program or teaching hospital closure.
     Discussion of and proposed changes relating to the 
implementation of the Rural Community Hospital Demonstration Program in 
FY 2021.
     Proposal to collect market-based rate information on the 
Medicare cost

[[Page 58442]]

report for cost reporting periods ending on or after January 1, 2021, 
and request for comment on a potential market-based MS-DRG relative 
weight methodology beginning in FY 2024, that we stated we may adopt in 
this rulemaking.
4. Proposed FY 2021 Policy Governing the IPPS for Capital-Related Costs
    In section V. of the preamble to the proposed rule, we discussed 
the proposed payment policy requirements for capital-related costs and 
capital payments to hospitals for FY 2021.
5. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate-of-Increase Percentages
    In section VI. of the preamble of the proposed rule, we discussed--
     Proposed changes to payments to certain excluded hospitals 
for FY 2021.
     Proposed continued implementation of the Frontier 
Community Health Integration Project (FCHIP) Demonstration.
6. Proposed Changes to the LTCH PPS
    In section VII. of the preamble of the proposed rule, we set 
forth--
     Proposed changes to the LTCH PPS Federal payment rates, 
factors, and other payment rate policies under the LTCH PPS for FY 
2021.
     Proposed rebasing and revising of the LTCH PPS market 
basket.
7. Proposed Changes Relating to Quality Data Reporting for Specific 
Providers and Suppliers
    In section VIII. of the preamble of the proposed rule, we 
addressed--
     Proposed requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program.
     Proposed changes to the requirements for the quality 
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
     Proposed changes to requirements pertaining to eligible 
hospitals and CAHs participating in the Medicare and Medicaid Promoting 
Interoperability Programs.
8. Other Proposed Changes
    Section IX. of the preamble to the proposed rule included the 
following:
     Proposed changes pertaining to the submission format 
requirements and reimbursement rates for patient records sent to the 
Beneficiary and Family Centered Care Quality Improvement Organizations 
(BFCC-QIOs).
     Proposed changes pertaining to allowing for mandatory 
electronic filing of Provider Reimbursement Review Board appeals.
     Proposed changes pertaining to and codification of certain 
longstanding Medicare Bad Debt policies.
9. Other Provisions of the Proposed Rule
    Section X. of the preamble to the proposed rule included our 
discussion of the MedPAC Recommendations.
    Section XI. of the preamble to the proposed rule included the 
following:
     A descriptive listing of the public use files associated 
with the proposed rule.
     The collection of information requirements for entities 
based on our proposals.
     Information regarding our responses to public comments.
     Waiver of the 60-day delay in effective date for the final 
rule.
10. Determining Prospective Payment Operating and Capital Rates and 
Rate-of-Increase Limits for Acute Care Hospitals
    In sections II. and III. of the Addendum to the proposed rule, we 
set forth the proposed changes to the amounts and factors for 
determining the proposed FY 2021 prospective payment rates for 
operating costs and capital-related costs for acute care hospitals. We 
proposed to establish the threshold amounts for outlier cases. In 
addition, in section IV. of the Addendum to the proposed rule, we 
addressed the update factors for determining the rate-of-increase 
limits for cost reporting periods beginning in FY 2021 for certain 
hospitals excluded from the IPPS.
11. Determining Prospective Payment Rates for LTCHs
    In section V. of the Addendum to the proposed rule, we set forth 
proposed changes to the amounts and factors for determining the 
proposed FY 2021 LTCH PPS standard Federal payment rate and other 
factors used to determine LTCH PPS payments under both the LTCH PPS 
standard Federal payment rate and the site neutral payment rate in FY 
2021. We proposed to establish the adjustment for wage levels, 
including the proposed changes in the CBSAs based on revisions to the 
OMB labor market area delineations and a proposed adjustment to reflect 
the expected increases in wages under the IPPS low wage index hospital 
policy. We are proposing to establish the adjustments for the labor-
related share, the cost-of-living adjustment, and high-cost outliers, 
including the applicable fixed-loss amounts and the LTCH cost-to-charge 
ratios (CCRs) for both payment rates.
12. Impact Analysis
    In Appendix A of the proposed rule, we set forth an analysis of the 
impact the proposed changes would have on affected acute care 
hospitals, CAHs, LTCHs, PCHs and other entities.
13. Recommendation of Update Factors for Operating Cost Rates of 
Payment for Hospital Inpatient Services
    In Appendix B of the proposed rule, as required by sections 
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of 
the appropriate percentage changes for FY 2021 for the following:
     A single average standardized amount for all areas for 
hospital inpatient services paid under the IPPS for operating costs of 
acute care hospitals (and hospital-specific rates applicable to SCHs 
and MDHs).
     Target rate-of-increase limits to the allowable operating 
costs of hospital inpatient services furnished by certain hospitals 
excluded from the IPPS.
     The LTCH PPS standard Federal payment rate and the site 
neutral payment rate for hospital inpatient services provided for LTCH 
PPS discharges.
14. Discussion of Medicare Payment Advisory Commission Recommendations
    Under section 1805(b) of the Act, MedPAC is required to submit a 
report to Congress, no later than March 15 of each year, in which 
MedPAC reviews and makes recommendations on Medicare payment policies. 
MedPAC's March 2020 recommendations concerning hospital inpatient 
payment policies address the update factor for hospital inpatient 
operating costs and capital-related costs for hospitals under the IPPS. 
We addressed these recommendations in Appendix B of the proposed rule. 
For further information relating specifically to the MedPAC March 2020 
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's website at: http://www.medpac.gov.

E. Advancing Health Information Exchange

    The Department of Health and Human Services (HHS) has a number of 
initiatives designed to encourage and support the adoption of 
interoperable health information technology and to promote nationwide 
health information exchange to improve health care and patient access 
to their health information. The Office of the National Coordinator for 
Health Information Technology (ONC) and CMS work collaboratively to 
advance

[[Page 58443]]

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

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

A. Background

    Section 1886(d) of the Act specifies that the Secretary shall 
establish a classification system (referred to as diagnosis-related 
groups (DRGs)) for inpatient discharges and adjust payments under the 
IPPS based on appropriate weighting factors assigned to each DRG. 
(Beginning in FY 2008, CMS adopted the Medicare-Severity DRGs (MS-DRGs) 
to better recognize severity of illness and resource use based on case 
complexity.) Therefore, under the IPPS, Medicare pays for inpatient 
hospital services on a rate per discharge basis that varies according 
to the DRG to which a beneficiary's stay is assigned. The formula used 
to calculate payment for a specific case multiplies an individual 
hospital's payment rate per case by the weight of the DRG to which the 
case is assigned. Each DRG weight represents the average resources 
required to care for cases in that particular DRG, relative to the 
average resources used to treat cases in all DRGs. Section 
1886(d)(4)(C) of the Act requires that the Secretary adjust the DRG 
classifications and relative weights at least annually to account for 
changes in resource consumption. These adjustments are made to reflect 
changes in treatment patterns, technology, and any other factors that 
may change the relative use of hospital resources.

B. Adoption of the MS-DRGs and MS-DRG Reclassifications

    For information on the adoption of the MS-DRGs in FY 2008, we refer 
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 
through 47189).
    For general information about the MS-DRG system, including yearly 
reviews and changes to the MS-DRGs, we refer readers to the previous 
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
43764 through 43766) and the FYs 2011 through 2020 IPPS/LTCH PPS final 
rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR 
53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; 81 FR 56787 through 
56872; 82 FR 38010 through 38085, 83 FR 41158 through 41258, and 84 FR 
42058 through 42165, respectively).

C. FY 2021 MS-DRG Documentation and Coding Adjustment

1. Background on the Prospective MS-DRG Documentation and Coding 
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90 and 
the Recoupment or Repayment Adjustment Authorized by Section 631 of the 
American Taxpayer Relief Act of 2012 (ATRA).
    In the FY 2008 IPPS final rule with comment period (72 FR 47140 
through 47189), we adopted the MS-DRG patient classification system for 
the IPPS, effective October 1, 2007, to better recognize severity of 
illness in Medicare payment rates for acute care hospitals. The 
adoption of the MS-DRG system resulted in the expansion of the number 
of DRGs from 538 in FY 2007 to 745 in FY 2008. By increasing the number 
of MS-DRGs and more fully taking into account patient severity of 
illness in Medicare payment rates for acute care hospitals, MS-DRGs 
encourage hospitals to improve their documentation and coding of 
patient diagnoses. In the FY 2008 IPPS final rule with comment period 
(72 FR 47175 through 47186), we indicated that the adoption of the MS-
DRGs had the potential to lead to increases in aggregate payments 
without a corresponding increase in actual patient severity of illness 
due to the incentives for additional documentation and coding. In that 
final rule with comment period, we exercised our authority under 
section 1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain 
budget neutrality by adjusting the national standardized amount, to 
eliminate the estimated effect of changes in coding or classification 
that do not reflect real changes in case-mix. Our actuaries estimated 
that maintaining budget neutrality required an adjustment of -4.8 
percentage points to the national standardized amount. We

[[Page 58444]]

provided for phasing in this -4.8 percentage point adjustment over 3 
years. Specifically, we established prospective documentation and 
coding adjustments of -1.2 percentage points for FY 2008, -1.8 
percentage points for FY 2009, and -1.8 percentage points for FY 2010.
    On September 29, 2007, Congress enacted the TMA [Transitional 
Medical Assistance], Abstinence Education, and QI [Qualifying 
Individuals] Programs Extension Act of 2007 (Pub. L. 110-90). Section 
7(a) of Public Law 110-90 reduced the documentation and coding 
adjustment made as a result of the MS-DRG system that we adopted in the 
FY 2008 IPPS final rule with comment period to -0.6 percentage point 
for FY 2008 and -0.9 percentage point for FY 2009.
    As discussed in prior year rulemakings, and most recently in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56780 through 56782), we 
implemented a series of adjustments required under sections 7(b)(1)(A) 
and 7(b)(1)(B) of Public Law 110-90, based on a retrospective review of 
FY 2008 and FY 2009 claims data. We completed these adjustments in FY 
2013 but indicated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 
through 53275) that delaying full implementation of the adjustment 
required under section 7(b)(1)(A) of Public Law 110-90 until FY 2013 
resulted in payments in FY 2010 through FY 2012 being overstated, and 
that these overpayments could not be recovered under Public Law 110-90.
    In addition, as discussed in prior rulemakings and most recently in 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38008 through 38009), 
section 631 of the American Taxpayer Relief Act of 2012 (ATRA) amended 
section 7(b)(1)(B) of Public Law 110-90 to require the Secretary to 
make a recoupment adjustment or adjustments totaling $11 billion by FY 
2017. This adjustment represented the amount of the increase in 
aggregate payments as a result of not completing the prospective 
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 
until FY 2013.
2. Adjustments Made for FY 2018, FY 2019, and FY 2020 as Required Under 
Section 414 of Public Law 114-10 (MACRA) and Section 15005 of Public 
Law 114-255
    As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785), 
once the recoupment required under section 631 of the ATRA was 
complete, we had anticipated making a single positive adjustment in FY 
2018 to offset the reductions required to recoup the $11 billion under 
section 631 of the ATRA. However, section 414 of the MACRA (which was 
enacted on April 16, 2015) replaced the single positive adjustment we 
intended to make in FY 2018 with a 0.5 percentage point positive 
adjustment for each of FYs 2018 through 2023. In the FY 2017 
rulemaking, we indicated that we would address the adjustments for FY 
2018 and later fiscal years in future rulemaking. Section 15005 of the 
21st Century Cures Act (Pub. L. 114-255), which was enacted on December 
13, 2016, amended section 7(b)(1)(B) of the TMA, as amended by section 
631 of the ATRA and section 414 of the MACRA, to reduce the adjustment 
for FY 2018 from a 0.5 percentage point positive adjustment to a 0.4588 
percentage point positive adjustment. As we discussed in the FY 2018 
rulemaking, we believe the directive under section 15005 of Public Law 
114-255 is clear. Therefore, in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38009) for FY 2018, we implemented the required +0.4588 
percentage point adjustment to the standardized amount. In the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41157) and in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42057), consistent with the requirements of section 
414 of the MACRA, we implemented 0.5 percentage point positive 
adjustments to the standardized amount for FY 2019 and FY 2020, 
respectively. We indicated that the FY 2018, FY 2019, and FY 2020 
adjustments were permanent adjustments to payment rates. We also stated 
that we plan to propose future adjustments required under section 414 
of the MACRA for FYs 2021 through 2023 in future rulemaking.
3. Adjustment for FY 2021
    Consistent with the requirements of section 414 of the MACRA, we 
proposed to implement a 0.5 percentage point positive adjustment to the 
standardized amount for FY 2021. We indicated that this would 
constitute a permanent adjustment to payment rates. We stated in the 
proposed rule that we plan to propose future adjustments required under 
section 414 of the MACRA for FYs 2022 through 2023 in future 
rulemaking.
    Comment: Commenters stated that in order to comply with ATRA 
requirements, CMS anticipated that a cumulative -3.2 percentage point 
adjustment to the standardized amount would achieve the mandated $11 
billion recoupment. A commenter stated that by retaining the -0.7 
percentage point adjustment made in FY 2017, CMS has miscalculated the 
directives issued by Congress, and has contravened Congress' clear 
instructions and intent. The commenter contends that when Section 15005 
of the 21st Century Cures Act (Pub. L. 114-255) altered the positive 
adjustment for FY 2018 from 0.5 percentage points to 0.4588 percentage 
points, Congress recognized that this difference would not be restored. 
According to the commenter, Congress thus assumed that the 0.7 
percentage point adjustment would be returned as part of the 
restoration process; otherwise, it would have updated the ``baseline'' 
to reflect CMS' revised total negative adjustment of 3.9%. A commenter 
asserted that the additional -0.7 percentage point adjustment made in 
FY 2017 has been improperly continued in FY 2018, FY 2019, and FY 2020, 
and failure to restore the additional 0.7 percentage point adjustment 
will cause hospitals to experience a significant cut in their 
reimbursement for FY 2021 (in addition to the losses already incurred 
for FYs 2018, 2019, and 2020). Other commenters urged CMS to use its 
exceptions and adjustments authority under section 1886(d)(5)(I) by FY 
2024, to restore an additional 0.7 percentage point payment adjustment 
to restore payment equity to hospitals and comply with what they 
asserted was Congressional intent. Another commenter suggested CMS 
implement an approximate positive adjustment of 1.0 percentage point by 
FY 2024 to fully and permanently restore the entire -3.9 percentage 
point recoupment adjustment to IPPS rates.
    Response: As we discussed in the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32471), and in response to similar comments in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42057), we believe section 414 of the 
MACRA and section 15005 of the 21st Century Cures Act set forth the 
levels of positive adjustments for FYs 2018 through 2023. We are not 
convinced that the adjustments prescribed by MACRA were predicated on a 
specific adjustment level estimated or implemented by CMS in previous 
rulemaking. While we had anticipated making a positive adjustment in FY 
2018 to offset the reductions required to recoup the $11 billion under 
section 631 of the ATRA, section 414 of the MACRA required that we 
implement a 0.5 percentage point positive adjustment for each of FYs 
2018 through 2023, and not the single positive adjustment we intended 
to make in FY 2018. As discussed in the FY 2017 IPPS/LTCH PPS final 
rule, by phasing in a total positive adjustment of only 3.0 percentage 
points, section 414 of the

[[Page 58445]]

MACRA would not fully restore even the 3.2 percentage point adjustment 
originally estimated by CMS in the FY 2014 IPPS/LTCH PPS final rule (78 
FR 50515). Moreover, as discussed in the FY 2018 IPPS/LTCH PPS final 
rule, Public Law 114-255, which further reduced the positive adjustment 
required for FY 2018 from 0.5 percentage point to 0.4588 percentage 
point, was enacted on December 13, 2016, after CMS had proposed and 
finalized the final negative -1.5 percentage point adjustment required 
under section 631 of the ATRA. We see no evidence that Congress enacted 
these adjustments with the intent that CMS would make an additional 
+0.7 percentage point adjustment in FY 2018 to compensate for the 
higher than expected final ATRA adjustment made in FY 2017, nor are we 
persuaded that it would be appropriate to use the Secretary's 
exceptions and adjustments authority under section 1886(d)(5)(I) of the 
Act to adjust payments in FY 2021 to restore any additional amount of 
the original 3.9 percentage point reduction, given Congress' 
prescriptive adjustment levels under section 414 of the MACRA and 
section 15005 of the 21st Century Cures Act. We intend to address 
adjustments for FY 2022 and later years in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal to implement a 0.5 percentage point adjustment 
to the standardized amount for FY 2021.

D. Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for FY 2021 MS-DRG 
Updates
a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Revision (ICD-10)
    As of October 1, 2015, providers use the International 
Classification of Diseases, 10th Revision (ICD-10) coding system to 
report diagnoses and procedures for Medicare hospital inpatient 
services under the MS-DRG system instead of the ICD-9-CM coding system, 
which was used through September 30, 2015. The ICD-10 coding system 
includes the International Classification of Diseases, 10th Revision, 
Clinical Modification (ICD-10-CM) for diagnosis coding and the 
International Classification of Diseases, 10th Revision, Procedure 
Coding System (ICD-10-PCS) for inpatient hospital procedure coding, as 
well as the ICD-10-CM and ICD-10-PCS Official Guidelines for Coding and 
Reporting. For a detailed discussion of the conversion of the MS-DRGs 
to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56787 through 56789).
b. Basis for FY 2021 MS-DRG Updates
    Given the need for more time to carefully evaluate requests and 
propose updates, as discussed in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38010), we changed the deadline to request updates to the MS-
DRGs to November 1 of each year, which provided an additional 5 weeks 
for the data analysis and review process. Interested parties had to 
submit any comments and suggestions for FY 2021 by November 1, 2019, 
and the comments that were submitted in a timely manner for FY 2021 are 
discussed in this section of the preamble of this final rule. As we 
discuss in the sections that follow, we may not be able to fully 
consider all of the requests that we receive for the upcoming fiscal 
year. We have found that, with the implementation of ICD-10, some types 
of requested changes to the MS-DRG classifications require more 
extensive research to identify and analyze all of the data that are 
relevant to evaluating the potential change. We note in the discussion 
that follows those topics for which further research and analysis are 
required, and which we will continue to consider in connection with 
future rulemaking.
    We stated in the proposed rule that with the continued increase in 
the number and complexity of the requested changes to the MS-DRG 
classifications since the adoption of ICD-10 MS-DRGs, and in order to 
consider as many requests as possible, more time is needed to carefully 
evaluate the requested changes, analyze claims data, and consider any 
updates. Therefore, we stated that we are changing the deadline to 
request changes to the MS-DRGs to October 20th of each year to allow 
for additional time for the review and consideration of any updates. We 
stated that interested parties should submit any comments and 
suggestions for FY 2022 by October 20, 2020 via the CMS MS-DRG 
Classification Change Request Mailbox located at: 
[email protected].
    Comment: A commenter expressed concern that changing the deadline 
to submit requested changes to the MS-DRGs from November 1st to October 
20th will shorten the amount of time that hospitals have to review the 
final rule each year and determine how changes may impact MS-DRG 
recommendations for the following year. The commenter opposed the 
change in date stating hospitals should be given more time to evaluate 
impacts of the MS-DRG changes. We also received comments urging CMS to 
consider the impact of the COVID-19 pandemic on the FY 2020 MedPAR data 
in evaluating potential MS-DRG changes for FY 2022. Commenters noted 
that the volume for MS-DRGs unrelated to COVID-19 hospitalizations may 
not be typical as a result of the postponement or cancellation of 
elective surgeries.
    Response: We believe that a change in the deadline from November 
1st to October 20th will continue to provide hospitals sufficient time 
to assess potential impacts and inform future MS-DRG recommendations. 
As noted later in this section, in response to prior public comments, 
we provided a test version of the ICD-10 MS-DRG GROUPER Software, 
Version 38 containing the proposed GROUPER logic for FY 2021 in 
connection with the proposed rule, allowing providers to build case 
examples reflecting the proposed MS-DRG changes. Therefore, we believe 
providers have sufficient time to assess potential impacts. However, 
because of the unique circumstance for this final rule for which we are 
waiving the delayed effective date (as discussed in section I.A.2 of 
this preamble), we are maintaining the deadline of November 1, 2020 for 
FY 2022 MS-DRG classification change requests, and expect to reconsider 
a change in the deadline beginning with comments and suggestions 
submitted for FY 2023. In response to the public comments received 
expressing concerns about evaluating potential MS-DRG changes for FY 
2022 using the FY 2020 MedPAR claims data, which may reflect various 
impacts as a result of the COVID-19 pandemic, we will consider these 
concerns in developing FY 2022 proposals. Accordingly, interested 
parties should submit any comments and suggestions for FY 2022 by 
November 1, 2020 via the CMS MS-DRG Classification Change Request 
Mailbox located at: [email protected].
    Based on public comments received in response to the FY 2020 IPPS/
LTCH PPS proposed rule, we provided a test version of the ICD-10 MS-DRG 
GROUPER Software, Version 38, in connection with the FY 2021 IPPS/LTCH 
PPS proposed rule so that the public could better analyze and 
understand the impact of the proposals included in the proposed rule. 
We noted that this test software reflects the proposed GROUPER logic 
for FY 2021. Therefore, it includes the new diagnosis

[[Page 58446]]

and procedure codes that are effective for FY 2021 as reflected in 
Table 6A.--New Diagnosis Codes--FY 2021 and Table 6B.--New Procedure 
Codes--FY 2021 that were associated with the proposed rule and does not 
include the diagnosis codes that are invalid beginning in FY 2021 as 
reflected in Table 6C.--Invalid Diagnosis Codes--FY 2021 that was 
associated with the proposed rule. We also noted that there were not 
any procedure codes that had been designated as invalid for FY 2021 at 
the time of the development of the proposed rule. Those tables were not 
published in the Addendum to the proposed rule, but are available via 
the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as 
described in section VI. of the Addendum to the proposed rule. Because 
the diagnosis codes no longer valid for FY 2021 are not reflected in 
the test software, we made available a supplemental file in Table 6P.1a 
that includes the mapped Version 38 FY 2021 ICD-10-CM codes and the 
deleted Version 37 FY 2020 ICD-10-CM codes that should be used for 
testing purposes with users' available claims data. Therefore, users 
had access to the test software allowing them to build case examples 
that reflect the proposals that were included in the proposed rule. In 
addition, users were able to view the draft version of the ICD-10 MS-
DRG Definitions Manual, Version 38.
    The test version of the ICD-10 MS-DRG GROUPER Software, Version 38, 
the draft version of the ICD-10 MS-DRG Definitions Manual, Version 38, 
and the supplemental mapping file in Table 6P.1a of FY 2020 and FY 2021 
ICD-10-CM diagnosis codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    Following are the changes that we proposed to the MS-DRGs for FY 
2021. We invited public comments on each of the MS-DRG classification 
proposed changes, as well as our proposals to maintain certain existing 
MS-DRG classifications discussed in the proposed rule. In some cases, 
we proposed changes to the MS-DRG classifications based on our analysis 
of claims data and consultation with our clinical advisors. In other 
cases, we proposed to maintain the existing MS-DRG classifications 
based on our analysis of claims data and consultation with our clinical 
advisors. For the FY 2021 IPPS/LTCH PPS proposed rule, our MS-DRG 
analysis was based on ICD-10 claims data from the September 2019 update 
of the FY 2019 MedPAR file, which contains hospital bills received 
through September 30, 2019, for discharges occurring through September 
30, 2019. In our discussion of the proposed MS-DRG reclassification 
changes, we referred to these claims data as the ``September 2019 
update of the FY 2019 MedPAR file.''
    In this FY 2021 IPPS/LTCH PPS final rule, we summarize the public 
comments we received on our proposals, present our responses, and state 
our final policies. For this FY 2021 final rule, we generally did not 
perform any further MS-DRG analysis of claims data. Therefore, our MS-
DRG analysis is based on ICD-10 claims data from the September 2019 
update of the FY 2019 MedPAR file, which contains hospital bills 
received through September 30, 2019, for discharges occurring through 
September 30, 2019, except as otherwise noted.
    As explained in previous rulemaking (76 FR 51487), in deciding 
whether to propose to make further modifications to the MS-DRGs for 
particular circumstances brought to our attention, we consider whether 
the resource consumption and clinical characteristics of the patients 
with a given set of conditions are significantly different than the 
remaining patients represented in the MS-DRG. We evaluate patient care 
costs using average costs and lengths of stay and rely on the judgment 
of our clinical advisors to determine whether patients are clinically 
distinct or similar to other patients represented in the MS-DRG. In 
evaluating resource costs, we consider both the absolute and percentage 
differences in average costs between the cases we select for review and 
the remainder of cases in the MS-DRG. We also consider variation in 
costs within these groups; that is, whether observed average 
differences are consistent across patients or attributable to cases 
that are extreme in terms of costs or length of stay, or both. Further, 
we consider the number of patients who will have a given set of 
characteristics and generally prefer not to create a new MS-DRG unless 
it would include a substantial number of cases.
    In our examination of the claims data, we apply the following 
criteria established in FY 2008 (72 FR 47169) to determine if the 
creation of a new complication or comorbidity (CC) or major 
complication or comorbidity (MCC) subgroup within a base MS-DRG is 
warranted:
     A reduction in variance of costs of at least 3 percent;
     At least 5 percent of the patients in the MS-DRG fall 
within the CC or MCC subgroup;
     At least 500 cases are in the CC or MCC subgroup;
     There is at least a 20-percent difference in average costs 
between subgroups; and
     There is a $2,000 difference in average costs between 
subgroups.
In order to warrant creation of a CC or MCC subgroup within a base MS-
DRG, the subgroup must meet all five of the criteria.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to expand 
the previously listed criteria to also include the NonCC subgroup. We 
explained that we believe that applying these criteria to the NonCC 
subgroup would better reflect resource stratification and also promote 
stability in the relative weights by avoiding low volume counts for the 
NonCC level MS-DRGs.
    Specifically, in our analysis of the MS-DRG classification requests 
for FY 2021 that we received by November 1, 2019, as well as any 
additional analyses that were conducted in connection with those 
requests, we applied these criteria to each of the MCC, CC and NonCC 
subgroups, as described in the following table. We provided the 
following table to better illustrate all five criteria and how they are 
applied for each CC subgroup, including their application to the NonCC 
subgroup beginning with the FY 2021 proposed rule. We also stated we 
had revised the order in which the criteria are presented for 
illustrative purposes.

[[Page 58447]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.000

    In general, once the decision has been made to propose to make 
further modifications to the MS-DRGs as described previously, such as 
creating a new base MS-DRG, or in our evaluation of a specific MS-DRG 
classification request to split (or subdivide) an existing base MS-DRG 
into severity levels, all five criteria must be met for the base MS-DRG 
to be split (or subdivided) by a CC subgroup. We note that in our 
analysis of requests to create a new MS-DRG, we evaluate the most 
recent year of MedPAR claims data available. For example, we stated 
earlier that for the FY 2021 IPPS/LTCH PPS proposed rule and this final 
rule, our MS-DRG analysis is based on ICD-10 claims data from the 
September 2019 update of the FY 2019 MedPAR file. However, in our 
evaluation of requests to split an existing base MS-DRG into severity 
levels, as noted in prior rulemaking (80 FR 49368), we analyze the most 
recent 2 years of data. This analysis includes 2 years of MedPAR claims 
data to compare the data results from 1 year to the next to avoid 
making determinations about whether additional severity levels are 
warranted based on an isolated year's data fluctuation and also, to 
validate that the established severity levels within a base MS-DRG are 
supported. The first step in our process of evaluating if the creation 
of a new CC subgroup within a base MS-DRG is warranted is to determine 
if all the criteria are satisfied for a three way split. If the 
criteria fail, the next step is to determine if the criteria are 
satisfied for a two way split. If the criteria for both of the two way 
splits fail, then a split (or CC subgroup) would generally not be 
warranted for that base MS-DRG. If the three way split fails on any one 
of the five criteria and all five criteria for both two way splits 
(1_23 and 12_3) are met, we would apply the two way split with the 
highest R2 value. We note that if the request to split (or subdivide) 
an existing base MS-DRG into severity levels specifies the request is 
for either one of the two way splits (1_23 or 12_3), in response to the 
specific request, we will evaluate the criteria for both of the two way 
splits, however we do not also evaluate the criteria for a three way 
split.
    Comment: A commenter acknowledged CMS's proposal to expand the 
previously listed criteria to create subgroups to also include the 
NonCC subgroup. This commenter expressed concern that the proposed 
principles are limited and restrictive and more applicable to MCCs than 
CCs.
    Response: It is not clear to us from the limited discussion in the 
comment why the commenter believes the principles are limited and 
restrictive and more applicable to MCCs than CCs, as the commenter did 
not provide further information or examples of this, nor suggest 
alternative approaches. We note that the criteria to create subgroups 
within the MS-DRGs as discussed in the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32472 through 32473) are separate from the guiding 
principles we discussed in the context of the comprehensive CC/MCC 
analysis of diagnosis codes when reported as a secondary diagnosis (85 
FR 32550). However, the commenter did not provide any further 
information, alternative suggestions or recommendations with respect to 
either analysis.
    Comment: A commenter noted that in CMS's analysis of the MS-DRG 
classification requests for FY 2021, the proposed expanded criteria 
were applied to each of the MCC, CC and NonCC subgroups and it 
questioned the appropriateness of applying the proposed subgroup 
criteria to include the NonCC subgroup for FY 2021 prior to it being 
finalized. This commenter also requested that CMS clarify how it will 
apply the proposed expansion of the subgroup criteria going forward. 
The commenter stated that if CMS were to apply the NonCC subgroup 
criteria retroactively in future rulemaking there are concerns with 
implications on the MS-DRG groupings and relative weights. The 
commenter conducted its own preliminary analysis using the FY 2018 
MedPAR data and noted that some MS-DRGs with three subgroups would have 
two subgroups under the new framework and it was not clear how this may 
impact the relative weights of those MS-DRGs.
    Response: In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed 
to expand the existing criteria to create subgroups within a base MS-
DRG to include the NonCC subgroup (85 FR 32472 through 32473). We noted 
that in our analysis of the MS-DRG classification requests for FY 2021, 
we applied the proposed criteria to each of the MCC, CC and NonCC 
subgroups. In response to the commenter's concern about the 
appropriateness of applying

[[Page 58448]]

the proposed subgroup criteria for MS-DRG classification requests in FY 
2021 prior to it being finalized, we note that we proposed and 
requested comments on the expansion of these criteria to the NonCC 
subgroup as part of this rulemaking and before finalization of this 
approach for FY 2021 MS-DRG changes. We also note that in the absence 
of applying the proposed criteria to include the NonCC subgroup, the 
MS-DRG related proposals for FY 2021 involving such requests to create 
subgroups would have similar results. However, to better illustrate for 
the reader the criteria that were established in FY 2008 (72 FR 47169) 
to determine if the creation of a new CC or MCC subgroup within a base 
MS-DRG is warranted, we have provided this table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.001

    As shown in the table, under column number two (Three-Way Split), 
the first criterion requires ``500+ cases for MCC group; and 500+ cases 
for CC group'' and the second criterion requires ``5%+ cases for MCC 
group; and 5%+ cases for CC group''. We note that there is no volume or 
percentage of cases requirement for the NonCC group under the first and 
second criterion for this type of severity level split under the 
existing criteria. We further note that the proposed expansion of the 
criteria to include the NonCC subgroup, as discussed in the proposed 
rule, is only applicable for a three-way split because as previously 
illustrated in the table, the criteria for the NonCC subgroup already 
exists in each of the options for a two-way split.
    As stated previously, in the absence of applying the proposed 
criteria to include the NonCC subgroup, the MS-DRG related proposals 
for FY 2021 involving such requests to create subgroups would have 
similar results. For example, in response to the request under the Pre-
MDC category to split MS-DRG 014 (Allogeneic Bone Marrow Transplant) 
into two severity levels, based on the presence of a MCC, we discussed 
our application of the criteria to create subgroups for each of the 
two-way severity level splits. We noted that the criterion that there 
be at least 500 cases for each subgroup (with MCC and without MCC) 
failed due to low volume, for both years analyzed. The analysis did not 
specifically rely on application of the proposed expansion of the 
criteria for the NonCC subgroup since the request was not for a three-
way severity split and we noted there was already an insufficient 
volume of cases (less than 500) in the CC subgroup (CC+NonCC group). 
Another example under the Pre-MDC category is for the proposed new MS-
DRG 018 (Chimeric Antigen Receptor (CAR) T-cell Immunotherapy), for 
which we received public comments regarding CC subgroups and is 
discussed in further detail in section II.E.2.b. of the preamble of 
this final rule.
    We take this opportunity to clarify that there are no plans to 
apply the proposed expansion of the criteria to the NonCC subgroup 
retroactively in future rulemaking. The commenter is correct that 
application of the proposed NonCC subgroup criteria going forward may 
result in modifications to certain MS-DRGs that are currently split 
into three severity levels and result in MS-DRGs that are split into 
two severity levels under the proposed new framework. Any proposed 
modifications to the MS-DRGs would be addressed in future rulemaking 
consistent with our annual process and reflected in the Table 5--
Proposed List of Medicare Severity Diagnosis Related Groups (MS-DRGs), 
Relative Weighting Factors, and Geometric and Arithmetic Mean Length of 
Stay for the applicable fiscal year.
    After consideration of the public comments we received, we are 
finalizing our proposal to expand the previously listed criteria to 
also include the NonCC subgroup.
    We are making the FY 2021 ICD-10 MS-DRG GROUPER and Medicare Code 
Editor (MCE) Software Version 38, the ICD-10 MS-DRG Definitions Manual 
files Version 38 and the Definitions of Medicare Code Edits Manual 
Version 38 available to the public on our CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
2. Pre-MDC
a. Bone Marrow Transplants
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32473 through 32475), we received two separate requests that involve 
the MS-

[[Page 58449]]

DRGs where bone marrow transplant procedures are assigned. The first 
request was to redesignate MS-DRG 014 (Allogeneic Bone Marrow 
Transplant), MS-DRG 016 (Autologous Bone Marrow Transplant with CC/MCC 
or T-Cell Immunotherapy), and MS-DRG 017 (Autologous Bone Marrow 
Transplant without CC/MCC) from surgical MS-DRGs to medical MS-DRGs. 
According to the requestor, bone marrow transplant procedures involve a 
transfusion of donor cells and do not involve a surgical procedure or 
require the resources of an operating room (O.R.). The second request 
involving bone marrow transplant procedures was to split MS-DRG 014 
(Allogeneic Bone Marrow Transplant) into two severity levels, based on 
the presence of a MCC. In this section of this rule, we discuss each 
request in more detail.
    With regard to the first request, the requestor noted that the 
logic for MS-DRG 014 consists of ICD-10-PCS procedure codes describing 
allogeneic bone marrow transplants that are designated as non-operating 
room (non-O.R.) procedures. The requestor also noted that the logic for 
MS-DRGs 016 and 017 includes ICD-10-PCS procedure codes describing 
autologous bone marrow transplants where certain procedure codes are 
designated as O.R. and other procedure codes are designated as non-O.R. 
procedures. The requestor stated that redesignating the bone marrow 
transplant MS-DRGs from surgical to medical would clinically align with 
the resources utilized in the performance of these procedures.
    The requestor is correct that bone marrow transplant procedures are 
currently assigned to MS-DRGs 014, 016, and 017 which are classified as 
surgical MS-DRGs under the Pre-MDC category for the ICD-10 MS-DRGs. The 
requestor is also correct that the logic for MS-DRG 014 consists of 
ICD-10-PCS procedure codes describing allogeneic bone marrow 
transplants that are designated as non-operating room (non-O.R.) 
procedures and that the logic for MS-DRGs 016 and 017 includes ICD-10-
PCS procedure codes describing autologous bone marrow transplants where 
certain procedure codes are designated as O.R. procedures and other 
procedure codes are designated as non-O.R. procedures. We refer the 
reader to the ICD-10 MS-DRG Definitions Manual Version 37 which is 
available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete documentation of the GROUPER 
logic for MS-DRGs 014, 016, and 017.
    As noted in the proposed rule, we consulted with our clinical 
advisors and they agreed that bone marrow transplant procedures are 
similar to a blood transfusion procedure, do not utilize the resources 
of an operating room, and are not surgical procedures. Our clinical 
advisors concurred that bone marrow transplants are medical procedures 
and it is more accurate to designate the MS-DRGs to which these 
procedures are assigned as medical MS-DRGs versus surgical MS-DRGs. 
Therefore, we proposed to redesignate MS-DRGs 014, 016, and 017 as 
medical MS-DRGs effective October 1, 2020 for FY 2021.
    As noted previously, the logic for MS-DRGs 016 and 017 includes 
ICD-10-PCS procedure codes describing autologous bone marrow 
transplants and related procedures where certain procedure codes are 
designated as O.R. and other procedure codes are designated as non-O.R. 
procedures. We stated in the proposed rule that during our review of 
the bone marrow transplant procedures assigned to these MS-DRGs, we 
identified the following 8 procedure codes that are currently 
designated as O.R procedures.
[GRAPHIC] [TIFF OMITTED] TR18SE20.002

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

[[Page 58450]]

from 1 year to the next to avoid making determinations about whether 
additional severity levels are warranted based on an isolated year's 
data fluctuation and also, to validate that the established severity 
levels within a base MS-DRG are supported. Therefore, we reviewed the 
claims data for base MS-DRG 014 using the September 2018 update of the 
FY 2018 MedPAR file and the September 2019 update of the FY 2019 MedPAR 
file, which were used in our analysis of claims data for MS-DRG 
reclassification requests for FY 2020 and FY 2021. Our findings are 
shown in the table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.003

    We applied the criteria to create subgroups for each of the two-way 
severity level splits. As discussed in section II.D.1.b., in the FY 
2021 IPPS/LTCH PPS proposed rule, we proposed to expand the previously 
listed criteria to also include the NonCC group. The criterion that 
there be at least 500 cases for each subgroup failed due to low volume, 
as shown in the table for both years. Specifically, for the ``with 
MCC'' and ``without MCC'' (CC+NonCC) split, there were only 183 
(141+42) cases in the ``without MCC'' subgroup based on the data in the 
FY 2019 MedPAR file and only 175 (140+35) cases in the ``without MCC'' 
subgroup based on the data in the FY 2018 MedPAR file. For the ``with 
CC/MCC'' and ``without CC/MCC'' (NonCC) split, there were only 42 cases 
in the NonCC subgroup based on the data in the FY 2019 MedPAR file and 
only 35 cases in the NonCC subgroup based on the data in the FY 2018 
MedPAR file. The claims data do not support a two-way severity level 
split for MS-DRG 014, therefore, we proposed to maintain the current 
structure of MS-DRG 014 for FY 2021.
    Comment: Commenters supported the proposal to redesignate MS-DRGs 
014, 016, and 017 as medical MS-DRGs and stated they agreed that bone 
marrow transplant procedures are medical procedures that do not utilize 
the resources of an operating room. However, the commenters also noted 
that bone marrow transplants remain resource intensive procedures and 
the patients are medically complex, often requiring additional 
monitoring and increased lengths of stay. Commenters also agreed that 
the ICD-10-PCS procedure codes describing bone marrow transplants 
should have the same designation and supported the proposal to 
redesignate the eight ICD-10-PCS procedure codes listed in the previous 
table from O.R. to non-O.R. procedures, affecting their current MS-DRG 
assignment for MS-DRGs 016 and 017. However, a single commenter 
disagreed with the proposal to redesignate the eight ICD-10-PCS 
procedure codes listed in the previous table from O.R. to non-O.R. 
procedures stating that the proposal did not provide any detail as to 
how the codes would be reassigned and recommended not finalizing the 
proposal until more information was provided in future rulemaking. 
Another commenter noted that the bone marrow transplant procedure codes 
represent an example of why the current process of determining whether 
a procedure qualifies for designation as an O.R. procedure may be 
outdated. This commenter acknowledged CMS' discussion from section 
II.D.11. in the proposed rule that stated while procedures have 
typically been evaluated on the basis of whether they would be 
performed in an operating room, there may be other factors to consider 
with regard to resource consumption (85 FR 32542 through 32549). 
Another commenter reported that in review of the eight procedure codes 
CMS proposed to redesignate from O.R. to non-O.R., they queried the FY 
2019 MedPAR claims data and discovered a limited number of claims 
reflecting these procedure codes. This commenter consulted with its 
clinical advisors to determine if a bone marrow transplant with an 
``open approach'' (as described by the procedure codes and the ICD-10-
PCS classification), would generally occur. According to the clinical 
advisors, it is illogical to maintain these procedure codes describing 
an open approach for allogeneic and autologous bone marrow transplant 
procedures. The commenter recommended that CMS remove the procedure 
codes identified with an open approach from the classification.
    Commenters also supported retaining the structure of MS-DRG 014 and 
not creating a two-way severity level split based on the data and 
information provided. A commenter stated they understood and did not 
dispute CMS' logic based on the criteria to create subgroups, however, 
they suggested that when proposals from the comprehensive CC/MCC 
analysis are finalized that this MS-DRG be reevaluated given the 
variation in the ``with CC/MCC'' and ``without CC/MCC'' subgroups 
($90,924 versus $60,277, respectively) displayed in the CMS data 
analysis. In addition, this commenter noted that the FY 2020 proposals 
related to the CC/MCC analysis involved redesignating the neoplasm 
codes from CC to NonCC and stated their belief that facilities 
addressing the costly and unavoidable consequences of allogeneic bone 
marrow transplants should be compensated for providing the care.
    Response: We appreciate the commenters' support for our proposals 
related to MS-DRGs 014, 016 and 017 for bone marrow transplant 
procedures. We agree with the commenters that bone marrow transplants 
are resource intensive procedures and the patients are medically 
complex, often requiring additional monitoring and increased lengths of 
stay. In response to the commenter who disagreed with the proposal to 
redesignate the eight ICD-10-PCS procedure codes listed in the previous 
table from O.R. to non-O.R. procedures because the proposal did not 
provide any detail as to how the codes would be reassigned and 
recommended not finalizing the proposal until more information was 
provided in future rulemaking, we note that the proposed rule 
specifically stated ``we are proposing to redesignate the listed ICD-
10-PCS procedure codes from O.R. to non-O.R. procedures, affecting 
their current MS-DRG assignment for MS-DRGs 016 and 017, effective 
October 1, 2020 for FY 2021''. As we also discussed in section 
II.D.11.a. of the proposed rule, each procedure that is designated as a 
non-O.R. procedure is

[[Page 58451]]

further classified as either affecting the MS-DRG assignment or not 
affecting the MS-DRG assignment. We noted that the non-O.R. 
designations that do affect the MS-DRG are referred to as ``non-O.R. 
affecting the MS-DRG.'' Accordingly, redesignating these eight 
procedure codes as non-O.R. procedures affecting their MS-DRG 
assignment means that they are non-O.R. and will continue to be 
assigned to MS-DRGs 016 and 017 for FY 2021.
    In response to the commenter who recommended that CMS remove the 
procedure codes describing an allogeneic or autologous bone marrow 
transplant with an open approach from the classification, we thank the 
commenter for their suggestion and note that proposed changes to these 
procedure codes can be considered at an ICD-10 Coordination and 
Maintenance Committee meeting. As discussed in section II.E.16. of the 
preamble of this final rule, we encourage commenters to submit 
proposals for procedure coding changes via Email to: 
[email protected].
    With regard to the commenter who suggested that MS-DRG 014 be 
reevaluated when proposals from the comprehensive CC/MCC analysis are 
finalized due to the variation in the ``with CC/MCC'' and ``without CC/
MCC'' subgroups as displayed in the CMS data analysis, we note that we 
will evaluate and analyze data for all the MS-DRGs consistent with our 
annual process.
    After consideration of the public comments that we received, we are 
finalizing our proposal to redesignate MS-DRGs 014, 016, and 017 from 
surgical to medical MS-DRGs under the Pre-MDC category and finalizing 
our proposal to redesignate the eight ICD-10-PCS procedure codes listed 
in the previous table from O.R. to non-O.R. procedures, affecting their 
current MS-DRG assignment for MS-DRGs 016 and 017 for FY 2021. We are 
also finalizing our proposal to maintain the current structure of MS-
DRG 014 for FY 2021.
b. Chimeric Antigen Receptor (CAR) T-Cell Therapies
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32475 through 
32476), we discussed several requests we received to create a new MS-
DRG for procedures involving CAR T-cell therapies. The requestors 
stated that creation of a new MS-DRG would improve payment for CAR T-
cell therapies in the inpatient setting. Some requestors noted that 
cases involving CAR T-cell therapies will no longer be eligible for new 
technology add-on payments in FY 2021 and that this would significantly 
reduce the overall payment for cases involving CAR T-cell therapies. 
Some requestors also noted that in the absence of the creation of a new 
MS-DRG for procedures involving CAR T-cell therapies, outlier payments 
for these cases would increase significantly, which would increase the 
share of total outlier payments that are attributable to CAR T-cell 
therapies.
    The requestors stated that the new MS-DRG for CAR T-cell therapies 
should include cases that report ICD-10-PCS procedure codes XW033C3 
(Introduction of engineered autologous chimeric antigen receptor t-cell 
immunotherapy into peripheral vein, percutaneous approach, new 
technology group 3) or XW043C3 (Introduction of engineered autologous 
chimeric antigen receptor t-cell immunotherapy into central vein, 
percutaneous approach, new technology group 3).
    Given the high cost of the CAR T-cell product, some requestors 
provided recommendations related to the differential treatment of cases 
where the CAR T-cell product was provided without cost as part of a 
clinical trial to ensure that the payment amount for the newly created 
MS-DRG for CAR T-cell therapy cases would appropriately reflect the 
average cost hospitals incur for providing CAR T-cell therapy outside 
of a clinical trial. For example, some requestors suggested that CMS 
make minor adjustments to its usual ratesetting methodology to exclude 
clinical trial claims from the calculation of the relative weight for 
any MS-DRG for CAR T-cell therapies. One requestor noted that these 
adjustments are consistent with CMS' general authority under sections 
1886(d)(4)(B) and (C) of the Act. Some requestors also suggested that 
CMS apply an offset to the MS-DRG payment in cases where the provider 
does not incur the cost of the CAR T-cell therapy.
    Currently, procedures involving CAR T-cell therapies are identified 
with ICD-10-PCS procedure codes XW033C3 and XW043C3, which became 
effective October 1, 2017. In the FY 2019 IPPS/LTCH PPS final rule, we 
finalized our proposal to assign cases reporting these ICD-10-PCS 
procedure codes to Pre-MDC MS-DRG 016 for FY 2019 and to revise the 
title of this MS-DRG to ``Autologous Bone Marrow Transplant with CC/MCC 
or T-cell Immunotherapy''. We refer readers to section II.F.2.d. of the 
preamble of the FY 2019 IPPS/LTCH PPS final rule for a complete 
discussion of these final policies (83 FR 41172 through 41174).
    As noted, the current procedure codes for CAR T-cell therapies both 
became effective October 1, 2017. In the FY 2019 IPPS/LTCH PPS final 
rule (83 FR 41172 through 41174), we indicated that we believed we 
should collect more comprehensive clinical and cost data before 
considering assignment of a new MS-DRG to these therapies. We stated in 
the FY 2020 IPPS/LTCH PPS proposed rule that, while the September 2018 
update of the FY 2018 MedPAR data file does contain some claims that 
include those procedure codes that identify CAR T-cell therapies, the 
number of cases is limited, and the submitted costs vary widely due to 
differences in provider billing and charging practices for this 
therapy. Therefore, while those claims could potentially be used to 
create relative weights for a new MS-DRG, we stated that we did not 
have the comprehensive clinical and cost data that we generally believe 
are needed to do so. Furthermore, we stated in the FY 2020 IPPS/LTCH 
PPS proposed rule that given the relative newness of CAR T-cell therapy 
and our proposal to continue new technology add-on payments for FY 2020 
for the two CAR T-cell therapies that currently have FDA approval 
(KYMRIAHTM and YESCARTATM), at the time we 
believed it was premature to consider creation of a new MS-DRG 
specifically for cases involving CAR T-cell therapy for FY 2020. We 
stated that in future years we would have additional data that could be 
used to evaluate the potential creation of a new MS-DRG specifically 
for cases involving CAR T-cell therapies.
    We stated in the FY 2021 IPPS/LTCH PPS proposed rule that we now 
have more data upon which to evaluate a new MS-DRG specifically for 
cases involving CAR T-cell therapies. We stated that we agree with the 
requestors it is appropriate to consider the development of a new MS-
DRG using the data that is now available. We examined the claims data 
from the September 2019 update of the FY 2019 MedPAR data file for 
cases that reported ICD-10-PCS procedure codes XW033C3 or XW043C3. For 
purposes of this analysis, we identified clinical trial cases as claims 
with ICD-10-CM diagnosis code Z00.6 (Encounter for examination for 
normal comparison and control in clinical research program) which is 
reported only for clinical trial cases, or with standardized drug 
charges of less than $373,000, which is the average sales price of 
KYMRIAH and YESCARTA, which are the two CAR T-cell medicines approved 
to treat relapsed/refractory diffuse large B-cell lymphoma as of the 
time of the development of the proposed rule and this final rule. We 
stated that we

[[Page 58452]]

distinguished between clinical trial and non-clinical trial cases in 
this analysis because we agree with the requestors who indicated that 
given the high cost of the CAR T-cell product, it is appropriate to 
distinguish cases where the CAR T-cell product was provided without 
cost as part of a clinical trial so that the analysis appropriately 
reflects the resources required to provide CAR T-cell therapy outside 
of a clinical trial. We also noted that we included cases that would 
have been identified as statistical outliers under our usual process 
when examined as part of MS-DRG 016 due to the extreme cost differences 
between the CAR T-cell therapy claims and other claims in MS-DRG 016, 
but would not be identified as statistical outliers when examining CAR 
T-cell therapy claims only. Our findings are shown in the table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.004

    *We note that we included 18 cases that were flagged as statistical 
outliers in our trim methodology due to the mix of CAR T- cell therapy 
and non-CAR T--cell therapy cases in the current MS-DRG.
    As shown in the table, we found 2,212 cases in MS-DRG 016, with an 
average length of stay of 18.2 days and average costs of $55,001. Of 
these 2,212 cases, 262 cases reported ICD-10-PCS procedure codes 
XW033C3 or XW043C3; these cases had an average length of stay of 16.3 
days and average costs of $127,408. Of these 262 cases, 94 were 
identified as non-clinical trial cases; these cases had an average 
length of stay of 17.2 days and average costs of $274,952. The 
remaining 168 cases were identified as clinical trial cases; these 
cases had an average length of stay of 15.8 days and average costs of 
$44,853.
    The data indicate that the average costs for the non-clinical trial 
cases that reported ICD-10-PCS procedure codes XW033C3 or XW043C3 are 
almost five times higher than the average costs for all cases in MS-DRG 
016. We stated that our clinical advisors also believe that the cases 
reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 can be 
clinically differentiated from other cases that group to MS-DRG 016, 
which includes procedures involving autologous bone marrow transplants, 
once the CAR T-cell therapy itself is taken into account in the 
comparison.
    As described earlier in this section, in deciding whether to 
propose to make modifications to the MS-DRGs for particular 
circumstances brought to our attention, we consider a variety of 
factors pertaining to resource consumption and clinical 
characteristics. We stated in the proposed rule that while we generally 
prefer not to create a new MS-DRG unless it would include a substantial 
number of cases, our clinical advisors believe that the vast 
discrepancy in resource consumption as reflected in the claims data 
analysis and the clinical differences warrant the creation of a new MS-
DRG. We therefore proposed to assign cases reporting ICD-10-PCS 
procedure codes XW033C3 or XW043C3 to a new MS-DRG 018 (Chimeric 
Antigen Receptor (CAR) T-cell Immunotherapy).
    We stated in the proposed rule that if additional procedure codes 
describing CART- cell therapies are approved and finalized, we would 
use our established process to assign these procedure codes to the most 
appropriate MS-DRG. Because these cases would no longer group to MS-DRG 
016, we proposed to revise the title for MS-DRG 016 from ``Autologous 
Bone Marrow Transplant with CC/MCC or T-cell Immunotherapy'' to 
``Autologous Bone Marrow Transplant with CC/MCC''.
    Comments: The vast majority of commenters supported CMS' proposal 
to create new MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell 
Immunotherapy), stating that it will better reflect the resource use 
involved in providing the CAR T-cell therapy. Commenters acknowledged 
that CMS had considered many factors previously raised by stakeholders 
in developing this new MS-DRG. A small number of commenters did not 
support the creation of a new MS-DRG and recommended that CMS maintain 
the new technology add-on payment for CAR T-cell therapies, delay 
creating a new MS-DRG, and consider public-private partnerships for 
data collection.
    Response: We appreciate commenters' support. With respect to 
commenters that requested that we instead maintain the new technology 
add-on payments, we refer the reader to the section of this rule where 
we address these comments. We believe that the data we currently have 
available is sufficient to establish a relative weight at this time, 
and therefore do not believe it is appropriate to delay the creation of 
a new MS-DRG. We also note that the weights are recalibrated yearly to 
reflect additional data as it becomes available. We note that the 
commenter did not provide additional detail regarding potential public/
private partnerships with respect to data collection.
    Comments: Some commenters requested that CMS clarify that all CAR 
T-cell therapy products, or more

[[Page 58453]]

broadly, all T-cell immunotherapy products, would be assigned to MS-DRG 
018 regardless of cost. One commenter expressed concern that MS-DRG 018 
is specific to one mechanistic approach to cellular therapy and has not 
provided for the array of cellular therapies in development.
    Response: As we stated in the proposed rule, if additional 
procedure codes describing CART-cell therapies are approved and 
finalized, we would use our established process to assign these 
procedure codes to the most appropriate MS-DRG. As described in the FY 
2020 final rule (84 FR 42061), assigning new procedure codes involves 
review of the predecessor procedure code's MS-DRG assignment. However, 
this process does not automatically result in the new procedure code 
being assigned (or proposed for assignment) to the same MS-DRG as the 
predecessor code. There are several factors to consider during this 
process that our clinical advisors take into account. For example, in 
the absence of volume, length of stay, and cost data, they may consider 
the specific service, procedure, or treatment being described by the 
new procedure code, the indications, treatment difficulty, and the 
resources utilized. Similarly, should additional cellular therapies 
become available, we would use our established process to determine 
whether there is a need to reconsider the MS-DRG assignment that would 
otherwise result from the principal diagnosis and other factors that go 
into MS-DRG assignment.
    Comments: Some commenters requested that CMS consider subdividing 
MS-DRG 018 into separate MS-DRGs for MCCs, CCs, and non-CCs in order to 
account for the higher costs involved in caring for patients who 
develop Cytokine Release Syndrome (CRS). Some commenters requested that 
payments consider factors such as patients' burden of illness, comorbid 
conditions and complications associated with receiving CAR T-cell 
therapy treatment and consider complications and/or comorbidity or 
major complications or comorbidity codes when evaluating reimbursement 
for CAR T-cell therapies as more clinical data become available.
    Response: As discussed in the proposed rule (85 FR 32472 through 
32473), one of the criteria for the creation of a new complication or 
comorbidity or major complication or comorbidity subgroup within a base 
MS-DRG is at least 500 cases are in the CC or MCC subgroup which, as 
discussed previously in this section, we are finalizing to also expand 
to the NonCC subgroup beginning with FY 2021. As noted previously, we 
identified 262 total cases reporting ICD-10-PCS procedure codes XW033C3 
or XW043C3 in MS-DRG 016 based on the data from the September 2019 
update of the FY MedPAR file. We may consider the creation of subgroups 
within MS-DRG 018 in future rulemaking once additional data is 
available.
    Comments: Some commenters requested that CMS create two new cost 
centers; one for cell therapy products, tied to revenue code 891, and 
one for gene therapy products, tied to revenue code 892. A commenter 
suggested that the use of a dedicated cost center would improve the 
accuracy of cost estimates since it would allow the creation of a 
separate CCR for CAR T-cell therapy products, and would not rely on 
hospitals setting their charges for CAR T-cell therapy products at very 
high levels. Commenters acknowledged that this would also require that 
CMS modify the cost report to break out these revenue centers. Other 
commenters requested that CMS issue a Medicare Learning Network (MLN) 
article instructing hospitals regarding adjustment of charges for CAR 
T-cell therapy products, while another commenter suggested that CMS 
could create a standardized charging protocol for CAR T-cell therapy 
products.
    Response: We appreciate the commenters' request regarding the 
creation of new cost centers for revenue codes 891 and 892 and may 
consider this request in future rulemaking. With respect to the 
commenters who expressed concerns about hospital charging practices, we 
note that there is nothing that precludes hospitals from setting their 
drug charges consistent with their CCRs.
    Comments: A commenter stated that the indefinite use of MS-DRG 018 
under the IPPS is not sustainable. Some commenters requested that CMS 
consider value-based care or other alternative payment models, add-on 
payments, or paying on a pass-through basis, as more appropriate 
payment mechanisms for CAR T-cell therapies. A commenter urged CMS to 
continue to engage all stakeholders to develop long-term sustainable 
solutions that can be adapted over time and account for innovations 
that transform how we treat disease. Another commenter stated that the 
question of how to best pay for CAR T-cell therapies can best be 
answered by Congress, but that CMS should continue pursuing policies 
that enable hospitals to recoup all of their costs for providing CAR T-
cell therapies. Another commenter requested that CMS create an add-on 
payment or otherwise modify the IPPS for pharmacy resources associated 
with CAR T-cell therapies.
    Response: We believe that is premature to make structural changes 
to the IPPS at this time to pay for CAR T-cell therapies. As we gain 
more experience with these therapies, including the use of a separate 
MS-DRG for CAR T-cell therapies, we may consider these comments in 
future rulemaking.
    We note that commenters also raised some concerns about outpatient 
billing instructions with respect to billing for outpatient cell 
collection and cell processing charges on the inpatient claim, payment 
issues for TEFRA hospitals, and questions regarding the MedPAR data 
dictionary. While we consider these comments about outpatient billing 
instructions and TEFRA hospitals outside of the scope of the proposals 
in the proposed rule, we will take these comments into consideration 
when developing policies and program requirements for future years. 
With respect to comments about the MedPAR data dictionary, we 
anticipate that the issues will be addressed in future MedPAR releases.
    After consideration of public comments received, we are finalizing 
our proposal to assign cases reporting ICD-10-PCS procedure codes 
XW033C3 or XW043C3 to a new MS-DRG 018 (Chimeric Antigen Receptor (CAR) 
T-cell Immunotherapy) and to revise the title for MS-DRG 016 from 
``Autologous Bone Marrow Transplant with CC/MCC or T-cell 
Immunotherapy'' to ``Autologous Bone Marrow Transplant with CC/MCC''. 
We refer readers to section II.E.2.b. of the preamble of this final 
rule for a discussion of the relative weight calculation for the new 
MS-DRG 018 for CAR T-cell therapy, and to section IV.I. of the preamble 
of this final rule for a discussion of the payment adjustment for CAR 
T-cell clinical trial and expanded access use immunotherapy cases.
3. MDC 1 (Diseases and Disorders of the Nervous System)
a. Carotid Artery Stent Procedures
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42078), we finalized 
our proposal to reassign 96 ICD-10-PCS procedure codes describing 
dilation of carotid artery with an intraluminal device(s) from MS-DRGs 
037, 038, and 039 (Extracranial Procedures with MCC, with CC, and 
without CC/MCC, respectively) to MS-DRGs 034, 035, and 036 (Carotid 
Artery Stent Procedures with MCC, with CC, and without CC/MCC, 
respectively). As discussed in the FY 2021 IPPS/LTCH proposed rule (85

[[Page 58454]]

FR 32476), we received a request to review six ICD-10-PCS procedure 
codes describing dilation of a carotid artery (common, internal or 
external) with drug eluting intraluminal devices(s) using an open 
approach that were still assigned to the logic for case assignment to 
MS-DRGs 037, 038, and 039 that were not included in the list of codes 
finalized for reassignment to MS-DRGs 034, 035 and 036 in the FY 2020 
IPPS/LTCH PPS final rule. The six codes are identified in the following 
table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.005

    The logic for case assignment to MS-DRGs 034, 035, and 036 as 
displayed in the ICD-10 MS-DRG Version 37 Definitions Manual, available 
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html is comprised of a list of logic which 
includes procedure codes for operating room procedures involving 
dilation of a carotid artery (common, internal or external) with 
intraluminal device(s). All of the ICD-10-PCS procedure codes in the 
logic list assigned to MS-DRGs 034, 035, and 036 describe dilation of a 
carotid artery with an intraluminal device.
    In response to the request, we first examined claims data from the 
September 2019 update of the FY 2019 MedPAR file for MS-DRGs 034, 035, 
and 036 which only include those procedure codes that describe 
procedures that involve dilation of a carotid artery with an 
intraluminal device. Our findings are reported in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.006

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

[[Page 58455]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.007

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

[[Page 58456]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.008

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

[[Page 58457]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.009


[[Page 58458]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.010

BILLING CODE 4120-01-C
    We then examined the claims data to determine if there were other 
MS-DRGs in which one of the 36 procedure codes listed in the table were 
reported. We found 8 cases that grouped to MS-DRGs 981, 982, and 983 
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively) when a principal diagnosis 
from MDC 01 was reported with one of the procedure codes in the table 
that describes dilation of a carotid artery with an intraluminal 
device, open approach.
    As noted previously, in the FY 2020 IPPS/LTCH PPS proposed rule (84 
FR 19184) and final rule (84 FR 42077), our clinical advisors stated 
that MS-DRGs 034, 035, and 036 are defined to include those procedure 
codes that describe procedures that involve dilation of a carotid 
artery with an intraluminal device. As a result, our clinical advisors 
supported adding the 36 ICD-10-PCS codes identified in the table to MS-
DRGs 034, 035, and 036 in MDC 01 for consistency to align with the 
definition of MS-DRGs 034, 035, and 036 and also to permit proper case 
assignment when a principal diagnosis from MDC 01 is reported with one 
of the procedure codes in the table that describes dilation of a 
carotid artery with an intraluminal device, open approach.
    Therefore, for FY 2021, we also proposed to add the 36 ICD-10-PCS 
codes identified in the table that are currently assigned in MDC 05 to 
MS-

[[Page 58459]]

DRGs 252, 253, and 254 to the GROUPER logic for MS-DRGs 034, 035, and 
036 in MDC 01.
    Comment: Commenters expressed support for CMS' proposal to reassign 
the identified ICD-10-PCS codes describing dilation of a carotid artery 
with an intraluminal device from MS-DRGs 037, 038 and 039 to MS-DRGs 
034, 035 and 036. Commenters also supported CMS' proposal to add the 
ICD-10-PCS codes describing dilation of a carotid artery with an 
intraluminal device currently assigned in MDC 05 to MDC 01. One 
commenter stated that these were positive reassignments and another 
stated that these reassignments will help to ensure consistency among 
the MS-DRG classifications for procedures involving dilation of a 
carotid artery with an intraluminal device.
    Response: We thank the commenters for their support.
    Comment: One commenter suggested that given the clinical congruence 
with the procedures involved with dilation of a carotid artery with an 
intraluminal device, procedure codes that describe vertebral and 
intracranial artery dilation and device placement should also be 
classified in MS-DRGs 034, 035 and 036, and that MS-DRG 034, 035 and 
036 be renamed as Carotid, Vertebral and Intracranial Stent Procedures 
and requested that this recommendation be assessed and analyzed for 
inclusion in next year's proposed rule.
    Response: We appreciate the commenter's suggestion. As stated in 
section II.E.1.b. of the preamble of this final rule, we encourage 
individuals with recommendations regarding changes to MS-DRG 
classification to submit these comments no later than November 1, 2020 
so that they can be considered for possible inclusion in the annual 
proposed rule. We will consider these public comments for possible 
proposals in future rulemaking as part of our annual review process.
    After consideration of the public comments we received, we are 
finalizing our proposal to reassign the 6 procedure codes discussed 
above from MS-DRGs 037, 038, and 039 to MS-DRGs 034, 035, and 036 
because the 6 procedure codes are consistent with the other procedures 
describing dilation of a carotid artery with an intraluminal device 
that are currently assigned to
    MS-DRGs 034, 035, and 036. Additionally, we are finalizing our 
proposal to add the 36 ICD-10-PCS codes identified in the table that 
are currently assigned in MDC 05 to MS-DRGs 252, 253, and 254 to the 
GROUPER logic for MS-DRGs 034, 035, and 036 in MDC 01.
b. Epilepsy With Neurostimulator
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32481), we received a request to reassign cases describing the 
insertion of a neurostimulator generator into the skull in combination 
with the insertion of a neurostimulator lead into the brain from MS-DRG 
023 (Craniotomy with Major Device Implant or Acute Complex Central 
Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy 
Implant or Epilepsy with Neurostimulator) to MS-DRG 021 (Intracranial 
Vascular Procedures with PDX Hemorrhage with CC) or to reassign these 
cases to another MS-DRG for more appropriate payment. The Responsive 
Neurostimulator (RNS(copyright)) System, a cranially 
implanted neurostimulator that is a treatment option for persons 
diagnosed with medically intractable epilepsy, is identified by the 
reporting of an ICD-10-PCS code combination capturing a neurostimulator 
generator inserted into the skull with the insertion of a 
neurostimulator lead into the brain and cases are assigned to MS-DRG 
023 when reported with a principal diagnosis of epilepsy.
    We stated that as discussed in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38015 through 38019), we finalized our proposal to reassign all 
cases with a principal diagnosis of epilepsy and one of the following 
ICD-10-PCS code combinations capturing cases with a neurostimulator 
generator inserted into the skull with the insertion of a 
neurostimulator lead into the brain (including cases involving the use 
of the RNS(copyright) neurostimulator) to MS-DRG 023 even if 
there is no MCC reported:
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H00MZ (Insertion of 
neurostimulator lead into brain, open approach).
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H03MZ (Insertion of 
neurostimulator lead into brain, percutaneous approach).
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H04MZ (Insertion of 
neurostimulator lead into brain, percutaneous endoscopic approach).
    We also finalized our change to the title of MS-DRG 023 from 
``Craniotomy with Major Device Implant or Acute Complex Central Nervous 
System (CNS) Principal Diagnosis (PDX) with MCC or Chemo Implant'' to 
``Craniotomy with Major Device Implant or Acute Complex Central Nervous 
System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant 
or Epilepsy with Neurostimulator'' to reflect the modifications to the 
MS-DRG structure.
    As noted in the proposed rule, the requestor acknowledged the 
refinements made to MS-DRG 023 effective for FY 2018, but stated that 
despite the previously-stated changes, cases describing the insertion 
of a neurostimulator generator into the skull in combination with the 
insertion of a neurostimulator lead into the brain continue to be 
underpaid. The requestor performed its own analysis and stated that it 
found that the average costs of cases describing the insertion of the 
RNS(copyright) neurostimulator were significantly higher 
than the average costs of all cases in their current assignment to MS-
DRG 023, and as a result, cases describing the insertion of the 
RNS(copyright) neurostimulator are not being adequately 
reimbursed. The requestor suggested the following two options for MS-
DRG assignment updates: (1) Reassign cases describing the insertion of 
a neurostimulator generator into the skull in combination with the 
insertion of a neurostimulator lead into the brain from MS-DRG 023 to 
MS-DRG 021 with a change in title to ``lntracranial Vascular Procedures 
with PDX Hemorrhage with CC or Epilepsy with Neurostimulator;'' or (2) 
reassign cases describing the insertion of a neurostimulator generator 
into the skull in combination with the insertion of a neurostimulator 
lead into the brain to another higher paying MS-DRG that would provide 
adequate reimbursement. The requestor stated its belief that MS-DRG 021 
is a better fit in terms of average costs and clinical coherence for 
reassignment of RNS(copyright) System cases and recognized 
that there is likely still not enough volume to warrant the creation of 
new MS-DRGs for cases describing the insertion of the 
RNS(copyright) neurostimulator.
    We first examined claims data from the September 2019 update of the 
FY 2019 MedPAR file for all cases in MS-DRG 023 and compared the 
results to cases representing a neurostimulator generator inserted into 
the skull with the insertion of a neurostimulator lead into the brain 
(including cases involving the use of the RNS(copyright) 
neurostimulator) that had a principal diagnosis of epilepsy in MS-DRG 
023. The following table shows our findings:

[[Page 58460]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.011

    As shown in the table, for MS-DRG 023, we identified a total of 
11,938 cases, with an average length of stay of 9.8 days and average 
costs of $40,264. Of the 11,938 cases in MS-DRG 023, there were 81 
cases describing a neurostimulator generator inserted into the skull 
with the insertion of a neurostimulator lead into the brain (including 
cases involving the use of the RNS(copyright) 
neurostimulator) that had a principal diagnosis of epilepsy with an 
average length of stay of 3.3 days and average costs of $52,362. Our 
clinical advisors reviewed these data, and agreed with the requestor 
that the number of cases is too small to warrant the creation of a new 
MS-DRG for these cases, for the reasons discussed in the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38015 through 38019).
    We also examined the reassignment of cases describing a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain (including cases involving the 
use of the RNS(copyright) neurostimulator) to MS-DRGs 020, 
021, and 022 (Intracranial Vascular Procedures with PDX Hemorrhage with 
MCC, with CC, and without CC/MCC, respectively). While the request was 
to reassign these cases to MS-DRG 021, MS-DRG 021 is specifically 
differentiated according to the presence of a secondary diagnosis with 
a severity level designation of a complication or comorbidity (CC). 
Cases with a neurostimulator generator inserted into the skull with the 
insertion of a neurostimulator lead into the brain (including cases 
involving the use of the RNS(copyright) neurostimulator) do 
not always involve the presence of a secondary diagnosis with a 
severity level designation of a complication or comorbidity (CC), and 
therefore we reviewed data for all three MS-DRGs. The following table 
shows our findings:
[GRAPHIC] [TIFF OMITTED] TR18SE20.012

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

[[Page 58461]]

the use of the RNS(copyright) neurostimulator) and a 
principal diagnosis of epilepsy, 19 reported at least one other 
procedure designated as an O.R. procedure, and had higher average costs 
($72,995 versus $52,362) compared to the average costs of all cases in 
this subset of MS-DRG 023.
    We also reviewed the cases reporting procedures describing a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain (including cases involving the 
use of the RNS(copyright) neurostimulator), and a principal 
diagnosis of epilepsy to identify the secondary diagnosis CC and/or MCC 
conditions reported in conjunction with these procedures that also may 
be contributing to the higher average costs for these cases. We 
reviewed the claims data to identify the number (frequency) and types 
of principal and secondary diagnosis CC and/or MCC conditions that were 
reported. Our findings for the cases reporting secondary diagnosis MCC 
and CC conditions, followed by the top 10 secondary diagnosis MCC and 
secondary diagnosis CC conditions that were reported within the claims 
data for this subset of cases are shown in the following tables:
[GRAPHIC] [TIFF OMITTED] TR18SE20.013

[GRAPHIC] [TIFF OMITTED] TR18SE20.014

[GRAPHIC] [TIFF OMITTED] TR18SE20.015

    While the results of the claims analysis as previously summarized 
indicate that the average costs of cases reporting a neurostimulator 
generator inserted into the skull with the insertion of a 
neurostimulator lead into the brain (including cases involving the use 
of the RNS(copyright) neurostimulator), and a principal 
diagnosis of epilepsy are higher compared to the average costs for all 
cases in their assigned MS-DRG, we stated in the proposed rule we could 
not ascertain from the claims data the resource use specifically 
attributable to the procedure during a hospital stay. These data show 
cases reporting a neurostimulator generator inserted into the skull 
with the insertion of a neurostimulator lead into the brain (including 
cases involving the use of the RNS(copyright) 
neurostimulator), and a principal diagnosis of epilepsy, can present 
greater treatment difficulty, and have a need for additional 
intervention with other O.R. procedures. When reviewing consumption of 
hospital resources for this subset of cases, the claims data also 
clearly shows that the patients typically have multiple MCC and CC 
conditions, and the increased costs appear to be

[[Page 58462]]

attributable to the severity of illness of the patient.
    In summary, we stated that we believe that further analysis of 
cases reporting a neurostimulator generator inserted into the skull 
with the insertion of a neurostimulator lead into the brain (including 
cases involving the use of the RNS(copyright) 
neurostimulator), and a principal diagnosis of epilepsy is needed prior 
to proposing any further reassignment of these cases to ensure clinical 
coherence between these cases and the other cases with which they may 
potentially be grouped. We stated that we expected in future years, 
that we would have additional data that exhibit an increased number of 
cases that could be used to evaluate the potential reassignment of 
cases reporting a neurostimulator generator inserted into the skull 
with the insertion of a neurostimulator lead into the brain (including 
cases involving the use of the RNS(copyright) 
neurostimulator), and a principal diagnosis of epilepsy. Therefore, we 
did not propose to reassign cases describing a neurostimulator 
generator inserted into the skull with the insertion of a 
neurostimulator lead into the brain (including cases involving the use 
of the RNS(copyright) neurostimulator) from MS-DRG 023 to 
MS-DRG 021. We also did not propose to reassign Responsive 
Neurostimulator (RNS(copyright)) System cases to another MS-
DRG at this time.
    Comment: Commenters agreed with CMS' proposal not to reassign cases 
describing a neurostimulator generator inserted into the skull with the 
insertion of a neurostimulator lead into the brain (including cases 
involving the use of the RNS(copyright) neurostimulator) 
from MS-DRG 023 to MS-DRG 021 or to any another MS-DRG at this time. A 
commenter specifically thanked CMS for its consideration of addressing 
the costs and reimbursements associated with the insertion of the 
Responsive Neurostimulator (RNS(copyright)) System. Another 
commenter stated they appreciate CMS' willingness to continue to 
analyze the data, recognizing the discrepancy in average costs and the 
potential need for a MS-DRG assignment that provides adequate 
reimbursement.
    Although supporting the decision to not reassign cases reporting 
the use of an RNS(copyright) System neurostimulator for 
epilepsy, a few commenters expressed concern that the average costs of 
these cases are higher than the average costs for all cases in the 
assigned MS-DRG 023 and stated their belief that the costs for the 
insertion of this device in traditional Medicare patients is not 
recouped. These same commenters acknowledged the issue is complex and 
beyond merely separating and reassigning neurostimulators for epilepsy. 
One commenter stated neurostimulator insertion for the treatment of 
epilepsy is not clinically similar to treatment of intracranial 
hemorrhage. Another commenter noted that complex neurostimulator 
implants may involve chronic disease states other than epilepsy, 
including Parkinson's disease and essential tremor and stated they 
agreed with CMS's decision to conduct further analyses, which would 
provide an opportunity to obtain additional stakeholder input related 
to improving MS-DRG assignments for neurostimulator procedures. 
Commenters noted that MS-DRGs 023 and 024 combine a wide range of 
principal diagnoses, procedures, and procedure approaches that could be 
contributing to the wide variation of costs of cases assigned to these 
MS-DRGs. Commenters proposed a number of ways CMS could attempt to 
create more homogenous groups and improve clinical cohesion such as (1) 
creating a new set of DRGs focused solely on the cost of the 
implantation of CNS devices that could be modeled after currently 
established MS-DRGs for the implantation of stents in carotid artery, 
stents in the coronary arteries or pacemakers, AICDs or other high-cost 
technologies in the heart, and/or (2) moving procedures assigned to MS-
DRGs 023 and 024 that describe extirpation, drainage and removal to MS-
DRGs 025, 026 and 027 (Craniotomy and Endovascular Intracranial 
Procedures with MCC, with CC, and without CC/MCC, respectively).
    Response: We appreciate the commenters' feedback and support.
    We also appreciate the commenters' suggestions regarding other 
potential changes to the current MS-DRG assignments for CMS's 
consideration. We continue to be attuned to the requestors' and 
commenters' concerns about reimbursement for cases describing the 
insertion of the RNS(copyright) neurostimulator. As part of 
our ongoing, comprehensive analysis of the MS-DRGs under ICD-10, we 
will continue to explore mechanisms to ensure clinical coherence 
between these cases and the other cases with which they may potentially 
be grouped. Therefore, after consideration of the public comments we 
received, and for the reasons stated above, we are finalizing our 
proposal to maintain the assignment of cases describing a 
neurostimulator generator inserted into the skull with the insertion of 
a neurostimulator lead into the brain (including cases involving the 
use of the RNS(copyright) neurostimulator) in MS-DRG 023 in 
MDC 01.
4. MDC 3 (Diseases and Disorders of Ear, Nose and Throat): 
Temporomandibular Joint Replacements
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32484 through 
32490), we discussed a request we received to consider reassignment of 
ICD-10-PCS procedure codes 0RRC0JZ (Replacement of right 
temporomandibular joint with synthetic substitute, open approach) and 
0RRD0JZ (Replacement of left temporomandibular joint with synthetic 
substitute, open approach) from MS-DRGs 133 and 134 (Other Ear, Nose, 
Mouth and Throat O.R. Procedures with and without CC/MCC, respectively) 
to MS-DRGs 131 and 132 (Cranial and Facial Procedures with and without 
CC/MCC, respectively) in MDC 03.
    The requestor stated that it is inaccurate for procedure codes 
0RRC0JZ and 0RRD0JZ that identify and describe replacement of the 
temporomandibular joint (TMJ), which involves excision of the TMJ 
followed by replacement with a prosthesis, to group to MS-DRGs 133 and 
134 while excision of the TMJ alone, identified by procedure codes 
0RBC0ZZ (Excision of right temporomandibular joint, open approach) and 
0RBD0ZZ (Excision of left temporomandibular joint, open approach), 
groups to the higher weighted MS-DRGs 131 and 132. According to the 
requestor, reassignment of procedure codes 0RRC0JZ and 0RRD0JZ to the 
higher weighted MS-DRGs 131 and 132 is reasonable and the MS-DRG title 
of ``Cranial and Facial Procedures'' is more appropriate. However, the 
requestor also stated that the cost of the prosthesis would continue to 
be underpaid, despite that recommended reassignment. As an alternative 
option, the requestor suggested CMS analyze if there may be other 
higher weighted MS-DRGs that could more appropriately compensate 
providers for a TMJ replacement with prosthesis procedure.
    In addition, the requestor recommended that we analyze all 
procedures involving the mandible and maxilla and consider reassignment 
of those procedure codes from MS-DRGs 129 (Major Head and Neck 
Procedures with CC/MCC or Major Device) and 130 (Major Head and Neck 
Procedures without CC/MCC) to MS-DRGs 131 and 132 because the codes 
describe procedures that are performed on facial and cranial 
structures. Finally, the requestor also suggested another option that 
included modifying the surgical hierarchy for MDC 03 by sequencing MS-
DRGs 131 and 132 above MS-DRGs 129 and 130, which the requestor

[[Page 58463]]

asserted would provide for more appropriate payment to providers for 
the performance of multiple facial procedures.
    In the proposed rule, we discussed these separate but related 
requests that involve procedures currently assigned to MS-DRGs 129, 
130, 131, 132, 133 and 134 in MDC 03.
    As discussed in the proposed rule, in our analysis of the request 
involving temporomandibular joint replacements, we first identified the 
ICD-10-PCS procedure codes that describe the excision or replacement of 
a temporomandibular joint as shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.016

    In the proposed rule we noted that the requestor is correct that 
procedure codes 0RRC0JZ and 0RRD0JZ that describe replacement of the 
right and left TMJ with a prosthesis (synthetic substitute) by an open 
approach group to MS-DRGs 133 and 134 and procedure codes 0RBC0ZZ and 
0RBD0ZZ that describe excision of the right and left TMJ alone by an 
open approach group to the higher weighted MS-DRGs 131 and 132. We also 
noted that the corresponding related codes as previously listed in the 
table that describe different approaches (excision procedures) or 
different types of tissue substitute (replacement procedures) are also 
assigned to the same respective MS-DRGs.
    We stated in the proposed rule that we examined claims data from 
the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 133 
and 134 to identify cases reporting ICD-10-PCS codes 0RRC0JZ or 
0RRD0JZ. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.017

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

[[Page 58464]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.018

    In MS-DRG 131, we found a total of 1,181 cases with an average 
length of stay of 5.4 days and average costs of $18,875. In MS-DRG 132, 
we found a total of 464 cases with an average length of stay of 2.5 
days and average costs of $11,558.
    We stated in the proposed rule that overall, the data analysis 
shows that the average costs for the cases reporting procedure codes 
0RRC0JZ and 0RRD0JZ in MS-DRGs 133 and 134 are more aligned with the 
average costs for all the cases in MS-DRG 131 ($21,677 and $20,430, 
respectively versus $18,875) compared to MS-DRG 132 where the average 
costs are not significantly different than the average costs of all the 
cases in MS-DRG 134 ($11,558 versus $9,512). We stated that our 
clinical advisors agreed that the replacement of a TMJ with prosthesis 
procedures (codes 0RRC0JZ or 0RRD0JZ) are more resource intensive and 
are clinically distinct from the cases reporting procedure codes 
0RBC0ZZ and 0RBD0ZZ that involve excision of the TMJ alone. They also 
agreed that procedure codes 0RRC0JZ and 0RRD0JZ should be reassigned to 
a higher weighted MS-DRG. However, they recommended we conduct further 
claims analysis to identify if there are other MS-DRGs in MDC 03 where 
cases reporting these procedure codes may also be found and to compare 
that data.
    As previously noted, the requestor had also recommended that we 
analyze all procedures involving the mandible and maxilla and consider 
reassignment of those procedure codes from MS-DRGs 129 and 130 to MS-
DRGs 131 and 132. The requestor did not provide a specific list of the 
procedure codes involving the mandible and maxilla, therefore, we 
reviewed the list of procedure codes in MS-DRGs 129 and 130 and 
identified the following 26 procedure codes describing procedures 
performed on the mandible. There were no procedure codes describing 
procedures performed on the maxilla in MS-DRGs 129 and 130.
[GRAPHIC] [TIFF OMITTED] TR18SE20.019

    As noted in the proposed rule, based on the advice of our clinical 
advisors as previously discussed, we conducted additional analyses for 
MDC 03 using the same FY 2019 MedPAR data file and found cases 
reporting procedure code 0RRC0JZ or 0RRD0JZ for the replacement of a 
TMJ with prosthesis procedure in MS-DRGs 129, 130, 131, and 132. As 
discussed in section II.D.15. of the proposed rule and section II.E.15. 
of this final rule, cases with multiple procedures are assigned to the 
highest surgical class in the hierarchy to which one of the procedures 
is assigned. For example, if procedure code 0RRC0JZ which is assigned 
to the logic for MS-DRGs 133 and 134 is reported on a claim with 
procedure code 0NSR04Z (Reposition maxilla with internal fixation 
device, open approach), which

[[Page 58465]]

is assigned to the logic for MS-DRGs 131 and 132, the case will group 
to MS-DRG 131 or 132 (depending on the presence of a CC or MCC) when 
reported with a principal diagnosis from MDC 03 because MS-DRGs 131 and 
132 are sequenced higher in the surgical hierarchy than MS-DRGs 133 and 
134. Therefore, since MS-DRGs 129, 130, 131, and 132 are sequenced 
higher in the surgical hierarchy than MS-DRGs 133 and 134 in MDC 03, 
cases reporting procedure code 0RRC0JZ or 0RRD0JZ along with another 
O.R. procedure that is currently assigned to one of those MS-DRGs in 
the GROUPER logic results in case assignment to one of those higher 
surgical class MS-DRGs. We also identified cases reporting procedures 
performed on the mandible from the previously discussed list of 
procedure codes in MS-DRGs 129 and 130. Our findings are shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.020

    As shown in the table, for MS-DRG 129, there was a total of 2,080 
cases with average length of stay of 5.2 days and average costs of 
$18,091. Of these 2,080 cases, there were 3 cases reporting a TMJ 
replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an 
average length of stay of 3 days and average costs of $33,581 and 592 
cases reporting a mandible procedure with average length of stay of 6.9 
days and average costs of $21,258. For MS-DRG 130, there was a total of 
948 cases with average length of stay of 2.7 days and average costs of 
$11,092. Of these 948 cases, there were there were 5 cases reporting a 
TMJ replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) 
with an average length of stay of 3.4 days and average costs of $27,396 
and 202 cases reporting a mandible procedure with average length of 
stay of 3.5 days and average costs of $14,712. For MS-DRG 131, there 
was a total of 1,181 cases with average length of stay of 5.4 days and 
average costs of $18,875. Of these 1,181 cases there were 4 cases 
reporting a TMJ replacement with prosthesis procedure (code 0RRC0JZ or 
0RRD0JZ) with an average length of stay of 7.3 days and average costs 
of $31,151. For MS-DRG 132, there was a total of 464 cases with average 
length of stay of 2.5 days and average costs of $11,558. Of these 464 
cases, there were 10 cases reporting a TMJ replacement with prosthesis 
procedure (code 0RRC0JZ or 0RRD0JZ) with an average length of stay of 
3.1 days and average costs of $24,099.
    The data analysis demonstrates that the average costs of cases 
reporting procedure code 0RRC0JZ or 0RRD0JZ for the replacement of a 
TMJ with prosthesis procedure in MS-DRGs 129, 130, 131, and 132 and the 
cases reporting procedures performed on the mandible in MS-DRGs 129 and 
130 have higher average costs compared to all the cases in their 
assigned MS-DRGs. While the volume of the cases reporting procedure 
code 0RRC0JZ or 0RRD0JZ was low with a total of 22 cases across MS-DRGs 
129, 130, 131, and 132, similar to the analysis results for MS-DRGs 133 
and 134 described earlier, the average costs for the cases are higher 
($33,581 versus $18,091; $27,396 versus $11,092; $31,151 versus 
$18,875; and $24,099 versus $11,558) affirming that replacement of a 
TMJ with prosthesis procedures are more costly. The analysis also 
demonstrates that the average length of stay for cases reporting 
procedure code 0RRC0JZ or 0RRD0JZ across MS-DRGs 130, 131, and 132 is 
longer (3.4 days versus 2.7 days; 7.3 days versus 5.4 days; and 3.1 
days versus 2.5 days) compared to all the cases in their assigned MS-
DRGs. For MS-DRG 129, we found that the average length of stay was 
shorter (3 days versus 5.2 days) for cases reporting procedure code 
0RRC0JZ or 0RRD0JZ. The data demonstrated similar results for the cases 
reporting procedures performed on the mandible in MS-DRGs 129 and 130, 
where the average costs for the cases are higher ($21,258 versus 
$18,091 and $14,712 versus $11,092, respectively) and the average 
length of stay was longer (6.9 days versus 5.2 days and 3.5 days versus 
2.7 days, respectively) compared to all the cases in their assigned MS-
DRG.
    The analysis of MS-DRGs 129, 130, 131, and 132 further demonstrated 
that the average length of stay and average costs for all cases were 
almost identical for each of the subgroups. For example, MS-DRG 129 is 
defined as ``with CC/MCC or major device'' and MS-DRG 131 is defined as 
``with CC/MCC'' while MS-DRGs 130 and 132 are both defined as ``without 
CC/MCC''. For all of the cases in MS-DRG 129, we found that the average 
length of stay was 5.2 days with an average cost of $18,091, and for 
all of the cases in MS-DRG 131, the average length of stay was 5.4 days 
with an average cost of $18,875. Similarly, for all of the cases in MS-
DRG 130, we found that the average length of stay was 2.7 days with an 
average cost of $11,092, and for MS-DRG 132, we found the average 
length of stay was 2.5 days with an average cost of $11,558.
    We noted in the proposed rule that as a result of the data analysis 
performed for MS-DRGs 129, 130, 131, and 132, including the analysis of 
the procedures describing replacement of a TMJ with prosthesis in MS-
DRGs 133 and 134, as well as considering the requestor's suggestion 
that we examine the appropriateness of modifying the surgical hierarchy 
for MDC 03 by sequencing MS-DRGs 131 and 132

[[Page 58466]]

above MS-DRGs 129 and 130 to enable more appropriate payment for the 
performance of multiple facial procedures, our clinical advisors 
recommended evaluating all the procedures currently assigned to MS-DRGs 
129, 130, 131, 132, 133, and 134 to compare costs, complexity of 
service and clinical coherence to assess any potential reassignment of 
these procedures. We refer the reader to the ICD-10 MS-DRG Definitions 
Manual Version 37, which is available via the internet on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software, for 
complete documentation of the GROUPER logic for MS-DRGs 129, 130, 131, 
132, 133, and 134.
    As noted in the proposed rule, we examined claims data from the 
September 2019 update of the FY 2019 MedPAR file for cases reporting 
any of the procedure codes that are currently assigned to MS-DRGs 129, 
130, 131, 132, 133, or 134. We refer the reader to Table 6P.2d 
associated with the proposed rule (which is available via the internet 
on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index/ for the detailed analysis. We 
note that if a procedure code that is currently assigned to MS-DRGs 
129, 130, 131, 132, 133, or 134 is not displayed it is because there 
were no cases found reporting that code in the assigned MS-DRG.
    The data analysis shows that there is wide variation in the volume, 
length of stay, and average costs of cases reporting procedures 
currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134. There 
were several instances in which only one case was found to report a 
procedure code from MS-DRG 129, 130, 131, 132, 133, or 134, and the 
average length of stay for these specific cases ranged from 1 day to 31 
days. For example, in MS-DRG 131, we found one case reporting procedure 
code 0NB70ZZ (Excision of occipital bone, open approach) with an 
average length of stay of 31 days which we consider to be an outlier in 
comparison to all the other cases reported in that MS-DRG with an 
average length of stay of 5.4 days. Overall, the average costs of cases 
in MS-DRGs 129 and 130 range from $4,970 to $38,217, the average costs 
of cases in MS-DRGs 131 and 132 range from $4,022 to $69,558 and the 
average costs of cases in MS-DRGs 133 and 134 range from $1,089 to 
$87,569. As noted previously, the data demonstrate there appear to be 
similar utilization of hospital resources specifically for cases 
reported in MS-DRGs 129, 130, 131 and 132.
    The highest volume of cases was reported in MS-DRGs 129 and 130 for 
the procedure codes describing resection of the right and left neck 
lymphatic. For MS-DRG 129, there was a total of 750 cases reporting 
procedure code 07T10ZZ (Resection of right neck lymphatic, open 
approach) with an average length of stay of 4.7 days and average costs 
of $17,155 and there was a total of 679 cases reporting procedure code 
07T20ZZ (Resection of left neck lymphatic, open approach) with an 
average length of stay of 4.8 days and average costs of $17,857. For 
MS-DRG 130, there was a total of 358 cases reporting procedure code 
07T10ZZ with an average length of stay of 2.6 days and average costs of 
$10,432 and there was a total of 331 cases reporting procedure code 
07T20ZZ with an average length of stay of 2.5 days and average costs of 
$10,467. For MS-DRGs 131 and 132, the highest volume of cases was 
reported for the procedure codes describing repositioning of the 
maxilla with internal fixation and repositioning of the right and left 
mandible with internal fixation. For MS-DRG 131, there was a total of 
186 cases reporting procedure code 0NSR04Z (Reposition maxilla with 
internal fixation device, open approach) with an average length of stay 
of 5.1 days and average costs of $20,500; a total of 114 cases 
reporting procedure code 0NST04Z (Reposition right mandible with 
internal fixation device, open approach) with an average length of stay 
of 5.7 days and average costs of $18,710, and a total of 219 cases 
reporting procedure code 0NSV04Z (Reposition left mandible with 
internal fixation device, open approach) with an average length of stay 
of 6.0 days and average costs of $20,202. For MS-DRG 132, there was a 
total of 84 cases reporting procedure code 0NSR04Z with an average 
length of stay of 2.1 days and average costs of $12,991 and a total of 
101 cases reporting procedure code 0NSV04Z with an average length of 
stay of 2.8 days and average costs of $11,386. For MS-DRGs 133 and 134, 
the highest volume of cases was reported for the procedure codes 
describing excision of the facial nerve or nasal turbinate. For MS-DRG 
133, there was a total of 60 cases reporting procedure code 09BL8ZZ 
(Excision of nasal turbinate, via natural or artificial opening 
endoscopic) with an average length of stay of 6.6 days and average 
costs of $21,253 and for MS-DRG 134, there was a total of 50 cases 
reporting procedure code 00BM0ZZ (Excision of facial nerve, open 
approach) with an average length of stay of 1.4 days and average costs 
of $8,048.
    Our clinical advisors reviewed the procedures currently assigned to 
MS-DRGs 129, 130, 131, 132, 133, and 134 to identify the patient 
attributes that currently define each of these procedures and to group 
them with respect to complexity of service and resource intensity. For 
example, procedures that we believe represent greater treatment 
difficulty and reflect a class of patients who are similar clinically 
with regard to consumption of hospital resources were grouped 
separately from procedures that we believe to be less complex but still 
reflect patients who are similar clinically with regard to consumption 
of hospital resources. This approach differentiated the more complex 
and invasive procedures, such as resection of cervical lymph nodes, 
repositioning of facial bones, and excision of mandible procedures from 
the less complex and less invasive procedures such as excisions 
(biopsies) of lymph nodes and facial nerves, drainage procedures of the 
upper respiratory system, and tonsillectomies.
    We stated in the proposed rule that after this comprehensive review 
of all the procedures currently assigned to MS-DRGs 129, 130, 131, 132, 
133, and 134, in combination with the results of the data analysis 
discussed previously, our clinical advisors support distinguishing the 
procedures currently assigned to those MS-DRGs by clinical intensity, 
complexity of service and resource utilization and also support 
restructuring of these MS-DRGs accordingly. We noted that during the 
analysis of the procedures currently assigned to MS-DRGs 129 and 130, 
we recognized the special logic defined as ``Major Device Implant'' for 
MS-DRG 129 that identifies procedures describing the insertion of a 
cochlear implant or other hearing device. We stated that our clinical 
advisors supported the removal of this special logic from the 
definition for assignment to any modifications to the MS-DRGs, noting 
the costs of the device have stabilized over time and the procedures 
can be appropriately grouped along with other procedures involving 
devices in any restructured MS-DRGs. We also identified 2 procedure 
codes currently assigned to MS-DRGs 131 and 132, 00J00ZZ (Inspection of 
brain, open approach) and 0WJ10ZZ (Inspection of cranial cavity, open 
approach), that our clinical advisors agreed should not be included in 
any modifications to the MS-DRGs in MDC 03, stating that they are 
appropriately assigned to MS-DRGs

[[Page 58467]]

in MDC 01 (Diseases and Disorders of the Nervous System). We further 
noted that during our analysis of the procedures currently assigned to 
MS-DRGs 133 and 134, we found 338 procedure codes that were 
inadvertently included as a result of replication during our transition 
from the ICD-9 to ICD-10 based MS-DRGs. We referred the reader to Table 
6P.2c associated with the proposed rule for a detailed list of these 
procedure codes that describe procedures performed on various sites, 
such as the esophagus, stomach, intestine, skin, and thumb that we 
stated our clinical advisors agree should be removed from the 
definition for assignment to any modifications to the MS-DRGs under MDC 
03.
    As a result of our review, we proposed the deletion of MS-DRGs 129, 
130, 131, 132, 133, and 134, and the creation of six new MS-DRGs. 
Currently, MS-DRGs 129, 131, and 133 are defined as base MS-DRGs, each 
of which is split by a two-way severity level subgroup. Our proposal 
includes the creation of two new base MS-DRGs with a three-way severity 
level split. As discussed in the proposed rule, our clinical advisors 
suggested that based on the analysis of procedures currently assigned 
to MS-DRGs 129, 130, 131, 132, 133, and 134 as described previously, 
only 2 base MS-DRGs were needed, each divided into 3 levels according 
to the presence of a CC or MCC. The MS-DRGs were developed consistent 
with the analysis to differentiate the more complex and invasive 
procedures from the less complex and less invasive procedures. As noted 
previously, our analysis of MS-DRGs 129, 130, 131, and 132 demonstrated 
that the average length of stay and average costs for all cases were 
almost identical for each of the severity level subgroups and 
therefore, the procedures assigned to these MS-DRGs were initially 
reviewed together as one clinical group and then evaluated further in 
comparison to the procedures currently assigned to MS-DRGs 133 and 134. 
The objective was to better differentiate procedures by treatment 
difficulty, clinical similarity, and resource use, and to propose a 
more appropriate restructuring. For example, based on this analysis, in 
some instances, we proposed to reassign procedures described by 
procedure codes that are currently assigned to MS-DRGs 129 and 130 or 
MS-DRGs 131 and 132 to what is being defined as the less complex MS-
DRGs. We stated that we believe the resulting MS-DRG assignments are 
more clinically homogeneous, coherent and better reflect hospital 
resource use.
    We applied the criteria to create subgroups for the three-way 
severity level split for the proposed new MS-DRGs and found that all 
five criteria were met. We stated that for the proposed new MS-DRGs, 
there is at least (1) 500 cases in the MCC group, the CC group and the 
NonCC group; (2) 5 percent of the cases in the MCC group, the CC group 
and the NonCC group; (3) a 20 percent difference in average costs 
between the MCC group, the CC group and the NonCC group; (4) a $2,000 
difference in average costs between the MCC group, the CC group and the 
NonCC group; and (5) a 3-percent reduction in cost variance, indicating 
that the severity level splits increase the explanatory power of the 
base MS-DRG in capturing differences in expected cost between the MS-
DRG severity level splits by at least 3 percent and thus improve the 
overall accuracy of the IPPS payment system. The following table 
reflects our simulation for the proposed new MS-DRGs with a three-way 
severity level split. We stated that our findings represent what we 
would expect under the proposed modifications and proposed new MS-DRGs, 
based on claims data in the FY 2019 MedPAR file.
[GRAPHIC] [TIFF OMITTED] TR18SE20.021

    We proposed to create two new base MS-DRGs, 140 and 143, with a 
three-way severity level split for proposed new MS-DRGs 140, 141, and 
142 (Major Head and Neck Procedures with MCC, with CC, and without CC/
MCC, respectively) and proposed new MS-DRGs 143, 144, and 145 (Other 
Ear, Nose, Mouth And Throat O.R. Procedures with MCC, with CC, and 
without CC/MCC, respectively).
    We referred the reader to Table 6P. 2a and Table 6P.2b associated 
with the proposed rule for the list of procedure codes we proposed for 
reassignment from MS-DRGs 129, 130, 131, 132, 133, and 134 to each of 
the new MS-DRGs. As noted, we also proposed the removal of procedure 
codes 00J00ZZ and 0WJ10ZZ, and the 338 procedure codes listed in Table 
6P. 2c associated with the proposed rule from the logic for MDC 03.
    Comment: Commenters generally agreed with the proposal to delete 
MS-DRGs 129, 130, 131, 132, 133, and 134, and to create proposed new 
MS-DRGs 140, 141, and 142 under proposed new base MS-DRG 140, and to 
create proposed new MS-DRGs 143, 144, and 145 under proposed new base 
MS-DRG 143, however, the commenters recommended CMS review the list of 
proposed procedure codes for assignment to the proposed new MS-DRGs. A 
commenter noted that procedure codes describing reposition of the left 
temporal bone were included in Table 6P.2a and proposed for assignment 
to MS-DRGs 140,141, and 142 while procedure codes describing reposition 
of the right temporal bone were included in Table 6P.2b and proposed 
for assignment to MS-DRGs 143, 144, and 145. The commenter also

[[Page 58468]]

stated their belief that CMS should classify all repositions of 
occipital, temporal, frontal and other bones of the skull as major 
surgery and assign them to proposed new MS-DRGs 140, 141, and 142. The 
commenter provided the following ICD-10-PCS procedure codes for CMS' 
consideration.
[GRAPHIC] [TIFF OMITTED] TR18SE20.022

    Another commenter stated there is not a clear understanding of the 
scope of the proposed changes because the MedPAR data included in the 
proposed rule referred to temporomandibular joint replacements; 
however, the procedure listing for the MS-DRGs extended beyond those 
procedures. The commenter stated that tables 6P.2a and

[[Page 58469]]

6P.2b associated with the proposed rule include procedures on vessels, 
lymphatic and other organs in the head and neck. The commenter stated 
the procedures noted in the tables cross multiple MS-DRGs such as 853, 
857, 856, 571, 264, 570, 463, and 902 which were not discussed in the 
proposed rule. The commenter requested that CMS provide clarity on this 
topic.
    A commenter acknowledged that CMS proposed removing a number of 
ICD-10-PCS procedure codes from the MDC 03 logic that had been 
inadvertently included as a result of replication during the transition 
from ICD-9- to ICD-10-based MS-DRGs. However, according to the 
commenter there are additional procedure codes not included on CMS' 
list shown in table 6P.2c that should also be removed from the MDC 03 
logic. The commenter noted an example of where some codes for 
procedures on the esophagus have been proposed for removal from the MDC 
03 logic, while other procedures performed on the esophagus are still 
proposed for inclusion in the GROUPER logic. The commenter also noted 
that procedures performed on the heart, carotid artery, chest, back 
abdomen, buttock, liver, and leg are not ear, nose, mouth, or throat 
procedures, but they are included in the proposed GROUPER logic for 
proposed new MS-DRGs 143, 144, and 145 (Other Ear, Nose, Mouth and 
Throat O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively). The commenter stated that procedures on the chest, back, 
and abdomen are not head or neck procedures, but they are included in 
the proposed GROUPER logic for proposed new MS-DRGs 140, 141, and 142 
(Major Head and Neck Procedures with MCC, with CC, and without CC/MCC, 
respectively). In addition, the commenter stated that while CMS 
proposed reassigning procedure code 0WJ10ZZ (Inspection of cranial 
cavity, open approach) from MDC 03 (Diseases and Disorders of Ear, Nose 
and Throat) to MDC 01 (Diseases and Disorders of the Nervous System), 
codes for other procedures performed on the cranial cavity are proposed 
to be included in the GROUPER logic for proposed new MS-DRGs 140, 141, 
and 142. The commenter recommended that CMS review the procedure codes 
listed in tables 6P.2a and 6P.2b to identify all of the procedure codes 
that should be removed from the GROUPER logic for proposed new MS-DRGs 
140, 141, 142, 143, 144, and 145. Lastly, the commenter suggested that 
CMS consider whether proposed new MS-DRGs 140, 141, and 142 (Major Head 
and Neck Procedures with MCC, with CC, and without CC/MCC, 
respectively) belong in MDC 03 or whether the title of the MDC should 
be changed since, according to the commenter, the MDC 03 description 
``Diseases and Disorders of Ear, Nose and Throat'' covers a more 
limited set of anatomic sites than the ``major head and neck 
procedures'' included in proposed new MS-DRGs 140, 141, and 142.
    Response: We thank the commenters for their support of the proposal 
to create two new base MS-DRGs, 140 and 143, with a three-way severity 
level split for new MS-DRGs 140, 141, and 142 and new MS-DRGs 143, 144, 
and 145. We appreciate the commenter noting that some procedure codes 
describing reposition of the left temporal bone were included in Table 
6P.2a and proposed for assignment to proposed new MS-DRGs 140, 141, and 
142, while procedure codes describing reposition of the right temporal 
bone were included in Table 6P.2b and proposed for assignment to 
proposed new MS-DRGs 143, 144, and 145. We note that this was an 
inadvertent error, and the procedure codes describing reposition of the 
left temporal bone that were included in Table 6P.2a were intended to 
be included in Table 6P.2b with the codes describing reposition of the 
right temporal bone, as both sets of codes were intended to be proposed 
for reassignment to proposed new MS-DRGs 143, 144, and 145 because they 
describe procedures that are considered to be less complex and less 
invasive compared to the procedures proposed for reassignment to 
proposed new MS-DRGs 140, 141, and 142 that describe more complex and 
more invasive procedures. In response to the commenter's recommendation 
to classify all repositions of occipital, temporal, frontal and other 
bones of the skull as major surgery and assign them to proposed new MS-
DRGs 140, 141, and 142, our clinical advisors do not agree. In the 
comprehensive review of all the procedures currently assigned to MS-
DRGs 129, 130, 131, 132, 133, and 134, which involved an analysis of 
claims data and clinical judgment, they identified and separated out 
the procedures they believed to be more clinically complex and resource 
intensive and those are the procedures that were proposed to be 
reassigned to proposed new MS-DRGs 140, 141, and 142 so that payment 
rates are better aligned. Therefore, with respect to the procedure 
codes describing reposition of temporal, frontal and other bones of the 
skull identified by the commenter, our clinical advisors do not believe 
these procedures reflect the complexity or resource utilization 
consistent with the other procedure codes proposed for reassignment to 
proposed new MS-DRGs 140, 141, and 142 because they are considered to 
be less complex and less resource intensive. We note that while the 
commenter suggested CMS review the procedure codes describing 
reposition of the occipital bone, it did not include any of those 
procedure codes for CMS' consideration in its list. We further note 
that procedure codes describing reposition of the occipital bone were 
already proposed to be reassigned to proposed new MS-DRGs 140, 141, and 
142 as displayed in table 6P.2a associated with the proposed rule, 
therefore we are unclear as to which procedure codes involving the 
occipital bone the commenter is specifically referring to.
    In response to the commenter who stated there is not a clear 
understanding of the scope of the proposed changes because the MedPAR 
data included in the proposed rule referred to other procedure codes in 
addition to the procedure code for temporomandibular joint 
replacements, we note that as discussed in the proposed rule (85 FR 
32484 through 32490), this was a multi-part request involving the 
reassignment of ICD-10-PCS procedure codes 0RRC0JZ and 0RRD0JZ that 
describe replacement of the right and left temporomandibular joint from 
MS-DRGs 133 and 134 to MS-DRGs 131 and 132, the reassignment of the 
procedures involving the mandible and maxilla identified with procedure 
codes from MS-DRGs 129 and 130 to MS-DRGs 131 and 132, and modifying 
the surgical hierarchy for MS-DRGs 131, 132, 133, and 134. We stated 
that we examined claims data for all the procedures identified by 
procedure codes currently assigned to MS-DRGs 129, 130, 131, 132, 133, 
and 134 and we provided our claims analysis in Table 6P.2d associated 
with the proposed rule as well as discussion of our analysis and the 
basis for our proposals. In response to the comments regarding Tables 
6P.2a and 6P.2b that included proposals for procedure codes describing 
procedures on vessels, lymphatic and other organs in the head and neck 
across multiple MS-DRGs such as 853, 857, 856, 571, 264, 570, 463, and 
902 we note that this is because certain procedure codes are currently 
assigned to multiple MDCs and MS-DRGs as shown in Appendix E-Operating 
Room Procedures and Procedure Code/MS-DRG Index of the ICD-10 MS-DRGs 
Definitions Manual. For example, procedure code 07B00ZZ (Excision of 
head lymphatic, open approach) which is listed in Table

[[Page 58470]]

6P.2b, is currently assigned to the following MDCs and MS-DRGs.
[GRAPHIC] [TIFF OMITTED] TR18SE20.023

    We encourage the commenter to review Appendix E of the ICD-10 MS-
DRG Definitions Manual for further clarification and understanding of 
how each procedure code may be assigned to multiple MDCs and MS-DRGs 
under the IPPS.
    In response to the commenter who stated their belief that there are 
additional codes that should also be removed from the MDC 03 logic, 
such as other procedures performed on the esophagus that were proposed 
to be included in the GROUPER logic, and procedures performed on the 
heart, carotid artery, chest, back abdomen, buttock, liver, and leg 
that are not ear, nose, mouth, or throat procedures, but were included 
in the proposed GROUPER logic for MS-DRGs 143, 144, and 145 (Other Ear, 
Nose, Mouth And Throat O.R. Procedures with MCC, with CC, and without 
CC/MCC, respectively), we note that, as stated in the ICD-10 MS-DRG 
Definitions Manual, ``In each MDC there is usually a medical and a 
surgical class referred to as ``other medical diseases'' and ``other 
surgical procedures,'' respectively. The ``other'' medical and surgical 
classes are not as precisely defined from a clinical perspective. The 
other classes would include diagnoses or procedures which were 
infrequently encountered or not well defined clinically. For example, 
the ``other'' medical class for the Respiratory System MDC would 
contain the diagnoses ``other somatoform disorders'' and ``congenital 
malformation of the respiratory system,'' while the ``other'' surgical 
class for the female reproductive MDC would contain the surgical 
procedures ``excision of liver'' (liver biopsy in ICD-9-CM) and 
``inspection of peritoneal cavity'' (exploratory laparotomy in ICD-9-
CM). The ``other'' surgical category contains surgical procedures 
which, while infrequent, could still reasonably be expected to be 
performed for a patient in the particular MDC. There are, however, also 
patients who receive surgical procedures which are completely unrelated 
to the MDC to which the patient was assigned. An example of such a 
patient would be a patient with a principal diagnosis of pneumonia 
whose only surgical procedure is a destruction of prostate 
(transurethral prostatectomy in ICD-9-CM). Such patients are assigned 
to a surgical class referred to as ``unrelated operating room 
procedures.'' These patients are ultimately never assigned to a well-
defined DRG.'' With regard to the comment that procedures on the chest, 
back, and abdomen were included in the proposed GROUPER logic for 
proposed new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures 
with MCC, with CC, and without CC/MCC, respectively), we note that the 
commenter did not provide the specific procedure codes for CMS to 
review and therefore we were unable to evaluate the commenter's 
concerns for FY 2021, however, we will take these comments under 
consideration for future rulemaking. In response to the commenter's 
statement that codes for other procedures performed on the cranial 
cavity were proposed to be included in the GROUPER logic for proposed 
new MS-DRGs 140, 141, and 142, we note that the logic for proposed new 
MS-DRGs 140, 141, and 142 is comprised of a subset of procedure codes 
describing procedures performed on the cranial cavity that are 
currently assigned to MS-DRGs 131 and 132 (Cranial and Facial 
Procedures with and without CC/MCC, respectively). Our clinical 
advisors reviewed the list of procedures currently assigned to those 
MS-DRGs and believed that procedure codes 00J00ZZ and 0WJ10ZZ could be 
removed from the logic based on the analysis of all the procedure codes 
and because these codes are currently assigned to MS-DRGs in MDC 01 
which they stated is clinically more appropriate. With respect to the 
commenter's suggestion that CMS consider whether proposed new MS-DRGs 
140, 141, and 142 (Major Head and Neck Procedures with MCC, with CC, 
and without CC/MCC, respectively) belong in MDC 03 or whether the title 
of the MDC should be changed since, according to the commenter, the MDC 
03 description ``Diseases and Disorders of Ear, Nose and Throat'' 
covers a more limited set of anatomic sites than the ``major head and 
neck procedures'' included in proposed new MS-DRGs 140, 141, and 142, 
we will take this under consideration for future rulemaking.
    After consideration of the comments we received, we are finalizing 
our proposal to create two new base MS-DRGs, 140 and 143, with a three-
way severity level split for new MS-DRGs 140, 141, and 142 and new MS-
DRGs 143, 144, and 145 and we are also finalizing our proposal to 
delete MS-

[[Page 58471]]

DRGs 129, 130, 131, 132, 133, and 134 for FY 2021. We refer the reader 
to Tables 6P.2a, 6P.2b, and 6P.2c associated with this final rule and 
available via the internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS for the finalized list of 
procedure codes that define the logic for the finalized MS-DRGs. We 
note that discussion of the surgical hierarchy for the modifications is 
discussed in section II.E.15. of this final rule.
5. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Left Atrial Appendage Closure (LAAC)
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49363 through 
49367), we finalized our proposal to create two new MS-DRGs to classify 
percutaneous intracardiac procedures. Specifically, we created MS-DRGs 
273 and 274 (Percutaneous Intracardiac Procedures with and without MCC, 
respectfully) for cases reporting procedure codes describing cardiac 
ablation and other percutaneous intracardiac procedures. In that 
discussion, as FY 2016 was the first year of our transition from the 
ICD-9 based MS-DRGs to the ICD-10 based MS-DRGs, we provided a list of 
the ICD-9-CM procedure codes that identify and describe the cardiac 
ablation procedures and other percutaneous intracardiac procedures that 
were the subject of that MS-DRG classification change request, one of 
which was ICD-9-CM procedure code 37.90 (Insertion of left atrial 
appendage device).
    Separately, we also discussed a request that we received for new 
technology add-on payments for the WATCHMANTM Left Atrial 
Appendage Closure (LAAC) device (80 FR 49480 through 49488). In that 
discussion, we noted that effective October 1, 2004 (FY 2005), ICD-9-CM 
procedure code 37.90 (Insertion of left atrial appendage device) was 
created to identify and describe procedures using the 
WATCHMANTM Left Atrial Appendage (LAA) Closure Technology 
and that under ICD-10-PCS, procedure code 02L73DK (Occlusion of left 
atrial appendage with intraluminal device, percutaneous approach) is 
the comparable translation. We also noted that at the time of the new 
technology request, under the ICD-9 based MS-DRGs, procedure code 37.90 
was assigned to MS-DRGs 250 and 251 (Percutaneous Cardiovascular 
Procedures without Coronary Artery Stent with MCC and without MCC, 
respectively). We further noted that, as stated previously, we 
finalized our proposal to assign procedures performed within the heart 
chambers using intracardiac techniques, including those identified by 
ICD-9-CM procedure code 37.90, and its comparable ICD-10-PCS code 
translations (that specifically identify a percutaneous or percutaneous 
endoscopic approach), including 02L73DK, to new MS-DRGs 273 and 274.
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32490 through 324950), we received two separate, but related requests 
involving the procedure codes that describe the technology that is 
utilized in the performance of LAAC procedures. The first request was 
to reassign ICD-10-PCS procedure code 02L73DK (Occlusion of left atrial 
appendage with intraluminal device, percutaneous approach) that 
identifies the WATCHMANTM Left Atrial Appendage Closure 
(LAAC) device, from MS-DRG 274 (Percutaneous Intracardiac Procedures 
without MCC) to MS-DRG 273 (Percutaneous Intracardiac Procedures with 
MCC) and revise the title for MS-DRG 273 to ``Percutaneous Intracardiac 
Procedures with MCC or Major Device Implant for Left Atrial Appendage 
Closure Procedures''. As stated in the proposed rule, cases involving 
LAAC procedures with a percutaneous or percutaneous endoscopic 
approach, including cases reporting ICD-10-PCS procedure code 02L73DK, 
are currently assigned to MS-DRGs 273 and 274.
    We stated in the proposed rule that according to the requestor's 
analysis, the average cost for LAAC procedures reporting ICD-10-PCS 
procedure code 02L73DK is $3,405 higher than the average cost for all 
cases in MS-DRG 274. The requestor stated that based on its analysis, 
this requested reassignment would have minimal impact on MS-DRGs 273 
and 274 and would ensure adequate payments and better resource 
coherency. The requestor stated that cases reporting procedure codes 
describing a LAAC procedure with procedure code 02L73DK within MS-DRG 
274 are more clinically similar and costs are more closely aligned to 
cases within MS-DRG 273.
    As indicated in the proposed rule, in response to the first 
request, we examined claims data from the September 2019 update of the 
FY 2019 MedPAR file for MS-DRGs 273 and 274 to identify cases reporting 
ICD-10-PCS procedure code 02L73DK. Our findings are shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.024

    In MS-DRG 273, we found a total of 7,048 cases with an average 
length of stay of 6.1 days and average costs of $28,100. Of those 7,048 
cases, there were 1,126 cases reporting ICD-10-PCS procedure code 
02L73DK, with an average length of stay of 2.7 days and average costs 
of $29,504. In MS-DRG 274, we found a total of 24,319 cases with an 
average length of stay of 2.0 days and average costs of $24,048. Of 
those 24,319 cases, there were 13,423 cases reporting ICD-10-PCS 
procedure code 02L73DK, with an average length of stay of 1.2 days and 
average costs of $25,846.
    The data analysis demonstrates that the average costs of the cases 
reporting procedure code 02L73DK in MS-DRG 274 are slightly higher than 
the average costs of all the cases in MS-DRG 274 ($25,846 versus 
$24,048), with a difference of approximately $1,798, however, the 
average length of stay for cases reporting procedure code 02L73DK in 
MS-DRG 274 is shorter compared to all the cases in MS-DRG

[[Page 58472]]

274 (1.2 days versus 2 days). We stated in the proposed rule that if we 
were to reassign cases reporting procedure code 02L73DK from MS-DRG 274 
to MS-DRG 273, we would be assigning cases with an average length of 
stay of 1.2 days to a MS-DRG with an average length of stay of 6.1 
days, which our clinical advisors did not support. As indicated in the 
proposed rule, the average costs of the cases reporting procedure code 
02L73DK in MS-DRG 274 ($25,846) compared to the average costs of all 
the cases in MS-DRG 273 ($28,100) show a difference of $2,254. We 
stated in the proposed rule that our clinical advisors did not support 
reassigning the 13,423 cases reporting procedure code 02L73DK without 
an MCC from MS-DRG 274 to MS-DRG 273, which includes cases reporting a 
MCC, noting that it would impact the average costs for all cases in 
this MS-DRG. Lastly, as stated in the proposed rule, our clinical 
advisors expressed concern regarding making MS-DRG changes based on a 
specific, single technology (WATCHMANTM Left Atrial 
Appendage Closure (LAAC) device), identified by only one unique 
procedure code versus considering changes based on a group of related 
procedure codes that can be reported to describe that same type or 
class of technology, which is more consistent with the intent of the 
MS-DRGs. Therefore, for these reasons, we did not propose to reassign 
cases reporting ICD-10-PCS procedure code 02L73DK (Occlusion of left 
atrial appendage with intraluminal device, percutaneous approach) from 
MS-DRG 274 to MS-DRG 273.
    In the proposed rule we also discussed a second request that we 
received to create a new MS-DRG specific to all left atrial appendage 
closure (LAAC) procedures or to map all LAAC procedures to a different 
cardiovascular MS-DRG that has payment rates aligned with procedural 
costs. The requestor stated that by creating a new MS-DRG specific to 
all LAAC procedures or mapping all LAAC procedures to a different 
cardiovascular MS-DRG, the MS-DRG would more appropriately recognize 
the clinical characteristics and cost differences in LAAC cases.
    The 9 ICD-10-PCS procedure codes that describe LAAC procedures and 
their corresponding MS-DRG assignment are listed in the following 
table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.025

    Currently, the MS-DRG assignments for these procedure codes are 
based on the surgical approach: open approach, percutaneous approach, 
or percutaneous endoscopic approach. Procedures describing an open 
approach are assigned to MS-DRGs 250 and 251 (Percutaneous 
Cardiovascular Procedures without Coronary Artery Stent with and 
without MCC, respectively); while procedures describing a percutaneous 
or percutaneous endoscopic approach are assigned to MS-DRGs 273 and 274 
(Percutaneous Intracardiac Procedures with and without MCC, 
respectfully). Of the nine listed ICD-10-PCS procedure codes, three 
(02L70CK, 02L70DK, and 02l70ZK) describe an open approach and are 
currently assigned to MS-DRG 250 and 251, and six (02L73CK, 02L73DK, 
02L73ZK, 02L74CK, 02L74DK, 02L74ZK) describe a percutaneous or 
percutaneous endoscopic approach and are currently assigned to MS-DRG 
273 and 274.
    As indicated in the proposed rule, we examined claims data from the 
September 2019 update of the FY 2019 MedPAR file for cases reporting 
LAAC procedures with an open approach in MS-DRGs 250 and 251. Our 
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.026


[[Page 58473]]


    In MS-DRG 250, we found a total of 4,192 cases with an average 
length of stay of 5.0 days and average costs of $18,807. Of those 4,192 
cases, there were 21 cases reporting a LAAC procedure with an open 
approach, with an average length of stay of 7.0 days and average costs 
of $44,012. In MS-DRG 251, we found a total of 4,941 cases with an 
average length of stay of 2.6 days and average costs of $12,535. Of 
those 4,941 cases, there were 74 cases reporting a LAAC procedure with 
an open approach, with an average length of stay of 3.4 days and 
average costs of $22,711. The analysis shows that the cases reporting a 
LAAC procedure with an open approach in MS-DRGs 250 and 251 have higher 
average costs compared to all cases in MS-DRGs 250 and 251 ($44,012 
versus $18,807 and $22,711 versus $12,535, respectively). The analysis 
also shows that the average length of stay for cases reporting a LAAC 
procedure with an open approach in MS-DRGs 250 and 251 is longer 
compared to all cases in MS-DRGs 250 and 251 (7.0 days versus 5.0 days 
and 3.4 days versus 2.6 days, respectively). Overall, there were a 
total of 95 (21+74) cases reporting a LAAC procedure with an open 
approach in MS-DRGs 250 and 251 with an average length of stay of 4.2 
days and average costs of $27,420. Based on the results of the claims 
data described previously, we conducted further analysis for the 95 
cases reporting a LAAC procedure with an open approach in MS-DRGs 250 
and 251 to determine if there were additional factors that may be 
contributing to the higher average costs and longer length of stay. Of 
those 95 cases, we found a total of 20 cases in which there was another 
O.R. procedure reported on the claim that is also currently assigned to 
MS-DRGs 250 and MS-DRG 251 and believed to be influencing the average 
costs and average length of stay, as shown in the following tables.
[GRAPHIC] [TIFF OMITTED] TR18SE20.027

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

[[Page 58474]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.028

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

[[Page 58475]]

open chest procedure, that we should evaluate cases reporting LAAC 
procedures with the other approaches in their assigned MS-DRGs.
    As indicated in the proposed rule, we then examined claims data 
from the September 2019 update of the FY 2019 MedPAR file for cases 
reporting LAAC procedures with a percutaneous or percutaneous 
endoscopic approach in MS-DRGs 273 and 274. Our findings are shown in 
the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.029

    In MS-DRG 273, we found a total of 7,048 cases with an average 
length of stay of 6.1 days and average costs of $28,100. Of those 7,048 
cases, there were 1,180 cases reporting a LAAC procedure with a 
percutaneous or percutaneous endoscopic approach, with an average 
length of stay of 2.9 days and average costs of $29,591. In MS-DRG 274, 
we found a total of 24,319 cases with an average length of stay of 2.0 
days and average costs of $24,048. Of those 24,319 cases, there were 
13,774 cases reporting a LAAC procedure with a percutaneous or 
percutaneous endoscopic approach, with an average length of stay of 1.2 
days and average costs of $25,765.
    The analysis shows that the cases reporting a LAAC procedure with a 
percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and 274 
have very similar average costs compared to all the cases in MS-DRGs 
273 and 274 ($29,591 versus $28,100 and $25,765 versus $24,048, 
respectively). The analysis also shows that the average length of stay 
for cases reporting a LAAC procedure with a percutaneous or 
percutaneous endoscopic approach in MS-DRGs 273 and 274 is shorter 
compared to all cases in MS-DRGs 273 and 274 (2.9 days versus 6.1 days 
and 1.2 days versus 2.0 days, respectively). Overall, there were a 
total of 14,954 (1,180 + 13,774) cases reporting a LAAC procedure with 
a percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and 
274 with an average length of stay of 1.3 days and average costs of 
$26,067.
    We stated in the proposed rule that our clinical advisors did not 
support creating a new MS-DRG for all LAAC procedures for FY 2021. 
Rather, our clinical advisors believe that ICD-10-PCS codes 02L70CK, 
02L70DK, and 02L70ZK that describe a LAAC procedure with an open 
approach are more suitably grouped to MS-DRGs 273 and 274. As indicated 
in the proposed rule our clinical advisors stated that this 
reassignment would allow all LAAC procedures to be grouped together 
under the same MS-DRGs and would improve clinical coherence. We noted 
that all the procedure codes describing LAAC procedures are designated 
as non-O.R. procedures that affect the MS-DRG to which they are 
assigned. Therefore, in the proposed rule, we proposed to reassign ICD-
10-PCS codes 02L70CK, 02L70DK, and 02L70ZK from MS-DRGs 250 and 251 
(Percutaneous Cardiovascular Procedures without Coronary Artery Stent 
with and without MCC, respectively) to MS-DRGs 273 and 274 
(Percutaneous Intracardiac Procedures with and without MCC, 
respectively).
    Comment: Several commenters supported CMS' proposal to not reassign 
cases reporting ICD-10-PCS procedure code 02L73DK from MS-DRG 274 to 
MS-DRG 273 and to not revise the title for MS-DRG 273 to ``Percutaneous 
Intracardiac Procedures with MCC or Major Device Implant for Left 
Atrial Appendage Closure Procedures''. A commenter concurred that MS-
DRG categories should not be based on a specific medical technology or 
unique procedure code. The commenter noted that the MS-DRGs are 
intended to group procedures with both similar resource intensity and 
clinical characteristics. This commenter further noted that the MS-DRG 
categories are not intended to benefit a single technology or be 
narrowly constituted such as by singling out a device implant in a 
field with multiple other techniques and technologies that address a 
similar disease that do not require an implant. The commenter stated 
that if CMS were to change its methodology of comparing the procedure 
requested for reassignment to all cases, as was requested for the 
WATCHMANTM LAAC device, then in fairness, CMS should do so 
for all the other procedure code MS-DRG reassignment requests it 
receives and that this kind of methodological change should be outlined 
in the proposed rule for comments so stakeholders can discuss the 
implications. This commenter also stated its belief that it is 
premature to modify the Percutaneous Intracardiac Procedures MS-DRGs at 
this time, because there are a number of technologies in this field 
using different techniques, including non-implanted devices, and are 
being studied in CMS Investigational Device Exemption (IDE) approved 
clinical trials. According to the commenter, it is anticipated that 
some of these technologies will receive marketing authorization in the 
near future and therefore, they should also be considered in any MS-
DRGs reclassification. In addition, the commenter stated that volume, 
costs, and length of stay data for the procedures utilizing these 
technologies

[[Page 58476]]

may not be fully incorporated in current hospital cost data, and 
current clinical trial pricing for these devices, which is lower than 
commercialized pricing, will not fully reflect true hospital costs. The 
commenter noted it is critical to ensure that as these alternative 
technologies are adopted by hospitals that they are not disadvantaged 
in their MS-DRG assignments, particularly relative to existing implant 
technologies. The commenter agreed that MS-DRGs 273 and MS-DRG 274 
should continue to be broadly constituted to include the full range of 
procedures performed within the heart chambers using intracardiac 
techniques. The commenter also agreed with CMS that the title of MS-DRG 
273 should remain ``Percutaneous Intracardiac Procedures'' and not 
reference device implants or be limited to a particular device approach 
when numerous other options exist and or are in clinical trials. The 
commenter stated that to the extent CMS implements MS-DRG changes 
impacting the assignment for WATCHMANTM LAAC procedures, 
they request that such policies apply to all LAA procedures, regardless 
of specific technique, including whether they involve an implant.
    Response: We appreciate the commenters' support of our proposal to 
maintain cases reporting procedure code 02L73DK in MS-DRG 274 and to 
retain the current titles for MS-DRGs 273 and 274 by not revising to 
include terminology referencing an implant. As discussed in the 
proposed rule, we agree that the MS-DRGs are intended to group 
procedures with both similar resource intensity and clinical 
characteristics, rather than to identify a specific, single technology, 
identified by only one unique procedure code. We further note that we 
would expect to discuss any changes to CMS' current methodology for 
evaluating MS-DRG requests involving reassignment of a procedure code 
in future rulemaking. We appreciate the information provided by the 
commenter regarding additional technologies and techniques for this 
clinical area that are under study in CMS Investigational Device 
Exemption (IDE) approved clinical trials and agree they should also be 
considered in any potential future MS-DRG reclassification.
    Comment: We received a comment (from the requestor) expressing 
concern that in the proposed rule, CMS' summary of the requestor's 
analysis for the average costs of LAAC procedures reporting ICD-10-PCS 
procedure code 02L73DK (Occlusion of left atrial appendage with 
intraluminal device, percutaneous approach), which identifies the 
WATCHMANTM device, may have been misunderstood. The 
commenter clarified that the $3,405 it referenced in its analysis 
represented the difference between the average costs of the cases 
identified by procedure code 02L73DK in MS-DRGs 273 and 274 versus all 
other procedure codes that do not identify the WATCHMANTM 
device in MS-DRGs 273 and 274. The commenter stated its belief that a 
comparison of the cases reporting procedure code 02L73DK 
``WATCHMANTM cases'' versus ``non-WATCHMANTM'' 
cases is more appropriate to evaluate cost alignment, opposed to the 
comparison of procedure code 02L73DK to all cases in MS-DRG 273 and 
274. The commenter noted that comparing the cases reporting procedure 
code 02L73DK (``WATCHMANTM cases'') against all cases 
includes cases reporting procedure code 02L73DK 
(``WATCHMANTM cases'') and effectively compares ``WATCHMAN 
cases'' to a pool of procedures in which ``WATCHMAN cases'' are a 
significant subgroup, and therefore influences the MS-DRGs cost. The 
commenter stated their belief that an accurate cost comparison requires 
an evaluation of two distinct groups (that is, WATCHMANTM 
procedures vs. non-WATCHMANTM procedures), as opposed to 
comparing one group against another of which it is a part (that is, 
WatchmanTM procedures vs. all procedures in the MS-DRG 
category). The commenter also stated that if CMS intends to use a 
methodology in which clinical/economic coherence is based upon a 
comparison against the group in which that procedure is already 
represented, this should be clarified for consistency in future 
rulemaking. The commenter provided an updated data analysis using FY 
2019 MedPAR and concluded that there is greater cost coherence between 
WATCHMANTM cases currently assigned to DRG 274 and Non-
WATCHMANTM cases currently assigned to DRG 273 (a difference 
of $2,019), as opposed to Non-WATCHMANTM cases currently 
assigned to DRG 274 (a difference of $4,059). The commenter reiterated 
its request for CMS to reassign all cases with procedure code 02L73DK 
from MS-DRG 274 to MS-DRG 273 and rename MS-DRG 273 ``Percutaneous 
Intracardiac Procedures with MCC or Major Device Implant for LAAC''.
    Response: We thank the commenter for the additional information and 
analysis provided. In response to the commenter's concern that CMS' 
summary of the requestor's analysis was misunderstood, we note that we 
inadvertently omitted the reference to MS-DRG 273 in our statement that 
read, ``According to the requestor's analysis, the average cost for 
LAAC procedures reporting ICD-10-PCS procedure code 02L73DK is $3,405 
higher than the average cost for all cases in MS-DRG 274.'' For 
clarification, the statement should have read, ``According to the 
requestor's analysis, the average cost for LAAC procedures reporting 
ICD-10-PCS procedure code 02L73DK is $3,405 higher than the average 
cost for all cases in MS-DRG 273 and 274.'' With regard to the 
commenter's remarks that an accurate cost comparison requires an 
evaluation of two distinct groups, as opposed to comparing one group 
against another of which it is a part, we note that we consider this 
information and the data in this way to understand the impact of the 
selected cases, however, we have generally not included this specific 
information in our discussions or summaries of our analysis. The claims 
data that is evaluated as part of the overall analysis includes the 
``with'' and ``without'' cases related to the specific request where 
applicable, therefore, CMS can consider including this additional data 
analysis information in future rulemaking. With respect to the 
commenter's statement that CMS should clarify in future rulemaking if 
it intends to use a methodology in which clinical/economic coherence is 
based upon a comparison against the group in which that procedure is 
already represented, we note that due to the structure of the MS-DRGs 
and the CC/MCC subgroups that exist, it is not entirely feasible to 
expect that a comparison would not include other MS-DRGs in which that 
procedure is already assigned. For the reasons previously discussed in 
the FY 2021 IPPS/LTCH PPS proposed rule, our clinical advisors continue 
to support the current structure of MS-DRGs 273 and 274 where all LAAC 
procedures, with or without an implant, are grouped together. 
Therefore, after consideration of the public comments that we received, 
we are finalizing our proposal to not reassign cases reporting ICD-10-
PCS procedure code 02L73DK (Occlusion of left atrial appendage with 
intraluminal device, percutaneous approach) from MS-DRG 274 
(Percutaneous Intracardiac Procedures without MCC) to MS-DRG 273 
(Percutaneous Intracardiac Procedures with MCC).
    Comment: Several commenters supported CMS' proposal to reassign 
ICD-10-PCS procedure codes 02L70CK, 02L70DK, and 02L70ZK from MS-DRGs 
250 and 251 to MS-DRGs 273 and 274.

[[Page 58477]]

A commenter stated that reassignment of these procedure codes is more 
representative of the average costs and average length of stay 
associated with procedures in the logic for MS-DRGs 273 and 274 
compared to the procedures that are included in the logic for MS-DRGs 
250 and 251. A commenter also suggested that CMS revise the titles for 
MS-DRGs 273 and 274 to ``Percutaneous and Other Intracardiac Procedures 
with and without MCC, respectively'', since the current MS-DRG titles 
suggest that only percutaneous procedures apply to these MS-DRGs. 
However, a commenter did not support CMS' proposal to reassign ICD-10-
PCS procedure codes 02L70CK, 02L70DK, and 02L70ZK from MS-DRGs 250 and 
251 to MS-DRGs 273 and 274 because according to the commenter, it would 
result in an inappropriate grouping of open procedures under the title 
of ``percutaneous'' procedures. The commenter asserted that although 
open atrial appendage closures are rarely performed as standalone 
procedures and are normally performed in conjunction with open coronary 
bypass and open valve procedures, if an open atrial appendage closure 
is actually performed standalone, MS-DRGs 228 and 229 (Other 
Cardiothoracic Procedures with and without MCC, respectively), would 
more appropriately compensate for the resources and longer length of 
stays expected with open heart procedures.
    Another commenter stated they understood CMS' rationale for not 
proposing to create a separate MS-DRG for the insertion of 
WATCHMANTM devices since the cost reductions involved in 
their shorter length of stay balances out the costs of the device.
    Response: We appreciate the commenters' support of the proposal to 
reassign ICD-10-PCS procedure codes 02L70CK, 02L70DK, and 02L70ZK from 
MS-DRGs 250 and 251 to MS-DRGs 273 and 274. We also agree with the 
commenter who suggested that the titles for MS-DRGs 273 and 274 should 
be revised to ``Percutaneous and Other Intracardiac Procedures with and 
without MCC, respectively'', to reflect this reassignment, as the 
current MS-DRG titles refer only to percutaneous procedures. In 
response to the commenter who did not agree with the proposal to 
reassign procedure codes 02L70CK, 02L70DK, and 02L70ZK from MS-DRGs 250 
and 251 to MS-DRGs 273 and 274 based on the current titles of the MS-
DRGs, as we have done in prior rulemaking and as another commenter 
suggested, we may revise the title of a MS-DRG to better reflect the 
procedures assigned to it. With regard to the commenter's statement 
that open LAAC procedures are normally performed in conjunction with 
open coronary bypass and open valve procedures, therefore, if an open 
atrial appendage closure is actually performed standalone, it would 
more appropriately compensate for the resources and longer length of 
stays expected with open heart procedures if assigned to MS-DRGs 228 
and 229, we consider this comment to be outside the scope of the 
proposal discussed. We can consider additional claims data analysis for 
these procedures in future rulemaking. With respect to the commenter 
who stated they understood CMS' rationale for not proposing to create a 
separate MS-DRG for the insertion of WATCHMANTM devices 
since the cost reductions involved in their shorter length of stay 
balances out the costs of the device, we are unclear as to what this 
comment is in reference to as there was no discussion in the FY 2021 
IPPS/LTCH PPS proposed rule about proposing to create a separate MS-DRG 
for procedures involving the insertion of a WATCHMANTM 
device, rather the discussion concerned reassigning cases reporting the 
procedure code describing the insertion of a WATCHMANTM 
device.
    After consideration of the public comments that we received, we are 
finalizing our proposal to reassign ICD-10-PCS procedure codes 02L70CK, 
02L70DK, and 02L70ZK from MS-DRGs 250 and 251 to MS-DRGs 273 and 274, 
and are finalizing a revision to the titles for MS-DRG 273 and 274 to 
Percutaneous and Other Intracardiac Procedures with and without MCC, 
respectively to reflect this reassignment for FY 2021.
b. Endovascular Cardiac Valve Replacement and Supplement Procedures
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32495 through 
32496), we discussed a request we received to revise MS-DRGs 266 and 
267 (Endovascular Cardiac Valve Replacement and Supplement Procedures 
with and without MCC, respectively) by removing the current two-way 
severity level split and creating a base MS-DRG without any severity 
level splits. According to the requestor, patients treated with an 
endovascular cardiac valve replacement procedure have severe heart 
failure due to a valvular disorder, which may be documented as either 
an exacerbation of heart failure or as chronic severe heart failure.
    The requestor noted that in the cases reporting an endovascular 
cardiac valve replacement procedure, a secondary diagnosis code 
describing the specific type of heart failure may be the only MCC 
reported on the claim and in instances where the heart failure 
diagnosis code is reported as the principal diagnosis on a claim, it is 
disregarded from acting as a MCC. In both scenarios, the requestor 
reported that the heart failure is treated with the endovascular 
cardiac valve replacement procedure, fluid balance, and medication.
    The requestor also stated that providers are challenged in reaching 
a consensus regarding this subset of patients' symptoms that may be 
helpful in establishing a diagnosis for exacerbation of heart failure 
versus chronic severe heart failure and stated that a single, base MS-
DRG would assist in the calculation of costs and charges more reliably, 
regardless of the diagnosis reported in combination with the 
endovascular cardiac valve replacement procedure.
    We noted in the proposed rule that we examined claims data from the 
September 2019 update of the FY 2019 MedPAR file for MS-DRGs 266 and 
267. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.030


[[Page 58478]]


    As shown in the table, there was a total of 19,012 cases with an 
average length of stay of 5.3 days and average costs of $50,879 in MS-
DRG 266. For MS-DRG 267, there was a total of 27,084 cases with an 
average length of stay of 2.1 days and average costs of $40,471.
    As indicated in the proposed rule, to evaluate the request to 
create a single MS-DRG for cases reporting endovascular cardiac valve 
procedures, we conducted an analysis of base MS-DRG 266. This analysis 
includes 2 years of MedPAR claims data to compare the data results from 
1 year to the next to avoid making determinations about whether 
additional severity levels are warranted based on an isolated year's 
data fluctuation and also, to validate that the established severity 
levels within a base MS-DRG are supported. Therefore, we reviewed the 
claims data for base MS-DRG 266 using the September 2018 update of the 
FY 2018 MedPAR file and the September 2019 update of the FY 2019 MedPAR 
file, which were used in our analysis of claims data for MS-DRG 
reclassification requests for FY 2020 and FY 2021. Our findings are 
shown in the table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.031

    As shown in the table, the data reflect that the criteria for a 
two-way split (``with MCC'' and ``without MCC'') are satisfied using 
both the data from the September 2018 update of the FY 2018 MedPAR file 
and the data from the September 2019 update of the FY 2019 MedPAR file: 
(1) At least 500 cases are in the MCC group and in the without MCC 
subgroup; (2) at least 5 percent of the cases in the MS-DRG are in the 
MCC group and in the without MCC subgroup; (3) at least a 20 percent 
difference in average costs between the MCC group and the without MCC 
group; (4) at least a $2,000 difference in average costs between the 
MCC group and the without MCC group; and (5) at least a 3-percent 
reduction in cost variance, indicating that the current severity level 
splits increase the explanatory power of the base MS-DRG in capturing 
differences in expected cost between the current MS-DRG severity level 
splits by at least 3 percent and thus improve the overall accuracy of 
the IPPS payment system. We stated in the proposed rule that our 
clinical advisors also did not agree with the requestor's assertion 
that a single, base MS-DRG would assist in calculating costs more 
reliably. As shown in the claims data and stated previously, the 
criteria are satisfied for the current two-way split. We further noted 
that the basis for the MS-DRGs is to better recognize severity and 
complexity of services, which is accomplished through the CC subgroups.
    Based on the results of our analysis, for FY 2021, we proposed to 
maintain the current structure of MS-DRGs 266 and 267 with a two-way 
severity level split and not create a single, base MS-DRG.
    Comment: Commenters supported CMS' proposal to retain the structure 
of MS-DRGs 266 and 267 with the current two-way severity level split 
based on the information and data analysis provided. A commenter also 
acknowledged the requestor's sentiments regarding situations where a 
secondary diagnosis code describing the specific type of heart failure 
may be the only MCC reported on the claim and in instances where the 
heart failure diagnosis code is reported as the principal diagnosis on 
a claim, it is disregarded from acting as a MCC. This commenter stated 
that inconsistencies in the MS-DRG CC Exclusion List for heart failure 
also confound the issues involving heart failure. The commenter 
suggested that CMS consider the following:
     Allow all acute heart failure codes to be sequenced as a 
principal diagnosis to serve as its own MCC in the same manner that 
acute cor pulmonale serves as an MCC when sequenced as a principal 
diagnosis with acute pulmonary embolism.
     Amend the CC Exclusion List as to eliminate list 682 for 
all the ICD-10-CM codes listed in this section of this rule and place 
all of them in list 2025. The commenter stated that if CMS chooses not 
to do this, it recommends that CMS transition the I50.23, I50.33, 
I50.41 and I50.43 diagnosis codes into the 2025 category so that all 
acute AND acute on chronic heart failure (I50.21, I50.23, I50.31, 
I50.33, I50.41, I50.43) codes are treated equally.

I50.21 MCC 2025:29 codes, Acute systolic (congestive) heart failure
I50.22 CC 0682:30 codes, Chronic systolic (congestive) heart failure
I50.23 MCC 0682:30 codes, Acute on chronic systolic (congestive) 
heart failure
I50.30 CC 0682:30 codes, Unspecified diastolic (congestive) heart 
failure
I50.31 MCC 2025:29 codes, Acute diastolic (congestive) heart failure
I50.32 CC 0682:30 codes, Chronic diastolic (congestive) heart 
failure
I50.33 MCC 0682:30 codes, Acute on chronic diastolic (congestive) 
heart failure
I50.40 CC 0682:30 codes, Unspecified combined systolic (congestive) 
and diastolic (congestive) heart failure
I50.41 MCC 0682:30 codes, Acute combined systolic (congestive) and 
diastolic (congestive) heart failure
I50.42 CC 0682:30 codes, Chronic combined systolic (congestive) and 
diastolic (congestive) heart failure
I50.43 MCC 0682:30 codes, Acute on chronic combined systolic 
(congestive) and diastolic (congestive) heart failure

    The commenter also suggested that CMS, as a member of the ICD-10 
Coordination and Maintenance Committee, advocate to expand ICD-10-CM 
diagnosis code I50.9 Heart failure, unspecified, and assign CC and MCC 
status to these suggested expanded codes, consistent with how the 
I50.2-, I50.3- and I50.4- series are assigned.

I50.90--Heart failure, unspecified
I50.91--Acute heart failure--should serve as an MCC
I50.92--Chronic heart failure--should serve as a CC
I50.93--Acute on chronic heart failure--should serve as an MCC

    According to the commenter, this action would sufficiently 
eliminate the administrative burden to providers regarding querying the 
physician for the specific type of heart failure.
    Response: We appreciate the commenters' support. In response to the 
commenter who suggested modifying the logic of all the acute heart 
failure codes to allow them to act as their own MCC or to amend the CC 
Exclusion list, we appreciate the commenter's suggestions. However, 
because we consider these public comments to be

[[Page 58479]]

outside the scope of the proposed rule, we are not addressing them in 
this final rule. With regard to the commenter's suggestion to expand 
diagnosis code I50.9 Heart failure, unspecified, as discussed in 
section II.E.16. of the preamble of this final rule, the CDC/NCHS has 
lead responsibility for the diagnosis code classification and proposals 
for code updates should be directed to [email protected] for 
consideration at a future ICD-10 Coordination and Maintenance Committee 
meeting. In addition, as discussed in section II.E.1.b. of the preamble 
of this final rule, we are maintaining the November 1 deadline for the 
submission of MS-DRG classification requests for FY 2022, therefore, 
with regard to the additional suggestions to modify the logic of all 
the acute heart failure codes to allow them to act as their own MCC or 
amend the CC Exclusion list, we encourage individuals with comments 
about MS-DRG classifications to submit these comments no later than 
November 1, 2020 so that they can be considered for possible inclusion 
in the annual proposed rule. We will consider these public comments for 
possible proposals in future rulemaking as part of our annual review 
process.
    After consideration of the public comments that we received, we are 
finalizing our proposal to maintain the structure of MS-DRGs 266 and 
277 for FY 2021.
c. Insertion of Cardiac Contractility Modulation Device
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32496), we received a request to review the MS-DRG assignment for cases 
that identify patients who receive a cardiac contractility modulation 
(CCM) device system for congestive heart failure. CCM is indicated for 
patients with moderate to severe heart failure resulting from either 
ischemic or non-ischemic cardiomyopathy. CCM utilizes electrical 
signals which are intended to enhance the strength of the heart and 
overall cardiac performance. CCM delivery device systems consist of a 
programmable implantable pulse generator (IPG) and three leads which 
are implanted in the heart. One lead is implanted into the right atrium 
and the other two leads are inserted into the right ventricle. The lead 
in the right atrium detects atrial electric signals and transmits them 
to the IPG. The IPG, which is usually implanted into the subcutaneous 
pocket of the pectoral region and secured to the fascia with a non-
absorbable suture, processes the atrial signal and generates the CCM 
signals which are transmitted to the right ventricle via the two 
ventricular leads. According to the requestor, MS-DRGs 222, 223, 224, 
225, 226, and 227 (Cardiac Defibrillator Implant with and without 
Cardiac Catheterization with and without AMI/HF/Shock with and without 
MCC, respectively) include code combinations or ``code pairs'' 
describing the insertion of contractility modulation devices. Currently 
however, the MS-DRG GROUPER logic requires the combination of the CCM 
device codes and a left ventricular lead to map to MS-DRGs 222, 223, 
224, 225, 226 and 227. The requestor stated the CCM device is 
contraindicated in patients with a left ventricular lead. Therefore, 
using the current V37 MS-DRG GROUPER logic, no case involving insertion 
of the CCM system can be appropriately mapped to MS-DRGs 222, 223, 224, 
225, 226 and 227. Instead, the cases map to MS-DRG 245 (AICD Generator 
Procedures). According to the requestor, to date, the procedure has 
been performed on an outpatient basis, but it is expected that some 
Medicare patients will receive CCM devices on an inpatient basis. The 
requestor asked that CMS revise the MS-DRG GROUPER logic to group cases 
reporting the use of the CCM device appropriately.
    As noted in the proposed rule, the ICD-10-PCS procedure code pairs 
currently assigned to MS-DRGs 222, 223, 224, 225, 226 and 227 that 
identify the insertion of contractility modulation devices are shown in 
the following table:

[[Page 58480]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.032

    We stated in the proposed rule that based on our analysis of cases 
reporting ICD-10-PCS procedure codes for CCM device systems, we agreed 
with the requestor that a procedure code pair for the insertion of a 
CCM device and right ventricular and/or right atrial lead does not 
exist in the logic for MS-DRGs 222, 223, 224, 225, 226 and 227. We also 
noted that our analysis indicated that the ICD-10-PCS procedure code 
combinations for right ventricular and/or right atrial lead insertion 
with insertion of contractility modulation devices were inadvertently 
excluded from MS-DRGs 222, 223, 224, 225, 226 and 227 as a result of 
replicating the ICD-9 based MS-DRGs.
    We then examined claims data from the September 2019 update of the 
FY 2019 MedPAR file for MS-DRG 245 and identified the subset of cases 
within MS-DRG 245 reporting procedure codes for the insertion of a 
rechargeable CCM device and the insertion of right ventricular and/or 
right atrium lead. We found zero cases in MS-DRG 245 reporting a 
procedure code combination that identifies the insertion of 
contractility modulation device and the insertion of a cardiac lead 
into the right ventricle and/or right atrium lead.
    We stated that our clinical advisors agreed that the insertion of a 
rechargeable CCM system always involves placement of a right-sided 
lead, and that the code combinations that currently exist in the MS-DRG 
GROUPER logic are considered clinically invalid. We examined claims 
data from the September 2019 update of the FY 2019 MedPAR file for MS-
DRGs 222, 223, 224, 225, 226 and 227 for this subset of cases to 
determine if there were any cases that reported one of the 12 
clinically invalid code combinations that exist in the GROUPER logic. 
Because the combinations of codes that describe the insertion of a 
rechargeable CCM device and the insertion of left ventricular lead are 
considered clinically invalid procedures, we stated we would not expect 
these code combinations to be reported in any claims data. We found 
zero cases across MS-DRGs 222, 223, 224, 225, 226 and 227 reporting the 
clinically invalid procedure code combination that identifies the 
insertion of contractility modulation device and the insertion of a 
cardiac lead into the left ventricle.
    We noted that while our analysis did not identify any cases 
reporting a procedure code combination for the insertion of 
contractility modulation device and the insertion of a cardiac lead 
into right ventricle or right atrium, recognizing that it is expected 
that some Medicare patients will receive CCM devices on an inpatient 
basis, we proposed to add the following 24 ICD-10-PCS code combinations 
to MS-DRGs 222, 223, 224, 225, 226 and 227.

[[Page 58481]]

We also proposed to delete the 12 clinically invalid code combinations 
from the GROUPER logic of MS-DRGs 222, 223, 224, 225, 226 and 227 that 
describe the insertion of contractility modulation device and the 
insertion of a cardiac lead into the left ventricle.
BILLING CODE 4120-01-P

[[Page 58482]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.033


[[Page 58483]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.034

BILLING CODE 4120-01-C
    Comments: Commenters supported the proposal to modify the GROUPER 
logic of MS-DRGs 222, 223, 224, 225, 226 and 227 by (1) adding the 24 
ICD-10-PCS code combinations describing the insertion of contractility 
modulation device and the insertion of a cardiac lead into right 
ventricle or right atrium to MS-DRGs 222, 223, 224, 225, 226 and 227; 
and (2) deleting the 12 clinically invalid procedure code combinations 
that describe the insertion of contractility modulation device and the 
insertion of a cardiac lead into the left ventricle. A commenter 
specifically thanked CMS for consulting with their clinical advisors, 
conducting a thorough analysis regarding these codes, and for 
determining the most appropriate MS-DRG assignments for cardiac 
contractility modulation devices. While indicating its support, one 
commenter questioned why cardiac contractility modulation devices 
qualify for MS-DRGs 222, 223, 224, 225, 226 and 227 and cardiac 
resynchronization therapy pacemakers (CRT-P) without defibrillators do 
not and requested that this be investigated in future rulemaking. This 
commenter also

[[Page 58484]]

suggested that CMS change the name of MS- DRGs 222, 223, 224, 225, 226 
and 227 since a cardiac modulation device is not used in all 
circumstances. Another commenter noted its intention to monitor the 
deletion of the 12 clinically invalid code combinations from the 
GROUPER logic in hopes that no unintended consequences come from this 
change.
    Response: We appreciate the commenters' feedback and support.
    In response to the commenter that questioned why cardiac 
contractility modulation devices qualify for MS-DRGs 222, 223, 224, 
225, 226 and 227 and cardiac resynchronization therapy pacemakers do 
not, procedures involving CRT-P are assigned to a number of MS-DRGs. 
Specifically, in MDC 05 (Diseases and Disorders of the Circulatory 
System), procedures involving these pacemakers are assigned to MS-DRGs 
242, 243, and 244 (Permanent Cardiac Pacemaker Implant with MCC, with 
CC, and without CC/MCC, respectively), MS-DRGs 258 and 259 (Cardiac 
Pacemaker Device Replacement with MCC and without MCC, respectively), 
and MS-DRGs 260, 261 and 262 (Cardiac Pacemaker Revision Except Device 
Replacement with MCC, with CC, and without CC/MCC, respectively).
    Procedures codes describing the insertion of total contractility 
modulation device systems have been assigned to MS-DRGs 222, 223, 224, 
225, 226 and 227 since the initial implementation of these procedure 
codes in FY 2010 under ICD-9-CM, recognizing that insertion of the CCM 
device might occur alone, in the presence of a pre-existing automatic 
implantable cardioverter-defibrillator (AICD), or in a combined 
implantation with an AICD. As stated in the proposed rule, the ICD-10-
PCS procedure code combinations for right ventricular and/or right 
atrial lead insertion with insertion of contractility modulation 
devices were inadvertently excluded from MS-DRGs 222, 223, 224, 225, 
226 and 227 as a result of replicating the ICD-9 based MS-DRGs. 
Recognizing that clinical practice might have changed since the 
creation of codes for CCM devices, our clinical advisors believe 
additional analyses are needed in MDC 05, specifically for cases 
reporting both contractility modulation device systems and pacemakers, 
as part of our efforts toward a broader approach to refining MS-DRGs 
and to address the commenters' request. As such, we also do not believe 
conforming changes to the titles of MS-DRGs 222, 223, 224, 225, 226 and 
227 are warranted at this time until further review is complete.
    CMS also will monitor claims data for unintended consequences as a 
result of the deletion of the 12 clinically invalid code combinations 
from the GROUPER logic as we continue our comprehensive analysis in 
future rulemaking. Therefore, after consideration of the public 
comments we received, we are finalizing our proposal to add the 24 ICD-
10-PCS code combinations as previously listed to MS-DRGs 222, 223, 224, 
225, 226 and 227. We are also finalizing our proposal to delete the 12 
clinically invalid code combinations from the GROUPER logic of MS-DRGs 
222, 223, 224, 225, 226 and 227 that describe the insertion of 
contractility modulation device and the insertion of a cardiac lead 
into the left ventricle under the ICD-10 MS-DRGs Version 38, effective 
October 1, 2020.
6. MDC 6 (Diseases and Disorders of the Digestive System): Acute 
Appendicitis
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32500 through 
32503), we discussed a request that we received to add ICD-10-CM 
diagnosis code K35.20 (Acute appendicitis with generalized peritonitis, 
without abscess) to the list of complicated principal diagnoses that 
group to MS-DRGs 338, 339 and 340 (Appendectomy with Complicated 
Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) so that all ruptured/perforated appendicitis codes in MDC 
06 (Diseases and Disorders of the Digestive System) group to MS-DRGs 
338, 339, and 340. ICD-10-CM diagnosis code K35.20 currently groups to 
MS-DRGs 341, 342, and 343 (Appendectomy without Complicated Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively). Under 
current coding conventions, the following inclusion term for 
subcategory K35.2 (Acute appendicitis with generalized peritonitis) is: 
Appendicitis (acute) with generalized (diffuse) peritonitis following 
rupture or perforation of the appendix. The requestor also noted that 
diagnosis code K35.32 (Acute appendicitis with perforation and 
localized peritonitis, without abscess) currently groups to MS-DRGs 
338, 339, and 340, however, diagnosis code K35.20 which describes a 
generalized, more extensive form of peritonitis does not. The requestor 
stated that ICD-10-CM diagnosis code K35.20 is the only ruptured 
appendicitis code not included in the list of complicated principal 
diagnosis codes for MS-DRGs 338, 339 and 340 and stated that it is 
clinically appropriate for all ruptured/perforated appendicitis 
diagnosis codes to group to MS-DRGs 338, 339 and 340.
    As indicated in the FY 2021 IPPS/LTCH PPS proposed rule, we 
analyzed claims data from the September 2019 update of the FY 2019 
MedPAR file for cases in MS-DRGs 341, 342, and 343 and claims reporting 
ICD-10-CM diagnosis code K35.20 as a principal diagnosis. Our findings 
are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.035

    As shown in the table, we found a total of 718 cases with an 
average length of stay of 5.9 days and average costs of $17,270 in MS-
DRG 341. Of those 718 cases, there were 62 cases reporting a principal 
diagnosis code of K35.20 with

[[Page 58485]]

an average length of stay of 7.8 days, and average costs of $20,244. We 
found a total of 2,184 cases with an average length of stay of 3.4 days 
and average costs of $10,611 in MS-DRG 342. Of those 2,184 cases there 
were 183 cases reporting a principal diagnosis code of K35.20 with an 
average length of stay of 4.2 days, and average costs of $10,952. We 
found a total of 2,329 cases with an average length of stay of 2.0 days 
and average costs of $8,298 in MS-DRG 343. Of those 2,329 cases, there 
were 137 cases reporting a principal diagnosis code of K35.20 with an 
average length of stay of 2.6 days, and average costs of $8,088.
    As indicated in the proposed rule, we also analyzed claims data 
from the September 2019 update of the FY 2019 MedPAR file for MS-DRGs 
338, 339, and 340. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.036

    As shown in the table, we found a total of 685 cases with an 
average length of stay of 8.1 days and average costs of $20,930 in MS-
DRG 338. We found a total of 2,245 cases with an average length of stay 
of 5.0 days and average costs of $12,705 in MS-DRG 339. We found a 
total of 1,840 cases, average length of stay 2.9 days, and average 
costs of $9,101 in MS-DRG 340.
    We stated in the proposed rule that our clinical advisors agreed 
that the presence of an abscess would clinically determine whether a 
diagnosis of acute appendicitis would be considered a complicated 
principal diagnosis. As diagnosis code K35.20 is described as 
``without'' an abscess, we stated our clinical advisors recommended 
that it not be added to the list of principal diagnoses for MS-DRGS 
338, 339, and 340 (Appendectomy with Complicated Principal Diagnosis 
with MCC, with CC, and without CC/MCC, respectively). We stated in the 
proposed rule, that we believe that while the average costs for cases 
reporting diagnosis code K35.20 are similar to the cases in MS-DRGs 
338, 339, and 340, diagnosis codes describing acute appendicitis that 
do not indicate the presence of an abscess should remain in MS-DRGs 
341, 342, and 343 (Appendectomy without Complicated Principal Diagnosis 
with MCC, with CC, and without CC/MCC, respectively). Therefore, we did 
not propose to reassign diagnosis code K35.20 from MS-DRGs 341, 342, 
and 343 to MS-DRGs 338, 339, and 340.
    As noted previously, the requestor pointed out that diagnosis 
K35.32 (Acute appendicitis with perforation and localized peritonitis, 
without abscess) currently groups to MS-DRGs 338, 339, and 340 
(Appendectomy with Complicated Principal Diagnosis with MCC, with CC, 
and without CC/MCC, respectively). Therefore, in the proposed rule, we 
identified all the diagnosis codes describing acute appendicitis within 
the ICD-10-CM classification under subcategory K35.2 (Acute 
appendicitis with generalized peritonitis) and subcategory K35.3 (Acute 
appendicitis with localized peritonitis) and reviewed their respective 
MS-DRG assignments for clinical coherence. The diagnosis codes in these 
subcategories are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.037

    As indicated in the proposed rule, we analyzed claims data from the 
September 2019 update of the FY 2019 MedPAR file for cases reporting 
any one of the ICD-10-CM diagnosis codes as previously listed as a 
principal diagnosis in MS-DRGs 338, 339, 340, 341, 342, and 343. Our 
findings are shown in the following table.

[[Page 58486]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.038

    As shown in the table, the diagnosis codes describing ``with 
abscess'' (K35.21 and K35.33) are currently assigned to MS-DRGs 338, 
339, and 340. In addition, the diagnosis codes describing ``without 
abscess'' (K35.20, K35.30, and K35.31) are currently assigned to MS-
DRGs 341, 342, and 343. We stated in the proposed rule, that our 
clinical advisors believe that cases reporting ICD-10-CM diagnosis 
codes describing ``with abscess'' are associated with higher severity 
of illness and resource consumption because of extended lengths of stay 
and treatment with intravenous antibiotics. Therefore, in the proposed 
rule, we noted that our clinical advisors determined that diagnosis 
code K35.32 should also be assigned to MS-DRGs 341, 342, and 343 for 
clinical consistency.
    Accordingly, in the proposed rule, we proposed to reassign 
diagnosis code K35.32 to MS-DRGs 341, 342, and 343 (Appendectomy 
without Complicated Principal Diagnosis with MCC, with CC, and without 
CC/MCC, respectively).
    As also noted in the proposed rule, the ICD-10 MS-DRG Version 37 
Definitions Manual currently lists the following ICD-10-CM diagnosis 
codes as Complicated Principal Diagnoses in MS-DRGs 338, 339, 340, 341, 
342, and 343: C18.1 (Malignant neoplasm of appendix); C7A.020 
(Malignant carcinoid tumor of the appendix); K35.21 (Acute appendicitis 
with generalized peritonitis, with abscess); K35.32 (Acute appendicitis 
with perforation and localized peritonitis, without abscess) and K35.33 
(Acute appendicitis with perforation and localized peritonitis, with 
abscess). For the same reasons discussed previously, we proposed to 
remove diagnosis code K35.32 from the complicated principal diagnosis 
list to be clinically consistent.
    Therefore, for the reasons discussed, in the proposed rule, we 
proposed to (1) maintain the current assignment of diagnosis code 
K35.20 (Acute appendicitis with generalized peritonitis, without 
abscess) in MS-DRGs 341, 342, and 343 (Appendectomy without Complicated 
Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively); (2) reassign diagnosis code K35.32 from MS-DRGs 338, 339 
and 340 to MS-DRGs 341, 342, and 343; and (3) remove diagnosis code 
K35.32 from the complicated principal diagnosis list in MS-DRGs 338, 
339, and 340 as listed in the ICD-10 MS-DRG Version 37 Definitions 
Manual.
    Comment: Commenters' supported CMS' proposal to reassign diagnosis 
code K35.32 from MS-DRGs 338, 339 and 340 to MS-DRGs 341, 342, and 343 
and to remove K35.32 from the complicated principal diagnosis list in 
MS-DRGs 338, 339, and 340. One commenter stated that the 
``peritonitis'' described by the diagnoses code may be just reactive 
peritonitis from the appendicitis and therefore would not be associated 
with an abscess or an increased length of stay. Another commenter 
supported CMS' proposal not to reassign ICD-10-CM diagnosis code K35.20 
(Acute appendicitis with generalized peritonitis, without abscess) from 
MS-DRGs 341, 342, and 343 (Appendectomy without Complicated Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively) to MS-
DRGs 338, 339, and 340 (Appendectomy with Complicated Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively). The 
commenter stated their agreement with CMS clinical advisors that the 
presence of an abscess should clinically determine whether a diagnosis 
of acute appendicitis would be considered a complicated principal 
diagnosis, therefore all diagnosis codes for acute appendicitis 
``without'' abscess should be assigned to MS-DRGs 341, 342, and 343 for 
clinical consistency.
    Response: We appreciate the commenters' support.
    Comment: One commenter stated that they disagreed with CMS on 
clinical grounds that ICD-10-CM code K35.20 is not a complicating 
diagnosis, and that all ICD-10-CM codes in subcategory K35.2 (Acute 
appendicitis with

[[Page 58487]]

generalized peritonitis) should serve as an MCC in the same manner that 
unspecified peritonitis serves as an MCC. This commenter also stated 
that given that acute appendicitis is more commonly encountered in non-
Medicare patients and that MS-DRGs are a common payment methodology for 
private insurance and Medicaid claims, CMS should additionally analyze 
Medicaid claims.
    Response: We thank the commenter for their feedback. We note 
diagnosis codes for acute appendicitis described as ``without abscess'' 
or ``without perforation'' were assigned the CC severity level 
designation in FY 2019 when diagnosis code K35.2 was subdivided into 
diagnosis codes K35.20 (Acute appendicitis with generalized 
peritonitis, without abscess) and K35.21 (Acute appendicitis with 
generalized peritonitis, with abscess) because our clinical advisors 
stated cases ``without abscess'' or ``without perforation'' are not as 
severe clinical conditions compared to cases ``with abscess'' or ``with 
perforation'' as discussed in the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41230). However, as noted in section II.E.12.b. of the preamble of 
this final rule, we plan to continue a comprehensive CC/MCC analysis, 
using a combination of mathematical analysis of claims data and the 
application of nine guiding principles. We continue to solicit comments 
regarding these guiding principles, as well as other possible ways we 
can incorporate meaningful indicators of clinical severity. We 
encourage the commenter to provide a detailed explanation of how 
applying a suggested concept or principle would ensure that the 
severity designation appropriately reflects resource use for diagnosis 
code K35.20. Commenters should submit their recommendations to the 
following email address: [email protected] by 
November 1, 2020.
    Comment: Some commenters opposed CMS' proposal to maintain the 
current MS-DRG assignment for ICD-10-CM diagnosis code K35.20 (Acute 
appendicitis with generalized peritonitis, without abscess). A 
commenter stated that the costs for treating acute appendicitis with 
generalized peritonitis are on the higher end of the scale as CMS's 
data demonstrated in the proposed rule and requested that CMS 
reconsider the request to move principal diagnosis code K35.20 from MS-
DRGs 341, 342, and 343 to MS-DRGs 338, 339 and 340 based on the 
severity of illness and the cost of treatment. The commenter stated 
that when ruptured appendicitis results in generalized peritonitis, 
resources are greater because the infection is not walled off, not 
localized, and has spread to two or more compartments within the 
abdominal cavity. According to the commenter, clinical literature 
supports the statement that generalized peritonitis is a more morbid 
(severe) presentation than just perforation or localized abscess. The 
commenter also stated that close postoperative monitoring is required 
to identify any signs of sepsis or organ dysfunction indicating 
persistent abdominal infection requiring intra-abdominal lavage via 
postoperative drains or relaparotomy. In addition, according to the 
commenter, antibiotics are given to the patient for 5-7 days until 
temperature and white blood cell count are within normal limits. 
Another commenter stated that the condition described by diagnosis code 
K35.20 (Acute appendicitis with generalized peritonitis, without 
abscess) can be associated with a risk of post-operative abscess 
formation and extended length of hospital stay, thereby warranting the 
classification as a complicated diagnosis. The commenter urged CMS to 
reassign diagnosis code K35.20 from MS-DRGs 341, 342, and 343 to MS-
DRGs 338, 339 and 340. Another commenter stated that diagnosis code 
K35.20, is a complicated diagnosis on clinical grounds and strongly 
believes that when sequenced as a principal diagnosis along with an 
appendectomy should continue to group to MS-DRGs 338, 339 and 340.
    Other commenters did not support the proposal to reassign diagnosis 
code K35.32 from MS-DRGs 338, 339 and 340 to MS-DRGs 341, 342, and 343 
and urged CMS to reconsider reassigning diagnosis code K35.32. A 
commenter stated that the condition described by ICD-10-CM diagnosis 
code K35.32 (Acute appendicitis with perforation and localized 
peritonitis, without abscess) represents a complicated diagnosis, and 
asked CMS to maintain the current complicated diagnosis classification 
for code K35.32. Another commenter analyzed data from their facility 
and found claims reporting a principal diagnosis of K35.32 in MS-DRGs 
338, 339 and 340 had an average LOS of 4.18 days and average charges of 
$60,000. This commenter stated when compared to claims at their 
facility grouped to MS-DRGs 341, 342 and 343, which had an average 
length of stay of 1.91 days and average charges of $42,000, claims 
reporting principal diagnosis ICD-10-CM diagnosis code K35.32 were more 
congruent with MS-DRG's 338-340. This commenter also stated it was the 
professional opinion of the critical care surgical staff of the 
facility that the presence of appendiceal perforations resulting in 
peritonitis (with or without abscess) requires longer hospitalizations 
and increased resources, such as peritoneal washings, intravenous 
antibiotics, and intravenous hydration to care for the increased 
severity of illness.
    Response: We appreciate the commenters' feedback.
    While our clinical advisors continue to believe that when 
peritonitis develops in a patient with acute appendicitis, the degree 
and severity of the peritonitis can vary greatly, we concur that the 
expansion of diagnosis codes K35.2 and K35.3 to introduce additional 
clinical concepts effective October 1, 2018 significantly changed the 
scope and complexity of the diagnosis codes for this subset of 
patients. As noted in the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41236), when we consulted with the staff at the Centers for Disease 
Control's (CDC's) National Center for Health Statistics (NCHS), because 
NCHS has the lead responsibility for maintaining the ICD-10-CM 
diagnosis codes, the NCHS' staff acknowledged the clinical concerns 
based on the manner in which diagnosis codes K35.2 and K35.3 were 
expanded and confirmed that they would consider further review of these 
newly expanded codes with respect to the clinical concepts. As such, we 
believe it would be appropriate to maintain the current assignments at 
this time in order to further examine the relevant clinical factors and 
similarities in resource consumption in order to best represent this 
subset of patients within the MS-DRG classification. Therefore, after 
consideration of the public comments we received, and for the reasons 
discussed, diagnosis code K35.20 (Acute appendicitis with generalized 
peritonitis, without abscess) will be maintained in MS-DRGs 341, 342, 
and 343 (Appendectomy without Complicated Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively) for FY 2021. We are not 
finalizing our proposal to reassign diagnosis code K35.32 (Acute 
appendicitis with perforation and localized peritonitis, without 
abscess) to MS-DRGs 341, 342, and 343; and we are not finalizing our 
proposal to remove diagnosis code K35.32 from the complicated principal 
diagnosis list in MS-DRGs 338, 339, and 340. Accordingly, the 
assignment of ICD-10-CM code K35.32 will be maintained in MS-DRGs 338, 
339, and 340 (Appendectomy with Complicated Principal Diagnosis with 
MCC, with CC, and without CC/MCC, respectively) and

[[Page 58488]]

ICD-10-CM diagnosis code K35.32 will continue to be listed as a 
Complicated Principal Diagnosis in MS-DRGs 338, 339, and 340, in the 
ICD-10 MS-DRG Version 38 Definitions Manual. As additional claims data 
become available, we will continue to analyze the clinical nature of 
each of the diagnoses and their MS-DRG assignments to further improve 
the overall accuracy of the IPPS payments in future rulemaking.
7. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
a. Cervical Radiculopathy
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32503 through 32505), we received a request to reassign ICD-10-CM 
diagnosis codes M54.11 (Radiculopathy, occipito-atlanto-axial region), 
M54.12 (Radiculopathy, cervical region) and M54.13 (Radiculopathy, 
cervicothoracic region) from MDC 01 (Diseases and Disorders of the 
Nervous System) to MDC 08 (Diseases and Disorders of the 
Musculoskeletal System and Connective Tissue). The requestor stated 
that when one of these diagnosis codes describing radiculopathy in the 
cervical/cervicothoracic area of the spine is reported as a principal 
diagnosis in combination with a cervical spinal fusion procedure code, 
the case currently groups to MDC 01 in MS-DRG 028 (Spinal Procedures 
with MCC), MS-DRG 029 (Spinal Procedures with CC or Spinal 
Neurostimulators), and MS-DRG 030 (Spinal Procedures without CC/MCC). 
The requestor acknowledged that radiculopathy results from nerve 
impingement, however, the requestor noted it typically also results 
from a musculoskeletal spinal disorder such as spondylosis or stenosis. 
According to the requestor, the underlying musculoskeletal cause should 
be reported as the principal diagnosis if documented. The requestor 
stated that when the medical record documentation to support a 
musculoskeletal cause is not available, cases reporting a cervical 
spinal fusion procedure with a principal diagnosis of cervical 
radiculopathy would be more consistent with other cervical spinal 
fusion procedures if they grouped to MDC 08 in MS-DRGs 471, 472, and 
473 (Cervical Spinal Fusion with MCC, with CC, and without CC/MCC, 
respectively). The requestor stated that the following diagnosis codes 
describing radiculopathy of the thoracic and lumbar areas of the spine 
are currently assigned to MDC 08 and therefore, group appropriately to 
the spinal fusion MS-DRGs in MDC 08.
[GRAPHIC] [TIFF OMITTED] TR18SE20.039

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

[[Page 58489]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.040

    We referred the reader to the ICD-10 MS-DRG Version 37 Definitions 
Manual (which is available via the internet on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete 
documentation of the GROUPER logic for the listed MS-DRGs.
    As indicated in the FY 2021 IPPS/LTCH PPS proposed rule, we 
examined claims data from the September 2019 update of the FY 2019 
MedPAR file for all cases in MS-DRGs 028, 029, and 030 and for cases 
reporting any one of the diagnosis codes describing radiculopathy of 
the cervical/cervicothoracic area of the spine (M54.11, M54.12, or 
M54.13) in combination with a cervical spinal fusion procedure. We 
refer the reader to Table 6P.1b associated with the proposed rule and 
this final rule (which is available via the internet on the CMS website 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index/ for the list of procedure codes describing a 
cervical spinal fusion procedure. Our findings are shown in the 
following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.041

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

[[Page 58490]]

average costs of $24,026. Of those 3,574 cases, there were 176 cases 
reporting a principal diagnosis of cervical radiculopathy with a 
cervical spinal fusion procedure with an average length of stay of 2.6 
days and average costs of $24,852. For MS-DRG 030, there were a total 
of 1,338 cases with an average length of stay of 3.1 days and average 
costs of $17,393. Of those 1,338 cases, there were 166 cases reporting 
a principal diagnosis of cervical radiculopathy with a cervical spinal 
fusion procedure with an average length of stay of 1.7 days and average 
costs of $23,003.
    We also reviewed the claims data for MS-DRGs 471, 472, and 473. Our 
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.042

    As shown in the table, there were a total of 3,327 cases with an 
average length of stay of 9 days and average costs of $36,941 in MS-DRG 
471. There were a total of 15,298 cases with an average length of stay 
of 3.3 days and average costs of $22,539 in MS-DRG 472. There were a 
total of 11,144 cases with an average length of stay of 2 days and 
average costs of $18,748 in MS-DRG 473.
    Based on the claims data, the average costs of the cases reporting 
a principal diagnosis of cervical radiculopathy with a cervical spinal 
fusion procedure are consistent with the average costs of all the cases 
in MS-DRGs 028, 029, and 030 in MDC 01. We also noted that the average 
costs of all the cases in MS-DRGs 028, 029, and 030 in MDC 01 are also 
comparable to the average costs of all the cases in MS-DRGs 471, 472, 
and 473, respectively; ($40,886 versus $36,941; $24,026 versus $22,539; 
and $17,393 versus $18,748).
    We stated that our clinical advisors do not support reassigning 
diagnosis codes M54.11, M54.12, and M54.13 that describe radiculopathy 
in the cervical/cervicothoracic area of the spine from MDC 01 to MDC 08 
until further analysis of the appropriate assignment of these and other 
diagnosis codes describing radiculopathy. As the requestor pointed out, 
the diagnosis codes describing radiculopathy of the thoracic and lumbar 
areas of the spine (M54.14, M54.15, M54.16 and M54.17) are currently 
assigned to MDC 08. We noted that there are also two other codes to 
identify radiculopathy within the classification, diagnosis code M54.10 
(Radiculopathy, site unspecified) and M54.18 (Radiculopathy, sacral and 
sacrococcygeal region), both of which are currently assigned to MDC 01. 
We stated that our clinical advisors recommended maintaining the 
current assignment of diagnosis codes describing cervical radiculopathy 
in MDC 01 until further analysis of whether all the diagnosis codes 
describing radiculopathy of a specified or unspecified site should be 
assigned to the same MDC and if so, whether those codes should be 
assigned to MDC 01 or MDC 08. As part of this analysis, they also 
recommended soliciting further input from the public on the appropriate 
assignment for all of the diagnosis codes describing radiculopathy, 
including from professional societies and national associations for 
neurology and orthopedics. For these reasons, we did not propose to 
reassign diagnosis codes M54.11, M54.12, and M54.13 from MDC 01 to MDC 
08 at this time.
    Comment: Commenters agreed with the proposal to maintain the 
current assignment of diagnosis codes describing cervical radiculopathy 
in MDC 01 until further analysis of whether all the diagnosis codes 
describing radiculopathy of a specified or unspecified site should be 
assigned to the same MDC, and if so, whether those codes should be 
assigned to MDC 1 or MDC 8. Commenters also agreed with CMS' plan to 
solicit clinical input from medical specialty societies on the 
appropriate MDC classification for the diagnosis codes describing 
radiculopathy. A commenter thanked CMS for the consideration of the 
request and the solicitation for outside support from the industry 
while continuing to evaluate. Another commenter recommended 
reclassifying all cervical spinal fusion procedures to the same MS-
DRGs, regardless of the diagnosis for which the procedure is performed. 
The commenter stated that the main driver for resource utilization is 
the surgical procedure and the ICD-10-CM diagnosis codes describing 
radiculopathy of the cervical/cervicothoracic spine would need to be 
classified to MDC 08 in order to group clinically similar cases under 
MS-DRGs 471, 472, and 473.
    Response: We appreciate the commenters' support. In response to the 
commenter who recommended reclassifying all cervical spinal fusion 
procedures to the same MS-DRGs, regardless of the diagnosis for which 
the procedure is performed, as noted above and stated in the FY 2021 
IPPS/LTCH PPS proposed rule (85 FR 32505), our clinical advisors 
recommended maintaining the current assignment of diagnosis codes 
describing cervical radiculopathy in MDC 01 until further analysis of 
whether all the diagnosis codes describing radiculopathy of a specified 
or unspecified site should be assigned to the same MDC as well as 
further input from the public, including professional societies, and 
national associations for neurology and orthopedics. We agree with the 
commenter that the main driver for resource utilization is the surgical 
procedure and the ICD-10-CM diagnosis codes describing radiculopathy of 
the cervical/cervicothoracic spine would need to be classified to MDC 
08 in order to group clinically similar cases under MS-DRGs 471, 472, 
and 473, however, it is the diagnosis codes and the MDC to which they 
should be clinically classified that requires further evaluation. From 
a clinical perspective, cervical radiculopathy involves inflammation or 
damage to the nerve root in the cervical spine which can affect a 
patient's neurological function. The underlying causes and risk factors 
vary, and depending on the patient's age, may more likely be attributed 
to a

[[Page 58491]]

musculoskeletal condition, an infection, congenital anomaly, injury or 
a tumor.
    After consideration of the public comments that we received, we are 
maintaining the current assignment of diagnosis codes M54.11, M54.12, 
and M54.13 describing cervical radiculopathy in MDC 01 for FY 2021, and 
as discussed intend to further review and analyze all the diagnosis 
codes describing radiculopathy of a specified or unspecified site to 
determine if they should be assigned to the same MDC, and if so, 
whether those codes should be assigned to MDC 1 or MDC 8.
b. Hip and Knee Joint Replacements
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32505 through 
32510), we discussed a request we received to restructure the MS-DRGs 
for total joint arthroplasty that utilize an oxidized zirconium bearing 
surface implant in total hip replacement and total knee replacement 
procedures. According to the requestor, several international joint 
replacement registries, retrospective claims review, and published 
clinical studies show compelling short-term, mid-term and long-term 
clinical outcomes for patients receiving these implants. The requestor 
stated that without specific MS-DRGs, beneficiary access to these 
implants is restricted and the benefit to patients and cost savings 
cannot be recognized.
    The requestor noted that effective October 1, 2017, new ICD-10-PCS 
procedure codes describing hip and knee replacement procedures with an 
oxidized zirconium bearing surface implant were established, which 
allow greater specificity and provide the ability to track costs and 
clinical outcomes for the patients who receive the implant. The 
requestor provided 3 options for CMS to consider as part of its request 
which are summarized in this section of this rule.
    The first option provided by the requestor was to create a new MS-
DRG by reassigning cases reporting a hip or knee replacement procedure 
with an oxidized zirconium bearing surface implant from MS-DRG 470 
(Major Hip and Knee Joint Replacement or Reattachment of Lower 
Extremity without MCC) to the suggested new MS-DRG. The requestor 
conducted its own analysis and noted that there were approximately 
18,000 cases reporting a hip or knee replacement with an oxidized 
zirconium bearing surface implant and the average length of stay for 
these cases was shorter in comparison to the cases reporting hip and 
knee replacement procedures without an oxidized zirconium bearing 
surface implant. The requestor suggested that patients receiving an 
oxidized zirconium bearing surface implant may be walking earlier after 
surgery and the risk of infection may be reduced as a result of the 
shorter hospitalization.
    The requestor stated that separating out these cases reporting the 
use of an oxidized zirconium bearing surface implant is clinically 
justified because the implants are designed for increased longevity. 
The requestor also stated that oxidized zirconium is an entirely 
distinct material from traditional ceramic or metal implants, as it is 
made through a unique thermal oxidation process which creates a 
ceramicised surface while maintaining the biocompatible zirconium alloy 
substrate. According to the requestor, this process creates an implant 
with the unique properties of both metals and ceramics: Durability, 
strength and friction resistance. Conversely, the requestor stated that 
cobalt chrome used in metal implants contains up to 143x more nickel 
(<0.5% vs <0.0035%) than oxidized zirconium and that nickel is the 
leading cause of negative reactions in patients with metal 
sensitivities.
    The requestor asserted that creating a new MS-DRG for hip and knee 
replacement procedures with an oxidized zirconium bearing surface 
implant would be a logical extension of the unique procedure codes that 
CMS finalized and stated that other countries have established higher 
government reimbursement for these implants to reflect the increased 
value of the technology. The requestor also asserted that multiple 
joint replacement registries have reported excellent hip replacement 
results, including a statistically significant 33 percent reduced risk 
of revision (p<0.001) for oxidized zirconium on highly cross-linked 
polyethylene (XLPE), from three months compared to the most common 
bearing surface of metal/XLPE.
    Lastly, the requestor stated that multiple U.S. data sources, 
including Medicare claims, show strong short-term outcomes, reduced 30-
day readmissions, fewer discharges to skilled nursing facilities 
(SNFs), shorter LOS, and more frequent discharges to home, resulting in 
less costly post-acute care.
    The second option provided by the requestor was to create a new MS-
DRG by reassigning all cases in MS-DRG 470 reporting a hip replacement 
procedure (excluding those with an oxidized zirconium bearing surface 
implant) with a principal diagnosis of hip fracture and all hip 
replacement procedures with an oxidized zirconium bearing surface 
implant, with or without a principal diagnosis of hip fracture to the 
suggested new MS-DRG. The requestor stated that based on its own 
analysis, this new MS-DRG would have approximately 58,000 cases with an 
estimated relative weight between the current MS-DRGs for total joint 
arthroplasty (MS-DRGs 469 and 470) to reflect the increased resource 
consumption of total hip replacement procedures performed due to a hip 
fracture, while also reflecting a higher resource grouping for oxidized 
zirconium bearing surface implants used in total hip replacement 
procedures, and lastly, to reflect statistically significant reductions 
in revision of total hip replacement procedure rates.
    The requestor also indicated that a new MS-DRG for total hip 
replacement procedures with a hip fracture would correspond to 
differentials recognized in the Comprehensive Care for Joint 
Replacement (CJR) model, which established a separate target 90-day 
episode price for total hip replacement procedures performed due to hip 
fracture cases, as these are typically higher severity patients with 
longer lengths of stay than hip replacement procedures absent a hip 
fracture.
    The requestor conducted its own analysis of Medicare claims data 
(Q4 2017-Q3 2018) for total hip replacement procedures and compared 
cases with an oxidized zirconium bearing surface implant to cases 
without an oxidized zirconium bearing surface implant. The requestor 
reported that it found statistically reduced SNF costs, hospital length 
of stay, 90-day episode costs, and 55% decreased mortality at 180 days 
for the oxidized zirconium bearing surface implant cases. The requestor 
urged CMS to recognize this technology with a differentiated payment in 
the form of a new MS-DRG, based on its findings of excellent clinical 
outcomes for total hip replacement procedures that utilize an oxidized 
zirconium bearing surface implant.
    The third option provided by the requestor was to reassign all 
cases reporting a total hip replacement procedure using an oxidized 
zirconium bearing surface implant with a principal diagnosis of hip 
fracture from MS-DRG 470 (Major Hip and Knee Joint Replacement or 
Reattachment of Lower Extremity without MCC) to MS-DRG 469 (Major Hip 
and Knee Joint Replacement or Reattachment of Lower Extremity with MCC 
or Total Ankle Replacement). The requestor stated this option would 
maintain the two existing MS-DRGs for total joint arthroplasty and 
would only involve moving a small

[[Page 58492]]

subset of cases (approximately 300) from MS-DRG 470 to MS-DRG 469.
    The requestor acknowledged that the third option was more limited 
than the first two options, however, the requestor stated that it was 
the least disruptive since the two MS-DRGs and estimated relative 
weights would remain essentially the same. The requestor also stated 
that reassigning cases reporting a total hip replacement procedure 
using an oxidized zirconium bearing surface implant with a principal 
diagnosis of hip fracture from MS-DRG 470 to MS-DRG 469 would encourage 
hospitals to use these high-quality, proven implants.
    The requestor also asserted that the third option focuses the 
suggested payment changes on the population of patients that benefit 
the most from the technology. According to the requestor, the analysis 
of Medicare claims data suggests that there is potential to improve 
care for the older population of patients who receive a total hip 
replacement by encouraging providers to use an oxidized zirconium 
bearing surface implant for hip fracture cases. In addition, the 
requestor stated that long-term Medicare solvency concerns impel 
consideration of incentives as a means to drive better outcomes at 
lower cost. Specifically, the requestor asserted that if all of the 
approximately 150,000 total hip replacement procedures performed 
annually in the U.S. for hip fracture achieved 90-day episode cost 
savings observed in Medicare claims for oxidized zirconium bearing 
surface implants, based on the requestor's analysis, potential annual 
savings of more than $650 million could be realized, in addition to 
longer-term savings achieved through reduced revisions.
    The requestor also welcomed additional analysis by CMS of the 
claims data and consideration of alternative configurations that might 
better align patient severity, clinical value and payment.
    As indicated by the requestor, October 1, 2017, new ICD-10-PCS 
procedure codes describing hip and knee replacement procedures with an 
oxidized zirconium bearing surface implant were created. The procedure 
codes are as follows:
[GRAPHIC] [TIFF OMITTED] TR18SE20.043

    We indicated in the FY 2021 IPPS/LTCH PPS proposed rule that we 
examined claims data from the September 2019 update of the FY 2019 
MedPAR file for MS-DRGs 469 and 470 where hip and knee replacement 
procedures are currently assigned for cases reporting the use of an 
oxidized zirconium bearing surface implant to address the three options 
provided by the requestor.
    To evaluate the first option provided by the requestor, we analyzed 
the cases reporting a total hip or total knee replacement procedure 
with an oxidized zirconium bearing surface implant in MS-DRG 470 to 
determine if a new MS-DRG is warranted. To evaluate the second option 
provided by the requestor, we analyzed the cases reporting a total hip 
replacement procedure without an oxidized zirconium bearing surface 
implant with a principal diagnosis of hip fracture and

[[Page 58493]]

cases reporting a total hip replacement procedure with an oxidized 
zirconium implant with or without a principal diagnosis of hip fracture 
in MS-DRG 470 to determine if a new MS-DRG is warranted. We referred 
the reader to Table 6P.1c associated with the proposed rule for a list 
of the procedure codes that describe a hip replacement without an 
oxidized zirconium bearing surface implant and to Table 6P.1e 
associated with the proposed rule for a list of the diagnosis codes 
describing a hip fracture that were provided by the requestor for 
consideration of options 2 and 3. To evaluate the third option provided 
by the requestor, we analyzed the cases reporting a total hip 
replacement procedure with an oxidized zirconium bearing surface 
implant and a principal diagnosis of fracture in MS-DRG 470 to 
determine if the cases warrant reassignment to MS-DRG 469. Our findings 
are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.044

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

[[Page 58494]]

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

[[Page 58495]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.045

    As shown in the table, there was a total of 14,163 cases reporting 
a total hip replacement procedure with a principal diagnosis of hip 
fracture with an average length of stay of 7.2 days and average costs 
of $21,951 in MS-DRG 469. There was a total of 47,632 cases reporting a 
total hip replacement procedure with a principal diagnosis of hip 
fracture with an average length of stay of 4.5 days and average costs 
of $16,092 in MS-DRG 470. The average length of stay for the cases 
reporting a total hip replacement procedure with a principal diagnosis 
of hip fracture in MS-DRGs 469 and 470 were longer (7.2 days versus 5.9 
days and 4.5 versus 2.3 days, respectively) compared to all the cases 
in their assigned MS-DRGs. The average costs of the cases reporting a 
total hip replacement procedure with a principal diagnosis of hip 
fracture in MS-DRG 469 were approximately $175 less when compared to 
the average costs of all cases in MS-DRG 469 ($21,951 versus $22,126) 
and slightly more for MS-DRG 470 ($16,092 versus $14,326). Our clinical 
advisors supported differentiating the cases reporting a total hip 
replacement procedure with a principal diagnosis of hip fracture from 
those cases without a hip fracture by assigning them to a new MS-DRG. 
They noted that clinically, individuals who undergo hip replacement 
following hip fracture tend to require greater resources for effective 
treatment than those without hip fracture. They further noted that the 
increased complexity associated with hip fracture patients can be 
attributed to the post traumatic state and the stress of pain, possible 
peri-articular bleeding, and the fact that this subset of patients, 
most of whom have fallen as the cause for their fracture, may be on 
average more frail than those who require hip replacement because of 
degenerative joint disease.
    We applied the criteria to create subgroups in a base MS-DRG as 
discussed in section II.D.1.b. of the FY 2021 IPPS/LTCH PPS proposed 
rule and section II.E.1.b. of this final rule. We noted that, as shown 
in the table that follows, a three-way split of this base MS-DRG failed 
to meet the criterion that there be at least a 20% difference in 
average costs between the CC and NonCC subgroup and also failed to meet 
the criterion that there be at least a $2,000 difference in average 
costs between the CC and NonCC subgroup. The following table 
illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TR18SE20.046

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

[[Page 58496]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.047

    For FY 2021, we proposed to create new MS-DRG 521 (Hip Replacement 
with Principal Diagnosis of Hip Fracture with MCC) and new MS-DRG 522 
(Hip Replacement with Principal Diagnosis of Hip Fracture without MCC). 
We referred the reader to Table 6P.1d associated with this proposed 
rule for the list of procedure codes describing hip replacement 
procedures and to Table 6P.1e associated with the proposed rule for the 
list of diagnosis codes describing hip fracture diagnoses that we 
proposed to define in the logic for these new MS-DRGs.
    Comment: Several commenters supported the proposal to create 
proposed new MS-DRGs 521 and 522 for patients undergoing a hip 
replacement due to a hip fracture. The commenters stated their belief 
that the proposed new MS-DRGs and payment rates will better match the 
resource utilization for these clinically distinct patients. 
Specifically, a commenter noted that it is appropriate to differentiate 
hip replacement cases based on whether the patient has a hip fracture 
since, as noted in clinical literature, total hip arthroplasty (THA) 
for hip fracture cases are subject to longer lengths of stay, and more 
postoperative complications, readmissions, reoperations, and mortality 
than THA cases performed for osteoarthritis of the hip. Another 
commenter stated that combining hip fractures in the current MS-DRGs 
469 and 470 with planned hip replacement procedures fails to take into 
consideration and adequately compensate for the complex nature of and 
additional care fracture patients require. The commenter noted that hip 
fracture patients require an increased acute length of stay, often have 
more post traumatic stressors due to their fall and are on average 
frailer than those patients who choose to have an elective hip 
replacement, therefore, creating two new MS-DRGs would help to capture 
the differences in the care required and the cost between hip fracture 
patients and elective hip replacement patients. Another commenter 
expressed appreciation for CMS' effort to review the analysis and 
provide results of each option and alternative options in detail with 
the associated diagnosis and procedure codes in the proposed rule to 
define in the logic for the proposed new MS-DRGs. Based on the results, 
the commenter stated they agreed that differentiating the cases 
reporting a total hip replacement procedure with a principal diagnosis 
of hip fracture from those cases without a hip fracture by assigning 
them to a new MS-DRG would better align cases by average length of stay 
and average costs of cases, and lead to a more reasonable MS-DRG 
classification of these cases. Lastly, a commenter specifically 
expressed support for the establishment of the proposed new MS-DRGs, 
regardless of the type of bearing surface implant used in the joint 
replacement procedure.
    However, a couple commenters who supported the concept of the 
proposal to create proposed new MS-DRGs 521 and 522 recommended that 
CMS not finalize the proposal until further analysis could be 
conducted. The commenters expressed concern that the relative weight 
and the average length of stay for proposed new MS-DRG 521 did not 
appear to align with clinical experience and underlying data since it 
is lower than the relative weight and average length of stay for MS-DRG 
469. The commenters suggested that CMS re-evaluate and provide 
clarification on the data analysis.
    A commenter expressed appreciation for the consideration CMS 
provided in response to the request to create MS-DRGs specifically for 
oxidized zirconium implants utilized in hip and knee replacement 
procedures. The commenter stated that although CMS' proposal did not 
explicitly focus on oxidized zirconium implants, an alternative option 
for the joint replacement procedures was examined and presented, 
resulting in the proposed new MS-DRGs 521 and 522. The commenter stated 
that these proposed MS-DRGs would improve distinguishing this subset of 
patients with a hip fracture who undergo a hip replacement procedure, 
however, the ability to differentiate meaningful parameters of care 
quality is not realized since the proposal treats all implants the 
same, despite what the commenter stated were the important clinical 
improvements demonstrated in the Medicare claims data for oxidized 
zirconium implants used for hip fracture patients. As a result, the 
commenter stated its belief that CMS should revise its proposal and 
adopt a specific MS-DRG for patients with a principal diagnosis of hip 
fracture receiving an oxidized zirconium bearing surface implant in a 
hip replacement procedure. According to the commenter, this would 
reflect an improvement over the proposed MS-DRGs 521 and 522, and best 
advance CMS policy and patient care objectives by creating incentives 
that appropriately encourage the use of a technology that has been 
shown to have substantial cost-saving and quality of care benefits. In 
addition, the commenter asserted that CMS stated a separate MS-DRG for 
oxidized zirconium is not warranted because certain criteria for 
establishing MS-DRG CC subgroups are not met. The commenter indicated 
CMS has broad statutory authority in the design of the Medicare 
inpatient payment system and is not required to limit its MS-DRG 
subgroups exclusively to be based on severity of co-morbidities or 
complications. The commenter remarked CMS should also not be limited to 
its five-step criteria for CC subgroups and by allowing for the 
creation of MS-DRG subgroups where there is clear evidence of a 
substantial clinical improvement will give CMS significantly greater 
flexibility to accomplish its goals of transformative quality 
improvement and cost-savings. The commenter stated that CMS has the 
ability and authority to make payment policy decisions that it believes 
will advance care and the Social Security Act grants CMS broad 
authority to establish a classification of inpatient hospital 
discharges by diagnosis-related groups and a methodology for 
classifying specific hospital discharges within these groups. The 
commenter maintained that nothing in the statute prohibits CMS from 
creating MS-DRG groups or sub-groups based partly upon other important 
policy criteria, such as actual improved patient outcomes. According to 
the commenter, CMS should use its exceptions and adjustments authority 
to accomplish this objective. The commenter provided the example that 
although CMS did not propose to create a new MS-DRG for

[[Page 58497]]

oxidized zirconium implants, it could still adjust payment rates for 
inpatient stays involving such implants and accomplish similar results. 
The commenter expressed appreciation that the IPPS centrally organizes 
MS-DRGs on the basis of resource usage and clinical coherence, however, 
urged CMS to incorporate outcomes-based consideration. The commenter 
also contended that CMS has the opportunity to more fully realize the 
value of proven technologies by making incremental MS-DRG changes that 
lend access to the technologies shown to provide the most significant 
clinical benefits and signal to hospitals, surgeons, private payers, 
and others that CMS sees the value of these implants and wants to make 
sure Medicare beneficiaries can access these technologies. The 
commenter suggested that CMS consider MS-DRG subgroup requests that 
fall outside of the current five-step criteria for CC sub-groups, 
provided that requestors can demonstrate a substantial clinical 
improvement since this would allow the agency additional flexibility to 
make changes in MS-DRGs for technologies that demonstrate substantial 
clinical improvement based on lengthy track records of proven 
performance. The commenter noted how CMS utilizes the substantial 
clinical improvement criterion as part of assessing whether a new 
technology is eligible for a New Technology Add-On Payment or 
Transitional Pass-Through status and urged CMS to expand its use of 
this standard as an alternative pathway when evaluating certain MS-DRG 
subgroup requests. The commenter stated that in reviewing certain 
technologies associated with total joint replacement procedures, CMS 
should evaluate implants based on their ability to demonstrate 
significant reductions in long-term revision rates which are critical 
in studying improved patient outcomes and cost savings within the 
Medicare program. Additional data for revision rates from international 
joint replacement registries, reduced mortality rates from both 
international registries and Medicare claims data, and readmission 
rates from Medicare claims data was also provided by the commenter who 
asserted the information compels CMS to determine whether to finalize 
MS-DRGs that capture the broad category of hip fracture cases, or to 
create a narrower hip fracture MS-DRG based on strong outcomes 
differences observed in Medicare claims. The commenter asserted that 
because the data show strong results for hip fracture patients treated 
with an oxidized zirconium implant, CMS should also consider an 
exception and expand on proposed MS-DRGs 521 and 522 by creating a 
specific MS-DRG for hip fracture patients treated with an oxidized 
zirconium implant.
    Lastly, the commenter expressed its appreciation for the analytical 
work and extensive consideration CMS provided to the request and 
acknowledged oxidized zirconium implants are only used in a very small 
portion of total hip replacement with hip fracture cases. The commenter 
stated its belief that the proposed MS-DRGs 521 and 522 would improve 
the ability to clinically distinguish hip fracture cases treated with a 
hip replacement from elective hip replacement procedures if CMS 
continues to believe a specific MS-DRG for hip fracture patients 
treated with an oxidized zirconium implant is not warranted.
    Another commenter stated the proposal to create proposed new MS-
DRGs 521 and 522 to account for differences in the cost of the THA 
procedure for a hip fracture appeared to be a neutral act in terms of 
cost. The commenter recommended that the proposal not be adopted as 
final policy since the current THA MS-DRGs 469 and 470 already provide 
similar reimbursement for the procedures through associated diagnostic 
codes, and the added expense of treating hip fractures is accounted for 
in the Comprehensive Care for Joint Replacement (CJR) Model. This 
commenter stated their belief that it would be inappropriate to make 
such a substantive change to the MS-DRG system without a strong body of 
evidence to support proposals which directly benefit one device over 
another. The commenter also stated they are not aware of any high-
quality randomized controlled trials which report beneficial effects of 
the oxidized zirconium bearing surface. According to the commenter, any 
reported beneficial effect is most likely due to selection bias (that 
is, choosing younger, healthier patients for the oxidized zirconium 
bearings), rather than any real difference in performance. The 
commenter stated that this is true for registry data as well as 
clinical cohort studies. In addition, the commenter noted that among 
their society's hip replacement experts, the superiority of oxidized 
zirconium-alloy bearings is not a generally accepted fact. The 
commenter stated that they support higher reimbursement for hip 
replacements with a fracture in the existing MS-DRGs 469 and 470, 
however, they currently do not support creating the new MS-DRGs as 
proposed.
    Response: We appreciate the commenters' support of the proposal to 
create proposed new MS-DRGs 521 and 522. We agree with the commenters 
that the proposed new MS-DRGs and payment rates will better match the 
resource utilization for these clinically distinct patients.
    In response to the commenters who supported the concept of the 
proposal however recommended that CMS conduct further analysis for 
proposed new MS-DRG 521 because the proposed relative weight and 
average length of stay did not appear to align with clinical experience 
and underlying data in comparison to MS-DRG 469, we note that effective 
October 1, 2017 (FY 2018) the logic for MS-DRG 469 includes total ankle 
replacement procedures, therefore, the average length of stay, the 
average costs, and the relative weight of MS-DRG 469 continue to 
reflect the resource utilization associated with total ankle 
replacement procedures. In addition, total knee replacement procedures 
with a MCC are also included in the logic for MS-DRG 469.
    The procedure codes identifying a total ankle replacement or total 
knee replacement are as follows:
BILLING CODE 4120-1-P

[[Page 58498]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.048


[[Page 58499]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.049


[[Page 58500]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.050

BILLING CODE 4120-01-C
    We analyzed data from the September 2019 update of the FY 2019 
MedPAR file for cases reporting a total ankle replacement procedure or 
a total knee replacement procedure in MS-DRG 469 for comparison to 
proposed MS-DRG 521. Our findings are shown in the following tables.

[[Page 58501]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.051

    We found a total of 25,701 cases in MS-DRG 469 with an average 
length of stay of 5.9 days and average costs of $22,126. Of those 
25,701 cases, we found a total of 2,819 cases reporting a total ankle 
replacement procedure with an average length of stay of 1.7 days and 
average costs of $22,327 and a total of 4,617 cases reporting a total 
knee replacement procedure with an average length of stay of 4.9days 
and average costs of $21,626.
    As discussed in the proposed rule and shown in the table above, for 
proposed MS-DRG 521, the average length of stay is 7.2 days which is 
longer than the average length of stay of 5.9 days for MS-DRG 469, and 
the average costs for proposed MS-DRG 521 are slightly lower ($175) 
compared to the average costs of MS-DRG 469 ($21,951 versus $22,126, 
respectively).
    The data demonstrates that the average costs of the total ankle 
replacement procedures in MS-DRG 469 are slightly higher than the 
average costs of all the cases in MS-DRG 469 ($22,327 versus $22,126). 
The proposal to reassign cases reporting a total hip replacement 
procedure with a principal diagnosis of a hip fracture from MS-DRG 469 
to proposed new MS-DRG 521 includes the reassignment of 14,163 cases 
out of the 25,701 cases resulting in a total of 11,538 cases proposed 
to remain in MS-DRG 469. Of those 11,538 cases remaining in MS-DRG 469, 
a total of 2,819 cases reflect a higher utilization of resources, 
thereby continuing to impact the relative weight of MS-DRG 469 such 
that it is slightly higher than the proposed relative weight for 
proposed MS-DRG 521 (3.0844 versus 3.0634). Therefore, the data appears 
to reflect that the difference in the relative weights can be 
attributed to the fact that the total ankle replacement procedures 
continue to have an impact for MS-DRG 469.
    In response to the commenter who stated that CMS should revise its 
proposal and adopt a specific MS-DRG for patients with a principal 
diagnosis of hip fracture receiving an oxidized zirconium bearing 
surface implant in a hip replacement procedure, we note that, our 
clinical advisors do not support the creation of a separate, specific 
MS-DRG for oxidized zirconium bearing surface implants for reasons 
previously discussed in the FY 2021 IPPS/LTCH PPS proposed rule. As the 
commenter stated in its own comments, CMS organizes MS-DRGs on the 
basis of resource usage and clinical coherence. Consistent with our 
annual process of evaluating MS-DRG classification requests, we 
performed a thorough review of the claims data for oxidized zirconium 
bearing surface implants utilized in a hip replacement procedure and 
provided a summary of that analysis, including input from our clinical 
advisors, as discussed in the proposed rule. Our clinical advisors 
believe that hip replacement procedures performed for a hip fracture 
demonstrate similar and predictable resource demands, regardless of the 
type of bearing surface implant used in the performance of the 
procedure. Therefore, we proposed to create new MS-DRGs 521 and 522, 
consistent with our efforts to continually refine the ICD-10 MS-DRGs 
while maintaining clinically coherent groups that also more accurately 
stratify Medicare patients with varying levels of severity. Therefore, 
with respect to the commenter's statement that CMS has broad authority 
to make policy changes, including the special exceptions and adjustment 
authority, we do not believe such changes would be appropriate or 
necessary for this group of hip replacement patients that receive an 
oxidized zirconium bearing surface implant. We can consider the 
commenter's suggestions to incorporate additional considerations into 
our analysis of MS-DRG classification requests in future rulemaking. We 
also wish to clarify for the commenter that the criteria to create 
subgroups within a base MS-DRG was not applied in evaluating the 
request to create a new MS-DRG. In other words, the criteria to create 
subgroups is only applied after the decision to propose to create a 
base MS-DRG is made.
    Finally, in response to the commenter's statement that CMS should 
expand its use of the substantial clinical improvement standard as an 
alternative pathway when evaluating certain MS-DRG subgroup requests 
similar to the new technology add-on payment policy process, we will 
take this into future consideration.
    In response to the commenter who stated their belief that it would 
be inappropriate to make a substantive change to the MS-DRG system 
without a strong body of evidence to support proposals which directly 
benefit one device over another and that they are not aware of any 
high-quality randomized controlled trials which report beneficial 
effects of the oxidized zirconium bearing surface, we wish to clarify 
that the CMS proposal did not involve proposing to directly benefit the 
oxidized zirconium bearing surface implant over other bearing surface 
implants. The CMS proposal presented was an alternative option to what 
the requestor submitted for CMS' consideration. Specifically, the CMS 
proposal was to group together all hip replacement procedures performed 
to treat a hip fracture, regardless of the type of bearing surface 
implant used, and the resulting MS-DRG assignment would be further 
differentiated based on the presence of a MCC, hence the proposal to 
create proposed new MS-DRGs 521 and 522 (Hip Replacement with Principal 
Diagnosis of Hip Fracture with and without MCC, respectively).
    After consideration of the comments we received, for the reasons 
previously discussed, we are finalizing our

[[Page 58502]]

proposal to create MS-DRGs 521 and 522 (Hip Replacement with Principal 
Diagnosis of Hip Fracture with and without MCC, respectively) for FY 
2021. We refer readers to table 6P.1d for the list of procedure codes 
describing hip replacements and table 6P.1e for the list of diagnosis 
codes describing hip fractures (available via the internet on the CMS 
web page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS) that we are finalizing in the GROUPER logic 
for MS-DRGs 521 and 522.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we also noted that the 
Comprehensive Care for Joint Replacement (CJR) model includes episodes 
triggered by MS-DRG 469 with hip fracture and MS-DRG 470 with hip 
fracture. Given the proposal to create new MS-DRG 521 and MS-DRG 522, 
we sought public comment on the effect this proposal would have on the 
CJR model and whether to incorporate MS-DRG 521 and MS-DRG 522, if 
finalized, into the CJR model's proposed extension to December 31, 
2023. As discussed in the CJR proposed rule ``Comprehensive Care for 
Joint Replacement Model Three-Year Extension and Changes to Episode 
Definition and Pricing'' (85 FR 10516), we proposed to extend the 
duration of the CJR model. We stated that this extension, if finalized, 
would revise certain aspects of the CJR model including, but not 
limited to, the episode of care definition, the target price 
calculation, the reconciliation process, the beneficiary notice 
requirements and the appeals process. Additionally, we stated that the 
CJR proposed rule would allow time to test the changes by extending the 
length of the CJR model through December 31, 2023, for certain 
participant hospitals. The comment period for the CJR proposed rule 
closed on June 23, 2020 (85 FR 22978). We intend to address the 
comments on the proposed rule and this solicitation in the 
Comprehensive Care for Joint Replacement Model Three-Year Extension and 
Changes to Episode Definition and Pricing Final Rule. . In an interim 
final rule that we published in the April 6, 2020 Federal Register, we 
extended the duration of the CJR model through March 31, 2021, in light 
of the COVID-19 pandemic, to ensure continuity of CJR model operations 
in participant hospitals during the public health emergency so that we 
did not create any additional disruptions to the standard of care 
procedures hospitals have in place during this challenging time. 
Because the model will continue until at least March 31, 2021, we 
intend to adopt a policy in the CJR final rule that incorporates MS-DRG 
521 and MS-DRG 522 into the CJR model as of the effective date of these 
new MS-DRGs. We believe such an approach would avoid disruption to the 
model for the remainder of PY5 (as extended) and thereafter, if our 
proposal to extend the CJR model to December 31, 2023 is finalized.
8. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract)
a. Kidney Transplants
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32510), we received two separate but related requests to review the MS-
DRG assignment for procedures describing the transplantation of 
kidneys. The first request was to designate kidney transplants as a 
Pre-MDC MS-DRG in the same manner that other organ transplants are. The 
requestor performed its own analysis and stated that it found that 
cases with a principal diagnosis from MDC 05 (Diseases and Disorders of 
the Circulatory System), for example I13.2 (Hypertensive heart and 
chronic kidney disease with heart failure and with stage 5 chronic 
kidney disease, or end stage renal disease), reported with a kidney 
transplant from MDC 11 (Diseases and Disorders of the Kidney and 
Urinary Tract), grouped to MS-DRG 981(Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC). The requestor stated it did 
not appear appropriate that a kidney transplant would group to MS-DRG 
981 when diagnosis code I13.2 is a legitimate principal diagnosis for 
this procedure. This requestor also suggested that if there was a 
proposal for designating the MS-DRG for kidney transplants as a Pre-MDC 
MS-DRG, that a severity level split should also be considered.
    As discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42128 
through 42129), during our review of cases that group to MS-DRGS 981 
through 983, we noted that when procedures describing transplantation 
of kidneys (ICD-10-PCS procedure codes 0TY00Z0 (Transplantation of 
right kidney, allogeneic, open approach) and 0TY10Z0 (Transplantation 
of left kidney, allogeneic, open approach) are reported in conjunction 
with ICD-10-CM diagnosis codes in MDC 05 (Diseases and Disorders of the 
Circulatory System), the cases group to MS-DRGs 981 through 983. For 
the reasons discussed, we proposed to add ICD-10-PCS procedure codes 
0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05. As summarized in the FY 
2020 IPPS/LTCH PPS final rule, commenters opposed our proposal to add 
ICD-10-PCS procedure codes 0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05. 
Commenters suggested that CMS instead assign these cases to MS-DRG 652, 
noting that the length of stay for the vast majority of kidney 
transplant cases involving serious cardiac conditions approximates the 
length of stay for kidney transplants in general. After consideration 
of public comments, we did not finalize our proposal to add ICD-10-PCS 
procedure codes 0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05. We stated 
that we believed it would be appropriate to take additional time to 
review the concerns raised by commenters consistent with the 
President's Executive Order on Advancing American Kidney Health (see 
https://www.whitehouse.gov/presidential-actions/executive-order-advancing-american-kidney-health/). Accordingly, cases reporting a 
principal diagnosis in MDC 05 with a procedure describing kidney 
transplantation (that is, procedure code 0TY00Z0 or 0TY10Z0) continue 
to group to MS-DRGs 981 through 983 under the ICD-10 MS-DRGs Version 
37, effective October 1, 2019.
    In the proposed rule, we stated in response to these public 
comments and the request we received on this topic for FY 2021 
consideration, we examined claims data from the September 2019 update 
of the FY 2019 MedPAR file for MS-DRG 652. In MS-DRG 652, there were 
11,324 cases reporting one of the procedure codes listed describing a 
kidney transplant procedure, with an average length of stay of 6 days 
and average costs of $25,424.

[[Page 58503]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.052

    We then analyzed claims data for cases reporting one of the 
procedure codes listed describing the transplantation of kidney 
reported in MS-DRGs 981, 982, and 983. We did not find any such cases 
in MS-DRG 983.
[GRAPHIC] [TIFF OMITTED] TR18SE20.053

    Of the 366 cases reporting procedures describing kidney transplants 
in MS-DRGs 981 and 982, all of the cases reported a principal diagnosis 
from MDC 05. The diagnoses reported are reflected in the table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.054


[[Page 58504]]


    Our clinical advisors reviewed these data. As indicated previously, 
in MS-DRG 652, there were 11,324 cases reporting one of the procedure 
codes listed describing a kidney transplant procedure, with an average 
length of stay of 6 days and average costs of $25,424. Our clinical 
advisors noted that the average costs for cases reporting 
transplantation of kidney with a diagnosis from MDC 05 listed 
previously are generally similar to the average costs of cases in MS-
DRG 652. The diagnoses assigned to MDC 05 reflect conditions associated 
with the circulatory system. We stated that our clinical advisors 
agreed that although these diagnoses might also be a reasonable 
indication for kidney transplant procedures, it would not be 
appropriate to move these diagnoses into MDC 11 because it could 
inadvertently cause cases reporting these same MDC 05 diagnoses with a 
circulatory system procedure to be assigned to an unrelated MS-DRG.
    To further examine the impact of moving MDC 05 diagnoses into MDC 
11, we analyzed claims data for cases reporting a circulatory system 
O.R. procedure and MDC 05 ICD-10-CM diagnosis code I13.2 (Hypertensive 
heart and chronic kidney disease with heart failure and with stage 5 
chronic kidney disease, or end stage renal disease). Diagnosis code 
I13.2 was selected since this diagnosis was the MDC 05 diagnosis most 
frequently reported with kidney transplant procedures. Our findings are 
reflected in the following table:
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR18SE20.055


[[Page 58505]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.056

BILLING CODE 4120-01-C
    As shown in the table, if we were to move diagnosis code I13.2 to 
MDC 11, 4,366 cases would be assigned to the surgical class referred to 
as ``unrelated operating room procedures'' as an unintended 
consequence. Therefore, as an alternate option, we proposed to modify 
the GROUPER logic for MS-DRG 652 by allowing the presence of a 
procedure code describing transplantation of the kidney to determine 
the MS-DRG assignment independent of the MDC of the principal diagnosis 
in most instances. The logic for MDC 24 (Multiple Significant Trauma) 
and MDC 25 (Human Immunodeficiency Virus Infections) will remain 
unchanged, meaning there would be two exceptions to the modification of 
the GROUPER logic for MS-DRG 652. If a principal diagnosis of trauma 
and at least two significant traumas of different body sites are 
present, the appropriate MS-DRG in MDC 24 would be assigned based on 
the principal diagnosis and procedures reported, instead of MS-DRG 652. 
Also, if either a principal diagnosis of HIV infection or a secondary 
diagnosis of HIV infection with a principal diagnosis of a significant 
HIV related condition are present, the appropriate MS-DRG in MDC 25 
would be assigned based on the principal diagnosis and procedures 
reported instead of MS-DRG 652. The diagram found towards the end of 
this discussion illustrates how the MS-DRG logic for MS-DRG 652 (Kidney 
Transplant) would function.
    We stated we recognized MS-DRG 652 is one of the only transplant 
MS-DRGs not currently defined as a Pre-MDC. Pre-MDCs were an addition 
to Version 8 of the Diagnosis Related Groups. This proposal was the 
first departure from the use of principal diagnosis as the initial 
variable in DRG and subsequently MS-DRG assignment. For Pre-MDC DRGs, 
the initial step in DRG assignment is not the principal diagnosis, but 
instead certain surgical procedures with extremely high costs such as 
heart transplant, liver transplant, bone marrow transplant, and 
tracheostomies performed on patients on long-term ventilation. When 
added in Version 8, these types of services were viewed as being very 
resource intensive. Our clinical advisors have noted, however, that 
treatment practices have shifted since the inception of Pre-MDCs. We 
stated that the current proposed refinements to MS-DRG 652 represent 
the first step in investigating how we may consider introducing this 
concept of allowing certain procedures to affect the MS-DRG assignment 
regardless of the MDC from which the diagnosis is reported in the 
future, with the possibility of removing the Pre-MDC category entirely. 
In other words, we would consider having the resource intensive 
procedures currently assigned to the Pre-MDC MS-DRGs determine 
assignment to MS-DRGs within the clinically appropriate MDC. We are 
making concerted efforts to continue refining the ICD-10 MS-DRGs and we 
believe that it is important to include the Pre-MDC category as part of 
our comprehensive review.
    Comment: Commenters agreed with CMS' proposal to modify the GROUPER 
logic for MS-DRG 652 (Kidney Transplant) to allow the presence of a 
procedure code describing

[[Page 58506]]

transplantation of the kidney to determine the MS-DRG assignment 
independent of the MDC. A commenter also stated they agreed that CMS 
should consider having the resource-intensive procedures currently 
assigned to the Pre-MDC MS-DRGs determine assignment to MS-DRGs with 
the ultimate goal of perhaps being able to eliminate the Pre-MDC 
category entirely.
    Response: We appreciate the commenters' support of the proposal and 
CMS' plan to include the Pre-MDC category as part of our comprehensive, 
systematic review of the ICD-10-PCS procedure codes. After 
consideration of the public comments we received, we are finalizing the 
proposal to modify the GROUPER logic for MS-DRG 652 to allow the 
presence of a procedure code describing transplantation of the kidney 
to determine the MS-DRG assignment independent of the MDC of the 
principal diagnosis except in the two instances noted above.
    We stated in the proposed rule, in response to the request for a 
severity level split, since the request to designate kidney transplants 
as a Pre-MDC MS-DRG did not involve a revision of the existing GROUPER 
logic for MS-DRG 652, we applied the five criteria as described in 
section II.E.1.b. of the preamble of this final rule to determine if it 
would be appropriate to subdivide cases currently assigned to MS-DRG 
652 into severity levels. This analysis includes 2 years of MedPAR 
claims data to compare the data results from 1 year to the next to 
avoid making determinations about whether additional severity levels 
are warranted based on an isolated year's data fluctuation and also, to 
validate that the established severity levels within a base MS-DRG are 
supported. Therefore, we reviewed the claims data for base MS-DRG 652 
using the September 2018 update of the FY 2018 MedPAR file and the 
September 2019 update of the FY 2019 MedPAR file, which were used in 
our analysis of claims data for MS-DRG reclassification requests for FY 
2020 and FY 2021. Our findings are shown in the table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.057

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

[[Page 58507]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.058

    We stated that we acknowledged that the request was to review the 
costs of dialysis performed after kidney transplantation during the 
same inpatient admission, however our clinical advisors pointed out, 
that while not routine, it is not uncommon for a patient to require 
dialysis while admitted for kidney transplantation before the procedure 
is performed due to factors related to the availability of the organ, 
nor is it uncommon for a kidney that has been removed from the donor, 
transported, and then implanted to require dialysis before it returns 
to optimal function. Therefore, we examined claims data from the 
September 2019 update of the FY 2019 MedPAR file for all cases in MS-
DRG 652 and compared the results to cases representing kidney 
transplantation with dialysis performed during the same inpatient 
admission either before or after the date of kidney transplantation. 
The following table shows our findings:
[GRAPHIC] [TIFF OMITTED] TR18SE20.059

    As shown by the table, for MS-DRG 652, we identified a total of 
11,324 cases, with an average length of stay of 6.0 days and average 
costs of $25,424. Of the 11,324 cases in MS-DRG 652, there were 3,254 
cases describing the performance of hemodialysis in an admission where 
the patient received a kidney transplant with an average length of stay 
of 7.6 days and average costs of $30,606. Our clinical advisors noted 
that the average length of stay and average costs of cases in MS-DRG 
652 describing the performance of hemodialysis in an admission where 
the patient received a kidney transplant were higher than the average 
length of stay and average costs for all cases in the same MS-DRG.
    We stated in further analyzing this issue, noting that patients can 
require a simultaneous pancreas/kidney transplant procedure, we also 
examined claims data from the September 2019 update of the FY 2019 
MedPAR file for all cases in Pre-MDC MS-DRG 008 (Simultaneous Pancreas/
Kidney Transplant) and compared the results to cases representing 
simultaneous pancreas/kidney transplantation with dialysis performed 
during the same inpatient admission either before or after the date of 
kidney transplantation. The following table shows our findings:
[GRAPHIC] [TIFF OMITTED] TR18SE20.060

    As shown by the table, for Pre-MDC MS-DRG 008, we identified a 
total of 374 cases, with an average length of stay of 10.9 days and 
average costs of $41,926. Of the 374 cases in Pre-MDC MS-DRG 008, there 
were 84 cases describing the performance of hemodialysis during an 
admission where the patient received a simultaneous pancreas/kidney 
transplant with an average length of stay of 13.4 days and average 
costs of $49,001. We stated our clinical advisors again noted that the 
average length of stay and average costs of cases in Pre-MDC MS-DRG 008 
describing the performance of hemodialysis during an admission where 
the patient received a simultaneous pancreas/kidney transplant were 
higher than the average length of stay and average costs for all cases 
in the same Pre-MDC MS-DRG.
    In the proposed rule, we stated our clinical advisors believe that 
these hemodialysis procedures either performed before or after kidney 
transplant or before or after simultaneous pancreas/kidney transplant 
contribute to increased resource consumption for these

[[Page 58508]]

transplant patients. While there is not a large number of cases 
describing a simultaneous pancreas/kidney transplant with hemodialysis 
procedures either performed before or after transplant represented in 
the Medicare data, and we generally prefer not to create a new MS-DRG 
unless it would include a substantial number of cases, we stated we 
believe creating separate MS-DRGs for these cases would appropriately 
address the differential in resource consumption consistent with the 
President's Executive Order on Advancing American Kidney Health (see 
https://www.whitehouse.gov/presidential-actions/executive-order-advancing-american-kidney-health/). For these reasons, we proposed to 
create new MS-DRGs for the performance of hemodialysis during an 
admission where the patient received a kidney transplant or 
simultaneous pancreas/kidney transplant.
    As stated in the proposed rule, to compare and analyze the impact 
of our suggested modifications, we ran a simulation using the Version 
37 ICD-10 MS-DRG GROUPER and the claims data from the September 2019 
update of the FY 2019 MedPAR file. The following table reflects our 
findings for all 3,254 cases representing kidney transplantation with 
dialysis performed during the same inpatient admission either before or 
after the date of kidney transplantation with a two-way severity level 
split.
[GRAPHIC] [TIFF OMITTED] TR18SE20.061

    As shown in the table, there was a total of 2,195 cases for the 
kidney transplant with hemodialysis with MCC subgroup, with an average 
length of stay of 8.0 days and average costs of $32,360. There was a 
total of 1,059 cases for the kidney transplant with hemodialysis 
without MCC subgroup, with an average length of stay of 6.8 days and 
average costs of $26,972. We applied the criteria to create subgroups 
for the two-way severity level split for the proposed MS-DRGs, 
including our expansion of the criteria to also include the nonCC 
group, and found that all five criteria were met. For the proposed MS-
DRGs, there is (1) at least 500 cases in the MCC subgroup and in the 
without MCC subgroup; (2) at least 5 percent of the cases are in the 
MCC subgroup and in the without MCC subgroup; (3) at least a 20 percent 
difference in average costs between the MCC subgroup and the without 
MCC subgroup; (4) at least a $2,000 difference in average costs between 
the MCC subgroup and the without MCC subgroup; and (5) at least a 3-
percent reduction in cost variance, indicating that the proposed 
severity level splits increase the explanatory power of the base MS-DRG 
in capturing differences in expected cost between the proposed MS-DRG 
severity level splits by at least 3 percent and thus improve the 
overall accuracy of the IPPS payment system.
    For the cases describing the performance of hemodialysis during an 
admission where the patient received a simultaneous pancreas/kidney 
transplant, we identified a total of 84 cases, so the criterion that 
there are at least 500 or more cases in any subgroup could not be met. 
Therefore, for FY 2021, we did not propose to subdivide the proposed 
new Pre-MDC MS-DRG for the performance of hemodialysis in an admission 
where the patient received a simultaneous pancreas/kidney transplant 
into severity levels.
    In summary, in the FY 2021 proposed rule, taking into consideration 
that it clinically requires greater resources to perform hemodialysis 
during an admission where the patient received a kidney or simultaneous 
pancreas/kidney transplant, we proposed to create a new Pre-MDC MS-DRG 
for cases describing the performance of hemodialysis during an 
admission where the patient received a simultaneous pancreas/kidney 
transplant. We also proposed to create two new MS-DRGs with a two-way 
severity level split for cases describing the performance of 
hemodialysis in an admission where the patient received a kidney 
transplant in MDC 11. These proposed new MS-DRGs are new Pre-MDC MS-DRG 
019 (Simultaneous Pancreas/Kidney Transplant with Hemodialysis), new 
MS-DRG 650 (Kidney Transplant with Hemodialysis with MCC) and new MS-
DRG 651 (Kidney Transplant with Hemodialysis without MCC). We proposed 
to add the procedure codes from current Pre-MDC MS-DRG 008 to the 
proposed new Pre-MDC MS-DRG 019 with the procedure codes describing a 
hemodialysis procedure. Similarly, we also proposed to add the 
procedure codes from current MS-DRG 652 to the proposed new MS-DRGs 650 
and 651 with the procedure codes describing a hemodialysis procedure. 
In the proposed rule, we noted that the procedure codes describing 
hemodialysis procedures are designated as non-O.R. procedures, 
therefore, as part of the logic for these proposed new MS-DRGs, we also 
proposed to designate these codes as non-O.R. procedures affecting the 
MS-DRG.
    Comment: Many commenters supported CMS' proposal. Commenters stated 
that the establishment of new MS-DRGs for kidney and simultaneous 
pancreas/kidney transplants with hemodialysis will increase the number 
of viable kidneys for transplantation and decrease the kidney discard 
rate by reducing the financial disincentive for using kidneys from 
medically complex donors. A few commenters stated they appreciate CMS' 
recognition of the higher cost involved in these cases and the effort 
to make kidney transplant services more accessible by aligning payment 
rates with the relative cost of services for kidney transplants. A 
commenter stated the proposed creation of two new MS-DRGs for kidney 
transplant cases with hemodialysis--one for cases with major 
complications and comorbidities (MCC) and one for cases without MCC, 
strengthens transplant programs and increases

[[Page 58509]]

patient access to this vital medical service. Another commenter stated 
the inclusion of a MCC subgroup for kidney transplant with hemodialysis 
is vital given the documented increase in the complexity of transplant 
patients. One commenter specifically stated they strongly support 
efforts to ensure that kidney transplant MS-DRGs better reflect the 
cost of all associated care.
    Response: We appreciate the commenters' support.
    Comment: A few commenters opposed this proposal. One commenter 
stated they are concerned that the proposal would decrease Medicare 
payment for all kidney transplants not requiring post-transplant 
dialysis and were against including components in the proposal that 
would result in a reduction in inpatient payment for kidney transplant 
in any category. Another commenter stated they were concerned that CMS 
will extract money from existing MS-DRG 652 and Pre-MDC MS-DRG 008 to 
pay for the proposed new MS-DRGs. A different commenter stated their 
facility has a low volume of admissions with both hemodialysis and 
kidney transplant performed, with only approximately 21 out of a total 
of 110 kidney transplants having such a combination, and therefore 
would be adversely affected should this proposal be finalized.
    Response: We appreciate the commenters' concerns, however as we 
have stated in prior rulemaking, the MS-DRGs are a classification 
system intended to group together those diagnoses and procedures with 
similar clinical characteristics and utilization of resources. We 
continue to believe that consistent with this classification system, 
the proposed new MS-DRGs would improve clinical coherence while 
appropriately addressing the differential in resource consumption for 
cases where hemodialysis is performed during an admission where the 
patient receives a kidney or simultaneous pancreas/kidney transplant. 
Each year, we calculate the relative weights by dividing the average 
cost for cases within each MS-DRG by the average cost for cases across 
all MS-DRGs. It is to be expected that when MS-DRGs are restructured, 
resulting in a different case-mix within the new MS-DRGs, the relative 
weights of the MS-DRGs will change as a result. We refer readers to 
section II.E.2. of the preamble of this final rule for a discussion of 
the relative weight calculations.
    Therefore, after consideration of the public comments received, and 
for the reasons stated above, we are finalizing our proposal to create 
new Pre-MDC MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with 
Hemodialysis) for cases describing the performance of hemodialysis 
during an admission where the patient received a simultaneous pancreas/
kidney transplant. We are also finalizing our proposal to create new 
MS-DRG 650 (Kidney Transplant with Hemodialysis with MCC) and new MS-
DRG 651 (Kidney Transplant with Hemodialysis without MCC) for cases 
describing the performance of hemodialysis in an admission where the 
patient received a kidney transplant in MDC 11. Accordingly, we are 
also finalizing our proposal to designate procedure codes 5A1D70Z, 
5A1D80Z, and 5A1D90Z that describe hemodialysis as non-O.R. procedures 
affecting the MS-DRG.
    The diagram illustrates how the MS-DRG logic for Kidney Transplants 
will function. The diagram (Diagram 1.), which is the same Diagram 1 
included in the proposed rule, begins by asking if the criteria for a 
Pre-MDC MS-DRG is met. If yes, the logic asks if the criteria for Pre-
MDC MS-DRGs 018, 001-006, 014 or 007 is met. If yes, the logic directs 
the case to either Pre-MDC MS-DRG 018, 001-006, 014 or 007 based on the 
principal diagnosis and/or procedures reported. If no, the logic asks 
if there is a simultaneous pancreas/kidney transplant with a qualifying 
diagnosis reported on the claim. If no, the logic directs the case to 
either Pre-MDC MS-DRGs 016, 017, or 010-013 based on the principal 
diagnosis and/or procedures reported. If yes, the logic asks if there 
was a hemodialysis procedure reported on the claim. If yes, the logic 
assigns the case to new Pre-MDC MS-DRG 019 (Simultaneous Pancreas/
Kidney Transplant with Hemodialysis). If no, the logic assigns the case 
to existing Pre-MDC MS-DRG 008 (Simultaneous Pancreas/Kidney 
Transplant).
    If the criteria for a Pre-MDC MS-DRG were not met at the first 
step, the GROUPER logic asks if there was a principal diagnosis of 
trauma and at least two significant traumas of different body sites. If 
yes, the logic directs the case to the appropriate MS-DRG in MDC 24 
based on the principal diagnosis and procedures reported. If no, the 
logic asks if there was either a principal diagnosis of HIV infection 
or a secondary diagnosis of HIV infection with a principal diagnosis of 
a significant HIV related condition. If yes, the logic directs the case 
to the appropriate MS-DRG in MDC 25 based on the principal diagnosis 
and procedures reported. If no, the logic asks if there is kidney 
transplant procedure reported on the claim. If no, the logic directs 
the case to the appropriate MDC and MS-DRG based on the principal 
diagnosis and procedures reported. If yes, the logic asks if there was 
a hemodialysis procedure reported on the claim. If yes, the logic 
assigns the case to new MS-DRGs 650 or 651 (Kidney Transplant with 
Hemodialysis with MCC or without MCC, respectively). If no, the logic 
assigns the case to existing MS-DRG 652 (Kidney Transplant).
    We also received public comments regarding a number of kidney and 
hemodialysis related MS-DRG issues that were outside the scope of the 
proposals included in the FY 2021 IPPS/LTCH PPS proposed rule. These 
comments were as follows:
     One commenter requested that CMS establish a new MS-DRG 
for Continuous Renal Replacement Therapy (CRRT).
     One commenter requested that CMS review other transplant 
cases that end up in MS-DRGs 981 through 983 for reassignment to a more 
appropriate MS-DRG.
     Two commenters requested that CMS evaluate and make 
modifications to any MS-DRG related to the delivery of dialysis.
    Because we consider these public comments to be outside the scope 
of the proposed rule, we are not addressing them in this final rule. As 
stated in section II.E.1.b. of the preamble of this final rule, we 
encourage individuals with comments about MS-DRG classification to 
submit these comments no later than November 1, 2020 so that they can 
be considered for possible inclusion in the annual proposed rule. We 
will consider these public comments for possible proposals in future 
rulemaking as part of our annual review process.
BILLING CODE 4120-01-P

[[Page 58510]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.062


[[Page 58511]]


b. Addition of Diagnoses to Other Kidney and Urinary Tract Procedures 
Logic
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32519), we received a request to add 29 ICD-10-CM diagnosis codes to 
the list of principal diagnoses assigned to MS-DRGs 673, 674, and 675 
(Other Kidney and Urinary Tract Procedures with MCC, with CC, and 
without CC/MCC, respectively) in MDC 11 (Diseases and Disorders of the 
Kidney and Urinary Tract) when reported with procedure codes describing 
the insertion of totally implantable vascular access devices (TIVADs) 
and tunneled vascular access devices. The list of 29 ICD-10-CM 
diagnosis codes submitted by the requestor, as well as their current 
MDC assignments, are found in the table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.063

BILLING CODE 4120-01-C
    The requestor stated that by adding the codes listed, cases 
reporting principal diagnosis codes describing complications of 
dialysis access sites and principal diagnosis codes describing kidney 
disease in the setting of diabetes or hypertension, would group to MS-
DRGs 673, 674, and 675 when a TIVAD or tunneled vascular access device 
is inserted. The requestor stated that patients who have kidney 
transplant complications or dialysis catheter complications typically 
also have chronic kidney disease, end stage renal disease (ESRD) or 
resolving acute tubular necrosis (ATN) but ICD-10-CM coding guidelines 
require a complication code to be sequenced first. The requester stated 
that when reporting a diagnosis code describing ESRD and diabetes, a 
diabetes code from ICD-10-CM Chapter 4 (Endocrine, Nutritional and 
Metabolic Diseases) must be sequenced first and when coding ESRD, 
hypertension, and heart failure, the combination code I13.2 
(Hypertensive heart and chronic kidney disease with heart failure and 
with stage 5 chronic kidney disease or end stage renal disease) must be 
sequenced first per coding guidelines. The requestor pointed out that 
code I13.11 (Hypertensive heart and chronic kidney disease without 
heart failure with stage 5 CKD or ESRD) is currently one of the 
qualifying principal diagnoses in MS-DRGs 673, 674, and 675 when 
reported with procedure codes describing the insertion of TIVADs or 
tunneled vascular access devices; therefore, according to the 
requestor, diagnosis code I13.2 should reasonably be added.
    As discussed in the proposed rule, to begin our analysis, we 
reviewed the GROUPER logic for MS-DRGs 673, 674, and 675 including the 
special logic in MS-DRGs 673, 674, and 675 for certain MDC 11 diagnoses 
reported with

[[Page 58512]]

procedure codes for the insertion of tunneled or totally implantable 
vascular access devices. As discussed in the FY 2003 IPPS/LTCH PPS 
final rule (67 FR 49993 through 49994), the procedure code for the 
insertion of totally implantable vascular access devices was added to 
the GROUPER logic of DRG 315 (Other Kidney and Urinary Tract O.R. 
Procedures), the predecessor DRG of MS-DRGs 673, 674, and 675, when 
combined with principal diagnoses specifically describing renal 
failure, recognizing that inserting these devices as an inpatient 
procedure for the purposes of hemodialysis can lead to higher average 
charges and longer lengths of stay for those cases.
    We next reviewed the 29 ICD-10-CM codes submitted by the requestor. 
In the proposed rule, we stated our clinical advisors noted that ICD-
10-CM diagnosis codes E10.21, E11.21, and E13.21 describing diabetes 
mellitus with diabetic nephropathy; codes E10.29, E11.29, and E13.29 
describing diabetes mellitus with other diabetic kidney complication; 
T80.211A, T80.212A, and T80.218A describing infection due to central 
venous catheters; and codes T82.7XXA, T82.818A, T82.828A, T82.838A, 
T82.848A, T82.858A, T82.868A, and T82.898A describing complications of 
cardiac and vascular prosthetic devices, implants and grafts, are not 
necessarily indicative of a patient having renal (kidney) failure 
requiring the insertion of a TIVAD or a tunneled vascular access device 
to allow access to the patient's blood for hemodialysis purposes. 
TIVADs and tunneled vascular access devices are widely used to provide 
central venous access for the administration of intravenous 
antibiotics, chemotherapeutic agents, parenteral nutrition and other 
treatments. They are used in a variety of disease groups, and in both 
children and adults. We stated in the proposed rule that as such, our 
clinical advisors do not support adding these diagnoses to the list of 
principal diagnosis codes in MS-DRG 673, 674, and 675 when reported 
with procedure codes describing the insertion of TIVADs and tunneled 
vascular access devices. They noted that TIVADs and tunneled vascular 
access devices may be inserted for a variety of principal diagnoses, 
and that adding these 17 diagnoses that are not specific to renal 
failure would not maintain the clinical coherence with other cases in 
this subset of cases in MS-DRGs 673, 674, and 675.
    We further stated that our clinical advisors also did not support 
adding ICD-10-CM diagnosis code I13.2 (Hypertensive heart and chronic 
kidney disease with heart failure and with stage 5 chronic kidney 
disease, or end stage renal disease) to the special logic in MS-DRGs 
673, 674, and 675. As discussed previously, code I13.2 is assigned to 
MDC 05 (Diseases and Disorders of the Circulatory System). Our clinical 
advisors agreed it would not be appropriate to move this diagnosis into 
MDC 11 because it would inadvertently cause cases reporting this same 
MDC 05 diagnosis with circulatory system procedures to be assigned to 
an unrelated MS-DRG.
    Therefore, for the reasons described previously, we did not propose 
to add the following 18 ICD-10-CM codes to the list of principal 
diagnosis codes for MS-DRGs 673, 674, and 675 when reported with a 
procedures code describing the insertion of a TIVAD or a tunneled 
vascular access device: E10.21, E10.29, E11.21, E11.29, E13.21, E13.29, 
I13.2, T80.211A, T80.212A, T80.218A, T82.7XXA, T82.818A, T82.828A, 
T82.838A, T82.848A, T82.858A, T82.868A, and T82.898A.
    Comment: Commenters supported our proposal to not add the 18 ICD-
10-CM diagnosis codes listed to the special logic in MS-DRGs 673, 674, 
and 675. One commenter specifically agreed stating these devices may be 
inserted for a variety of diagnoses, and adding diagnosis codes that 
are not specific to renal failure would not maintain clinical coherence 
with other cases in these MS-DRGs.
    Response: We appreciate the commenters' support.
    After consideration of the public comments received, we are 
finalizing our proposal to not add the following 18 ICD-10-CM codes to 
the list of principal diagnosis codes for MS-DRGs 673, 674, and 675 
when reported with a procedures code describing the insertion of a 
TIVAD or a tunneled vascular access device: E10.21, E10.29, E11.21, 
E11.29, E13.21, E13.29, I13.2, T80.211A, T80.212A, T80.218A, T82.7XXA, 
T82.818A, T82.828A, T82.838A, T82.848A, T82.858A, T82.868A, and 
T82.898A.
    We then reviewed the remaining 11 diagnosis codes submitted by the 
requestor. Codes T82.41XA, T82.42XA, T82.43XA and T82.49XA describe 
mechanical complications of vascular dialysis catheters. We stated in 
the proposed rule that our clinical advisors believe the insertion of 
TIVADs or tunneled vascular access devices for the purposes of 
hemodialysis is clearly clinically related to diagnosis codes 
describing a mechanical complication of a vascular dialysis catheter 
and that for clinical coherence, these cases should be grouped with the 
subset of cases that report the insertion of totally implantable 
vascular access devices or tunneled vascular access devices as an 
inpatient procedure for the purposes of hemodialysis for renal failure.
    As discussed in the proposed rule, codes T82.41XA, T82.42XA, 
T82.43XA and T82.49XA that describe mechanical complications of 
vascular dialysis catheters are currently assigned to MDC 05 and would 
require reassignment to MDC 11 in MS-DRGs 673, 674, and 675 to group 
with the subset of cases that report the insertion of totally 
implantable vascular access devices or tunneled vascular access devices 
as an inpatient procedure for the purposes of hemodialysis for renal 
failure. We examined claims data from the September 2019 update of the 
FY 2019 MedPAR file for all cases reporting procedures describing the 
insertion of TIVADs or tunneled vascular access devices with a 
principal diagnosis from the T82.4- series in MDC 05 and compared this 
data to cases in MS-DRGs 673, 674 and 675. The following table shows 
our findings:

[[Page 58513]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.064

    As shown in the table, there were 13,068 cases in MS-DRG 673 with 
an average length of stay of 11 days and average costs of $26,528. 
There were 1,025 cases reporting a principal diagnosis describing a 
mechanical complication of vascular dialysis catheter, with a secondary 
diagnosis of MCC, and a procedure code for the insertion of a TIVAD or 
tunneled vascular access device with an average length of stay of 4.6 
days and average costs of $14,882. There were 6,592 cases in MS-DRG 674 
with an average length of stay of 7.6 days and average costs of 
$17,491. There were two cases reporting a principal diagnosis 
describing a mechanical complication of vascular dialysis catheter, 
with a secondary diagnosis of CC, and a procedure code for the 
insertion of a TIVAD or tunneled vascular access device with an average 
length of stay of 6 days and average costs of $15,016. There were 437 
cases in MS-DRG 675 with an average length of stay of 3.4 days and 
average costs of $12,506. There was one case reporting a principal 
diagnosis describing a mechanical complication of vascular dialysis 
catheter, without a secondary diagnosis of CC or MCC, and a procedure 
code for the insertion of a TIVAD or tunneled vascular access device 
with a length of stay of 3 days and costs of $9,317. Our clinical 
advisors noted that the average length of stay and average costs of 
cases reporting a diagnosis describing a mechanical complication of a 
vascular dialysis catheter and the insertion of a TIVAD or a tunneled 
vascular access device are lower than for all cases in MS-DRGs 673, 
674, and 675, respectively.
    For the reasons discussed, we stated in the proposed rule that our 
clinical advisors believe that it is clinically appropriate for the 
four ICD-10-CM diagnosis codes describing a mechanical complication of 
a vascular dialysis catheter to group to the subset of GROUPER logic 
that recognizes the insertion of totally implantable vascular access 
devices or tunneled vascular access devices as an inpatient procedure 
for the purposes of hemodialysis. Therefore, we proposed to reassign 
ICD-10-CM diagnosis codes T82.41XA, T82.42XA, T82.43XA, and T82.49XA 
from MDC 05 in MS-DRGs 314, 315, and 316 (Other Circulatory System 
Diagnoses with MCC, with CC, and without CC/MCC, respectively) to MDC 
11 (Diseases and Disorders of the Kidney and Urinary Tract) assigned to 
MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures 
with MCC, with CC, and without CC/MCC, respectively) and 698, 699, and 
700 (Other Kidney and Urinary Tract Diagnoses with MCC, with CC, and 
without CC/MCC, respectively).
    Comment: One commenter questioned the rationale as to the extent 
totally implantable vascular access devices (TIVADs) are considered 
``kidney and urinary tract procedures'' when placed to address a 
condition assigned to MDC 05.
    Response: We appreciate the commenters' concern.
    As discussed in the proposed rule, the procedure code for the 
insertion of totally implantable vascular access devices was originally 
added to the GROUPER logic of DRG 315 (Other Kidney and Urinary Tract 
O.R. Procedures), the predecessor DRG of MS-DRGs 673, 674, and 675, 
when combined with principal diagnoses specifically describing renal 
failure, recognizing that these devices are inserted as an inpatient 
procedure for the purposes of hemodialysis. Our clinical advisors 
believe the four ICD-10-CM diagnosis codes describing a mechanical 
complication of a vascular dialysis catheter are clearly clinically 
related to diagnosis codes that describe renal failure because the 
complicated vascular dialysis catheter described by these diagnosis 
codes would not be in place if hemodialysis was not indicated. 
Therefore, our clinical advisors believe that it is clinically 
appropriate for the four ICD-10-CM diagnosis codes describing a 
mechanical complication of a vascular dialysis catheter to group to

[[Page 58514]]

the subset of GROUPER logic that recognizes the insertion of totally 
implantable vascular access devices or tunneled vascular access devices 
as an inpatient procedure for the purposes of hemodialysis.
    Comment: Other commenters supported the reassignment of diagnosis 
codes describing a mechanical complication of a vascular dialysis 
catheter to MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract 
Procedures with MCC, with CC, and without CC/MCC, respectively) and 
698, 699, and 700 (Other Kidney and Urinary Tract Diagnoses with MCC, 
with CC, and without CC/MCC, respectively) in MDC 11.
    Response: We appreciate the commenters' support.
    After consideration of the public comments received, we are 
finalizing our proposal to reassign ICD-10-CM diagnosis codes T82.41XA, 
T82.42XA, T82.43XA, and T82.49XA from MDC 05 in MS-DRGs 314, 315, and 
316 (Other Circulatory System Diagnoses with MCC, with CC, and without 
CC/MCC, respectively) to MDC 11 (Diseases and Disorders of the Kidney 
and Urinary Tract) assigned to MS-DRGs 673, 674, and 675 (Other Kidney 
and Urinary Tract Procedures with MCC, with CC, and without CC/MCC, 
respectively) and 698, 699, and 700 (Other Kidney and Urinary Tract 
Diagnoses with MCC, with CC, and without CC/MCC, respectively) under 
the ICD-10 MS-DRGs Version 38, effective October 1, 2020.
    In reviewing ICD-10-CM codes E10.22, E11.22, and E13.22 describing 
diabetes mellitus with diabetic chronic kidney disease, we noted that 
related ICD-10-CM diagnosis code E09.22 (Drug or chemical induced 
diabetes mellitus with diabetic chronic kidney disease) is also not 
included in the current list of diagnosis codes included in the special 
logic in MS-DRGs 673, 674, and 675 for certain MDC 11 diagnoses 
reported with procedure codes for the insertion of tunneled or totally 
implantable vascular access devices, and therefore we included E09.22 
in our review. ICD-10-CM assumes a causal relationship between diabetes 
mellitus and chronic kidney disease. According to the ICD-10-CM 
Official Guidelines for Coding and Reporting, the word ``with'' or 
``in'' should be interpreted to mean ``associated with'' or ``due to'' 
when it appears in a code title, the Alphabetic Index (either under a 
main term or subterm), or an instructional note in the Tabular List, 
meaning these conditions should be coded as related even in the absence 
of provider documentation explicitly linking them, unless the 
documentation clearly states the conditions are unrelated. To code 
diabetic chronic kidney disease in ICD-10-CM, instructional notes 
direct to ``code first any associated diabetic chronic kidney disease'' 
(that is, E09.22, E10.22, E11.22, and E13.22) with a second code from 
subcategory of N18 listed after the diabetes code to specify the stage 
of chronic kidney disease. Recognizing that coding guidelines instruct 
to code E09.22, E10.22, E11.22, and E13.22 before codes that specify 
the stage of chronic kidney disease, our clinical advisors recommended 
adding diabetic codes E09.22, E10.22, E11.22, and E13.22 when reported 
with a secondary diagnosis of either N18.5 Chronic kidney disease, 
stage 5) or N18.6 (End stage renal disease) to the special logic in MS-
DRGs 673, 674, and 675 since these diagnosis code combinations describe 
an indication that could require the insertion of a totally implantable 
vascular access device or a tunneled vascular access device to allow 
access to the patient's blood for hemodialysis purposes.
    ICD-10-CM codes T86.11, T86.12, T86.13, and T86.19 describe 
complications of kidney transplant and are currently assigned to MDC 
11. We stated our clinical advisors believe these diagnoses are also 
indications for hemodialysis and these cases represent a distinct, 
recognizable clinical group similar to those cases in the subset of 
cases assigned to the special logic in MS-DRGs 673, 674, and 675 when 
reported with procedure codes describing the insertion of totally 
implantable vascular access devices or tunneled vascular access devices 
for hemodialysis.
    To summarize, we proposed to add ICD-10-CM codes E09.22, E10.22, 
E11.22, and E13.22, when reported with a secondary diagnosis of N18.5 
or N18.6, to the list of principal diagnosis codes in the subset of 
GROUPER logic in MS-DRGs 673, 674, and 675 that recognizes the 
insertion of totally implantable vascular access devices or tunneled 
vascular access devices as an inpatient procedure for the purposes of 
hemodialysis. We also proposed to add ICD-10-CM codes T86.11, T86.12, 
T86.13, and T86.19 to the list of principal diagnosis codes in this 
subset of GROUPER logic in MS-DRGs 673, 674, and 675.
    Comment: Commenters supported our proposal to add ICD-10-CM codes 
E09.22, E10.22, E11.22, and E13.22, when reported with a secondary 
diagnosis of N18.5 or N18.6, to the list of principal diagnosis codes 
in the subset of GROUPER logic in MS-DRGs 673, 674, and 675. The 
commenters stated they agreed that these diagnosis code combinations 
describe an indication that could require the insertion of a totally 
implantable vascular access device or a tunneled vascular access device 
for hemodialysis purposes. Commenters also supported the addition of 
ICD-10-CM codes for complications of kidney transplant to the list of 
principal diagnosis codes in the subset of GROUPER logic in MS-DRGs 
673, 674, and 675 that recognizes the insertion of totally implantable 
vascular access devices or tunneled vascular access devices as an 
inpatient procedure for the purposes of hemodialysis.
    Response: We appreciate the commenters' support.
    After consideration of the public comments received, we are 
finalizing our proposal to add ICD-10-CM codes E09.22, E10.22, E11.22, 
and E13.22, when reported with a secondary diagnosis of N18.5 or N18.6, 
to the list of principal diagnosis codes in the subset of GROUPER logic 
in MS-DRGs 673, 674, and 675. We are also finalizing our proposal to 
add ICD-10-CM codes T86.11, T86.12, T86.13, and T86.19 to the list of 
principal diagnosis codes in this subset of GROUPER logic in MS-DRGs 
673, 674, and 675.
    Lastly, we reviewed the current list of 20 MDC 11 diagnoses 
assigned to the special logic in MS-DRGs 673, 674, and 675 when 
reported with procedure codes for the insertion of tunneled or totally 
implantable vascular access devices. The list of MDC 11 diagnosis codes 
currently included in the special logic of MS-DRGs 673, 674, and 675 
are found in the following table:

[[Page 58515]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.065

[GRAPHIC] [TIFF OMITTED] TR18SE20.066

    As stated in the proposed rule, our clinical advisors pointed out 
that ICD-10-CM codes I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, and 
N18.9 do not describe renal failure and they do not describe 
indications that would generally require the insertion of totally 
implantable vascular access devices or tunneled vascular access devices 
for the purposes of hemodialysis. Our advisors noted hemodialysis 
replicates the function of the kidneys. In cases of acute kidney 
failure and anuria, hemodialysis is indicated to prevent urea and other 
waste material from building up in the blood until the kidneys return 
to normal function. A diagnosis of chronic kidney disease stages 1 
through 4, however, means the kidneys still have the ability to filter 
waste and extra fluid out of the blood. Dialysis is not often initiated 
in chronic kidney disease until the chronic kidney disease progresses 
to stage 5 or ESRD, which is defined as when kidney function drops to 
15 percent or less. Our clinical advisors stated that these seven codes 
do not describe indications requiring the insertion of totally 
implantable vascular access devices or tunneled vascular access devices 
for hemodialysis and recommended these codes be removed from the 
special logic in MS-DRGs 673, 674, and 675.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for MS-DRGs 673, 674, and 675 for this subset of cases 
to determine if there were any cases that reported one of the seven 
ICD-10-CM codes in the special logic of MS-DRGs 673, 674, and 675 that 
do not necessarily describe indications requiring the insertion of 
totally implantable vascular access devices or tunneled vascular access 
devices for hemodialysis, the frequency with which they were reported 
and the relative resource use as compared with all cases assigned to 
the special logic in MS-DRGs 673, 674, and 675. The following table 
shows our findings:

[[Page 58516]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.067

    As shown by the table, for MS-DRG 673, we identified a total of 
7,391 cases assigned to the special logic within this MS-DRG with an 
average length of stay of 12.1 days and average costs of $28,273. Of 
these 7,391 cases in the subset of MS-DRG 673, there were 34 cases 
describing insertion of a TIVAD or tunneled vascular access device with 
a principal diagnosis of I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or 
N18.9 with an average length of stay of 14.2 days and average costs of 
$27,844. For MS-DRG 674, we identified a total of 3,055 cases assigned 
to the special logic within this MS-DRG with an average length of stay 
of 7.8 days and average costs of $17,107. Of these 3,055 cases in the 
subset of MS-DRG 674, there were 30 cases describing insertion of a 
TIVAD or tunneled vascular access device with a principal diagnosis of 
I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or N18.9 with an average 
length of stay of 7.2 days and average costs of $11,227. For MS-DRG 
675, we identified a total of 58 cases assigned to the special logic 
within this MS-DRG with an average length of stay of 6.1 days and 
average costs of $12,582. Of these 58 cases in the subset of MS-DRG 
675, there was one case describing insertion of a TIVAD or tunneled 
vascular access device with a principal diagnosis of I12.9, I13.10, 
N18.1, N18.2, N18.3, N18.4, or N18.9 with a length of stay of 4 days 
and costs of $6,549. Overall, for MS-DRGs 673, 674 and 675, there were 
a relatively small number of cases reporting a principal diagnosis of 
I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or N18.9 and a procedure 
code describing the insertion of a TIVAD or tunneled vascular access 
device demonstrating that these conditions are not typically addressed 
by insertion of these devices.
    As stated previously, TIVADs and tunneled vascular access devices 
may be inserted for a variety of principal diagnoses. We stated in the 
proposed rule that our clinical advisors believe that continuing to 
include these seven diagnoses that are not specific to renal failure or 
that do not otherwise describe indications requiring the insertion of 
totally implantable vascular access devices or tunneled vascular access 
devices for hemodialysis would not maintain clinical coherence with 
other cases in this subset of cases in MS-DRGs 673, 674, and 675. 
Therefore, for the reasons stated, we proposed to remove ICD-10-CM 
codes I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, and N18.9 from the 
subset of GROUPER logic in MS-DRGs 673, 674, and 675 that recognizes 
the insertion of totally implantable vascular access devices or 
tunneled vascular access devices as an inpatient procedure for the 
purposes of hemodialysis.
    Comment: One commenter expressed concerns about the proposal and 
did not fully agree with this change. This commenter described a 
scenario in which a patient with stage 3 chronic kidney disease 
develops acute kidney failure and has totally implantable vascular 
access device inserted for the purpose of hemodialysis during an 
inpatient hospitalization. The commenter questioned if this scenario 
would qualify for the subset of GROUPER logic in MS-DRGs 673, 674, and 
675 that recognizes the insertion of totally implantable vascular 
access devices or tunneled vascular access devices as an inpatient 
procedure for the purposes of hemodialysis.
    Response: We appreciate the commenter's concern.
    As discussed in the proposed rule, ICD-10-CM diagnosis codes N17.0,

[[Page 58517]]

N17.1 N17.2, N17.8 and N17.9 which describe acute kidney failure are 
currently included in the special logic of MS-DRGs 673, 674, and 675. 
These codes were not listed in the seven codes proposed to be removed. 
In the hypothetical scenario described by the commenter, the case would 
qualify for the subset of GROUPER logic in MS-DRGs 673, 674, and 675 
that recognizes the insertion of totally implantable vascular access 
devices or tunneled vascular access devices as long as the diagnosis of 
acute kidney failure met the definition of principal diagnosis. We 
encourage the commenter to review the Official ICD-10-CM Coding 
Guidelines, which can be found on the CDC website at: http://www.cdc.gov/nchs/icd/icd10.htm.
    Comment: Other commenters supported our proposal and stated they 
agreed that the seven ICD-10-CM codes that do not describe renal 
failure or indications that would generally require the insertion of 
totally implantable vascular access devices for the purpose of 
hemodialysis should be removed from the special logic in MS-DRGs 673, 
674, and 675.
    Response: We appreciate the commenters' support.
    After consideration of the public comments received, we are 
finalizing our proposal to remove ICD-10-CM codes I12.9, I13.10, N18.1, 
N18.2, N18.3, N18.4, and N18.9 from the subset of GROUPER logic in MS-
DRGs 673, 674, and 675 that recognizes the insertion of totally 
implantable vascular access devices or tunneled vascular access devices 
as an inpatient procedure for the purposes of hemodialysis under the 
ICD-10 MS-DRGs Version 38, effective October 1, 2020.
9. MDC 17 (Myeloproliferative Diseases and Disorders, Poorly 
Differentiated Neoplasms): Inferior Vena Cava Filter Procedures
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32524), we received a request to review the GROUPER logic in MDC 17. 
The requester stated that cases reporting the introduction of a high 
dose chemotherapy agent, or reporting a chemotherapy principal 
diagnosis with a secondary diagnosis describing acute leukemia, are 
assigned to medical MS-DRGs 837 (Chemotherapy with Acute Leukemia as 
Secondary Diagnosis or with High Dose Chemotherapy Agent with MCC), MS-
DRG 838 (Chemotherapy with Acute Leukemia as Secondary Diagnosis with 
CC or High Dose Chemotherapy Agent), and MS-DRG 839 (Chemotherapy with 
Acute Leukemia as Secondary Diagnosis without CC/MCC). However, when 
procedure codes describing the placement of an inferior vena cava (IVC) 
filter, namely 06H03DZ (Insertion of intraluminal device into inferior 
vena cava, percutaneous approach), are also reported with the same 
codes describing the introduction of a high dose chemotherapy agent or 
report a chemotherapy principal diagnosis with a secondary diagnosis 
describing acute leukemia, the cases are assigned to surgical MS-DRGs 
829 and 830 (Myeloproliferative Disorders or Poorly Differentiated 
Neoplasms with Other Procedure with and without CC/MCC, respectively). 
According to the requestor, the additional resources used by the 
hospital to place an IVC filter should not result in assignment to 
lower-weighted MS-DRGs.
    As stated in the proposed rule, the ICD-10-PCS codes that describe 
the insertion of an infusion device or the insertion of an intraluminal 
device into the inferior vena cava are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.068

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

[[Page 58518]]

chemotherapy agent as reflected in the logic table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.069

    We refer the reader to the ICD-10 MS-DRG Version 37 Definitions 
Manual (which is available via the internet on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete 
documentation of the GROUPER logic for the listed MS-DRGs.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file for all cases in MS-DRGs 829 and 830 and for cases 
reporting the insertion of an IVC filter (procedure codes 06H00DZ, 
06H03DZ, and 06H04DZ) with a procedure code describing the introduction 
of a high dose chemotherapy agent, or with a chemotherapy principal 
diagnosis code with a secondary diagnosis code describing acute 
leukemia. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.070

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

[[Page 58519]]

procedure code describing the introduction of a high dose chemotherapy 
agent, or with a chemotherapy principal diagnosis code with a secondary 
diagnosis code describing acute leukemia have higher average costs 
($83,861 versus $24,188) and a longer average length of stay (25.6 days 
versus 9.2 days) than all the cases in MS-DRG 829.
    We also reviewed the claims data for MS-DRGs 837, 838, and 839. Our 
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.071

    As shown in the table, there were a total of 1,776 cases with an 
average length of stay of 17 days and average costs of $40,667 in MS-
DRG 837. There were a total of 1,172 cases with an average length of 
stay of 7.3 days and average costs of $16,594 in MS-DRG 838. There were 
a total of 810 cases with an average length of stay of 5 days and 
average costs of $10,994 in MS-DRG 839. Based on the claims data, the 
cases reporting procedure code 06H03DZ with a procedure code describing 
the introduction of a high dose chemotherapy agent, or with a 
chemotherapy principal diagnosis code with a secondary diagnosis code 
describing acute leukemia again have higher average costs ($83,861 
versus $40,667, $16,594, and $10,994 respectively) and a longer average 
length of stay (25.6 days versus 17 days, 7.3 days and 5 days, 
respectively) than all the cases in MS-DRG 837, 838, and 839. We stated 
our clinical advisors reviewed the claims data and noted there were 
only a small number of cases reporting procedure code 06H03DZ with a 
procedure code describing the introduction of a high dose chemotherapy 
agent, or with a chemotherapy principal diagnosis code with a secondary 
diagnosis code describing acute leukemia, and believe there may have 
been other factors contributing to the higher costs for these cases. 
Our clinical advisors stated the procedure to insert an IVC filter is 
not surgical in nature and recommended further analysis.
    We performed further analysis on the other ICD-10-PCS codes 
describing the insertion of a device into the inferior vena cava to 
identify if they have a similar extensive O.R. designations and noted 
inconsistencies among the O.R. and non-O.R. designations. In Version 37 
of the ICD-10 MS-DRGs, ICD-10-PCS procedure codes 06H003T, 06H003Z, 
06H033T, 06H033Z, and 06H043Z identify the insertion of an infusion 
device into the inferior vena cava with various approaches and are 
classified as Non-O.R. procedures. ICD-10-PCS procedure codes 06H00DZ, 
06H03DZ, and 06H04DZ identify the insertion of an intraluminal device 
into the inferior vena cava (IVC filter procedure) with various 
approaches and are classified as extensive O.R. procedures. We stated 
that our clinical advisors indicated that codes 06H00DZ, 06H03DZ, and 
06H04DZ describing the insertion of an intraluminal device into the 
inferior vena cava do not require the resources of an operating room, 
that the procedure to insert an IVC filter is not surgical in nature 
and that these procedures are comparable to the related ICD-10-PCS 
procedure codes that describe the insertion of infusion devices into 
the inferior vena cava that are currently designated as Non-O.R. 
procedures. We stated our clinical advisors believe that, given the 
similarity in factors such as complexity, resource utilization, and 
lack of a requirement for anesthesia administration between all 
procedures describing insertion of a device into the inferior vena 
cava, it would be more appropriate to designate these three ICD-10-PCS 
codes describing the insertion of an intraluminal device into the 
inferior vena cava as Non-O.R. procedures. Therefore, we proposed to 
remove ICD-10-PCS procedure codes 06H00DZ, 06H03DZ, and 06H04DZ from 
the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E--
Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. 
procedures. Under this proposal, these procedures would no longer 
impact MS-DRG assignment.
    Comment: A few commenters supported CMS' proposal and agreed ICD-
10-PCS procedure codes 06H00DZ, 06H03DZ, and 06H04DZ describing the 
insertion of an intraluminal device into the inferior vena cava should 
be designated as non-O.R. procedures since these procedures are not 
surgical in nature, and related ICD-10-PCS codes are currently 
designated as non-O.R. procedures.
    Response: We appreciate the commenters' support.
    Comment: A commenter stated that they recommend that CMS remove 
code Z08 from the GROUPER logic for MS-DRGs 837, 838, and 839. The 
commenter stated that ICD-10-CM code Z08 identifies a follow-up visit 
after completed treatment for a malignant neoplasm which implies that 
the condition has been fully treated and no longer exists. Therefore, 
ICD-10-CM code Z08 does not describe an admission for chemotherapy. 
This commenter also noted that code Z08 is on the Unacceptable 
Principal diagnosis edit code list.
    Response: We appreciate the commenters' concern.
    The GROUPER logic assignment for each diagnosis code as a principal 
diagnosis is for grouping purposes only. As discussed in the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41227), because the diagnoses are codes 
listed under the heading of ``Principal Diagnosis'' in the ICD-10 MS-
DRG Definitions Manual, it may appear to indicate that these codes are 
to be reported as a principal diagnosis for assignment to these MS-
DRGs. However, the Definitions Manual display of the GROUPER logic 
assignment for each diagnosis code does not correspond to coding 
guidelines for reporting the principal diagnosis. The MS-DRG logic must 
specifically require a condition to group based on whether it is 
reported as a principal diagnosis or a secondary diagnosis, and 
consider any procedures that are reported, in addition to consideration 
of the patient's age, sex and discharge status in order to affect the 
MS-DRG assignment. In other words, cases will group according to the 
GROUPER logic, regardless of any coding guidelines or coverage 
policies. It is the Medicare Code Editor (MCE)

[[Page 58520]]

and other payer-specific edits that identify inconsistencies in the 
coding guidelines or coverage policies. The MCE is designed to identify 
cases that require further review before classification into an MS-DRG. 
These data integrity edits address issues such as data validity, coding 
rules, and coverage policies. Since the inception of the IPPS, the data 
editing function has been a separate and independent step in the 
process of determining a DRG assignment. The separation of the MS-DRG 
grouping and data editing functions allows the MS-DRG GROUPER to remain 
stable even though coding rules and coverage policies may change during 
the fiscal year.
    Comment: Other commenters opposed CMS' proposal. A commenter stated 
the insertion of vena cava filters requires the use of specialized 
interventional radiology suites and in other hospitals without such 
specialized suites, the procedure may be performed in a multipurpose 
operating room. A few commenters stated that that the insertion of an 
inferior vena cava filter is not comparable to the insertion of an 
infusion device and that while it may be true that in some hospitals 
the procedure may be done at bedside similar to the insertion of 
infusion devices, this is not universally true and facilities incur 
significant costs beyond those for infusion devices to compensate for 
the costly implanted devices, specialized procedure rooms, equipment, 
and skill. A commenter stated that they believe that this proposed 
change will result in insufficient reimbursement for the resources 
utilized in delivering care to these patients. One commenter 
specifically noted that the costs of vena cava filters are higher than 
infusion catheters because filters can easily add over $4,000 to the 
cost of the procedure. Another commenter stated all open and 
laparoscopic vascular procedures should always be designated as O.R. 
procedures strictly because of the approach.
    Response: We appreciate the commenters' feedback and concern.
    With regard to the comments about the implications for 
reimbursement, we note that the goals of changing the designation of 
procedures from non-O.R. to O.R., or vice versa, are to better 
clinically represent the resources involved in caring for these 
patients and to enhance the overall accuracy of the system. Therefore, 
decisions to change an O.R. designation are based on whether such a 
change would accomplish those goals and not whether the change in 
designation would impact the payment in a particular direction.
    Our clinical advisors reviewed the commenters' concerns and 
continue to support changing the O.R. designation of procedures 
describing insertion of an intraluminal device into the inferior vena 
cava performed via a percutaneous approach for consistency with the 
other procedure codes describing the insertion of a device into the 
inferior vena cava that are currently designated as non-O.R procedures 
because, as commenters noted in their own comments, inferior vena cava 
filters are most often placed in Interventional Radiology suites. The 
resources involved in furnishing these procedures are consistent with 
non-O.R. procedures and our clinical advisors noted it is not uncommon 
for anesthesia to be used in the radiology suite. Our clinical advisors 
also disagree with the assertion that these procedures are dissimilar 
to procedures describing the insertion of infusion devices into the 
inferior vena cava and believe that these procedures involve similar 
technical complexity.
    Our clinical advisors do, however, concur with the commenters that 
while the procedure to insert an IVC filter is not surgical in nature, 
procedures describing the insertion of an intraluminal device into the 
inferior vena cava performed via an open or a percutaneous endoscopic 
approach could require greater resources than a procedure describing 
insertion of an intraluminal device into the inferior vena cava 
performed via a percutaneous approach. As such, we believe that at this 
time it would be appropriate to take additional time to further examine 
the relevant clinical factors and similarities in resource consumption 
between procedures describing the insertion of an intraluminal device 
into the inferior vena cava performed via an open or a percutaneous 
endoscopic approach. As discussed in section II.E.11. of the preamble 
of this final rule, we are exploring alternatives on how we may 
restructure the current O.R. and non-O.R. designations for procedures 
by leveraging the detail that is now available in the ICD-10 claims 
data. We continue to develop our process and methodology, and will 
provide more detail in future rulemaking.
    Therefore, after consideration of the public comments we received, 
and for the reasons stated above, under the ICD-10 MS-DRGs Version 38, 
effective October 1, 2020, we are (1) finalizing our proposal to change 
the designation of ICD-10-PCS procedure code 06H03DZ from O.R. 
procedure to non-O.R. procedure and (2) maintaining the O.R. 
designation of procedure codes 06H00DZ and 06H04DZ. Accordingly, 
procedure codes 06H00DZ and 06H04DZ will continue to impact MS-DRG 
assignment.
10. Review of Procedure Codes in MS-DRGs 981 Through 983 and 987 
Through 989
    We annually conduct a review of procedures producing assignment to 
MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to 
Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) or MS-DRGs 987 through 989 (Non-Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) on the basis of volume, by procedure, to see if it would 
be appropriate to move cases reporting these procedure codes out of 
these MS-DRGs into one of the surgical MS-DRGs for the MDC into which 
the principal diagnosis falls. The data are arrayed in two ways for 
comparison purposes. We look at a frequency count of each major 
operative procedure code. We also compare procedures across MDCs by 
volume of procedure codes within each MDC. We use this information to 
determine which procedure codes and diagnosis codes to examine. We 
identify those procedures occurring in conjunction with certain 
principal diagnoses with sufficient frequency to justify adding them to 
one of the surgical MS-DRGs for the MDC in which the diagnosis falls. 
We also consider whether it would be more appropriate to move the 
principal diagnosis codes into the MDC to which the procedure is 
currently assigned.
    In addition to this internal review, we also consider requests that 
we receive to examine cases found to group to MS-DRGs 981 through 983 
or MS-DRGs 987 through 989 to determine if it would be appropriate to 
add procedure codes to one of the surgical MS DRGs for the MDC into 
which the principal diagnosis falls or to move the principal diagnosis 
to the surgical MS DRGs to which the procedure codes are assigned.
    Based on the results of our review of the claims data from the 
September 2019 update of the FY 2019 MedPAR file, as well as our review 
of the requests that we received to examine cases found to group to MS-
DRGs 981 through 983 or MS-DRGs 987 through 989, we proposed to move 
the cases reporting the procedures and/or principal diagnosis codes 
described in this section of this rule from MS-DRGs 981 through 983 or 
MS-DRGs 987 through 989 into one of the surgical MS-DRGs for the MDC 
into which the principal diagnosis or procedure is assigned.

[[Page 58521]]

a. Horseshoe Abscess With Drainage
    As discussed in the proposed rule, we received a request to 
reassign cases reporting a principal diagnosis of a horseshoe abscess 
with a procedure involving open drainage of perineum subcutaneous 
tissue and fascia from MS-DRGs 987, 988, and 989 (Non-Extensive O.R. 
Procedure Unrelated to Principal Diagnosis with MCC, with CC, and 
without CC/MCC, respectively) to MS-DRGs 356, 357, and 358 (Other 
Digestive System O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 06. ICD-10-CM diagnosis code K61.31 (Horseshoe 
abscess) is used to report a horseshoe abscess and is currently 
assigned to MDC 06 (Diseases and Disorders of the Digestive System). A 
horseshoe abscess is a specific type of ischiorectal abscess caused by 
an abscessed anal gland located in the posterior midline of the anal 
canal with suppuration found in the ischiorectal fossae. ICD-10-PCS 
procedure code 0J9B0ZZ (Drainage of perineum subcutaneous tissue and 
fascia, open approach) may be reported to describe drainage of an 
abscess in the ischiorectal space and is currently assigned to MDC 08 
(Diseases and Disorders of the Musculoskeletal System and Connective 
Tissue), MDC 09 (Diseases and Disorders of the Skin, Subcutaneous 
Tissue and Breast), MDC 21 (Injuries, Poisonings and Toxic Effects of 
Drugs) and MDC 24 (Multiple Significant Trauma).
    We stated in the proposed rule that our analysis of this grouping 
issue confirmed when a horseshoe abscess is reported as a principal 
diagnosis with ICD-10-PCS procedure code 0J9B0ZZ, these cases group to 
MS-DRGs 987, 988, and 989. As previously noted, whenever there is a 
surgical procedure reported on the claim that is unrelated to the MDC 
to which the case was assigned based on the principal diagnosis, it 
results in an MS-DRG assignment to a surgical class referred to as 
``unrelated operating room procedures''.
    We first examined the claims data to identify cases reporting 
procedure code 0J9B0ZZ with a principal diagnosis of K61.31 that are 
currently grouping to MS-DRGs 987, 988, and 989. Our findings are shown 
in this table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.072

    As previously noted, the requester asked that we reassign these 
cases to MS-DRGs 356, 357, and 358. We therefore examined the data for 
all cases in MS-DRGs 356, 357, and 358. Our findings are shown in this 
table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.073

    We stated while our clinical advisors noted that the average length 
of stay and average costs of cases in MS-DRGs 356, 357, and 358 are 
higher than the average length of stay and average costs for the small 
subset of cases reporting procedure code 0J9B0ZZ and a principal 
diagnosis code of K61.31 in MS-DRGs 987, 988, and 989, they believe 
that the procedure is clearly clinically related to the principal 
diagnosis and is a logical accompaniment of the diagnosis. Therefore, 
they believe it is clinically appropriate for the procedure to group to 
the same MS-DRGs as the principal diagnosis.
    Therefore, we proposed to add ICD-10-PCS procedure code 0J9B0ZZ to 
MDC 06 in MS-DRGs 356, 357, and 358. Under this proposal, cases 
reporting procedure code 0J9B0ZZ in conjunction with a principal 
diagnosis from MDC 06, such as diagnosis code K61.31, would group to 
MS-DRGs 356, 357, and 358.
    Comment: Commenters supported our proposal to add ICD-10-PCS 
procedure code 0J9B0ZZ to MDC 06 in MS-DRGs 356, 357, and 358.
    Response: We appreciate the commenters' support.
    After consideration of the public comments received, we are 
finalizing our proposal to add ICD-10-PCS procedure code 0J9B0ZZ to MDC 
06 in MS-DRGs 356, 357, and 358.
b. Chest Wall Deformity With Supplementation
    We received a request to reassign cases reporting a principal 
diagnosis of acquired deformity of chest and rib with a procedure 
involving the placement of a biological or synthetic material that 
supports or strengthens the body part from MS-DRGs 981, 982, and 983 
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively) to MS-DRGs 515, 516, and 517 
(Other Musculoskeletal System and Connective Tissue O.R. Procedures, 
with MCC, with CC, and without CC/MCC, respectively) in MDC 08.

[[Page 58522]]

    As discussed in the proposed rule, ICD-10-CM diagnosis code M95.4 
(Acquired deformity of chest and rib) is used to report this condition 
and is currently assigned to MDC 08 (Diseases and Disorders of the 
Musculoskeletal System and Connective Tissue). ICD-10-PCS procedure 
codes 0WU807Z (Supplement chest wall with autologous tissue substitute, 
open approach), 0WU80JZ (Supplement chest wall with synthetic 
substitute, open approach) and 0WU80KZ (Supplement chest wall with 
nonautologous tissue substitute, open approach) may be reported to 
describe procedures to supplement or reinforce the chest wall with 
biologic or synthetic material. ICD-10-PCS procedure codes 0WU807Z and 
0WU80KZ are currently assigned to MDC 04 (Diseases and Disorders of the 
Respiratory System). We noted that ICD-10-PCS procedure code 0WU80JZ is 
already assigned to MDC 08 (Diseases and Disorders of the 
Musculoskeletal System and Connective Tissue) as well as MDC 04 
(Diseases and Disorders of the Respiratory System), so these cases 
already group to MS-DRGs 515, 516, and 517 when reported with a 
principal diagnosis of ICD-10-CM diagnosis code M95.4.
    We stated in the proposed rule that our analysis of this grouping 
issue confirmed that when diagnosis code M95.4 is reported as a 
principal diagnosis with ICD-10-PCS procedure codes 0WU807Z or 0WU80KZ, 
these cases group to MS-DRGs 981, 982, and 983. As noted in the 
previous discussion, whenever there is a surgical procedure reported on 
the claim that is unrelated to the MDC to which the case was assigned 
based on the principal diagnosis, it results in an MS-DRG assignment to 
a surgical class referred to as ``unrelated operating room 
procedures''.
    We examined the claims data to identify cases reporting procedure 
codes 0WU807Z or 0WU80KZ with principal diagnosis code M95.4 that are 
currently grouping to MS-DRGs 981, 982, and 983. Our analysis showed 
one case reporting a principal diagnosis of code M95.4 with procedure 
code 0WU807Z, with a length of stay of 2.0 days and average costs of 
$11,594 in MS-DRG 983. We found zero cases in MS-DRGs 981 and 982 
reporting procedure codes 0WU807Z or 0WU80KZ and a principal diagnosis 
of M95.4.
    We also examined the data for cases in MS-DRGs 515, 516, and 517, 
and our findings are shown in this table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.074

    While there was only one case reporting procedure codes 0WU807Z or 
0WU80KZ with principal diagnosis M95.4 in MS-DRGs 981, 982, and 983, we 
stated our clinical advisors reviewed this request and believe that the 
cases involving procedures of chest wall supplementation with a 
principal diagnosis of acquired deformity of chest and rib represent a 
distinct, recognizable clinical group similar to those cases in MS-DRGs 
515, 516, and 517, and that procedures reporting 0WU80JZ and 0WU80KZ 
are clearly related to the principal diagnosis code. They believe that 
it is clinically appropriate for the three ICD-10-PCS codes describing 
procedures to supplement or reinforce the chest wall with biologic or 
synthetic material to group to the same MS-DRGs as the principal 
diagnoses.
    Therefore, we proposed to add ICD-10-PCS procedure codes 0WU807Z 
and 0WU80KZ to MDC 08 in MS-DRGs 515, 516, and 517. Under this 
proposal, cases reporting procedure codes 0WU807Z or 0WU80KZ in 
conjunction with a principal diagnosis code from MDC 08 would group to 
MS-DRGs 515, 516, and 517.
    Comments: Commenters supported the proposal to add ICD-10-PCS 
procedure codes 0WU807Z and 0WU80KZ to MDC 08 in MS-DRGs 515, 516, and 
517. The commenters stated that the proposal was reasonable, given the 
ICD-10-CM code and the information provided. One commenter specifically 
stated this reassignment would allow procedures describing chest wall 
supplementation to be assigned to the appropriate MS-DRG when reported 
with the principal diagnosis of acquired deformity of chest and rib 
instead of one of the unrelated operating room procedure MS-DRGs. 
Another commenter stated this would improve clinical consistency since 
one of the codes describing these procedures is already assigned to MDC 
08.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add ICD-10-PCS procedure codes 0WU807Z and 
0WU80KZ to MDC 08 in MS-DRGs 515, 516, and 517.
c. Hepatic Malignancy With Hepatic Artery Embolization
    As discussed in the proposed rule, we received a request to 
reassign cases for hepatic malignancy when reported with procedures 
involving the embolization of a hepatic artery from MS-DRGs 987, 988, 
and 989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis 
with MCC, with CC, and without CC/MCC, respectively) to MS-DRGs 423, 
424, and 425 (Other Hepatobiliary or Pancreas Procedures with MCC, with 
CC, and without CC/MCC, respectively) in MDC 08.
    We stated in the proposed rule that ICD-10-PCS procedure code 
04V33DZ (Restriction of hepatic artery with intraluminal device, 
percutaneous approach) may be reported to describe embolization 
procedures to narrow or partially occlude a hepatic artery with an 
intraluminal device and is currently assigned to MDC 05 (Diseases and 
Disorders of the Circulatory System). ICD-10-PCS procedure code 04L33DZ 
(Occlusion of hepatic artery with intraluminal device, percutaneous 
approach) may be reported to describe embolization procedures to 
completely close off a hepatic artery with an intraluminal device and 
is currently assigned to MDC 05 (Diseases and Disorders of the 
Circulatory System) and MDC 06 (Diseases and Disorders of the Digestive 
System).
    The requestor did not provide an ICD-10-CM diagnosis code in its 
request so we reviewed ICD-10-CM diagnosis codes in the C00 through D49 
code range to identify conditions that describe hepatic malignancies. 
We

[[Page 58523]]

identified the following fourteen ICD-10-CM diagnosis codes, all 
currently assigned to MDC 07 (Diseases and Disorders of the 
Hepatobiliary System & Pancreas):
[GRAPHIC] [TIFF OMITTED] TR18SE20.075

    Our analysis of this grouping issue confirmed that, when one of the 
fourteen hepatic malignancy ICD-10-CM diagnosis codes previously listed 
is reported as a principal diagnosis with ICD-10-PCS procedure code 
04L33DZ, these cases group to MS-DRGs 987, 988, and 989. However, we 
noted that when one of these fourteen hepatic malignancy ICD-10-CM 
diagnosis codes is reported as a principal diagnosis with ICD-10-PCS 
procedure code 04V33DZ, these cases currently group to MS DRGs 981, 
982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis 
with MCC, with CC, and without CC/MCC, respectively). As noted in the 
previous discussion, whenever there is a surgical procedure reported on 
the claim that is unrelated to the MDC to which the case was assigned 
based on the principal diagnosis, it results in an MS-DRG assignment to 
a surgical class referred to as ``unrelated operating room 
procedures''.
    To understand the resource use for the subset of cases reporting 
procedure code 04V33DZ with a principal diagnosis of hepatic malignancy 
that are currently grouping to MS-DRGs 981, 982, and 983, we examined 
claims data for the average length of stay and average costs for these 
cases. Our findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.076

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

[[Page 58524]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.077

    We also examined the data for cases in MS-DRGs 423, 424, and 425, 
and our findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.078

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

[[Page 58525]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.079

    As indicated earlier, the requestor suggested that we move ICD-10-
PCS procedure code 03LY3DZ to MS-DRGs 163, 164, and 165. We stated, 
however, our clinical advisors believe that, within MDC 04, procedure 
codes describing percutaneous embolization of an upper artery with an 
intraluminal device are more clinically aligned with the procedure 
codes assigned to MS-DRGs 166, 167, and 168 (Other Respiratory System 
O.R. Procedures with MCC, with CC and without CC/MCC, respectively), as 
these procedures would not be considered major chest procedures. 
Therefore, we examined claims data to identify the average length of 
stay and average costs for cases assigned to MS-DRGs 166, 167 and 168. 
Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.080

    While our clinical advisors noted that the average costs of cases 
in MS-DRGs 166, 167, and 168 are lower than the average costs for the 
subset of cases reporting procedure codes 03LY0DZ, 03LY3DZ or 03LY4DZ 
and a principal diagnosis code from MDC 04, they believe that these 
procedures are clearly related to the principal diagnoses as these 
procedures are appropriate for certain respiratory tract diagnoses. We 
stated that therefore, it is clinically appropriate for the procedures 
to group to the same MDC as the principal diagnoses.
    Therefore, we proposed to add ICD-10-PCS procedure codes 03LY0DZ, 
03LY3DZ and 03LY4DZ to MDC 04 in MS-DRGs 166, 167, and 168. Under this 
proposal, cases reporting procedure codes 03LY0DZ, 03LY3DZ or 03LY4DZ 
in conjunction with a principal diagnosis code from MDC 04 such as 
hemoptysis (R04.2) would group to MS-DRGs 166, 167, and 168.
    Comment: A few commenters supported our proposal.
    Response: We appreciate the commenters' support.
    Comment: A commenter stated that ICD-10-PCS does not have procedure 
codes with a root operation of control in association with these upper 
arteries and there are times when an embolization procedure to control 
acute bleeding manifested as hemoptysis is necessary. This commenter 
also stated that the correct ICD-10-PCS root operation involving an 
intervention to address current acute or postprocedural bleeding or to 
prevent future bleeding is control involving the organ that is 
bleeding.
    Response: We appreciate the commenter raising its concerns.
    While we agree that the ICD-10-PCS Official Guidelines for Coding 
and Reporting define the root operation ``control'' as ``stopping or 
attempting to stop, postprocedural or other acute bleeding'', the 
guidelines also state that if a more definitive root operation is 
required to stop the bleeding then the more definitive root operation 
is coded instead of ``control''. That is, when embolization is 
performed to stop acute postprocedural or other acute bleeding of a 
tubular body part, the more definitive root operations that should be 
coded in those instances are restriction (if the intent is to partially 
close) or occlusion (if the intent is to completely occlude) the 
tubular body part, and not the root operation ``control''. We encourage 
this commenter to review the posted ICD-10-PCS Guidelines on the CMS 
website at: https://www.cms.gov/medicare/icd-10/2021-icd-10-pcs.html.
    Comment: Another commenter disagreed with our proposal and stated 
hemoptysis could be due to other non-respiratory reasons and believed 
these procedures should be assigned to a ``circulatory'' over a 
``respiratory'' DRG if the source of bleeding is not known and a non-
respiratory artery or circulatory vessel is occluded to stop the 
bleeding.
    Response: We disagree with the commenter that hemoptysis can be due 
to other non-respiratory reasons and note that the term ``hemoptysis'' 
specifically refers to the expectoration of blood originating from the 
respiratory tract. The expectoration of blood from a source other than 
the respiratory tract is not defined as hemoptysis and would not be 
coded with ICD-10-CM diagnosis code R04.2 (Hemoptysis).
    As stated in the proposed rule, ICD-10-CM diagnosis code R04. 2 
(Hemoptysis) is currently assigned to MDC 04 (Diseases & Disorders of 
the Respiratory System), not MDC 05 (Diseases & Disorders of the 
Circulatory System). We proposed to add these procedures to MDC 04, to 
address the matter of these procedures producing assignment to MS-DRGs 
981 through 983 when coded with this diagnosis.
    We note that under this proposal ICD-10-PCS procedure codes 
03LY0DZ, 03LY3DZ and 03LY4DZ will continue to also be assigned to 
several MS-DRGs in three other MDCs (including MDC 05 (Diseases & 
Disorders of the Circulatory System)) as discussed in the proposed 
rule. With the exception of the pre-

[[Page 58526]]

MDC, assignment to MDCs is driven by the principal diagnosis and not by 
the procedure. We also note that according to the ICD-10-CM Official 
Guidelines for Coding and Reporting, diagnoses described by codes from 
Chapter 18 (Symptoms, Signs and Abnormal Clinical and Laboratory 
Findings) of ICD-10-CM, such as R04.2, are acceptable for reporting 
when a related definitive diagnosis has not been established 
(confirmed) by the provider. If the expectoration of blood from the 
respiratory tract or another source is determined to be due another 
condition, that condition should be coded as principal diagnosis 
instead and assignment to a MDC will be driven by that principal 
diagnosis.
    Our clinical advisors continue to believe that these procedures are 
also clearly related to ICD-10-CM diagnosis code R04.2 (Hemoptysis) 
assigned to MDC 04 and believe that it is appropriate to add these 
procedures to MDC 04. Therefore, after consideration of the public 
comments received, we are finalizing our proposal to add ICD-10-PCS 
procedure codes 03LY0DZ, 03LY3DZ and 03LY4DZ to MDC 04 in MS-DRGs 166, 
167, and 168.
e. Acquired Coagulation Factor Deficiency With Percutaneous Artery 
Embolization
    As discussed in the proposed rule, we received a request to 
reassign cases for acquired coagulation factor deficiency when reported 
with a procedure describing the complete occlusion of an artery with an 
intraluminal device from MS-DRGs 981, 982, and 983 (Extensive O.R. 
Procedure Unrelated to Principal Diagnosis with MCC, with CC, and 
without CC/MCC, respectively) to MS-DRGs 252, 253 and 254 (Other 
Vascular Procedures with MCC, with CC, and without CC/MCC, 
respectively) or 270, 271, and 272 (Other Major Cardiovascular 
Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 
05 (Diseases and Disorders of the Circulatory System). The requestor 
asked that we reassign ICD-10-CM diagnosis code D68.4 (Acquired 
coagulation factor deficiency) from MDC 16 (Diseases and Disorders of 
Blood, Blood Forming Organs, Immunologic Disorders) in MS-DRG 813 
(Coagulation Disorders), to MDC 05. The requestor provided the 
following list of 59 ICD-10-PCS procedure codes describing the complete 
occlusion of an artery with an intraluminal device in its request for 
consideration to reassign the ICD-10-CM diagnosis code for acquired 
coagulation factor deficiency to MDC 05. The requester noted that the 
diagnosis of Hemorrhage, not elsewhere classified (ICD-10-CM diagnosis 
code R58) groups to MS-DRGs 252, 253 and 254 or 270, 271, and 272 in 
MDC 05 when reported with one of the 59 ICD-10-PCS procedure codes 
listed and requested that cases reporting a diagnosis describing 
acquired coagulation factor deficiency also group to those MS-DRGs when 
reported with one of the 59 ICD-10-PCS procedure codes listed.
BILLING CODE 4120-01-P

[[Page 58527]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.081


[[Page 58528]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.082


[[Page 58529]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.083

BILLING CODE 4120-01-C
    We stated our analysis of this grouping issue confirmed that, when 
diagnosis code D68.4 is reported as a principal diagnosis with one of 
the 59 ICD-10-PCS procedure codes provided by the requestor, these 
cases group to MS-DRGs 981, 982, and 983. As noted in the previous 
discussion, whenever there is a surgical procedure reported on the 
claim that is unrelated to the MDC to which the case was assigned based 
on the principal diagnosis, it results in an MS-DRG assignment to a 
surgical class referred to as ``unrelated operating room procedures''. 
We examined the claims data to identify cases involving the 59 
procedure codes in MDC 05 reported with a principal diagnosis of code 
D68.4 that are currently grouping to MS-DRGs 981, 982, and 983. Our 
analysis showed one case reported a principal diagnosis of D68.4 with a 
procedure code in MDC 05, with a length of stay of 2.0 days and costs 
of $21,890 in MS-DRG 981. We found zero cases in MS-DRGs 982 and 983 
reporting a procedure code from MDC 05 and a principal diagnosis of 
code D68.4.
    Overall, for MS-DRGs 981, 982 and 983, there was a total of one 
case reporting a principal diagnosis of acquired coagulation factor 
deficiency with any of the procedures from MDC 05 provided by the 
requestor, demonstrating that acquired coagulation factor deficiency is 
not typically corrected surgically by occlusion of an artery with an 
intraluminal device.
    As discussed in the proposed rule, we also examined the data for 
cases in MS-DRG 813, and our findings are shown in this table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.084

    As shown in this table, there were a total of 16,680 cases in MS-
DRG 813, with an average length of stay of 4.7 days and average costs 
of $11,286. In MS-DRG 813, we found 142 cases reporting a principal 
diagnosis of an acquired coagulation factor deficiency with an average 
length of stay of 6.41 days and average costs of $17,822. We note that 
the average costs for the subset of cases in MS-DRG 813 reporting a 
principal diagnosis of an acquired coagulation factor deficiency are 
higher than the average costs of all cases that currently group to MS-
DRG 813.
    We are clarifying in this final rule that cases reporting a 
principal diagnosis of acquired coagulation factor deficiency group to 
MS-DRGs 813, which is the medical MS-DRG that contains coagulation 
disorders, in the absence of a surgical procedure. We note that every 
diagnosis code is assigned to a medical MS-DRG to define the logic of 
the MS-DRG either as a principal or secondary diagnosis. As discussed 
in section II.E.12.a., certain procedure codes may affect the MS-DRG 
and result in a surgical MS-DRG assignment. Cases reporting a principal 
diagnosis of acquired coagulation factor deficiency group to MS-DRGs 
799, 800 and 801 (Splenectomy with MCC, with CC, and without CC/MCC, 
respectively) or MS-DRGs 802, 803, and 804 (Other O.R. Procedures of 
the Blood and Blood Forming Organs with MCC, with CC, and without CC/
MCC, respectively) in the presence of a surgical procedure such as the 
procedures listed by the requestor. We refer the reader to the ICD-10 
MS-DRG Version 37 Definitions Manual for complete documentation of the 
logic for case assignment to surgical MS-DRGs 799, 800, 801, 802, 803, 
and 804 and to medical MS-DRG 813 (which is available via the internet 
on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html).
    However, as stated in the proposed rule, our clinical advisors 
believe that diagnosis code D68.4 describes acquired bleeding disorders 
in which the affected person lacks the necessary coagulation factors 
for proper clot formation and wound healing, and therefore, is most 
clinically aligned with the diagnosis codes assigned to MDC 16 (where 
it is currently assigned). Our clinical advisors further note that a 
diagnosis of an acquired bleeding disorder is not comparable to 
conditions described by the ICD-10-CM code R58 (Hemorrhage, not 
elsewhere classified) as suggested by the requestor. Diagnoses 
described by codes from Chapter 18 (Symptoms, Signs and Abnormal 
Clinical and Laboratory Findings) of ICD-10-CM, such as R58, can be the 
result of a variety of underlying conditions, or describe conditions of 
an unexplained etiology. We stated that as an ill-defined condition, 
our clinical advisors do not believe it is appropriate to equate this 
diagnosis code with a bleeding disorder. Therefore, we did not propose 
to reassign ICD-10-CM diagnosis code D68.4 from MDC 16 to MDC 05.
    Comments: Commenters agreed with CMS' proposal not to reassign ICD-
10-CM diagnosis code D68.4 from MDC 16 to MDC 05. One commenter stated 
a diagnosis of an acquired bleeding disorder is not comparable to 
conditions described by the ICD-10-CM code R58, Hemorrhage, not 
elsewhere classified, and ICD-10-CM code D68.4 is most clinically 
aligned with the diagnosis codes in MDC 16.

[[Page 58530]]

    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the assignment of ICD-10-CM 
diagnosis code D68.4 in MDC 16.
f. Epistaxis with Percutaneous Artery Embolization
    We received a request to consider adding cases for a hemorrhage of 
the nose when reported with a procedure describing percutaneous 
arterial embolization to MDC 03 (Disease and Disorders of the Ear, 
Nose, Mouth and Throat) in MS-DRGs 133 and 134 (Other Ear, Nose, Mouth 
and Throat O.R. Procedures with CC/MCC and without CC/MCC, 
respectively). ICD-10-CM diagnosis code R04.0 (Epistaxis) is used to 
describe a hemorrhage of the nose or ``nosebleed'' and is currently 
assigned to MDC 03. ICD-10-PCS procedure codes describing percutaneous 
arterial embolization may be reported with procedure codes 03LM3DZ 
(Occlusion of right external carotid artery with intraluminal device, 
percutaneous approach), 03LN3DZ (Occlusion of left external carotid 
artery with intraluminal device, percutaneous approach), or 03LR3DZ 
(Occlusion of face artery with intraluminal device, percutaneous 
approach) and are currently assigned to several MS-DRGs in five MDCs as 
illustrated in the table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.085

    According to the requestor, when diagnosis code R04.0 is reported 
as a principal diagnosis with any one of the procedure codes describing 
a percutaneous arterial embolization (03LM3DZ, 03LN3DZ, or 03LR3DZ), 
these cases are grouping to MS-DRGs 981, 982, and 983 (Extensive O.R. 
Procedure Unrelated to Principal Diagnosis with MCC, with CC, and 
without CC/MCC, respectively).
    As stated in the proposed rule, our analysis of this grouping issue 
confirmed that, when epistaxis (ICD-10-CM diagnosis code R04.0) is 
reported as a principal diagnosis with ICD-10-PCS procedure codes 
03LM3DZ, 03LN3DZ, or 03LR3DZ, these cases group to MS-DRGs 981, 982, 
and 983. The reason for this grouping is because whenever there is a 
surgical procedure reported on a claim that is unrelated to the MDC to 
which the case was assigned based on the principal diagnosis, it 
results in an MS-DRG assignment to a surgical class referred to as 
``unrelated operating room procedures.''
    For our review of this grouping issue and the request to have cases 
reporting procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ added to MDC 03 
in MS-DRGs 133 through 134, we first examined claims data from 
September 2019 update of the FY 2019 MedPAR file for cases reporting 
ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ with a 
principal diagnosis of R04.0 from MDC 03 that currently group to MS-
DRGs 981 through 983. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.086

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

[[Page 58531]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.087

    As shown in the table, for MS-DRG 133, there were a total of 1,757 
cases with an average length of stay of 5.6 days and average costs of 
$15,337. For MS-DRG 134, there were a total of 849 cases with an 
average length of stay of 2.5 days and average costs of $9,512. Our 
clinical advisors believe that procedure codes 03LM3DZ, 03LN3DZ, and 
03LR3DZ are appropriate procedures to treat commonly occurring ear, 
nose, and throat bleeding diagnoses and expressed support for these 
procedure codes to group to MDC 03.
    We noted that, as discussed in section II.D.4 of the preamble of 
the proposed rule and section II.E.4. of this final rule, we proposed 
to delete MS-DRGs 133 and 134 and create new MS-DRGs 143, 144, and 145 
(Other Ear, Nose, Mouth and Throat O.R. Procedures with MCC, with CC, 
and without CC/MCC, respectively). Therefore, we proposed to add ICD-
10-PCS procedure codes 03LM3DZ, 03LN3DZ, and 03LR3DZ to MDC 03 in new 
MS-DRGs 143, 144, and 145, if finalized. Under this proposal, cases 
reporting ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ with 
a principal diagnosis from MDC 03 would group to new MS-DRGs 143, 144, 
and 145.
    The following table reflects our simulation for ICD-10-PCS 
procedure codes 03LM3DZ, 03LN3DZ, and 03LR3DZ in new MS-DRGs 143, 144, 
and 145.
[GRAPHIC] [TIFF OMITTED] TR18SE20.088

    Comment: A commenter supported our proposal to add procedure codes 
describing a percutaneous arterial embolization to MDC 03. This 
commenter also stated CMS should expand ICD-10-PCS to include procedure 
codes describing the control of bleeding of the nasal passages 
performed using a percutaneous and percutaneous endoscopic approach so 
the resources involved in addressing acute or postprocedural bleeding 
in this manner can be assessed.
    Response: We appreciate the commenter's support. As discussed in 
section II.E.16. of the preamble of this final rule, the ICD-10 
Coordination and Maintenance Committee addresses updates to the ICD-10-
CM and ICD-10-PCS coding systems. We encourage commenters to submit 
proposals for procedure coding changes via Email to: 
[email protected].
    Comment: Another commenter questioned CMS's proposal and stated 
these procedures should be classified to the circulatory MS-DRGs if the 
bleed is due to an artery or vessel and a procedure is performed on 
that artery/vessel.
    Response: We appreciate the comment and concerns raised on our 
proposal.
    As explained in the proposed rule, when conducting the review of 
procedures producing assignment to MS-DRGs 981 through 983 or MS-DRGs 
987 through 989, the objective is to identify those procedures 
occurring in conjunction with certain principal diagnoses with 
sufficient frequency to justify adding them to one of the surgical MS-
DRGs for the MDC in which the diagnosis falls, or to move the principal 
diagnosis codes to the MDC in which the procedure falls.
    As stated in the proposed rule, ICD-10-CM diagnosis code R04.0 
(Epistaxis) is used to describe a hemorrhage of the nose or 
``nosebleed'' and is currently assigned to MDC 03 (Diseases & Disorders 
of the Ear, Nose, Mouth & Throat), not MDC 05 (Diseases & Disorders of 
the Circulatory System). We proposed to add these procedures to MDC 03, 
to address the matter of these procedures producing assignment to MS-
DRGs 981 through 983 when performed for a diagnosis of epistaxis.
    We note that under this proposal ICD-10-PCS procedure codes 
03LM3DZ, 03LN3DZ, and 03LR3DZ will continue to also be assigned to 
several MS-DRGs in five other MDCs (including MDC 05 (Diseases & 
Disorders of the Circulatory System)) as discussed in the proposed 
rule. With the exception of the pre-MDC, assignment to MDCs is driven 
by the principal diagnosis and not by the procedure. We also note that 
according

[[Page 58532]]

to the ICD-10-CM Official Guidelines for Coding and Reporting, 
diagnoses described by codes from Chapter 18 (Symptoms, Signs and 
Abnormal Clinical and Laboratory Findings) of ICD-10-CM, such as R04.0, 
are acceptable for reporting when a related definitive diagnosis has 
not been established (confirmed) by the provider. If the nasal bleeding 
is determined to be due another condition, that condition should be 
coded as principal diagnosis instead and assignment to a MDC will be 
driven by that principal diagnosis. Our clinical advisors continue to 
believe that these procedures are also clearly related to the principal 
diagnoses ICD-10-CM diagnosis code R04.0 (Epistaxis), assigned to MDC 
03 and believe that it is appropriate to add these procedures to MDC 
03.
    Therefore, after consideration of the public comments we received, 
we are finalizing our proposal to add ICD-10-PCS procedure codes 
03LM3DZ, 03LN3DZ, and 03LR3DZ to MDC 03 in new MS-DRGs 143, 144, and 
145. We refer the reader to section II.E.4. of this final rule for the 
comments regarding our proposal to create new MS-DRGs 143, 144, and 
145, as well as our finalization of that proposal.
g. Revision or Removal of Synthetic Substitute in Peritoneal Cavity
    As discussed in the proposed rule, during our review of the cases 
that group to MS-DRGs 981 through 983, we noted that when several ICD-
10-PCS procedure codes describing revision or removal of synthetic 
substitute in the peritoneal cavity are reported in conjunction with 
ICD-10-CM diagnosis codes in MDC 01 (Diseases and Disorders of the 
Nervous System), such as complications of intracranial shunts, the 
cases group to MS-DRGs 981 through 983. ICD-10-PCS procedure codes 
0WWG0JZ (Revision of synthetic substitute in peritoneal cavity, open 
approach), 0WWG4JZ (Revision of synthetic substitute in peritoneal 
cavity, percutaneous endoscopic approach), and 0WPG0JZ (Removal of 
synthetic substitute from peritoneal cavity, open approach) are 
currently assigned to MDC 06 (Diseases and Disorders of the Digestive 
System) in MS-DRGs 356, 357, and 358 (Other Digestive System O.R. 
Procedures with MCC, with CC, and without CC/MCC, respectively).
    As stated in the proposed rule, we examined cases that reported a 
principal diagnosis in MDC 01 and procedure code 0WWG0JZ, 0WWG4JZ, or 
0WPG0JZ that currently group to MS-DRGs 981 through 983. Our findings 
are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.089

    Within MDC 01, our clinical advisors believe that these procedures, 
which describe revision or removal of synthetic substitute in 
peritoneal cavity, are most clinically similar to those in MS-DRGs 031, 
032, and 033 (Ventricular Shunt Procedures with MCC, with CC, and 
without CC/MCC, respectively). We therefore examined the data for all 
cases in MS-DRGS 031, 032, and 033.
[GRAPHIC] [TIFF OMITTED] TR18SE20.090

    The average costs for the subset of cases in MS-DRGs 981, 982, and 
983 that report procedures describing revision or removal of synthetic 
substitute in the peritoneal cavity with a principal diagnosis from MDC 
01 are lower than the average costs of cases in MS-DRGs 031, 032, and 
033 as a whole, and the average length of stay for this subset of cases 
is also lower in two of the MS-DRGs and higher in one. Our clinical 
advisors believe the procedure codes describing revision or removal of 
synthetic substitute in the peritoneal cavity are clearly related to 
the principal diagnosis codes describing complications of intracranial 
shunts and, therefore, it is clinically appropriate for the procedures 
to group to the same MS-DRGs (031, 032, and 033) as the principal 
diagnoses describing complications of intracranial shunts. We proposed 
to add ICD-10-PCS procedure codes 0WWG0JZ, 0WWG4JZ, and 0WPG0JZ to MDC 
01 (Diseases and Disorders of the Nervous System) in MS-DRGs 031, 032, 
and 033.
    Comments: Commenters supported our proposal to add ICD-10-PCS 
procedure codes 0WWG0JZ, 0WWG4JZ, and 0WPG0JZ to MDC 01 (Diseases and 
Disorders of the Nervous System) in MS-DRGs 031, 032, and 033. One 
commenter stated that ICD-10-PCS procedure codes describing revision or 
removal of synthetic substitute in the peritoneal cavity are related to 
the principal diagnosis codes describing complications of intracranial 
shunts, and so it is appropriate for the procedures to group to the 
same MS-

[[Page 58533]]

DRGs as the principal diagnoses describing complications of 
intracranial shunts. Another commenter noted that another indication 
for shunt revision is most commonly complications of 
ventriculoperitoneal shunts, and ICD-10-CM diagnosis codes describing 
complication of the ventriculoperitoneal shunts are assigned to MDC 01.
    Response: We appreciate the commenters' support.
    After consideration of the public comments received, we are 
finalizing our proposal to add ICD-10-PCS procedure codes 0WWG0JZ, 
0WWG4JZ, and 0WPG0JZ to MDC 01 (Diseases and Disorders of the Nervous 
System) in MS-DRGs 031, 032, and 033.
h. Revision of Totally Implantable Vascular Access Devices
    As discussed in the proposed rule, during our review of the cases 
currently grouping to MS-DRGs 981 through 983, we noted that when 
procedure codes describing Totally Implantable Vascular Access Devices 
(TIVADs) are reported with ICD-10-CM diagnosis codes assigned to MDC 04 
(Diseases and Disorders of the Respiratory System), MDC 06 (Diseases 
and Disorders of the Digestive System), MDC 07 (Diseases and Disorders 
of the Hepatobiliary System and Pancreas), MDC 08 (Diseases and 
Disorders of the Musculoskeletal System and Connective Tissue), MDC 13 
(Diseases and Disorders of the Female Reproductive System), or MDC 16 
(Diseases and Disorders of Blood, Blood Forming Organs, Immunologic 
Disorders), the cases group to MS-DRGs 981 through 983.
    TIVADs are port catheter devices inserted for chemotherapy 
treatment. The nine ICD-10-PCS procedure codes describing TIVADs are 
listed in this table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.091

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

[[Page 58534]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.092

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

[[Page 58535]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.093

    In the proposed rule, we noted that while the average costs and 
length of stay are similar in some cases and in some cases vary between 
the subset of cases currently grouping to MS-DRGs 981 through 983 and 
the cases currently grouping to the MS-DRGs describing ``Other'' 
procedures as set forth in the table, our clinical advisors noted that 
TIVADs are frequently inserted in order to administer chemotherapy for 
a variety of malignancies. MDCs 04, 06, 07, 08, 13, or 16 each contain 
ICD-10-CM diagnosis codes that describe a variety of malignancies. 
Therefore, our clinical advisors believe that the TIVAD procedures are 
clearly related to the principal diagnoses within MDCs 04, 06, 07, 08, 
13, and 16. For the reasons previously indicated, our clinical advisors 
believe that cases reporting TIVADs with a principal diagnosis in MDCs 
04, 06, 07, 08, 13, or 16 would mostly suitably group to the MS-DRGs 
describing ``Other'' procedures for each of these MDCs.
    Therefore, we proposed to add the nine ICD-10-PCS procedure codes 
describing TIVADs as set forth in the table to the MS-DRGs describing 
``Other'' procedures within each of MDCs 04, 06, 07, 08, 13, and 16, 
specifically: MDC 04 in MS-DRGs 166, 167, and 168, MDC 06 in MS-DRGs 
356, 357, and 358, MDC 07 in MS-DRGs 423, 424, and 425, MDC 08 in MS-
DRGs 515, 516, and 517, MDC 13 in MS-DRGs 749 and 750, and MDC 16 in 
MS-DRGs 802, 803, and 804. Under this proposal, cases reporting a 
principal diagnosis in MDCs 04, 06, 07, 08, 13, or 16 with a TIVAD 
procedure would group to the respective MS-DRGs within the MDC.
    Comments: Commenters supported the addition of ICD-10-PCS procedure 
codes describing insertion of totally implantable vascular access 
devices to the MS-DRGs describing ``Other'' procedures within MDCs 04, 
06, 07, 08, 13, and 16.
    Response: We appreciate the commenters' support.
    After consideration of the public comments received, we are 
finalizing our proposal to add the nine ICD-10-PCS procedure codes 
describing TIVADs as set forth in the table to the MS-DRGs describing 
``Other'' procedures within each of MDCs 04, 06, 07, 08, 13, and 16, 
specifically: MDC 04 in MS-DRGs 166, 167, and 168, MDC 06 in MS-DRGs 
356, 357, and 358, MDC 07 in MS-DRGs 423, 424, and 425, MDC 08 in MS-
DRGs 515, 516, and 517, MDC 13 in MS-DRGs 749 and 750, and MDC 16 in 
MS-DRGs 802, 803, and 804.
i. Multiple Trauma With Internal Fixation of Joints
    As discussed in the proposed rule, for FY 2020, we received a 
request to reassign cases involving diagnoses that identify multiple 
significant trauma combined with internal fixation of joint procedures 
from MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to 
Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) to MS-DRGs 957, 958, and 959 (Other O.R. Procedures for 
Multiple Significant Trauma with MCC, with CC, and without CC/MCC, 
respectively) in MDC 24 (Multiple Significant Trauma). The requestor 
provided an example of several ICD-10-CM diagnosis codes that together 
described multiple significant trauma in conjunction with ICD-10-PCS 
procedure codes beginning with the prefix ``0RH'' and ``0SH'' that 
describe internal fixation of upper and lower joints. The requestor 
provided several suggestions to address this reassignment, including: 
Adding all ICD-10-PCS procedure codes from MDC 08 (Diseases and 
Disorders of the Musculoskeletal System and Connective Tissue) with the 
exception of codes that group to MS-DRG 956 (Limb Reattachment, Hip and 
Femur Procedures for Multiple Significant

[[Page 58536]]

Trauma) to MS DRGs 957, 958, and 959; adding codes with the prefix 
``0RH'' and ``0SH'' to MDC 24; and adding ICD-10-PCS procedure codes 
from all MDCs except those that currently group to MS-DRG 955 
(Craniotomy for Multiple Significant Trauma) or MS-DRG 956 (Limb 
Reattachment, Hip and Femur Procedures for Multiple Significant Trauma) 
to MS-DRGs 957, 958, and 959 in MDC 24. In the FY 2020 IPPS/LTCH PPS 
proposed rule, we stated that we believe any potential reassignment of 
these cases requires significant analysis. We therefore did not propose 
any changes to the cases identified by the requestor.
    For FY 2021, as the first step of the comprehensive analysis needed 
to assess the reassignment of cases involving diagnoses that identify 
multiple significant trauma combined with internal fixation of joint 
procedures, we stated in the proposed rule, our clinical advisors 
reviewed the list of procedure codes in the ``0RH'' and ``0SH'' code 
ranges, as suggested by the requestor. Our clinical advisors identified 
161 ICD-10-PCS codes, which are listed in table 6P.1f., that they 
believe are clinically related to diagnoses assigned to MDC 24. We 
examined the claims data for cases that would be assigned to MDC 24 
based on their diagnoses, but currently group to MS-DRGs 981 through 
983 based on the presence of procedure codes in the ``0RH'' and ``0SH'' 
code ranges. Our findings are shown in this table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.094

    In the proposed rule, we noted that we found only 8 claims, with 
varying lengths of stay and average costs. We also examined the claims 
data for all cases in MS-DRGs 957, 958, and 959. Our findings are shown 
in this table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.095


[[Page 58537]]


    The very small number of claims we identified for cases that would 
be assigned to MDC 24 based on their diagnoses, but grouped to MS-DRGs 
981 through 983 based on the presence of procedure codes in the ``0RH'' 
and ``0SH'' code ranges, have varying resource use relative to MS-DRGs 
957, 958, and 959 as a whole. The average costs of the cases found in 
MS-DRGs 981-983 range from $7,015 to $72,331 with average lengths of 
stay ranging from 3 days to 14 days. The average costs of the cases 
found in MS-DRGs 957-959 range from $20,563 to $54,771 with average 
lengths of stay ranging from 5 days to 13.2 days. We stated given the 
nature of trauma cases, the resource use would be expected to vary 
based on the nature of the patient's injuries. In addition, as noted, 
our clinical advisors believe that these procedure codes are clinically 
related to the diagnoses in MDC 24. Therefore, we proposed to add the 
161 ICD-10-PCS codes shown in Table 6P.1f associated with the proposed 
rule to MDC 24 in MS-DRGs 957, 958, and 959. Under this proposal, cases 
that would be assigned to MDC 24 based on their diagnoses, that also 
report one of the 161 ICD-10-PCS codes included in table 6P.1f, will 
group to MDC 24 in MS-DRGs 957, 958, and 959, rather than to MS-DRGs 
981 through 983.
    In the proposed rule, we noted that while we made this proposal to 
address the grouping issue for internal fixation of upper and lower 
joint procedures identified by the requestor, our clinical advisors 
believe that a more comprehensive analysis is required within MDC 24 to 
address the differences in severity level of diagnoses as well as the 
assignment of procedure codes to the MS-DRGs within MDC 24. We plan to 
continue this comprehensive analysis in future rulemaking.
    Comment: Commenters supported our proposal to add the 161 ICD-10-
PCS codes shown in Table 6P.1f to MDC 24 in MS-DRGs 957, 958, and 959. 
A commenter specifically stated they endorse the proposal as a means of 
more accurately representing the costs associated with the care and 
treatment of multi trauma patients. Commenters also stated they agreed 
that a more comprehensive analysis of the diagnoses and procedures 
assigned to MDC 24 should be undertaken.
    Response: We appreciate the commenters' support.
    After consideration of the public comments received, we are 
finalizing our proposal to add the 161 ICD-10-PCS codes shown in Table 
6P.1f associated with this final rule to MDC 24 in MS-DRGs 957, 958, 
and 959. Accordingly, cases that would be assigned to MDC 24 based on 
their diagnoses, that also report one of the 161 ICD-10-PCS codes 
included in table 6P.1f, will group to MDC 24 in MS-DRGs 957, 958, and 
959 under the ICD-10 MS-DRGs Version 38, effective October 1, 2020. As 
noted in the proposed rule, we plan to continue this comprehensive 
analysis in future rulemaking.
j. Reassignment of Procedures Among MS-DRGs 981 Through 983 and 987 
Through 989
    We also review the list of ICD-10-PCS procedures that, when in 
combination with their principal diagnosis code, result in assignment 
to MS-DRGs 981 through 983, or 987 through 989, to ascertain whether 
any of those procedures should be reassigned from one of those two 
groups of MS-DRGs to the other group of MS-DRGs based on average costs 
and the length of stay. We look at the data for trends such as shifts 
in treatment practice or reporting practice that would make the 
resulting MS-DRG assignment illogical. If we find these shifts, we 
would propose to move cases to keep the MS-DRGs clinically similar or 
to provide payment for the cases in a similar manner. Generally, we 
move only those procedures for which we have an adequate number of 
discharges to analyze the data.
    Based on the results of our review of claims data in the September 
2019 update of the FY 2019 MedPAR file, we proposed to reassign three 
procedure codes from MS-DRGs 981, 982, and 983 (Extensive O.R. 
Procedure Unrelated to Principal Diagnosis with MCC, with CC, without 
CC/MCC, respectively) to MS-DRGs 987, 988, and 989 (Non-Extensive 
Procedure Unrelated to Principal Diagnosis with MCC, with CC, without 
CC/MCC, respectively). We also proposed to reassign three procedure 
codes from MS-DRGs 987, 988, and 989 (Non-Extensive Procedure Unrelated 
to Principal Diagnosis with MCC, with CC, without CC/MCC, respectively) 
to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to 
Principal Diagnosis with MCC, with CC, without CC/MCC, respectively).
    In conducting our review of the request to designate ICD-10-PCS 
procedure code 0W3G0ZZ (Control bleeding in peritoneal cavity, open 
approach) as an O.R. procedure (as described in section II.E.11.c.5. of 
this final rule), our clinical advisors noted that ICD-10-PCS codes 
0W3G3ZZ (Control bleeding in peritoneal cavity, percutaneous approach) 
and 0W3G4ZZ (Control bleeding in peritoneal cavity, percutaneous 
endoscopic approach) are currently assigned to MS-DRGs 981 through 983 
when reported with a principal diagnosis that is not assigned to one of 
the MDCs to which these procedure codes are assigned. We stated that 
our clinical advisors believe that these procedures would be more 
appropriately assigned to MS-DRGs 987 through 989 because they are on 
average less complex and difficult than the same procedure performed by 
an open approach, and therefore should be assigned to the ``less 
extensive'' DRG. Therefore, we proposed to reassign ICD-10-PCS codes 
0W3G3ZZ and 0W3G4ZZ from MS-DRGs 981 through 983 to 987 through 989.
    Comment: A commenter supported our proposal.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing our proposal to reassign ICD-10-PCS codes 0W3G3ZZ and 
0W3G4ZZ from MS-DRGs 981 through 983 to 987 through 989, effective 
October 1, 2020.
    In conducting our review of the request to designate ICD-10-PCS 
procedure codes 0WBC4ZX (Excision of mediastinum, percutaneous 
endoscopic approach, diagnostic) and 0WBC3ZX (Excision of mediastinum, 
percutaneous approach, diagnostic) as O.R. procedures (as described in 
section II.E.11.c.1. of this final rule), our clinical advisors noted 
that ICD-10-PCS code 0WBC0ZX (Excision of mediastinum, open approach, 
diagnostic) is currently assigned to MS-DRGs 981 through 983 when 
reported with a principal diagnosis that is not assigned to one of the 
MDCs to which the procedure code is assigned. We stated that our 
clinical advisors believe that this procedure would be more 
appropriately assigned to MS-DRGs 987 through 989 because this 
assignment is consistent with the assignment of other procedures that 
describe excision of the mediastinum performed by an open, 
percutaneous, or percutaneous endoscopic approach, and is consistent 
with the proposal for procedure codes 0WBC4ZX and 0WBC3ZX (with 
diagnostic qualifier) as discussed in section II.E.11.c.1. of this 
final rule. Therefore, we proposed to reassign ICD-10-PCS code 0WBC0ZX 
from MS-DRGs 981 through 983 to 987 through 989.
    Comment: A commenter supported our proposal.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing our proposal to reassign ICD-10-PCS code 0WBC0ZX from MS-
DRGs

[[Page 58538]]

981 through 983 to 987 through 989, effective October 1, 2020.
    As discussed in the proposed rule, we received a request to examine 
cases reporting a procedure describing the open excision of 
gastrointestinal body parts in the gastrointestinal body system. The 
requester stated that when procedures describing the open excision of a 
specific gastrointestinal body part in the gastrointestinal body system 
are reported with a principal diagnosis such as C49.A3 
(Gastrointestinal stromal tumor of small intestine (GIST)), the cases 
are assigned to MS-DRGs 987, 988, and 989 (Non-Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively). However, when procedures describing the excision of a 
general gastrointestinal body part in the gastrointestinal body system 
are reported with the same principal diagnosis of GIST, the cases are 
assigned to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively). The requestor stated that procedures describing a 
specific body part value should be assigned to the same MS-DRG as 
procedures describing a general body part value.
    The requestor provided four ICD-10-PCS procedure codes in its 
request. These four ICD-10-PCS procedure codes, as well as their MDC 
assignments, are listed in the table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.096

    In the proposed rule, we noted that in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42120 through 42122), we finalized our proposal to 
move seven ICD-10-CM diagnosis codes describing gastrointestinal 
stromal tumors (GIST), including C49.A3, from MDC 08 to MDC 06, under 
the ICD-10 MS-DRGs Version 37, effective October 1, 2019. As a result, 
cases reporting a principal diagnosis of GIST and a procedure code that 
is assigned to MDC 06 (such as ICD-10-PCS codes 0DBA0ZZ, 0DBB0ZZ, 
0DB80ZZ, and 0DB90ZZ) group to MS-DRGs in MDC 06.
    We stated in the proposed rule that our analysis of this grouping 
issue found that these four ICD-10-PCS codes describing related 
procedures have dissimilar designations that determine whether and in 
what way the presence of the procedure impacts the MS-DRG assignment. 
We noted ICD-10-PCS code 0DB80ZZ is classified as an extensive O.R. 
procedure and ICD-10-PCS codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ are 
classified as non-extensive O.R. procedures. As a result, whenever ICD-
10-PCS code 0DB80ZZ is reported with a principal diagnosis that is 
assigned to a different MDC than the procedure code, the case would be 
assigned to MS-DRGs 981 through 983. When ICD-10-PCS codes 0DB90ZZ, 
0DBA0ZZ, or 0DBB0ZZ are reported with a principal diagnosis that is 
assigned to a different MDC than the procedure code, the case would be 
assigned to MS-DRGs 987 through 989.
    We examined the claims data to identify cases reporting procedure 
code 0DB80ZZ that are currently grouping to MS-DRGs 981, 982 and 983. 
Our findings are shown in this table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.097

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

[[Page 58539]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.098

    We stated the results of our data analysis indicated that cases 
reporting procedure codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ describing the 
open excision of a specific gastrointestinal body part in MS-DRGs 987, 
988, and 989 generally have a longer length of stay and higher average 
costs when compared to all the cases in their assigned MS-DRG. The 
subset of cases reporting 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ and the subset 
of cases in MS-DRGs 981, 982 and 983 reporting 0DB80ZZ are more closely 
aligned in terms of the lengths of stay and average costs. Further we 
stated, our clinical advisors believed that, given the similarity in 
resource use required for procedures describing an open excision of a 
gastrointestinal body part in terms of the use of an operating room, 
anesthesia and skills required, for clinical coherence and consistency 
in assignment with ICD-10-PCS code 0DB80ZZ, it would be appropriate to 
also designate ICD-10-PCS codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ as 
extensive O.R. procedures.
    Therefore, we proposed to change the designation of ICD-10-PCS 
codes 0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ from non-extensive O.R. procedures 
to extensive O.R. procedures for FY 2021. Under this proposal, cases 
reporting procedure codes 0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ, which are 
unrelated to the MDC to which the case would otherwise be assigned 
based on the principal diagnosis, will group to MS-DRGs 981, 982 and 
983.
    Comment: A commenter supported our proposal to change the 
designation of the three procedure codes so that when cases reporting 
procedure codes 0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ, which are unrelated to 
the MDC to which the case would otherwise be assigned based on the 
principal diagnosis, will group to MS-DRGs 981, 982 and 983 instead of 
MS-DRGs 987, 988, and 989.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of ICD-10-PCS codes 
0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ from non-extensive O.R. procedures to 
extensive O.R. procedures, effective October 1, 2020.
11. Operating Room (O.R.) and Non-O.R. Issues
a. Background
    Under the IPPS MS-DRGs (and former CMS MS-DRGs), we have a list of 
procedure codes that are considered operating room (O.R.) procedures. 
Historically, we developed this list using physician panels that 
classified each procedure code based on the procedure and its effect on 
consumption of hospital resources. For example, generally the presence 
of a surgical procedure which required the use of the operating room 
would be expected to have a significant effect on the type of hospital 
resources (for example, operating room, recovery room, and anesthesia) 
used by a patient, and therefore, these patients were considered 
surgical. Because the claims data generally available do not precisely 
indicate whether a patient was taken to the operating room, surgical 
patients were identified based on the procedures that were performed. 
Generally, if the procedure was not expected to require the use of the 
operating room, the patient would be considered medical (non-O.R.).
    Currently, each ICD-10-PCS procedure code has designations that 
determine whether and in what way the presence of that procedure on a 
claim impacts the MS-DRG assignment. First, each ICD-10-PCS procedure 
code is either designated as an O.R. procedure for purposes of MS-DRG 
assignment (``O.R. procedures'') or is not designated as an O.R. 
procedure for purposes of MS-DRG assignment (``non-O.R. procedures''). 
Second, for each procedure that is designated as an O.R. procedure, 
that O.R. procedure is further classified as either extensive or non-
extensive. Third, for each procedure that is designated as a non-O.R. 
procedure, that non-O.R. procedure is further classified as either 
affecting the MS-DRG assignment or not affecting the MS-DRG assignment. 
We refer to these designations that do affect MS-DRG assignment as 
``non-O.R. affecting the MS-DRG.'' For new procedure codes that have 
been finalized through the ICD-10 Coordination and Maintenance 
Committee meeting process and are proposed to be classified as O.R.

[[Page 58540]]

procedures or non-O.R. procedures affecting the MS-DRG, our clinical 
advisors recommend the MS-DRG assignment which is then made available 
in association with the proposed rule (Table 6B.--New Procedure Codes) 
and subject to public comment. These proposed assignments are generally 
based on the assignment of predecessor codes or the assignment of 
similar codes. For example, we generally examine the MS-DRG assignment 
for similar procedures, such as the other approaches for that 
procedure, to determine the most appropriate MS-DRG assignment for 
procedures to be newly designated as O.R. procedures. As discussed in 
section II.E.13. of the preamble of this final rule, we are making 
Table 6B.--New Procedure Codes--FY 2021 available on the CMS website 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. We also refer readers to the ICD-10 MS-
DRG Version 37 Definitions Manual at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for detailed information regarding 
the designation of procedures as O.R. or non-O.R. (affecting the MS-
DRG) in Appendix E--Operating Room Procedures and Procedure Code/MS-DRG 
Index. In the FY 2020 IPPS/LTCH PPS proposed rule, we stated that, 
given the long period of time that has elapsed since the original O.R. 
(extensive and non-extensive) and non-O.R. designations were 
established, the incremental changes that have occurred to these O.R. 
and non-O.R. procedure code lists, and changes in the way inpatient 
care is delivered, we plan to conduct a comprehensive, systematic 
review of the ICD-10-PCS procedure codes. This will be a multi-year 
project during which we will also review the process for determining 
when a procedure is considered an operating room procedure. For 
example, we may restructure the current O.R. and non-O.R. designations 
for procedures by leveraging the detail that is now available in the 
ICD-10 claims data. We refer readers to the discussion regarding the 
designation of procedure codes in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38066) where we stated that the determination of when a 
procedure code should be designated as an O.R. procedure has become a 
much more complex task. This is, in part, due to the number of various 
approaches available in the ICD-10-PCS classification, as well as 
changes in medical practice. While we have typically evaluated 
procedures on the basis of whether or not they would be performed in an 
operating room, we believe that there may be other factors to consider 
with regard to resource utilization, particularly with the 
implementation of ICD-10.
    We discussed in the FY 2020 IPPS/LTCH PPS proposed rule that as a 
result of this planned review and potential restructuring, procedures 
that are currently designated as O.R. procedures may no longer warrant 
that designation, and conversely, procedures that are currently 
designated as non-O.R. procedures may warrant an O.R. type of 
designation. We intend to consider the resources used and how a 
procedure should affect the MS-DRG assignment. We may also consider the 
effect of specific surgical approaches to evaluate whether to subdivide 
specific MS-DRGs based on a specific surgical approach. We plan to 
utilize our available MedPAR claims data as a basis for this review and 
the input of our clinical advisors. As part of this comprehensive 
review of the procedure codes, we also intend to evaluate the MS-DRG 
assignment of the procedures and the current surgical hierarchy because 
both of these factor into the process of refining the ICD-10 MS-DRGs to 
better recognize complexity of service and resource utilization.
    We will provide more detail on this analysis and the methodology 
for conducting this review in future rulemaking. As we noted in the FY 
2020 IPPS/LTCH PPS rulemaking, as we continue to develop our process 
and methodology, as previously noted, we are soliciting recommendations 
on other factors to consider in our refinement efforts to recognize and 
differentiate consumption of resources for the ICD-10 MS-DRGs. 
Therefore, in the FY 2021 proposed rule, we again solicited feedback on 
what factors or criteria to consider in determining whether a procedure 
is designated as an O.R. procedure in the ICD-10-PCS classification 
system for future consideration. We stated commenters should submit 
their recommendations to the following email address: 
[email protected] by October 20, 2020.
    In this FY 2021 IPPS/LTCH PPS final rule, we present a summation of 
the comments we received in response to this discussion in the proposed 
rule.
    Comment: Several commenters supported CMS' plan to continue to 
conduct the comprehensive, systematic review of the ICD-10-PCS codes 
that includes a process for determining when a procedure is designated 
as O.R. or Non-O.R. and acknowledged the magnitude of the potential 
impact to significantly restructure MS-DRGs.
    Response: We thank the commenters for their support and appreciate 
their acknowledgement of the magnitude of this effort.
    Comment: Two commenters stated that the public feedback they 
submitted by November 1, 2019 in response to CMS' request for feedback 
in the FY 2020 IPPS/LTCH PPS proposed rule was not stated in the FY 
2021 IPPS/LTCH proposed rule.
    Response: CMS appreciates the comments submitted in response to our 
request for feedback in both the FY 2020 IPPS/LTCH PPS proposed rule 
and in the FY 2021 IPPS/LTCH PPS proposed rule. While the comments 
submitted by the November 1, 2019 deadline were not specifically 
addressed in the FY 2021 IPPS/LTCH PPS proposed rule, feedback on what 
factors and/or criteria to consider in determining whether a procedure 
is designated as an O.R. procedure in the ICD-10-PCS classification 
system will be included when we provide more detail on this analysis 
and the methodology for conducting this comprehensive review in future 
rulemaking.
    Comment: Several commenters requested that CMS consider the drivers 
of complexity and resource consumption surrounding the entire procedure 
and not only O.R. charges. The commenters stated that while large 
hospitals may have hybrid operating rooms or specialized procedure 
rooms (for example, interventional radiology suites), many smaller 
community hospitals may have multi-purpose O.R.s where the same room 
may be used for invasive general surgeries as well as procedures that 
may be performed in specialized procedure rooms in large hospitals. One 
of these commenters provided an example of the complexity and resource 
consumption of a procedure performed in a catheterization lab and 
stated that O.R verses Non O.R. may not be the most critical 
differentiator of resource consumption. Another commenter urged CMS to 
consider the definition of a ``significant procedure'' as defined in 
the Uniform Hospital Discharge Data Set (UHDDS) which states, ``A 
significant procedure is one that is: Surgical in nature; carries a 
procedural risk; carries an aesthetic risk; or requires specialized 
training.'' This commenter stated that this definition does not include 
whether an ``O.R.'' is required, but in many cases, the procedure 
itself determines if it is ``surgical in nature'' and other procedures 
that do not require an

[[Page 58541]]

``O.R.'' do require specialized training or carry risk.
    Response: CMS appreciates the commenters' feedback and 
recommendations as to factors to consider in evaluating O.R. 
designations. As stated previously, we have typically evaluated 
procedures on the basis of whether or not they would be performed in an 
operating room. We agree with commenters and believe that there may be 
other factors to consider with regard to resource utilization, 
particularly with the implementation of ICD-10. As discussed in the 
proposed rule, we are exploring alternatives on how we may restructure 
the current O.R. and non-O.R. designations for procedures by leveraging 
the detail that is now available in the ICD-10 claims data. We continue 
to develop our process and methodology, and will provide more detail in 
future rulemaking.
    Comment: Several commenters suggested that CMS assemble an advisory 
panel comprised of clinical, coding and financial stakeholders, 
physician specialty societies and experts to review methodologies for 
O.R. determination and that CMS should address procedures performed in 
all settings as there may be variations based on geographical 
differences, hospital size, resources and physician specialty 
availability. Two commenters suggested that CMS allow sufficient time 
for provider review and stated that thorough data analysis with 
provider input is critical to allow for appropriate insight in provider 
comments. These commenters stated that outside of the CMS noted 
intentions for consideration, additional data for each ICD-10-PCS 
procedure code should be provided so that a more thorough analysis can 
be completed. One of these commenters further suggested revising the 
October 20 deadline for submission of public comments if CMS could not 
provide the additional data timely.
    Response: CMS appreciates this feedback. While CMS has already 
convened an internal workgroup comprised of clinicians, consultants, 
coding specialists and other policy analysts, we look forward to 
further collaboration with the industry. As discussed in section 
II.D.1.b. of the preamble of the proposed rule, given the continued 
increase in the number and complexity of the requested changes to the 
MS-DRG classifications since the adoption of ICD-10 MS-DRGs, and in 
order to consider as many requests as possible, more time is needed to 
carefully evaluate the requested changes, analyze claims data, and 
consider any proposed updates. Therefore, changing the deadline to 
October 20th of each year would allow CMS the additional time for the 
review and consideration of any proposed updates. However, as stated in 
section II.E.1.b. of this final rule, we are maintaining the deadline 
of November 1, 2020 for the submission of such requests for FY 2022. 
Recognizing sufficient time is needed to provide feedback on what 
factors or criteria to consider in determining whether a procedure 
should be designated as an O.R. procedure in the ICD-10-PCS 
classification system, we have provided opportunity for the public to 
provide feedback beginning with the FY 2018 final rule and we continue 
to solicit input. We encourage the public to submit comments on other 
factors to consider in our refinement efforts to recognize and 
differentiate consumption of resources for the ICD-10 MS-DRGs timely 
for consideration. Once we are in a position to provide more detail on 
this analysis and the methodology for conducting this comprehensive 
review in future rulemaking, the public will again have the opportunity 
to provide feedback.
    In the FY 2021 IPPS/LTCH PPS proposed rule and this final rule, we 
are addressing requests that we received regarding changing the 
designation of specific ICD-10-PCS procedure codes from non-O.R. to 
O.R. procedures, or changing the designation from O.R. procedure to 
non-O.R. procedure. In this section of the rule we discuss the process 
that was utilized for evaluating the requests that were received for FY 
2021 consideration. For each procedure, our clinical advisors 
considered--
     Whether the procedure would typically require the 
resources of an operating room;
     Whether it is an extensive or a nonextensive procedure; 
and
     To which MS-DRGs the procedure should be assigned.
    We note that many MS-DRGs require the presence of any O.R. 
procedure. As a result, cases with a principal diagnosis associated 
with a particular MS-DRG would, by default, be grouped to that MS-DRG. 
Therefore, we do not list these MS-DRGs in our discussion in this 
section of this rule. Instead, we only discuss MS-DRGs that require 
explicitly adding the relevant procedure codes to the GROUPER logic in 
order for those procedure codes to affect the MS-DRG assignment as 
intended. In cases where we proposed to change the designation of 
procedure codes from non-O.R. procedures to O.R. procedures, we also 
proposed one or more MS-DRGs with which these procedures are clinically 
aligned and to which the procedure code would be assigned.
    In addition, cases that contain O.R. procedures will map to MS-DRG 
981, 982, or 983 (Extensive O.R. Procedure Unrelated to Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-
DRG 987, 988, or 989 (Non-Extensive O.R. Procedure Unrelated to 
Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) when they do not contain a principal diagnosis that 
corresponds to one of the MDCs to which that procedure is assigned. 
These procedures need not be assigned to MS-DRGs 981 through 989 in 
order for this to occur. Therefore, if requestors included some or all 
of MS-DRGs 981 through 989 in their request or included MS-DRGs that 
require the presence of any O.R. procedure, we did not specifically 
address that aspect in summarizing their request or our response to the 
request in this section of this rule.
    For procedures that would not typically require the resources of an 
operating room, our clinical advisors determined if the procedure 
should affect the MS-DRG assignment.
    As indicated in the proposed rule, we received several requests to 
change the designation of specific ICD-10-PCS procedure codes from non-
O.R. procedures to O.R. procedures, or to change the designation from 
O.R. procedures to non-O.R. procedures. In this section of this rule, 
as we did in the proposed rule, we detail and respond to some of those 
requests and, further, summarize and respond to the public comments we 
received in response to our proposals, if applicable. With regard to 
the remaining requests, as stated in the proposed rule, our clinical 
advisors believe it is appropriate to consider these requests as part 
of our comprehensive review of the procedure codes as previously 
discussed.
b. O.R. Procedures to Non-O.R. Procedures
(1) Endoscopic Revision of Feeding Devices
    One requestor identified three ICD-10-PCS procedure codes that 
describe endoscopic revision of feeding devices, shown in the following 
table.

[[Page 58542]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.099

    In the ICD-10 MS-DRG Version 37 Definitions Manual, these three 
ICD-10-PCS procedure codes are currently recognized as O.R. procedures 
for purposes of MS-DRG assignment. The requestor noted that these 
procedures would not require the resources of an operating room and 
that they consume resources comparable to related ICD-10-PCS procedure 
codes describing the endoscopic insertion of feeding tubes that 
currently are designated as Non-O.R. procedures.
    In the proposed rule, we stated that we agreed with the requestors 
that these procedures do not typically require the resources of an 
operating room, and are not surgical in nature. Therefore, we proposed 
to remove 0DW08UZ, 0DW68UZ, and 0DWD8UZ from the FY 2021 ICD-10 MS-DRGs 
Version 38 Definitions Manual in Appendix E--Operating Room Procedures 
and Procedure Code/MS-DRG Index as O.R. procedures. We stated in the 
proposed rule that, under this proposal, these procedures would no 
longer impact MS-DRG assignment.
    Comments: Commenters supported our proposal to designate ICD-10-PCS 
procedure codes 0DW08UZ, 0DW68UZ, 0DWD8UZ as non-O.R. procedures. One 
commenter specifically stated they believed that the endoscopic 
revision of feeding devices does not typically require the resources of 
an O.R. and can be safely performed in non-O.R. settings such as 
interventional radiology or endoscopy suites.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of procedure codes 
0DW08UZ, 0DW68UZ, and 0DWD8UZ from O.R. procedures to non-O.R. 
procedures, effective October 1, 2020.
c. Non-O.R. Procedures to O.R. Procedures
(1) Percutaneous/Endoscopic Biopsy of Mediastinum
    One requestor identified ICD-10-PCS procedure code 0WBC4ZX 
(Excision of mediastinum, percutaneous endoscopic approach, diagnostic) 
that describes a percutaneous endoscopic biopsy of the mediastinum that 
the requestor stated is performed in the operating room under general 
anesthesia, requires an incision through the chest wall, insertion of a 
mediastinoscope in the space between the lungs and involves removal of 
a tissue sample. The requestor recommended that all procedures 
performed within the mediastinum by an open or percutaneous endoscopic 
approach, regardless of whether it is a diagnostic or therapeutic 
procedure, should be designated as O.R. procedures because the 
procedures require great skill and pose risks to patients due to the 
structures contained within the mediastinum. The requestor noted that 
the mediastinum contains loose connective tissue, the heart and great 
vessels, esophagus, trachea, nerves, and lymph nodes. The requestor 
further noted that redesignating these procedures from non-O.R. to O.R. 
would provide compensation for operating room resources and general 
anesthesia.
    We note that under the ICD-10-PCS procedure classification, biopsy 
procedures are identified by the 7th digit qualifier value 
``diagnostic'' in the code description. In response to the requestor's 
suggestion that all procedures performed within the mediastinum by an 
open or percutaneous endoscopic approach, regardless of whether it is a 
diagnostic or therapeutic procedure should be designated as an O.R. 
procedure, we examined the following procedure codes:
[GRAPHIC] [TIFF OMITTED] TR18SE20.100

    In the ICD-10 MS-DRGs Definitions Manual Version 37, procedure 
codes 0WBC0ZX, 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ are currently designated 
as O.R. procedures, however, procedure codes 0WBC3ZX and 0WBC4ZX are 
not recognized as O.R. procedures for purposes of MS-DRG assignment. We 
stated in the proposed rule that we agree with the requestor that 
procedure code 0WBC4ZX would typically require the resources of an 
operating room. We further stated that our clinical advisors also agree 
that procedure code 0WBC3ZX would typically require the resources of an 
operating room. Therefore, we proposed to add these 2 procedure codes 
to the FY 2021 ICD-10 MS-DRGs Version 38 Definitions Manual in Appendix 
E- Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. 
procedures, assigned to MS-DRGs 166, 167 and 168 (Other Respiratory 
System O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 04 (Diseases and Disorders of the Respiratory

[[Page 58543]]

System); MS-DRGs 628, 629, and 630 (Other Endocrine, Nutritional and 
Metabolic O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 10 (Endocrine, Nutritional and Metabolic Diseases 
and Disorders); MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with 
Major O.R. Procedure with MCC, with CC, and without CC/MCC, 
respectively) and MS-DRGs 826, 827, and 828 (Myeloproliferative 
Disorders or Poorly Differentiated Neoplasms with Major O.R. Procedure 
with MCC, with CC, and without CC/MCC, respectively) in MDC 17 
(Myeloproliferative Diseases and Disorders, Poorly Differentiated 
Neoplasms); and to MS-DRGs 987, 988, and 989 (Non-Extensive O.R. 
Procedure Unrelated to Principal Diagnosis with MCC, with CC and 
without MCC/CC, respectively).
    As previously noted, procedure codes 0WBC0ZX, 0WBC0ZZ, 0WBC3ZZ, and 
0WBC4ZZ are currently designated as O.R. procedures. As displayed in 
the FY 2020 ICD-10 MS-DRGs Version 37 Definitions Manual in Appendix E- 
Operating Room Procedures and Procedure Code/MS-DRG Index, these 
procedure codes are assigned to several MS-DRGs across many MDCs. 
During our process of reviewing potential MDC and MS-DRG assignments 
for procedure codes 0WBC3ZX and 0WBC4ZX, our clinical advisors 
recommended that we reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 
0WBC4ZZ from their current MS-DRG assignments in MDC 04 (Diseases and 
Disorders of the Respiratory System). Procedure codes 0WBC0ZZ, 0WBC3ZZ, 
and 0WBC4ZZ are currently assigned to MS-DRGs 163, 164, and 165 (Major 
Chest Procedures with MCC, with CC, and without CC/MCC, respectively) 
and procedure code 0WBC0ZX is assigned to MS-DRGs 166, 167 and 168 
(Other Respiratory System O.R. Procedures with MCC, with CC, and 
without CC/MCC, respectively). We stated in the proposed rule that 
according to our clinical advisors, procedure codes 0WBC0ZZ, 0WBC3ZZ, 
and 0WBC4ZZ would be more appropriately and clinically aligned with the 
same MS-DRG assignment as procedure code 0WBC0ZX, which is also 
consistent with the assignment for other procedures performed on the 
mediastinum. Therefore, we proposed to reassign procedure codes 
0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ to MS-DRGs 166, 167 and 168 (Other 
Respiratory System O.R. Procedures with MCC, with CC, and without CC/
MCC, respectively).
    Comment: Commenters supported the proposal to reclassify ICD-10-PCS 
procedure codes 0WBC4ZX (Excision of mediastinum, percutaneous 
endoscopic approach, diagnostic) and 0WBC3ZX (Excision of mediastinum, 
percutaneous approach, diagnostic) as O.R. procedures for the purposes 
of MS-DRG assignment for FY 2021. A commenter stated their belief that 
surgeries performed within the mediastinum by an open or percutaneous 
endoscopic approach, regardless of whether it is a diagnostic or 
therapeutic procedure, typically require the resources of the O.R. to 
control for possible damage to the structures contained within the 
mediastinum, including loose connective tissue, the heart and great 
vessels, esophagus, trachea, nerves, and lymph nodes. The commenter 
noted that the invasive nature of these procedures also necessitates 
the sterile environment of an O.R. to limit the risk of secondary 
infection.
    Commenters also supported the proposal to reassign procedure codes 
0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ from MS-DRGs 163, 164, and 165 to MS-DRGs 
166, 167, and 168. However, a couple commenters did not agree with the 
proposal and stated that the open, percutaneous, and endoscopic 
therapeutic mediastinal excisions should remain distinct from the 
diagnostic mediastinal procedures. The commenters noted that while the 
approaches of the procedures are the same, the time, risk and resource 
utilization is different for the therapeutic and diagnostic procedures. 
The commenters stated that diagnostic procedures require only a small 
mediastinal resection, more specifically an incisional biopsy, for 
diagnostic purposes while the therapeutic mediastinal resection 
involves the complete resection of large tumors, cysts or masses that 
may be malignant or benign juxtaposed to critical mediastinal 
structures. In addition, the commenters reported that therapeutic 
mediastinal resections will often require more time in the O.R., 
slightly longer lengths of stay, and more post-operative care due to 
the invasive nature of the procedures.
    Response: We appreciate the commenters' feedback on the proposal to 
reclassify ICD-10-PCS procedure codes 0WBC4ZX and 0WBC3ZX as O.R. 
procedures for the purposes of MS-DRG assignment and on the proposal to 
reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ from MS-DRGs 
163, 164, and 165 to MS-DRGs 166, 167, and 168. In response to the 
commenters who did not agree with the proposal to reassign procedure 
codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ from MS-DRGs 163, 164, and 165 to 
MS-DRGs 166, 167, and 168, as noted by the commenters, the approaches 
of the therapeutic and diagnostic procedures are the same, however our 
clinical advisors did not agree that the time, risk and resource 
utilization are necessarily different for the therapeutic and 
diagnostic procedures.
    While the commenters' asserted that therapeutic mediastinal 
procedures will often require more time in the O.R., slightly longer 
lengths of stay, and more post-operative care due to the invasive 
nature of the procedures, our analysis of claims data found that the 
average length of stay and the average costs for the diagnostic 
procedures were greater than those of the therapeutic procedures. We 
examined data from the September 2019 update of the FY 2019 MedPAR data 
for both diagnostic and therapeutic mediastinal excision procedures 
across all MS-DRGs. Our findings are shown in the table below.

[[Page 58544]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.101

    As shown in the table, there were a total of 1,141 cases reporting 
a diagnostic excision of mediastinum procedure with an average length 
of stay of 8.2 days and average costs of $21,279 and a total of 291 
cases reporting a therapeutic excision of mediastinum procedure with an 
average length of stay of 4.3 days and average costs of $17,267. Our 
clinical advisors maintain that therapeutic and diagnostic procedures 
involving excision of the mediastinum are clinically aligned and should 
be grouped together. However, as noted in prior rule making (84 FR 
42148), our clinical advisors recognize that MS-DRGs 163, 164, 165, 
166, 167, and 168 may warrant further review and therefore, we plan to 
begin this more detailed review beginning with our FY 2022 MS-DRG 
classification analysis of claims data and determine what modifications 
may need to be considered for future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal to add procedure codes 0WBC4ZX and 0WBC3ZX as 
O.R. procedures to the FY 2021 ICD-10 MS-DRGs Version 38 Definitions 
Manual in Appendix E--Operating Room Procedures and Procedure Code/MS- 
DRG Index as O.R. procedures, assigned to MS-DRGs 166, 167, and 168 
(Other Respiratory System O.R. Procedures with MCC, with CC, and 
without CC/MCC, respectively) in MDC 04 (Diseases and Disorders of the 
Respiratory System); MS-DRGs 628, 629, and 630 (Other Endocrine, 
Nutritional and Metabolic O.R. Procedures with MCC, with CC, and 
without CC/MCC, respectively) in MDC 10 (Endocrine, Nutritional and 
Metabolic Diseases and Disorders); MS-DRGs 820, 821, and 822 (Lymphoma 
and Leukemia with Major O.R. Procedure with MCC, with CC, and without 
CC/MCC, respectively) and MS-DRGs 826, 827, and 828 (Myeloproliferative 
Disorders or Poorly Differentiated Neoplasms with Major O.R. Procedure 
with MCC, with CC, and without CC/MCC, respectively) in MDC 17 
(Myeloproliferative Diseases and Disorders, Poorly Differentiated 
Neoplasms); and to MS-DRGs 987, 988, and 989 (Non-Extensive O.R. 
Procedure Unrelated to Principal Diagnosis with MCC, with CC and 
without MCC/CC, respectively). We are also finalizing our proposal to 
reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ from MS-DRGs 
163, 164, and 165 to MS-DRGs 166, 167, and 168, effective FY 2021.
    One requestor identified ICD-10-PCS procedure code 3E0L4GC 
(Introduction of other therapeutic substance into pleural cavity, 
percutaneous endoscopic approach) that the requestor stated is 
currently not recognized as an O.R. procedure for purposes of MS-DRG 
assignment. The requestor noted that talc pleurodesis via video-
assisted thoracoscopic surgery (VATS), involves placing a thoracoscope 
through the chest wall for visualization, then placing a port and 
injecting talc, doxycycline, or other chemical into the pleural cavity 
under general anesthesia and should therefore be recognized as an O.R. 
procedure for purposes of MS-DRG assignment.
    We stated in the proposed rule that we agreed with the requestor 
that ICD-10-PCS procedure code 3E0L4GC typically requires the resources 
of an operating room. We also note that the AHA published Coding Clinic 
advice in 2015 that instructed to code both ICD-10-PCS procedure codes 
0BJQ4ZZ (Inspection of pleura, percutaneous endoscopic approach) and 
3E0L3GC (Introduction of other therapeutic substance into pleural 
cavity, percutaneous approach) for thoracoscopic chemical pleurodesis. 
In the publication, code 0BJQ4ZZ, recognized as an O.R. procedure for 
purposes of MS-DRG assignment, was instructed to be reported for the 
video-assisted thoracoscopic portion of the procedure since the 
endoscopic component of the procedure could not be captured by the 
approach values available at the time. In FY 2018, the approach value 
``4'' Percutaneous Endoscopic was added to the root operation 
Introduction table 3E0, to capture percutaneous endoscopic 
administration of a therapeutic substance, meaning that code 0BJQ4ZZ 
was no longer needed along with code 3E0L3GC to report thoracoscopic 
chemical pleurodesis. Only code 3E0L4GC is needed to report all 
components of the procedure. Designating code 3E0L4GC as an O.R. 
procedure for purposes of MS-DRG assignment classifies the procedure as 
intended when two codes were needed to fully code the procedure. 
Therefore, we proposed to add procedure code 3E0L4GC to the FY 2021 
ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E--Operating 
Room Procedures and Procedure Code/MS-DRG Index as an O.R. procedure 
assigned to MS-DRGs 166, 167, and 168 (Other Respiratory System O.R. 
procedures with MCC, CC, without CC/MCC, respectively) in MDC 04 
(Diseases and Disorders of the Respiratory System); and MS-DRG 264 
(Other Circulatory System O.R. Procedures) in MDC 05 (Diseases and 
Disorders of the Circulatory System).
    Comments: Commenters supported our proposal to designate ICD-10-PCS 
procedure code 3E0L4GC as an O.R. procedure. A commenter noted that

[[Page 58545]]

since code 0BJQ4ZZ, Inspection of pleura, percutaneous endoscopic 
approach, is no longer necessary as an additional code to capture the 
endoscopic component of the procedure it makes sense for code 3E0L4GC 
to be designated as an O.R. procedure.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of procedure code 
3E0L4GC from non-O.R. procedure to O.R. procedure, effective October 1, 
2020.
(3) Percutaneous Endoscopic Excision of Stomach
    One requestor identified ICD-10-PCS procedure code 0DB64ZZ 
(Excision of stomach, percutaneous endoscopic approach) that the 
requestor stated is currently not recognized as an O.R. procedure for 
purposes of MS-DRG assignment. The requestor noted that percutaneous 
endoscopic excisions of gastric lesions and percutaneous endoscopic 
partial gastrectomies are performed in the operating room under general 
anesthesia, use comparable resources, and are designated as O.R. 
procedures. Therefore, the requestor stated that this procedure should 
also be recognized as O.R. procedure for purposes of MS-DRG assignment.
    We stated in the proposed rule that we agreed with the requestor 
that ICD-10-PCS procedure code 0DB64ZZ typically requires the resources 
of an operating room. During our review, we also noted that ICD-10-PCS 
code 0DB64ZX (Excision of stomach, percutaneous endoscopic approach, 
diagnostic) was not currently recognized as an O.R. procedure. We 
proposed to add these codes to the FY 2021 ICD-10 MS-DRG Version 38 
Definitions Manual in Appendix E--Operating Room Procedures and 
Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRGs 326, 
327, and 328 (Stomach, Esophageal and Duodenal Procedures with MCC, 
with CC, and without CC/MCC, respectively) in MDC 06 (Diseases and 
Disorders of the Digestive System); MS-DRGs 619, 620, and 621 
(Procedures for Obesity with MCC, with CC, and without CC/MCC, 
respectively) in MDC 10 (Endocrine, Nutritional and Metabolic Diseases 
and Disorders); and MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia 
with Major Procedure with MCC, with CC, and without CC/MCC, 
respectively), MS-DRGs 826, 827, and 828 (Myeloproliferative Disorders 
or Poorly Differentiated Neoplasms with Major Procedure with MCC, with 
CC, and without CC/MCC, respectively), and MS-DRGs 829 and 830 
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
Other Procedure with CC/MCC and without CC/MCC, respectively) in MDC 17 
(Myeloproliferative Diseases and Disorders, Poorly Differentiated 
Neoplasms).
    Comments: Many commenters supported our proposal. One commenter 
specifically stated they concurred with the requestor's statement that 
similar procedures such as percutaneous endoscopic excisions of gastric 
lesions and percutaneous endoscopic partial gastrectomies are currently 
classified as O.R. procedures, and that the two listed stomach excision 
codes should be designated as O.R. procedures due to comparable costs 
and resource use. This commenter also stated they believed that the 
invasive nature of such procedures also necessitates the sterile 
environment of an O.R. to limit the risk of secondary infection.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of procedure codes 
0DB64ZZ and 0DB64ZX from non-O.R. procedures to O.R. procedures, 
effective October 1, 2020.
    As discussed in the proposed rule, during our review, we also noted 
that ICD-10-PCS procedure code 0DB64Z3 (Excision of stomach, 
percutaneous endoscopic approach, vertical (sleeve)), which is 
clinically similar to ICD-10-PCS codes 0DB64ZZ and 0DB64ZX, is 
designated as an O.R. procedure assigned to the same MS-DRGs as we 
proposed for ICD-10-PCS codes 0DB64ZZ and 0DB64ZX, as well as to MS-DRG 
264 (Other Circulatory System O.R. Procedures) in MDC 05 (Diseases and 
Disorders of the Circulatory System); MS-DRGs 907, 908, and 909 (Other 
O.R. Procedures for Injuries, with MCC, with CC, and without CC/MCC, 
respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of 
Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. procedures for 
multiple significant trauma, with MCC, with CC, and without CC/MCC, 
respectively) in MDC 24 (Multiple Significant Trauma). We stated our 
clinical advisors believe that principal diagnoses in MDCs 05 and 21 
are typically not indications for procedures describing percutaneous 
endoscopic excision of stomach and that ICD-10-PCS procedure code 
0DB64Z3 should be assigned to the same MS-DRGs as ICD-10-PCS codes 
0DB64ZZ and 0DB64ZX.
    We examined claims data from the September 2019 update of the FY 
2019 MedPAR file to determine if there were any cases that reported 
0DB64Z3 and were assigned to MDC 05, MDC 21, or MDC 24. The following 
table shows our findings:
[GRAPHIC] [TIFF OMITTED] TR18SE20.102


[[Page 58546]]


    We found zero cases in MS-DRGs 957, 958, and 959 reporting 0DB64Z3 
and a principal diagnosis in MDC 24 (Multiple Significant Trauma). We 
stated our analysis demonstrated that diagnoses assigned to MDC 05, MDC 
21, and MDC 24 are not typically corrected surgically by percutaneous 
endoscopic vertical (sleeve) gastrectomy given the small number of 
cases reporting this procedure in these MDCs. We also stated our 
clinical advisors believe procedure codes describing the percutaneous 
endoscopic excision of stomach should have the same MDC assignments in 
the ICD-10 MS-DRGs Version 38 for coherence. Therefore, we proposed to 
remove the assignments of code 0DB64Z3 from MS-DRG 264 (Other 
Circulatory System O.R. Procedures) in MDC 05 (Diseases and Disorders 
of the Circulatory System); MS-DRGs 907, 908, and 909 (Other O.R. 
Procedures for Injuries, with MCC, with CC, and without CC/MCC, 
respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of 
Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. procedures for 
multiple significant trauma, with MCC, with CC, and without CC/MCC, 
respectively) in MDC 24 (Multiple Significant Trauma).
    Comments: Commenters supported our proposal and stated they agreed 
that diagnoses assigned to MDC 05 (Diseases and Disorders of the 
Circulatory System), MDC 21 (Injuries, Poisonings and Toxic Effects of 
Drugs), and MDC 24 (Multiple Significant Trauma) are not typically 
corrected surgically by percutaneous endoscopic vertical (sleeve) 
gastrectomy, and that procedure codes describing the percutaneous 
endoscopic excision of stomach should all be assigned to the same MDCs.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the assignments of code 0DB64Z3 from 
MS-DRG 264 (Other Circulatory System O.R. Procedures) in MDC 05 
(Diseases and Disorders of the Circulatory System); MS-DRGs 907, 908, 
and 909 (Other O.R. Procedures for Injuries, with MCC, with CC, and 
without CC/MCC, respectively) in MDC 21 (Injuries, Poisonings and Toxic 
Effects of Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. procedures 
for multiple significant trauma, with MCC, with CC, and without CC/MCC, 
respectively) in MDC 24 (Multiple Significant Trauma), effective 
October 1, 2020.
    Lastly, we stated while we were reviewing this request, we noted 
inconsistencies in how procedures involving the excision of stomach are 
designated. Excision of stomach codes differ by approach and qualifier. 
ICD-10-PCS procedure codes describing excision of stomach with similar 
approaches have been assigned different attributes in terms of 
designation as an O.R. or Non-O.R. procedure. We identified the 
following five related codes:
[GRAPHIC] [TIFF OMITTED] TR18SE20.103

    As discussed in the proposed rule, in the ICD-10 MS-DRGs Version 
37, these ICD-10-PCS codes are currently recognized as O.R. procedures 
for purposes of MS-DRG assignment, while similar excision of stomach 
procedure codes with the same approach but different qualifiers are 
recognized as Non-O.R. procedures. We stated our clinical advisors 
indicated that these procedures are not surgical in nature and do not 
require an incision. Therefore, we proposed to remove ICD-10-PCS 
procedure codes 0DB63Z3, 0DB63ZZ, 0DB67Z3, 0DB67ZZ, and 0DB68Z3 from 
the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E--
Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. 
procedures. Under this proposal, these procedures would no longer 
impact MS-DRG assignment.
    Comments: Commenters opposed our proposal. A few commenters noted 
that the five procedure codes describing excision of stomach listed are 
similar in nature to procedure codes 0DB64ZZ and 0DB64ZX that describe 
percutaneous endoscopic excisions of the stomach, which CMS proposed to 
change from non-O.R. procedures to O.R. procedures. One commenter also 
stated that procedure codes describing excision of stomach via 
percutaneous approach or excision of stomach via percutaneous 
endoscopic approach should have the same O.R. procedure designation.
    Response: We appreciate the comments and concerns raised on our 
proposal.
    Our clinical advisors continue to indicate that these procedures 
are not surgical in nature and do not require an incision however, 
after acknowledging the concerns raised by commenters, believe it would 
be appropriate to take additional time to review the inconsistencies in 
how procedures involving the excision of stomach are designated. 
Therefore, after consideration of public comments, we are not 
finalizing our proposal to remove ICD-10-PCS procedure codes 0DB63Z3, 
0DB63ZZ, 0DB67Z3, 0DB67ZZ, and 0DB68Z3 from the FY 2021 ICD-10 MS-DRG 
Version 38 Definitions Manual in Appendix E--Operating Room Procedures 
and Procedure Code/MS-DRG Index as O.R. procedures. Accordingly, these 
procedures will continue to impact MS-DRG assignment under the ICD-10 
MS-DRGs Version 38, effective October 1, 2020.
(4) Percutaneous Endoscopic Drainage
    One requestor identified six ICD-10-PCS procedure codes that 
describe procedures involving laparoscopic drainage of peritoneum, 
peritoneal cavity, and gallbladder that the requestor stated are 
currently not recognized as O.R. procedures for purposes of MS-DRG 
assignment. The six procedure codes are listed in the following table:

[[Page 58547]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.104

    The requestor stated these procedures would commonly be performed 
under general anesthesia and require the resources of an operating 
room. The requestor also noted that similar procedures such as 
percutaneous endoscopic inspection of gallbladder, percutaneous 
endoscopic excision of peritoneum and percutaneous endoscopic 
extirpation of matter from peritoneal cavity are currently classified 
as O.R. procedures in Version 37 of the ICD-10 MS-DRGs and that the six 
listed procedure codes should be designated as O.R. procedures due to 
comparable costs and resource use.
    We stated in the proposed rule that we agreed with the requestor 
that the six ICD-10-PCS procedure codes listed in the table typically 
require the resources of an operating room. Therefore, to the FY 2021 
ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E--Operating 
Room Procedures and Procedure Code/MS-DRG Index, we proposed to add 
codes 0D9W4ZZ and 0D9W40Z as O.R. procedures assigned to MS-DRGs 356, 
357, and 358 (Other Digestive System O.R. Procedures, with MCC, with 
CC, and without CC/MCC, respectively) in MDC 06 (Diseases and Disorders 
of the Digestive System); and MS-DRGs 907, 908, and 909 (Other O.R. 
Procedures for Injuries with MCC, with CC, and without CC/MCC, 
respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of 
Drugs). We also proposed to add codes 0W9G4ZZ and 0W9G40Z as O.R. 
procedures assigned to MS-DRGs 356, 357, and 358 (Other Digestive 
System O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 06 (Diseases and Disorders of the Digestive 
System); MS-DRGs 420, 421, and 422 (Hepatobiliary Diagnostic 
Procedures, with MCC, with CC, and without CC/MCC, respectively) in MDC 
07 (Diseases and Disorders of the Hepatobiliary System and Pancreas); 
MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract Procedures, 
with MCC, with CC, and without CC/MCC, respectively) in MDC 11 
(Diseases and Disorders of the Kidney and Urinary Tract); MS-DRGs 749 
and 750 (Other Female Reproductive System Procedures with and without 
CC/MCC, respectively) in MDC 13 (Diseases and Disorders of the Female 
Reproductive System); MS-DRGs 802, 803, and 804 (Other O.R. Procedures 
of the Blood and Blood Forming Organs, with MCC, with CC, and without 
CC/MCC, respectively) in MDC 16 (Diseases and Disorders of Blood, Blood 
Forming Organs, Immunologic Disorders); MS-DRGs 820, 821, and 822 
(Lymphoma and Leukemia with Major Procedure with MCC, with CC, and 
without CC/MCC, respectively) and MS-DRGs 826, 827, and 828 
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
Major Procedure with MCC, with CC, and without CC/MCC, respectively) in 
MDC 17 (Myeloproliferative Diseases and Disorders, Poorly 
Differentiated Neoplasms); and MS-DRGs 907, 908, and 909 (Other O.R. 
Procedures for Injuries with MCC, with CC, and without CC/MCC, 
respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of 
Drugs). Lastly, we proposed to add codes 0F944ZZ and 0F9440Z as O.R. 
procedures assigned to MS-DRGs 408, 409, and 410 (Biliary Tract 
Procedures Except Only Cholecystectomy with or without C.D.E., with 
MCC, with CC, and without CC/MCC, respectively) in MDC 07 (Diseases and 
Disorders of the Hepatobiliary System and Pancreas).
    Comments: Commenters supported our proposal. One commenter stated 
they concurred with the requestor's statement that similar procedures 
such as percutaneous endoscopic inspection of gallbladder, percutaneous 
endoscopic excision of peritoneum and percutaneous endoscopic 
extirpation of matter from peritoneal cavity are currently classified 
as O.R. procedures, and that the six listed procedure codes should be 
designated as O.R. procedures due to comparable costs and resource use. 
The commenter also stated they believed that the invasive nature of 
such procedures also necessitates the sterile environment of an O.R. to 
limit the risk of secondary infection. Other commenters stated they 
agreed all ICD-10-PCS procedure codes describing procedures involving 
laparoscopic drainage of peritoneum, peritoneal cavity, or gallbladder 
should be designated as O.R. procedures.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of ICD-10-PCS 
procedure codes 0D9W4ZZ, 0D9W40Z, 0W9G4ZZ 0W9G40Z, 0F944ZZ and 0F9440Z 
from non-O.R. procedures to O.R. procedures, effective October 1, 2020.
    As discussed in the proposed rule, during our review of this 
request, we identified related ICD-10-PCS procedure code 0F944ZX 
(Drainage of gallbladder, percutaneous endoscopic approach, diagnostic) 
that is also currently not recognized as an O.R. procedure for purposes 
of MS-DRG assignment. We stated that our clinical advisors believe that 
similar to the six procedure codes submitted by the requester, this 
procedure typically requires the resources of an operating room and 
should have the same attributes in Version 38 for coherence. Therefore, 
we proposed to add code 0F944ZX as an O.R. procedure assigned to MS-
DRGs 420, 421 and 422 (Hepatobiliary Diagnostic Procedures, with MCC, 
with CC, and without CC/MCC, respectively) in MDC 07 (Diseases and 
Disorders of the Hepatobiliary System and Pancreas) to the FY 2021 ICD-
10 MS-DRG Version 38 Definitions Manual in Appendix E--Operating Room 
Procedures and Procedure Code/MS-DRG Index.
    Comments: Commenters supported our proposal and as previously 
mentioned stated they agreed all ICD-10-PCS procedure codes describing 
procedures involving laparoscopic drainage of the peritoneum, 
peritoneal cavity, or gallbladder should be designated as O.R. 
procedures.
    Response: We appreciate the commenters' support.

[[Page 58548]]

    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of 0F944ZX from non-
O.R. procedure to O.R. procedure, effective October 1, 2020.
    In the proposed rule, we stated during our review, we also 
identified the related ICD-10-PCS procedure codes 0F940ZZ (Drainage of 
gallbladder, open approach), 0F940ZX (Drainage of gallbladder, open 
approach, diagnostic) and 0F9400Z (Drainage of gallbladder with 
drainage device, open approach). Our analysis found that the ICD-10-PCS 
codes describing drainage of gallbladder have dissimilar MDC 
assignments. Procedure codes 0F940ZZ and 0F940ZX are currently assigned 
to MS-DRGs 356, 357, and 358 (Other Digestive System O.R. Procedures, 
with MCC, with CC, and without CC/MCC, respectively) in MDC 06 
(Diseases and Disorders of the Digestive System) and MS-DRGs 408, 409, 
and 410 (Biliary Tract Procedures Except Only Cholecystectomy with or 
without C.D.E, with MCC, with CC, and without CC/MCC, respectively) in 
MDC 07 (Diseases and Disorders of the Hepatobiliary System and 
Pancreas). However, ICD-10-PCS procedure code 0F9400Z is currently 
assigned to MS-DRGs 408, 409, and 410 (Biliary Tract Procedures Except 
Only Cholecystectomy with or without C.D.E, with MCC, with CC, and 
without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the 
Hepatobiliary System and Pancreas) alone. We stated our clinical 
advisors believe that principal diagnoses in MDC 06 are typically not 
indications for procedures describing the drainage of gallbladder. We 
examined claims data from the September 2019 update of the FY 2019 
MedPAR file to determine if there were any cases that reported 
procedure codes 0F940ZZ or 0F940ZX and were assigned to MDC 06. We 
found zero cases in MS-DRGs 356, 357, and 358 reporting code 0F944ZZ or 
0F940ZX and a principal diagnosis in MDC 06 (Diseases and Disorders of 
the Digestive System), demonstrating that diagnoses in MDC 06 are not 
typically corrected surgically by drainage of the gallbladder. Our 
clinical advisors believe procedure codes describing the drainage of 
gallbladder should have the same MDC assignments in Version 38 for 
coherence. Therefore, we proposed to remove procedure codes 0F940ZZ and 
0F940ZX from MS-DRGs 356, 357, and 358 in MDC 06 (Diseases and 
Disorders of the Digestive System).
    Comments: Commenters supported our proposal and stated they agreed 
that procedure codes describing the drainage of the gallbladder should 
be assigned to the same MDC.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove procedure codes 0F940ZZ and 0F940ZX 
from MS-DRGs 356, 357, and 358 in MDC 06 (Diseases and Disorders of the 
Digestive System), effective October 1, 2020.
    As stated in the proposed rule, our further analysis of this 
request identified the nine ICD-10-PCS codes in the following table 
describing drainage of the peritoneum, peritoneal cavity, or 
gallbladder:
[GRAPHIC] [TIFF OMITTED] TR18SE20.105

    We noted that these procedures are currently classified as 
extensive O.R. procedures. Our clinical advisors have noted that 
treatment practices have shifted since the initial O.R. procedure 
designations. We stated our clinical advisors believe that, given the 
similarity in factors such as complexity, resource utilization, and 
requirement for anesthesia administration between procedures describing 
the drainage of the peritoneum, peritoneal cavity, and gallbladder, it 
would be more appropriate to designate these nine ICD-10-PCS codes as 
non-extensive O.R. procedures. Therefore, we also proposed to change 
the designation of ICD-10-PCS codes 0D9W00Z, 0D9W0ZX, 0D9W0ZZ, 0D9W4ZX, 
0W9G00Z, 0W9G0ZZ, 0F9400Z, 0F940ZZ and 0F940ZX from extensive O.R. 
procedures to non-extensive O.R. procedures for FY 2021.
    Comment: A commenter supported our proposal to designate the nine 
ICD-10-PCS codes describing drainage of the peritoneum, peritoneal 
cavity, or gallbladder that are currently classified as extensive O.R. 
procedures as non-extensive O.R. procedures.
    Response: We appreciate the commenter's support.
    Comment: One commenter opposed CMS' proposal and stated location 
should be factored in. The commenter stated the designation of these 
procedures should differ depending if the procedure was performed in an 
operating room versus a radiology suite versus a procedure room. The 
commenter also stated procedures performed via an open approach should 
be designated as extensive O.R. procedures and procedures performed via 
a percutaneous endoscopic approach should be designated as non-
extensive O.R. procedures. This same commenter specifically opposed 
changing the designation of procedure codes that describe the open 
drainage of the peritoneal cavity from extensive O.R. to non-extensive 
O.R. procedure and believed the designation should depend on how deep 
the open drainage incision site is.
    Response: We do not agree that unilaterally all open procedures 
should be designated as extensive O.R. procedures and procedures 
performed laparoscopically should be designated

[[Page 58549]]

as non-extensive O.R. procedures. While the site in which the procedure 
is performed and the procedural approach are important considerations 
in the designation of a procedure, there are other clinical factors 
such as procedure complexity, resource utilization, and need for 
anesthesia administration that should also be considered. In this 
regard, our clinical advisors believe the nine ICD-10-PCS codes that 
describe the drainage of the peritoneum, peritoneal cavity, and 
gallbladder, regardless of approach, are generally less complex than 
other procedures designated as extensive O.R. procedures.
    Also, we are not clear what the commenter means when they state 
that ``the designation of procedure codes describing the open drainage 
of the peritoneum should depend on how deep the open drainage incision 
site is''. The peritoneum is defined as the smooth transparent serous 
membrane that lines the cavity of the abdomen. Procedure codes for the 
open drainage of the peritoneum are used to describe any procedure 
where the skin or mucous membrane and any other body layers necessary 
to expose the peritoneum are cut through to take or let out fluid and/
or gases. Any anatomical differences from patient to patient that might 
factor into the technical complexity of the procedure, such as habitus, 
would be captured in the ICD-10-CM diagnosis coding.
    In the absence of a compelling clinical rationale for maintaining 
the designation of these procedures as extensive O.R. procedures, our 
clinical advisors continue to believe that, given the similarity in 
factors such as complexity, resource utilization, and requirement for 
anesthesia administration between procedures describing the drainage of 
the peritoneum, peritoneal cavity, and gallbladder, it would be more 
appropriate to designate these nine ICD-10-PCS codes as non-extensive 
O.R. procedures. Therefore, after consideration of the public comments 
we received, we are finalizing our proposal to change the designation 
of ICD-10-PCS codes 0D9W00Z, 0D9W0ZX, 0D9W0ZZ, 0D9W4ZX, 0W9G00Z, 
0W9G0ZZ, 0F9400Z, 0F940ZZ and 0F940ZX from extensive O.R. procedures to 
non-extensive O.R. procedures, effective October 1, 2020.
(5) Control of Bleeding
    One requestor identified ICD-10-PCS procedure code 0W3G0ZZ (Control 
bleeding in peritoneal cavity, open approach) that describes a 
procedure in which the bleeding source within the peritoneal cavity is 
controlled by cautery, clips, and/or suture through an open abdominal 
incision with direct visualization of the surgical site, that the 
requestor stated requires the resources of an operating room and 
general anesthesia but is currently not recognized as an O.R. procedure 
for purposes of MS-DRG assignment. The requestor also noted that ICD-
10-PCS procedure codes 0W3F0ZZ (Control bleeding in abdominal wall, 
open approach), 0W3H0ZZ (Control bleeding in retroperitoneum, open 
approach), and 0W3J0ZZ (Control bleeding in pelvic cavity, open 
approach) describe procedures to control bleeding in various anatomic 
sites and are currently classified as O.R. procedures.
    We stated in the proposed rule that we agree with the requestor 
that it would be clinically appropriate to redesignate procedure code 
0W3G0ZZ as an O.R. procedure consistent with procedure codes 0W3F0ZZ, 
0W3H0ZZ and 0W3J0ZZ, that also describe procedures performed to control 
bleeding and are designated as O.R. procedures. Therefore, we proposed 
to add procedure code 0W3G0ZZ to the FY 2021 ICD-10 MS-DRG Version 38 
Definitions Manual in Appendix E--Operating Room Procedures and 
Procedure Code/MS-DRG Index as an O.R. procedure assigned to MS-DRG 264 
(Other Circulatory O.R. Procedures) in MDC 05 (Diseases and Disorders 
of the Circulatory System); MS-DRGs 356, 357, and 358 (Other Digestive 
System O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively) in MDC 06 (Diseases and Disorders of the Digestive 
System); MS-DRGs 423, 424, and 425 (Other Hepatobiliary or Pancreas 
O.R. Procedures with MCC, with CC, and without CC/MCC, respectively) in 
MDC 07 (Diseases and Disorders of the Hepatobiliary System and 
Pancreas); MS-DRGs 673, 674, and 675 (Other Kidney and Urinary Tract 
Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC 
11 (Diseases and Disorders of the Kidney and Urinary Tract); MS-DRGs 
820, 821, and 822 (Lymphoma and Leukemia with Major O.R. Procedure with 
MCC, with CC, and without CC/MCC, respectively), MS-DRGs 826, 827, and 
828 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms 
with Major O.R. Procedure with MCC, with CC, and without CC/MCC, 
respectively), and MS-DRGs 829 and 830 (Myeloproliferative Disorders or 
Poorly Differentiated Neoplasms with Other Procedure with and without 
CC/MCC, respectively) in MDC 17 (Myeloproliferative Diseases and 
Disorders, Poorly Differentiated Neoplasms); MS-DRGs 907, 908, and 909 
(Other O.R. Procedures for Injuries with and without CC/MCC, 
respectively) in MDC 21 ((Injuries, Poisonings and Toxic Effects of 
Drugs); MS-DRGs 957, 958, and 959 (Other O.R. Procedures for Multiple 
Significant Trauma, with MCC, with CC, and without CC/MCC, 
respectively) in MDC 24 (Multiple Significant Trauma) and to MS-DRGs 
981, 982 and 983 (Extensive O.R. Procedure Unrelated to Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively).
    Comment: Commenters agreed with the proposed redesignation of ICD-
10-PCS procedure code 0W3G0ZZ as an O.R. procedure, and stated this 
would be consistent with similar procedure codes describing control of 
bleeding in other anatomic sites.
    Response: We thank the commenters for their support.
    After consideration of the public comments received, we are 
finalizing our proposal to add ICD-10-PCS procedure code 0W3G0ZZ to the 
ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E--Operating 
Room Procedures and Procedure Code/MS-DRG Index as an O.R. procedure 
assigned to the MDCs and MS-DRGs noted earlier in this section, 
effective October 1, 2020.
(6) Inspection of Penis
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32549), one requestor stated that ICD-10-PCS procedure code 0VJS0ZZ 
(Inspection of penis, open approach) is currently not recognized as an 
O.R. procedure for purposes of MS-DRG assignment. The requestor noted 
that there are circumstances that warrant inpatient admission for open 
exploration of the penis, such as to rule out penile fracture and 
extravasation due to trauma. The requestor stated their belief that 
because this procedure involves an open incision for exploration of 
penile structures and utilizes general anesthesia in the operating 
room, it would be appropriately classified as an O.R. procedure. In the 
proposed rule, we stated that we agreed with the requestor that ICD-10-
PCS procedure code 0VJS0ZZ typically requires the resources of an 
operating room. Therefore, we proposed to add ICD-10-PCS procedure code 
0VJS0ZZ to the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in 
Appendix E- Operating Room procedures and procedure code/MS-DRG Index 
as an O.R. procedure assigned to MS-DRGs 709 (Penis Procedures with CC/
MCC) and 710 (Penis Procedures without CC/

[[Page 58550]]

MCC) in MDC 12 (Diseases and Disorders of the Male Reproductive 
System).
    Comments: Several commenters supported CMS' proposal to reclassify 
ICD-10-PCS procedure code 0VJS0ZZ from a non-O.R. procedure to an O.R 
procedure for purposes of MS-DRG assignment for MS-DRGs 709 and 710.
    Response: We appreciate the commenters' support.
    After consideration of the public comments received, we are 
finalizing our proposal to add ICD-10-PCS procedure code 0VJS0ZZ 
(Inspection of penis, open approach) to the FY2021 ICD-10 MS-DRG 
Version 38 Definitions Manual in Appendix E Operating Room Procedures 
and Procedure Code/MS-DRG Index as an O.R. procedure to MS-DRGs 709 
(Penis Procedures with CC/MCC) and 710 (Penis Procedures without CC/
MCC) in MDC 12 (Diseases and Disorders of the Male Reproductive System) 
for FY2021 effective October 1, 2020.
12. Changes to the MS-DRG Diagnosis Codes for FY 2021
a. Background of the CC List and the CC Exclusions List
    Under the IPPS MS-DRG classification system, we have developed a 
standard list of diagnoses that are considered CCs. Historically, we 
developed this list using physician panels that classified each 
diagnosis code based on whether the diagnosis, when present as a 
secondary condition, would be considered a substantial complication or 
comorbidity. A substantial complication or comorbidity was defined as a 
condition that, because of its presence with a specific principal 
diagnosis, would cause an increase in the length-of-stay by at least 1 
day in at least 75 percent of the patients. However, depending on the 
principal diagnosis of the patient, some diagnoses on the basic list of 
complications and comorbidities may be excluded if they are closely 
related to the principal diagnosis. In FY 2008, we evaluated each 
diagnosis code to determine its impact on resource use and to determine 
the most appropriate CC subclassification (non-CC, CC, or MCC) 
assignment. We refer readers to sections II.D.2. and 3. of the preamble 
of the FY 2008 IPPS final rule with comment period for a discussion of 
the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008 
(72 FR 47152 through 47171).
b. Overview of Comprehensive CC/MCC Analysis
    In the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159), we described 
our process for establishing three different levels of CC severity into 
which we would subdivide the diagnosis codes. The categorization of 
diagnoses as a MCC, a CC, or a non-CC was accomplished using an 
iterative approach in which each diagnosis was evaluated to determine 
the extent to which its presence as a secondary diagnosis resulted in 
increased hospital resource use. We refer readers to the FY 2008 IPPS/
LTCH PPS final rule (72 FR 47159) for a complete discussion of our 
approach. Since the comprehensive analysis was completed for FY 2008, 
we have evaluated diagnosis codes individually when receiving requests 
to change the severity level of specific diagnosis codes.
    We noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) 
that with the transition to ICD-10-CM and the significant changes that 
have occurred to diagnosis codes since the FY 2008 review, we believed 
it was necessary to conduct a comprehensive analysis once again. Based 
on this analysis, we proposed changes to the severity level 
designations for 1,492 ICD-10-CM diagnosis codes and invited public 
comments on those proposals. As summarized in the FY 2020 IPPS/LTCH PPS 
final rule, many commenters expressed concern with the severity level 
designation changes overall and recommended that CMS conduct further 
analysis prior to finalizing any proposals. After careful consideration 
of the public comments we received, as discussed further in the FY 2020 
final rule, we generally did not finalize our changes to the severity 
designations for the ICD-10-CM diagnosis codes, other than the changes 
to the severity level designations for the diagnosis codes in category 
Z16- (Resistance to antimicrobial drugs) from a non-CC to a CC. We 
stated that postponing adoption of the comprehensive changes in the 
severity level designations would allow further opportunity to provide 
additional background to the public on the methodology utilized and 
clinical rationale applied across diagnostic categories to assist the 
public in its review. We refer readers to the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42150 through 42152) for a complete discussion of our 
response to public comments regarding the severity level designation 
changes for FY 2020.
c. Guiding Principles for Making Changes to Severity Levels
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32550), to provide the public with more information on the CC/MCC 
comprehensive analysis discussed in the FY 2020 IPPS/LTCH PPS proposed 
and final rules, CMS hosted a listening session on October 8, 2019. The 
listening session included a review of the methodology to measure the 
impact on resource use. It also provided an opportunity for CMS to 
receive public input on this analysis and to address any questions in 
order to assist the public in formulating written comments on the 
current severity level designations for consideration in the FY 2021 
rulemaking. We refer readers to https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/PodcastAndTranscripts.html for the 
transcript and audio file of the listening session. We also refer 
readers to https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for 
the supplementary file containing the data describing the impact on 
resource use of specific ICD-10-CM diagnosis codes when reported as a 
secondary diagnosis that was made available for the listening session.
    Following the listening session, we further considered the public 
comments received and reconvened an internal workgroup comprised of 
clinicians, consultants, coding specialists and other policy analysts 
to identify guiding principles to apply in evaluating whether changes 
to the severity level designations of diagnoses are needed and to 
ensure the severity designations appropriately reflect resource use 
based on review of the claims data, as well as consideration of 
relevant clinical factors (for example, the clinical nature of each of 
the secondary diagnoses and the severity level of clinically similar 
diagnoses) and improve the overall accuracy of the IPPS payments. In 
the proposed rule, we stated our goal was to develop a set of guiding 
principles that, when applied, could assist in determining whether the 
presence of the specified secondary diagnosis would lead to increased 
hospital resource use in most instances. The workgroup identified the 
following nine guiding principles as meaningful indicators of expected 
resource use by a secondary diagnosis.
     Represents end of life/near death or has reached an 
advanced stage associated with systemic physiologic decompensation and 
debility.
     Denotes organ system instability or failure.
     Involves a chronic illness with susceptibility to 
exacerbations or abrupt decline.
     Serves as a marker for advanced disease states across 
multiple different comorbid conditions.

[[Page 58551]]

     Reflects systemic impact.
     Post-operative condition/complication impacting recovery.
     Typically requires higher level of care (that is, 
intensive monitoring, greater number of caregivers, additional testing, 
intensive care unit care, extended length of stay).
     Impedes patient cooperation and/or management of care.
     Recent (last 10 years) change in best practice, or in 
practice guidelines and review of the extent to which these changes 
have led to concomitant changes in expected resource use.
    We stated in the FY 2021 IPPS/LTCH PPS proposed rule that we plan 
to continue a comprehensive CC/MCC analysis, using a combination of 
mathematical analysis of claims data as discussed in the FY 2020 IPPS/
LTCH PPS proposed rule (84 FR 19235) and the application of these 
guiding principles, and present the findings and proposals in future 
rulemaking. We invited public comments regarding these guiding 
principles, as well as other possible ways we could incorporate 
meaningful indicators of clinical severity. When providing additional 
feedback or comments, we encouraged the public to provide a detailed 
explanation of how applying a suggested concept or principle would 
ensure that the severity designation appropriately reflects resource 
use for any diagnosis code.
    Comment: Many commenters supported the guiding principles. 
Commenters stated the application of the nine guiding principles, as 
laid out in the proposed rule, rather than solely relying on a 
mathematical analysis of claims data is a reasoned approach in 
addressing the concerns raised last year. A commenter specifically 
stated they acknowledge and appreciate CMS' recognition that the 
transition to ICD-10-CM, and the significant changes that have occurred 
to diagnosis codes since the FY 2008 review, warrants a comprehensive 
CC/MCC analysis.
    Response: We thank the commenters for their support.
    Comment: Some commenters noted general concerns with the guiding 
principles. Commenters stated that the nine guiding principles appeared 
to be open to interpretation or differences in clinical opinion and do 
not provide clear logic for decision-making. Other commenters stated 
that it was not clear how CMS will apply these guiding principles in 
conjunction with the mathematical analyses of claims data to make 
decisions about severity levels. These commenters stated that more 
information is needed to better understand CMS's process for decision 
making on the designation of diagnosis severity levels.
    Response: We thank the commenters for sharing their concerns.
    The nine guiding principles are not criteria, intended to turn the 
analysis into a quantitative exercise, but instead to provide a 
framework for assessing relevant clinical factors. As patients present 
with a variety of diagnoses, in examining the secondary diagnoses, we 
would consider what additional resources are required, above and beyond 
those that are already being utilized to address the principal 
diagnosis and/or other secondary diagnoses that might also be present 
on the claim. The goal of our comprehensive analysis is to create 
stratification for reimbursing inpatient hospitalization in the fewest 
amount of categories with the most explanatory power in a clinically 
cohesive way.
    Our intended approach is first, CMS will use these guiding 
principles in making an initial clinical assessment of the appropriate 
severity level designation for each ICD-10-CM code as a secondary 
diagnosis. CMS will then use a mathematical analysis of claims data as 
discussed in the FY 2020 IPPS/LTCH PPS proposed rule to determine if 
the presence of the ICD-10-CM code as a secondary diagnosis appears to, 
or does not appear to, increase hospital resource consumption. There 
may be instances in which we would decide that the clinical analysis 
weighs in favor of proposing to maintain or proposing to change the 
severity designation of an ICD-10-CM code after application of the nine 
guiding principles.
    Comment: Some commenters stated that the guiding principles 
appeared to be more applicable to MCC conditions, were too strict and 
could potentially eliminate CC conditions. A commenter stated that the 
application of the guiding principles would represent a substantial 
revision to the definition of a CC, noting MS-DRG Definition Manual 
Version 37.1 provides the following definition: ``A substantial 
complication or comorbidity was defined as a condition that because of 
its presence with a specific principal diagnosis would cause an 
increase in length of stay by at least one day in at least 75 percent 
of the patients.'' A few commenters highlighted individual ICD-10-CM 
diagnoses and stated these conditions warrant assignment into CC or MCC 
MS-DRGs based on certain clinical criteria.
    Response: We appreciate the commenters' feedback.
    We do not believe the nine guiding principles would be mostly 
applicable, or only applicable, to MCC conditions. In applying the nine 
guiding principles in our review of the appropriate severity level 
designation, the intention is not to require that a diagnosis code 
satisfy each principle, or a specific number of principles in assessing 
whether to designate a secondary diagnosis code as a non-CC versus a CC 
versus a MCC. Rather, the severity level determinations would be based 
on the consideration of the clinical factors captured by these 
principles as well as the empirical analysis of the additional 
resources associated with the secondary diagnosis.
    We wish to clarify that the definition of a ``substantial 
complication or comorbidity'' from the MS-DRG Definition Manual that 
the commenter referenced, is the definition of a CC that was used in 
Version 8 of the DRGs. In FY 2008, for Version 25 of the MS-DRGs, the 
diagnoses comprising the CC list were completely redefined and instead 
each CC was categorized as a major CC or a CC (that is, non-major CC) 
based on relative resource use. As stated previously, we refer readers 
to the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159) for a complete 
discussion of our approach. We also wish to clarify that there is a 
difference between the non-CC, CC, or MCC designation of an individual 
diagnosis code and the requirements for GROUPER assignment into a 
severity split MS-DRG. MS-DRG assignment is a different issue and is 
based on GROUPER logic and the other codes reported on a claim.
    Comment: A commenter encouraged the use of the APR-DRG GROUPER to 
analyze severity levels for individual diagnoses and in conjunction 
with certain principal diagnoses to reinforce change decisions or 
identify conflicts requiring re-evaluation. Some commenters questioned 
how conditions such as obstetrical diagnoses or congenital conditions 
would, or would not, be considered in the application of the guiding 
principles.
    Response: We thank the commenters for sharing their input and 
suggestions.
    The Medicare GROUPER is for the Medicare population and is not 
designed to account for all populations like the APR-DRG GROUPER, so we 
generally do not believe it would be appropriate to use the APR-DRG 
GROUPER severity of illness and risk of mortality scores to analyze 
severity levels as they relate to Medicare inpatient prospective 
payment. In regards to obstetric conditions, given the limited number 
of cases reporting ICD-10-CM obstetrical codes in the Medicare claims 
data, we are considering use of datasets other than MedPAR cost data, 
as we indicated in the FY 2020 IPPS/LTCH PPS final rule

[[Page 58552]]

(84 FR 42152), to be used in addition to the application of these 
guiding principles for future evaluation of severity level designation 
for the ICD-10-CM diagnosis codes from the Obstetrics chapter of the 
ICD-10-CM classification. In contrast, the diagnosis codes from the 
Congenital Malformations, Deformities and Chromosomal Abnormalities 
Chapter of the ICD-10-CM classification may be used throughout the life 
of the patient. Our internal workgroup believe the nine guiding 
principles are applicable to these conditions and these codes lend 
themselves to review using a combination of mathematical analysis of 
claims data as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 
FR 19235) and the application of these guiding principles.
    In this FY 2021 IPPS/LTCH PPS final rule, we present a summation of 
the comments we received for each of the nine guiding principles and 
our responses to those comments. We thank commenters for sharing their 
views and their willingness to support CMS in our efforts to continue a 
comprehensive CC/MCC analysis.
     Represents end of life/near death or has reached an 
advanced stage associated with systemic physiologic decompensation and 
debility.
    Comment: A commenter opposed this principle and stated that 
decisions in these patients are complex, especially when being guided 
by family members as part of `person and community engagement' which 
hospitals are scored on under the Value Based Purchasing program. This 
commenter expressed concern that a family may insist on continued use 
of resources that CMS then determines it will not pay for, placing the 
financial burden onto the hospital.
    Response: We note the target of our analysis is on individual ICD-
10-CM codes, as secondary diagnosis codes, as they relate to inpatient 
prospective payment. While we appreciate the commenters' concern, we 
note that in certain instances, conditions that denote end of life or 
near death may conversely also decrease resource use as the decision to 
withdraw care is made. We also note that the impact of the secondary 
diagnosis is dependent on the principal diagnosis reported, with which 
it is associated. If the secondary diagnosis is reported with a 
principal diagnosis that reflects serious illness with treatment 
complexity, then the marginal contribution of the secondary diagnosis 
to the overall resource use may actually be relatively small. In 
applying these principles as part of the clinical analysis of the 
appropriate severity level designation for each ICD-10-CM code as a 
secondary diagnosis, CMS will take this into consideration.
     Denotes organ system instability or failure.
    Comments: Commenters supported this guiding principle.
    Response: We appreciate the commenters' support.
     Involves a chronic illness with susceptibility to 
exacerbations or abrupt decline.
    Comments: Some commenters opposed this principle and stated this 
principle may not be able to be applied across the board as many ICD-
10-CM diagnosis codes do not distinguish exacerbation. The commenters 
stated there are conditions that have separate acute and chronic 
diagnosis codes, combined acute/chronic concepts into single diagnosis 
codes, and some conditions for which the diagnosis code does not 
indicate the specificity of acute or chronic.
    Response: All ICD-10-CM diagnosis codes, including codes that do 
not explicitly describe acute exacerbations, would be reviewed using 
this guiding principle to assess the degree to which the individual 
ICD-10-CM diagnosis code as a secondary diagnosis affects hospital 
resource consumption, to determine if the severity designation is more 
appropriately non-CC, CC, or MCC. The intention is again, not to 
require that every diagnosis code satisfy each principle, but instead 
to identify relevant clinical factors to help denote if, and to what 
degree, additional resources are required above and beyond those that 
are already being utilized to address the principal diagnosis and/or 
other secondary diagnoses that might also be present on the claim.
     Serves as a marker for advanced disease states across 
multiple different comorbid conditions.
    Comment: A few commenters noted that this guiding principle is open 
to interpretation.
    Response: A marker is a clinical measurement that is associated 
with or believed to be related pathophysiologically to a clinical 
outcome and can serve as an indicator for health or disease. While we 
appreciate that assessing relevant clinical factors will depend on the 
particular diagnosis codes at issue, our clinical advisors believe this 
principle, along with the other 8 principles, would provide appropriate 
parameters for our clinical review.
     Reflects systemic impact.
    Comment: A commenter noted that many current CC or MCC diagnoses 
are limited to a single body system and therefore, stated it is unclear 
what the guideline means by ``systemic impact.''
    Response: Systemic impact refers to conditions that affect more 
than one body system or the entire body.
     Post-operative condition/complication impacting recovery.
    Comment: Several commenters recommended that CMS revise the 
language used so that this guiding principle includes the term ``post-
procedure'' to more broadly recognize that some procedures also have 
associated complications that are severe that can typically warrant 
additional resources (that is, drugs, supplies, ancillary tests, etc.). 
These commenters stated they believed stakeholders are likely to take 
the wording of this guiding principle literally as originally stated. 
Commenters also stated that the term ``recovery'' is conceptually 
appropriate, so long as its use does not result in the exclusion of 
consideration of costs that may impact the patient stay. Another 
commenter also stated that CMS should describe the cost implications of 
each of these principles.
    Response: CMS agrees that adding the term ``post-procedure'' would 
be appropriate to encompass procedures that have associated 
complications that may warrant additional resources. We are revising 
this guiding principle to ``post-operative/post-procedure condition/
complication impacting recovery''. To clarify for the commenters, when 
reviewing costs, we do not analyze impact using a detailed cost 
accounting approach. The approach that is utilized in the mathematical 
analysis of claims data for impact analysis is the same expected cost 
approach that used in the relative weight computations. All charges in 
each revenue bucket, that already include supply and ancillary costs, 
are adjusted specific to the revenue cost to charge ratio, on a 
national scale and incorporated into impact values from a total 
estimated cost perspective. As part of this statistical review to 
determine if a secondary diagnosis appears to, or does not appear to, 
increase resource consumption, our clinical workgroup will also examine 
the additional days the secondary diagnosis contributed to the length 
of stay against what would be expected.
     Typically requires higher level of care (that is, 
intensive monitoring, greater number of caregivers, additional testing, 
intensive care unit care, extended length of stay).
    Comment: Commenters stated that while they agree with this 
principle, they request that CMS clarify if ``intermediate care'' will 
be considered within this guiding principle. Other

[[Page 58553]]

commenters requested clarification on how conditions meeting this 
principle would be determined. Other commenters noted that this 
principle is similar to Section III of the ICD-10-CM Guidelines for 
Coding and Reporting regarding reportable secondary diagnosis.
    Response: Mathematical data regarding ICU usage will inform the 
clinical decision making of our internal workgroup, but we note that 
definitions for terms such as ``intermediate care'' and ``ICU'' vary 
from institution to institution. We note as stated above, our intention 
is not to be prescriptive in matching hospital costs, instead our 
intention is to ensure the severity designations appropriately reflect 
resource use and improve the overall accuracy of the IPPS payment 
system. To clarify for the commenters, the definition for ``other 
diagnoses'' as stated in the ICD-10-CM Official Guidelines for Coding 
and Reporting is intended to ensure inpatient data elements are 
reported in a standardized manner. This guiding principle is to 
intended to assist in assessing what additional resources are required 
for each ICD-10-CM code as a secondary diagnosis, above and beyond 
those that are already being utilized to address the principal 
diagnosis and/or other secondary diagnoses that might also be present 
on the claim.
     Impedes patient cooperation and/or management of care.
    Comment: A number of commenters requested that codes for various 
social determinants of health (SDOH) be considered in this principle 
and in subsequent data analysis. One commenter suggested that CMS use 
registry information, rather than relying solely on administrative 
data, to take into consideration these underlying risk factors, 
including socioeconomic status. Another commenter questioned whether 
the post discharge environment should be added as a guiding principle.
    Response: The ICD-10-CM classification in its entirety will be 
reviewed in our comprehensive CC/MCC analysis, not excluding the ICD-
10-CM codes for the social determinants of health, which are the 
socioeconomic, cultural and environmental circumstances in which 
individuals live. We note the focus of our comprehensive analysis is on 
the appropriate severity level designation of individual ICD-10-CM 
codes as secondary diagnosis codes as they relate to the resource 
utilization required while the patient is in the hospital and on 
inpatient prospective payment. In reference to the comment that CMS use 
registry information, we appreciate the suggestion but we do not 
believe there is enough consistency in voluntary registry data for this 
purpose, and it would also be challenging for CMS to operationalize.
     Recent (last 10 years) change in best practice, or in 
practice guidelines and review of the extent to which these changes 
have led to concomitant changes in expected resource use.
    Comment: Many commenters stated CMS needs a method to assign CC and 
MCC designations to new ICD-10-CM diagnosis codes in advance of 
receiving claims data, since the availability of claims data lags for 
two years after new codes are released, to account for diagnoses which 
require costly treatment or might otherwise require ICU care or 
lengthier stays. Another commenter stated this guiding principle is 
poorly worded at best and vague on how it would be converted to a 
decision by CMS. Another commenter questioned the validity of this 
principle and noted that most medical conditions have potentially had 
some changes in best practices in the last 10 years
    Response: We would like to clarify and note that CMS does have an 
established process to assign severity level designation to new 
diagnosis codes. Our process in assigning a severity level designation 
to a new diagnosis code generally begins with identifying the 
designation of the predecessor ICD-10-CM code. To inform our 
assignments, we also review materials from the discussions relating to 
proposed new diagnosis codes from the ICD-10 Coordination and 
Maintenance Committee meetings to determine if there are new or revised 
clinical concepts included in the new diagnosis codes that should also 
be considered when assigning a severity level designation. We refer 
readers to section II.E.16. of the preamble of this final rule for a 
discussion of the ICD-10 (previously ICD-9-CM) Coordination and 
Maintenance Committee meeting process.
    We agree with the commenter that most medical conditions have 
potentially had some changes in best practices in the last 10 years. 
Significant strides have been made in the past 10 years to ensure that 
Medicare beneficiaries have access to critical and life-saving new 
cures and technologies that improve beneficiary health outcomes. 
Consequently, we believe this comprehensive analysis should take into 
account the way changes in medical practice have, or have not, affected 
the impact on relative resource use for each ICD-10-CM code as a 
secondary diagnosis since our last comprehensive analysis in FY 2008.
    Therefore, after consideration of the public comments we received, 
we are updating the nine guiding principles as follows:
     Represents end of life/near death or has reached an 
advanced stage associated with systemic physiologic decompensation and 
debility.
     Denotes organ system instability or failure.
     Involves a chronic illness with susceptibility to 
exacerbations or abrupt decline.
     Serves as a marker for advanced disease states across 
multiple different comorbid conditions.
     Reflects systemic impact.
     Post-operative/post-procedure condition/complication 
impacting recovery.
     Typically requires higher level of care (that is, 
intensive monitoring, greater number of caregivers, additional testing, 
intensive care unit care, extended length of stay).
     Impedes patient cooperation and/or management of care.
     Recent (last 10 years) change in best practice, or in 
practice guidelines and review of the extent to which these changes 
have led to concomitant changes in expected resource use.
    Comment: A few commenters recommended that CMS convene a technical 
advisory panel comprised of industry stakeholders and subject matter 
experts (including clinicians and health information professionals) to 
review the guiding principles. Other commenters requested that the 
mathematical data to be utilized in our comprehensive analysis be again 
presented and explained in a public listening session, similar to what 
the agency held in October 2019 on this topic.
    Response: We again thank commenters for sharing their views and 
their willingness to support CMS in our efforts to continue a 
comprehensive CC/MCC analysis. While CMS has already convened an 
internal workgroup comprised of clinicians, consultants, coding 
specialists and other policy analysts, as well as provided opportunity 
to provide feedback on the guiding principles, we look forward to 
further collaboration with the industry. We plan to make an updated 
impact on resource use file available after publication of this final 
rule.
    We continue to solicit feedback regarding these guiding principles, 
as well as other possible ways we can incorporate meaningful indicators 
of clinical severity. When providing additional feedback or comments, 
we encourage the public to provide a detailed explanation of how 
applying a suggested concept or principle would

[[Page 58554]]

ensure that the severity designation appropriately reflects resource 
use for any diagnosis code.
    Commenters should submit their recommendations to the following 
email address: [email protected] by November 1, 
2020.
d. Additions and Deletions to the Diagnosis Code Severity Levels for FY 
2021
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32550) we noted 
the following tables identify the proposed additions and deletions to 
the diagnosis code MCC severity levels list and the proposed additions 
and deletions to the diagnosis code CC severity levels list for FY 2021 
and are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Table 6I.1--Proposed Additions to the MCC List--FY 2021;
    Table 6I.2--Proposed Deletions to the MCC List--FY 2021;
    Table 6J.1--Proposed Additions to the CC List--FY 2021; and
    Table 6J.2--Proposed Deletions to the CC List--FY 2021.
    Comment: Commenters agreed with the proposed additions and 
deletions to the MCC and CC lists as shown in tables 6I.1, 6I.2, 6J.1, 
and 6J.2 associated with the proposed rule.
    Response: We appreciate the commenters' support.
    As discussed in section II.E.13. of the preamble of this final 
rule, after consideration of the public comments received, we are 
finalizing changes to the severity levels for new diagnosis codes 
D89.833, D89.834, and D89.835 describing cytokine release syndrome 
(CRS) from NonCC to CC for FY 2021. Therefore, these diagnosis codes 
are now reflected in Table 6J.1--Additions to the CC List--FY 2021.
    The following tables associated with this final rule reflect the 
finalized severity levels under Version 38 of the ICD-10 MS-DRGs for FY 
2021 and are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Table 6I.--Complete MCC List--FY 2021;
    Table 6I.1--Additions to the MCC List--FY 2021;
    Table 6I.2--Deletions to the MCC List--FY 2021;
    Table 6J.--Complete CC List--FY 2021;
    Table 6J.1--Additions to the CC List--FY 2021; and
    Table 6J.2--Deletions to the CC List--FY 2021.
e. CC Exclusions List for FY 2021
    In the September 1, 1987 final notice (52 FR 33143) concerning 
changes to the DRG classification system, we modified the GROUPER logic 
so that certain diagnoses included on the standard list of CCs would 
not be considered valid CCs in combination with a particular principal 
diagnosis. We created the CC Exclusions List for the following reasons: 
(1) To preclude coding of CCs for closely related conditions; (2) to 
preclude duplicative or inconsistent coding from being treated as CCs; 
and (3) to ensure that cases are appropriately classified between the 
complicated and uncomplicated DRGs in a pair.
    In the May 19, 1987 proposed notice (52 FR 18877) and the September 
1, 1987 final notice (52 FR 33154), we explained that the excluded 
secondary diagnoses were established using the following five 
principles:
     Chronic and acute manifestations of the same condition 
should not be considered CCs for one another;
     Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for the same condition should not be considered 
CCs for one another;
     Codes for the same condition that cannot coexist, such as 
partial/total, unilateral/bilateral, obstructed/unobstructed, and 
benign/malignant, should not be considered CCs for one another;
     Codes for the same condition in anatomically proximal 
sites should not be considered CCs for one another; and
     Closely related conditions should not be considered CCs 
for one another.
    The creation of the CC Exclusions List was a major project 
involving hundreds of codes. We have continued to review the remaining 
CCs to identify additional exclusions and to remove diagnoses from the 
master list that have been shown not to meet the definition of a CC. We 
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 
through 50544) for detailed information regarding revisions that were 
made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
    The ICD-10 MS-DRGs Version 37 CC Exclusion List is included as 
Appendix C in the ICD-10 MS-DRG Definitions Manual, which is available 
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html and includes two lists identified as 
Part 1 and Part 2. Part 1 is the list of all diagnosis codes that are 
defined as a CC or MCC when reported as a secondary diagnosis. For all 
diagnosis codes on the list, a link is provided to a collection of 
diagnosis codes which, when used as the principal diagnosis, would 
cause the CC or MCC diagnosis to be considered as a non-CC. Part 2 is 
the list of diagnosis codes designated as a MCC only for patients 
discharged alive; otherwise, they are assigned as a non-CC.
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32550 through 
32551), we discussed a request we received to consider removing 
diagnosis codes describing any type of stroke that is designated as a 
MCC in the code range I60.00 through I63.9 from the CC Exclusion list 
when a principal diagnosis of diabetes in the code range E08.00 through 
E13 is reported. According to the requestor, acute strokes and chronic 
diabetes are two distinct conditions, therefore a stroke that occurs 
during an admission for an underlying diabetic condition should not be 
excluded from acting as a MCC. The requestor provided an example of a 
patient with type 2 diabetes who was admitted for treatment of infected 
foot ulcers and then experienced a stroke prior to discharge, resulting 
in assignment to MS-DRG 639 (Diabetes without CC/MCC). The requestor 
asserted the more appropriate assignment is MS-DRG 637 (Diabetes with 
MCC), which they stated more appropriately reflects severity of illness 
and resources involved in the treatment of an acute stroke. In another 
example provided by the requestor, a patient with type 2 diabetes and 
osteomyelitis underwent a left below the knee amputation and 
experienced a stroke before discharge, resulting in assignment to MS-
DRG 617 (Amputation of Lower Limb for Endocrine, Nutritional, and 
Metabolic Diseases with CC). The requestor asserted the more 
appropriate assignment is MS-DRG 616 (Amputation of Lower Limb for 
Endocrine, Nutritional, and Metabolic Diseases with MCC), which they 
stated more appropriately reflects severity of illness and resources 
involved in the treatment of an acute stroke.
    We stated in the proposed rule that our clinical advisors agreed 
that acute strokes and chronic diabetes are two distinct conditions and 
a case reporting a secondary diagnosis of a stroke in the code range 
I60.00 through I63.9 should not be excluded from acting as a MCC when 
reported with a principal diagnosis of diabetes in the code range 
E08.00 through E13.9.

[[Page 58555]]

    As noted in the proposed rule, we analyzed claims data from the 
September 2019 update of the FY 2019 MedPAR file for cases reporting a 
principal diagnosis of diabetes in the code range E08.00 through E13.9 
with a secondary diagnosis of a stroke in the code range I60.00 through 
I63.9. We refer the reader to table 6P.3a for a detailed list of the 
diagnosis codes describing diabetes that were analyzed and table 6P.3b 
associated with the proposed rule for a detailed list of the diagnosis 
codes describing a stroke that were analyzed and that are also 
designated as a MCC in this code range. We found a total of 1,109 cases 
across 40 MS-DRGs with an average length of stay of 10.1 days and 
average costs of $24,672 reporting a principal diagnosis of diabetes 
with a secondary diagnosis of a stroke that was excluded from acting as 
a MCC. Of those 1,109 cases, we identified 161 cases that would result 
in assignment to the higher severity level ``with MCC'' MS-DRG if the 
diagnosis of stroke was no longer excluded from acting as a MCC. The 
remaining 948 cases would maintain their existing MS-DRG assignment 
since they were either already grouped to the highest MCC severity 
level based on another diagnosis code that is designated as a MCC or 
they were assigned to one of the Pre-MDC MS-DRGs. We refer the reader 
to table 6P.4a associated with the proposed rule for the detailed 
analysis.
    Based on the advice of our clinical advisors, for FY 2021, we 
proposed to remove the diagnosis codes describing stroke in the code 
range I60.00 through I63.9 that are designated as a MCC from the list 
of CC Exclusions when reported with a principal diagnosis of diabetes 
in the code range E08.00 through E13.9 from the ICD-10 MS-DRGs Version 
38 CC Exclusion List as reflected in Table 6H.1.--Proposed Secondary 
Diagnosis Order Deletions to the CC Exclusions List--FY 2021 and Table 
6H.2.--Proposed Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2021 associated with the proposed rule and 
available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
    Comment: Commenters supported the proposal to remove diagnosis 
codes describing stroke in the code range I60.00 through I63.9 that are 
designated as a MCC from the list of CC Exclusions when reported with a 
principal diagnosis of diabetes in the code range E08.00 through E13.9.
    Response: We thank the commenters for their support.
    We proposed additional changes to the ICD-10 MS-DRGs Version 38 CC 
Exclusion List based on the diagnosis and procedure code updates as 
discussed in section II.D.13. of the FY 2021 IPPS/LTCH PPS proposed 
rule and set forth in Tables 6G.1, 6G.2, 6H.1, and 6H.2 associated with 
the proposed rule and available via the internet on the CMS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
    Comment: Commenters supported the proposed additions and deletions 
to the CC Exclusion List as shown in tables 6G.1, 6G.2, 6H.1 and 6H.2.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove diagnosis codes describing stroke in 
the code range I60.00 through I63.9 that are designated as a MCC from 
the list of CC Exclusions when reported with a principal diagnosis of 
diabetes in the code range E08.00 through E13.9.
    The proposed CC Exclusions for a subset of the diagnosis codes as 
set forth in Tables 6G.1, 6G.2, 6H.1, and 6H.2 associated with the FY 
2021 IPPS/LTCH PPS proposed rule reflect the proposed severity level 
designations as discussed in section II.D.13. of the preamble of the 
proposed rule. As discussed in section II.E.13. of the preamble of this 
final rule, we are finalizing changes to the severity level 
designations for three diagnosis codes after consideration of the 
public comments received. Therefore, the finalized CC Exclusions List 
as displayed in Tables 6G.1, 6G.2, 6H.1 6H.2, and 6K, associated with 
this final rule reflect the severity levels under Version 38 of the 
ICD-10 MS-DRGs.
    We have developed Table 6G.1.--Secondary Diagnosis Order Additions 
to the CC Exclusions List--FY 2021; Table 6G.2.--Principal Diagnosis 
Order Additions to the CC Exclusions List--FY 2021; Table 6H.1.--
Secondary Diagnosis Order Deletions to the CC Exclusions List--FY 2021; 
Table 6H.2.--Principal Diagnosis Order Deletions to the CC Exclusions 
List--FY 2021; and Table 6K.--Complete List of CC Exclusions--FY 2021. 
For Table 6G.1, each secondary diagnosis code for addition to the CC 
Exclusion List is shown with an asterisk and the principal diagnoses to 
exclude the secondary diagnosis code are provided in the indented 
column immediately following it. For Table 6G.2, each of the principal 
diagnosis codes for which there is a CC exclusion is shown with an 
asterisk and the conditions for addition to the CC Exclusion List that 
will not count as a CC are provided in an indented column immediately 
following the affected principal diagnosis. For Table 6H.1, each 
secondary diagnosis code for deletion from the CC Exclusion List is 
shown with an asterisk followed by the principal diagnosis codes that 
currently exclude it. For Table 6H.2, each of the principal diagnosis 
codes is shown with an asterisk and the proposed deletions to the CC 
Exclusions List are provided in an indented column immediately 
following the affected principal diagnosis. Table 6K is a list of all 
of the codes that are defined as either CC or a MCC when used as a 
secondary diagnosis. Within the table each code is specifically 
indicated as CC or MCC. A table number is given to a collection of 
diagnosis codes which, when used as the principal diagnosis, will cause 
the CC or MCC to be considered as only a non-CC. Tables 6G.1., 6G.2., 
6H.1., 6H.2., and 6K. associated with this final rule are available via 
the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    The ICD-10 MS-DRGs Version 38 CC Exclusion List is included as 
Appendix C of the Definitions Manual (available in two formats; text 
and HTML). The manuals are available via the internet on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software and each 
format includes two lists identified as Part 1 and Part 2. Part 1 is 
the list of all diagnosis codes that are defined as a CC or MCC when 
reported as a secondary diagnosis. For all diagnosis codes on the list, 
a link (HTML version) is provided to a collection of diagnosis codes 
which, when used as the principal diagnosis, would cause the CC or MCC 
diagnosis to be considered as a non-CC. Part 2 is the list of diagnosis 
codes designated as a MCC only for patients discharged alive; 
otherwise, they are assigned as a non-CC.
13. Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
    To identify new, revised and deleted diagnosis and procedure codes, 
for FY 2021, we have developed Table 6A.--New Diagnosis Codes, Table 
6B.--New Procedure Codes, Table 6C.--Invalid Diagnosis Codes, and Table 
6E.--Revised Diagnosis Code Titles for this final rule.
    These tables are not published in the Addendum to the proposed rule 
or final rule, but are available via the internet on the CMS website 
at: https://www.cms.gov/Medicare/Medicare-Fee-

[[Page 58556]]

for-Service-Payment/AcuteInpatientPPS/index.html as described in 
section VI. of the Addendum to this final rule. As discussed in section 
II.E.16. of the preamble of this final rule, the code titles are 
adopted as part of the ICD-10 (previously ICD-9-CM) Coordination and 
Maintenance Committee meeting process. Therefore, although we publish 
the code titles in the IPPS proposed and final rules, they are not 
subject to comment in the proposed or final rules.
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32551 through 
32552), we proposed the MDC and MS-DRG assignments for the new 
diagnosis codes and procedure codes as set forth in Table 6A.--New 
Diagnosis Codes and Table 6B.--New Procedure Codes. We also stated that 
the proposed severity level designations for the new diagnosis codes 
are set forth in Table 6A. and the proposed O.R. status for the new 
procedure codes are set forth in Table 6B.
    Comment: A commenter stated they appreciated the finalization of 
new ICD-10-CM diagnosis code J84.170 (Interstitial lung disease with 
progressive fibrotic phenotype in diseases classified elsewhere) that 
was included in Table 6A--New Diagnosis Codes associated with the 
proposed rule. The commenter stated this new diagnosis code will 
provide clarification for current coding of Interstitial Lung Disease 
(ILD) within the ICD-10-CM classification by enabling identification of 
patients with chronic fibrotic ILD who exhibit a progressive phenotype. 
The commenter noted this update is critical for facilitating research 
for patients with a progressive fibrotic ILD phenotype which is an area 
of high unmet needs. Another commenter also supported the creation of 
diagnosis code J84.170 and stated they generally support new ICD-10 
codes that enable identification of beneficiaries with specific 
diseases or clinically important diagnoses, such as that represented by 
diagnosis code J84.170. However, the commenter expressed concern that 
the process for obtaining new ICD-10 codes can be cumbersome and cause 
delays in approving new codes that are important to identify and 
support appropriate treatment for patients with specific diseases or 
conditions. The commenter provided an example that current ICD-10 codes 
do not accurately characterize the disease progression of Alzheimer's 
Disease and have not kept up with the current clinical documentation 
and management of patient treatments, and do not accurately reflect the 
various stages of disease progression. The commenter noted that proper 
identification is necessary, not only in clinical practice, but also to 
track the real word outcomes as patients progress through the disease 
states. The commenter stated CMS, along with the CDC, should consider 
steps to expedite the timetable for implementing important new 
diagnosis codes in emerging therapeutic areas in order to ensure timely 
patient access to vital treatment options.
    Response: We appreciate the commenters' support. In response to the 
commenter who expressed concern regarding the process and timing for 
obtaining new ICD-10 codes, we note that, as discussed in section 
II.E.16. of the preamble of this final rule, the CDC/NCHS has lead 
responsibility for the ICD-10-CM diagnosis classification while CMS has 
lead responsibility for the ICD-10-PCS procedure classification. Each 
organization has their own established process in responding to 
requests for code updates, including when specific topics may appear on 
the agenda of an ICD-10 Coordination and Maintenance Committee meeting 
and the fiscal year in which code proposals are considered for 
implementation. With regard to the commenter's concerns involving 
outdated and insufficient diagnosis code descriptions for Alzheimer's 
Disease, we encourage the commenter to contact the CDC/NCHS directly as 
they have lead responsibility for the ICD-10-CM diagnosis 
classification. Requests for new and revised diagnosis code updates 
must be submitted to [email protected] for consideration. In response 
to the commenter's suggestion that CMS and CDC should consider steps to 
expedite the timetable for implementing important new diagnosis codes 
in emerging therapeutic areas in order to ensure timely patient access 
to vital treatment options, we note that, as also discussed in section 
II.E.16. of the preamble of this final rule, there are existing 
processes in place to implement diagnosis codes in an expedited manner.
    Comment: A commenter expressed appreciation for CMS' request for 
comment on the MDC, MS-DRG and severity level for diagnosis code U07.1 
(COVID-19). The commenter stated there are variable and changing 
practices related to COVID-19, particularly as related to medication 
use. In addition, the commenter noted as medications may be used off-
label or become newly approved for COVID-19, the cost of those 
medications remains to be seen. According to the commenter, these costs 
may have a significant impact on a hospital's ability to treat patients 
with COVID-19. Therefore, the commenter suggested that as CMS considers 
the most appropriate MDC, MS-DRG and severity level assignments for 
diagnosis code U07.1, it recommended the agency account for the ongoing 
changes in best practices and medication use related to COVID-19, and 
whether additional reimbursement options or flexibilities could be 
provided to limit financial risks to hospitals. Another commenter 
applauded the speed with which CMS and CDC/NCHS addressed and 
implemented the new ICD-10-CM diagnosis codes U07.0 (Vaping-related 
disorder) and U07.1 (COVID-19) effective April 1, 2020 with MS-DRG 
assignments. This commenter encouraged the agencies to respond swiftly 
to address any similar public health emergencies in the future.
    Response: We thank the commenters for their support. In Table 6A--
New Diagnosis Codes, associated with the proposed rule, we proposed to 
continue to designate diagnosis code U07.1 (COVID-19) as a MCC in MDC 
04 (Diseases and Disorders of the Respiratory System) for MS-DRGs 177, 
178, and 179 (Respiratory Infections and Inflammations with MCC, with 
CC, and without CC/MCC, respectively); in MDC 15 (Newborns and Other 
Neonates with Conditions Originating in Perinatal Period) for MS-DRGs 
791 (Prematurity with Major Problems) and 793 (Full Term Neonate with 
Major Problems); and in MDC 25 (Human Immunodeficiency Virus 
Infections) for MS-DRGs 974, 975, and 976 (HIV with Major Related 
Condition with MCC, with CC, and without CC/MCC, respectively). We note 
that these are the same MDC and MS-DRG assignments that were applied at 
the time diagnosis code U07.1 was implemented, effective April 1, 2020, 
as discussed in section II.D.16. of the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32559). In response to the commenter's recommendation that 
CMS account for changes in best practices and medications used for the 
treatment of COVID-19 with respect to providing additional payment 
options and flexibilities to limit financial risk to hospitals, we note 
that we have developed several resources in the form of a Coronavirus 
(COVID-19) Partner Toolkit available at the following CMS webpage: 
https://www.cms.gov/outreach-education/partner-resources/coronavirus-covid-19-partner-toolkit for various providers with respect to the 
COVID-19 public health emergency. Specifically, on that CMS webpage 
under the section titled ``If you are in a Care Setting'' there is a 
``Hospitals and

[[Page 58557]]

Healthcare Systems'' list of 20 resource documents that have been made 
publicly available.
    Comment: Several commenters expressed concern regarding the 
proposed NonCC severity level designation for a subset of the new ICD-
10-CM diagnosis codes describing cytokine release syndrome (CRS) as 
displayed in Table 6A--New Diagnosis Codes (associated with the 
proposed rule and available via the internet on the CMS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS). Specifically, the commenters stated diagnosis codes 
D89.833 (Cytokine release syndrome, grade 3), D89.834 (Cytokine release 
syndrome, grade 4), and D89.835 (Cytokine release syndrome, grade 5) 
warrant further consideration. The commenters noted that CRS has 
emerged as an established diagnosis in association with CAR T-cell 
therapy for various cancers, and providers are now seeing this syndrome 
in patients who present with COVID-19. The commenters requested CMS 
reconsider how the diagnosis codes describing CRS are designated within 
the ICD-10 MS-DRGs.
    Some commenters suggested that the American Society for 
Transplantation and Cellular Therapy (ASTCT) CRS Grading system be 
examined in review of potential CC and MCC designations for the CRS 
diagnosis codes. Other commenters stated that based on the ASTCT CRS 
Grading system, the CRS diagnosis codes describing grades 3, 4, and 5 
appear to satisfy many of the CMS guiding principles discussed in the 
FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32550). A commenter 
recommended that severity level assignments for the various grades of 
CRS could be used as a test case for these new guiding principles. 
According to the commenter, the guiding principles as described in the 
proposed rule do not indicate that a required threshold for the number 
of cases for Medicare patients be attained before an analysis of the 
severity level assignment occurs. The commenter stated that based on 
the ASTCT CRS Grading system, grades 3, 4 and 5 meet the criteria for 7 
of the 9 proposed guiding principles. The commenter provided the 
following information for CMS' consideration.
[GRAPHIC] [TIFF OMITTED] TR18SE20.106

    This same commenter also suggested that CMS consider expanding the 
logic for the CRS diagnosis codes to include patients diagnosed with 
COVID-19. The commenter reported that based on current academic 
literature, CRS is a common occurrence and a focus of treatment in 
patients presenting with advanced COVID-19. According to the commenter, 
the presence of CRS in the COVID-19 population also indicates that the 
new CRS diagnosis codes meet the 4th guiding principle of ``marker for 
advanced disease states across multiple different comorbid 
conditions.''
    Another commenter urged CMS to assign the CRS diagnosis codes 
identified as Grades 3, 4, and 5 (D89.833, D89.834, and D89.835, 
respectively) as a MCC and to assign the CRS diagnosis code identified 
as Grade 2, D89.832 (Cytokine release syndrome, grade 2) as a CC based 
on clinical significance. The commenter agreed with the proposed NonCC 
designation for the CRS diagnosis code identified as Grade 1, D89.831 
(Cytokine release syndrome, grade 1) until additional data is available 
for analysis and consideration.
    A commenter noted that for Table 6A--New Diagnosis Codes, 
associated with the proposed rule, that the proposed MDC for the new 
CRS diagnosis codes is MDC 16 (Diseases and Disorders of Blood, Blood 
Forming Organs, Immunologic Disorders) and the proposed MS-DRGs are 
814, 815, and 816 (Reticuloendothelial and Immunity Disorders with MCC, 
with CC, and without CC/MCC, respectively). The commenter stated that 
since the CRS diagnosis codes were proposed as NonCC it understood this 
to equate to the CRS diagnosis codes being assigned to MS-DRG 816. The 
commenter disagreed with the proposed severity levels for the CRS 
diagnosis codes and recommended CMS consider revising. According to the 
commenter, CRS is the most common complication of Immune Effector Cell 
(IEC) therapy as described in the ASTCT's Consensus Grading

[[Page 58558]]

paper.\1\ Symptoms can be progressive, include fever at the onset, and 
may include hypotension, hypoxia, and end organ dysfunction. The 
commenter noted that patients with CRS grade 3 require treatment for 
hypotension and hypoxia and patients with CRS grade 4 experience 
hypoxia requiring treatment, are hemodynamically unstable, and have 
capillary leak which can lead to pulmonary edema and ventilation 
impairment and may require mechanical ventilation. Lastly, the 
commenter noted CRS grade 5 is defined as ``death due to CRS,'' and 
suggested this condition be considered a MCC. In addition, the 
commenter compared the APR-DRG Grouper severity levels, as described in 
the FY 2008 IPPS/LTCH PPS final rule (72 FR 47158) to inform how CMS 
should assign CC/MCC designations for the new CRS codes. For example, 
the commenter suggested diagnosis code D89.831 (Cytokine release 
syndrome, grade (1) should be designated as NonCC; diagnosis code 
D86.832 (Cytokine release syndrome, grade (2) should be designated as 
CC; diagnosis code D89.833 (Cytokine release syndrome, grade (3) should 
be designated as MCC; diagnosis code D89.834 (Cytokine release 
syndrome, grade (4) should be designated as MCC; diagnosis code D89.835 
(Cytokine release syndrome, grade (5) should be designated as MCC; and 
diagnosis code D89.839 (Cytokine release syndrome, grade unspecified) 
should be designated as NonCC.
---------------------------------------------------------------------------

    \1\ ASTCT Consensus Grading for Cytokine Release Syndrome and 
Neurologic Toxicity Associated with Immune Effector Cells. Lee, 
Daniel W. et al. Biology of Blood and Marrow Transplantation, Volume 
25, Issue 4, 625-638.
---------------------------------------------------------------------------

    Similar to comments discussed earlier in this section, this 
commenter also stated that when applying CMS' guiding principles as 
described in the proposed rule for severity level assignments, many of 
them are applicable to the new CRS diagnosis codes. The commenter 
provided the following table for CMS' consideration and review which 
also included recommended MS-DRG assignments.
[GRAPHIC] [TIFF OMITTED] TR18SE20.107


[[Page 58559]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.108

    The commenter also noted that coding guidelines instruct the CRS 
diagnosis codes to be sequenced as a secondary diagnosis with a 
complication code (T code) sequenced first when CRS is a complication 
due to a procedure. The commenter expressed concern regarding how CRS 
cases will group into MS-DRGs 814, 815, and 816 as proposed by CMS 
since sequencing a T code as the principal diagnosis results in a 
different MS-DRG assignment. The commenter suggested CMS consider 
revising the Grouper logic, proposing different MS-DRGs for CRS and 
allow for public comment, or urging NCHS to change the coding 
instruction at subcategory D89.83 to allow only for diagnosis code 
T80.90XA (Unspecified complication following infusion and therapeutic 
injection) to be reported first since it would group to MS-DRGs 814, 
815, and 816. The commenter also urged CMS to request that the NCHS and 
the AHA publish clear coding guidance to eliminate any confusion about 
the appropriate T code to report for CRS due to CAR T-cell therapy.
    Another commenter also recommended that CMS assign the new CRS 
diagnosis codes to CC and MCC MS-DRGs within the MS-DRG 814, 815, and 
816 series. The commenter stated their belief that several of the CMS 
guiding principles described in the proposed rule provide sufficient 
rationale for such assignments. The commenter also stated that once 
information regarding the CRS codes becomes available in the claims 
data, CMS can re-evaluate MS-DRG assignments.
    Response: Consistent with our annual process of assigning new 
diagnosis codes to MDCs, MS-DRGs, and designating a severity level 
(MCC, CC or NonCC), we reviewed the predecessor diagnosis code 
assignment for CRS. The predecessor code for CRS is diagnosis code 
D89.89 (Other specified disorders involving the immune mechanism, not 
elsewhere classified) which is designated as a NonCC, therefore our 
proposed severity level designation for each of the CRS codes was also 
a NonCC. After consideration of the commenters' concerns regarding the 
proposed severity level designations for the new ICD-10-CM diagnosis 
codes describing cytokine release syndrome (hereafter referred to as 
``CRS codes'') as displayed in Table 6A--New Diagnosis Codes, 
associated with proposed rule, we agree that the CRS codes warrant 
further consideration.
    Upon further review and consideration, our clinical advisors 
believe a CC severity level for CRS codes identified as grade 3, 4, or 
5 would be warranted since these patients may require additional 
resources and treatment including intensive monitoring, blood pressure 
support, oxygen or mechanical ventilation, that are above and beyond 
the resources required for patients with CRS identified as a grade 1, 
2, or an unspecified grade. Our clinical advisors continue to believe 
that CRS codes with a grade 1, 2, or an unspecified grade do not 
warrant the CC severity level.
    Our clinical advisors also acknowledged the commenters' 
recommendations to review the American Society for Transplantation and 
Cellular Therapy (ASTCT) CRS Grading system to reassess potential CC 
and MCC designations for the CRS codes and consider how the CMS guiding 
principles discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32550) could be applied as a test case for the various grades of the 
CRS codes. As noted previously, we applied our established process in 
proposing severity level assignments for these codes and the other new 
diagnosis codes for FY 2021. We also note that the guiding principles 
continue to be under development as we consider the public comments 
received, as discussed in section II.E.12.c. of the preamble of this 
final rule. We further note that with respect to proposing severity 
level assignments for new diagnosis codes in the future, we anticipate 
continuing our current process of first reviewing the predecessor code 
assignment, followed by review and consideration of the guiding 
principles that may be applied, in future rulemaking.
    We note that while our clinical advisors do not dispute the 
commenters' assessments that the CRS codes would appear to meet most of 
the guiding principles, they also noted, as discussed previously, that 
a distinction between

[[Page 58560]]

assigning the codes as a CC versus a MCC cannot be made based on the 
fact that they appear to meet several of the guiding principles nor can 
assignment of a secondary diagnosis be based on whether the code meets 
1 or 2 principles or meets 7 or 8 of the principles. Our clinical 
advisors maintain that generally, the proposed severity level 
ultimately depends on clinical judgement and, where the data is 
available, the empirical analysis of the additional resources 
associated with the secondary diagnosis. The impact of the secondary 
diagnosis is dependent on the principal diagnosis reported, with which 
it is associated. If the secondary diagnosis is reported primarily with 
a principal diagnosis that reflects serious illness with treatment 
complexity, then the marginal contribution of the secondary diagnosis 
to the overall resource use may actually be relatively small. The CRS 
codes initially appeared to fall into this category, since it occurs in 
patients who are quite ill to begin with, the ``grading'' definitions 
have varied among organizations, and it has evolved over time. However, 
for the reasons noted, and after further consideration, we believe that 
a CC severity level for CRS codes identified as grade 3, 4, or 5 is 
warranted. We will continue to monitor the CRS codes and their impact 
on resource use once the claims data becomes available to determine if 
further modifications to the severity level are warranted.
    In response to the commenter who expressed concern regarding how 
CRS cases will group into MS-DRGs 814, 815, and 816 as proposed by CMS 
(since sequencing certain T codes as the principal diagnosis results in 
a different MS-DRG assignment), we note that after notification and 
consideration of the concerns involving the proposed Tabular List 
instructions for the CRS codes were brought to its attention, the CDC/
NCHS updated and finalized the Tabular instruction for the CRS codes. 
As noted in section II.E.16. of the preamble of this final rule, the 
CDC/NCHS has lead responsibility for the diagnosis codes and CMS has 
lead responsibility for the ICD-10-PCS procedure codes. The finalized 
changes effective FY 2021 include updates to the diagnosis codes 
instructed to be sequenced first, followed by the applicable CRS code 
as follows:

D89.83 Cytokine release syndrome

    Code first underlying cause, such as:

Complications following infusion, transfusion and therapeutic injection 
(T80.89-)
complications of transplanted organs and tissue (T86.-)
Use additional code to identify associated manifestations
D89.831 Cytokine release syndrome, grade 1
D89.832 Cytokine release syndrome, grade 2
D89.833 Cytokine release syndrome, grade 3
D89.834 Cytokine release syndrome, grade 4
D89.835 Cytokine release syndrome, grade 5
D89.839 Cytokine release syndrome, grade unspecified

    As a result, CMS considered modifications to the GROUPER logic to 
allow cases reporting diagnosis code T80.89XA (Other complications 
following infusion, transfusion and therapeutic injection) as the 
principal diagnosis with any one of the CRS codes as a secondary 
diagnosis to group to MS-DRGs 814, 815, and 816. We note that diagnosis 
code T80.90XA (Unspecified complication following infusion and 
therapeutic injection) as the commenter suggested would not be 
appropriate to report as the principal diagnosis for these cases since 
the code descriptor refers to an ``unspecified complication'' and the 
complication is specified as CRS. In response to the commenter's 
suggestion that CMS request the NCHS and the AHA publish clear coding 
guidance to eliminate any confusion about the appropriate T code to 
report for CRS due to CAR T-cell therapy, we note that it is standard 
practice for the AHA to publish coding guidance for the annual 
diagnosis and procedure code updates in the AHA's Coding Clinic for 
ICD-10-CM and ICD-10-PCS 4th Quarter publication each year.
    With respect to the commenter who recommended that CMS assign the 
new CRS diagnosis codes to CC and MCC MS-DRGs within the MS-DRG 814, 
815, and 816 series, we note that whenever there are new diagnosis 
codes finalized, the first step for incorporating the new diagnosis 
code into the logic of the ICD-10 MS-DRGs is to assign the diagnosis 
code to the appropriate MDC. The next step is to determine if and how 
the diagnosis code may define the logic for a specific MS-DRG 
assignment. For example, the diagnosis may be listed as principal or as 
any one of the secondary diagnoses, as a secondary diagnosis, or only 
as a secondary diagnosis as noted in more detail below.
     Principal or secondary diagnoses. Indicates that a 
specific set of diagnoses are used in the definition of the MS-DRG. The 
diagnoses may be listed as principal or as any one of the secondary 
diagnoses. A special case of this condition is MS-DRG 008 in which two 
diagnoses (for example, renal and diabetic) must both be present 
somewhere in the list of diagnoses in order to be assigned to MS-DRG 
008.
     Secondary diagnoses. Indicates that a specific set of 
secondary diagnoses are used in the definition of the MS-DRG. For 
example, a secondary diagnosis of acute leukemia with chemotherapy is 
used to define MS-DRG 839.
     Only secondary diagnoses. Indicates that in order to be 
assigned to the specified MS-DRG no secondary diagnoses other than 
those in the specified list may appear on the patient's record. For 
example, in order to be assigned to MS-DRG 795, only secondary 
diagnoses from the specified list may appear on the patient's record.
    As discussed earlier in this section, modifications to the GROUPER 
logic were made to allow cases reporting diagnosis code T80.89XA (Other 
complications following infusion, transfusion and therapeutic 
injection) as the principal diagnosis with any one of the CRS codes as 
a secondary diagnosis to group to MS-DRGs 814, 815, and 816. We note 
that whenever there is a secondary diagnosis component to the MS-DRG 
logic, the diagnosis code can either be used in the logic for 
assignment to the MS-DRG or to act as a CC/MCC. For this specific 
scenario, the CRS codes, as secondary diagnoses, are being used in the 
definition of the logic for assignment to MS-DRGs 814, 815, and 816, 
similar to the example described above, where a secondary diagnosis of 
acute leukemia with chemotherapy is used to define MS-DRG 839.
    In response to the commenter that suggested CMS consider expanding 
the logic for the CRS diagnosis codes to include patients diagnosed 
with COVID-19, we note that for cases where CRS is present in a patient 
diagnosed with COVID-19, depending on the circumstances of the 
admission, the COVID-19 would be reported as the principal diagnosis 
and the appropriate CRS code would be reported as a secondary 
diagnosis. In this scenario, the case would group to a MS-DRG under MDC 
04 (Diseases and Disorders of the Respiratory System) because that is 
where diagnosis code U07.1, (COVID-19) is assigned. Therefore, we do 
not agree that it is necessary to create specific logic for these 
patients.
    After consideration of the public comments received, and for the 
reasons previously discussed, for FY 2021, we are modifying our 
proposed severity level designations for a subset of the CRS codes as 
shown in Table 6A--New Diagnosis Codes, associated with this

[[Page 58561]]

final rule, and displayed in the table below.
[GRAPHIC] [TIFF OMITTED] TR18SE20.109

    We are also finalizing modifications to the ICD-10 MS-DRG GROUPER 
logic V38 for MS-DRGs 814, 815, and 816. Effective with discharges on 
and after October 1, 2020 (FY 2021), the logic for case assignment to 
MS-DRGs 814, 815, and 816 will include a principal diagnosis of 
T89.89XA with a secondary diagnosis of any CRS code as noted below.
Principal Diagnosis
T80.89XA Other complications following infusion, transfusion and 
therapeutic injection, initial encounter

with
Secondary Diagnosis
D89.831 Cytokine release syndrome, grade 1
D89.832 Cytokine release syndrome, grade 2
D89.833 Cytokine release syndrome, grade 3
D89.834 Cytokine release syndrome, grade 4
D89.835 Cytokine release syndrome, grade 5
D89.839 Cytokine release syndrome, grade unspecified

    Comment: Several commenters requested that CMS consider higher 
reimbursement for the performance of ultrasound accelerated 
thrombolysis procedures utilizing the EKOSTM device. 
Specifically, the commenters recommended that ultrasound accelerated 
thrombolysis procedures performed with the EKOSTM device for 
the treatment of pulmonary embolism (PE) should be assigned to MS-DRGs 
163, 164, and 165 (Major Chest Procedures with MCC, with CC, and 
without CC/MCC, respectively) versus MS-DRGs 166, 167, and 168 (Other 
Respiratory System O.R. Procedures with MCC, with CC, and without CC/
MCC, respectively), and ultrasound accelerated thrombolysis procedures 
performed with the EKOSTM device for the treatment of deep 
venous thrombosis (DVT) should be assigned to MS-DRGs 270, 271, and 272 
(Other Major Cardiovascular Procedures with MCC, with CC, and without 
CC/MCC, respectively) versus MS-DRGs 252, 253, and 254 (Other Vascular 
Procedures with MCC, with CC, and without CC/MCC, respectively), as 
proposed in Table 6B--New Procedure Codes associated with the proposed 
rule, regardless of a physician's clinical decision to use a device 
that removes matter or a device that fragments matter using ultrasound 
accelerated thrombolysis. Some commenters asserted that unique devices 
that remove matter, known as extirpating devices, are very similar to 
the EKOSTM device in the performance of an ultrasound 
accelerated thrombolysis procedure to treat PE or DVT. The commenters 
stated the difference is that these extirpating devices, specifically 
the FlowTriever[supreg] and ClotTriever[supreg] (Inari Medical, Inc) 
and the Indigo[supreg] System (Penumbra), remove matter and the 
EKOSTM device (Boston Scientific), fragments matter with the 
use of thrombolytics and ultrasonic assistance.
    A commenter stated its belief that:

    A. Percutaneous ultrasonic fragmentation and extirpation are 
both catheter-based procedures that address solid matter in a body 
part;
    B. Percutaneous ultrasonic fragmentation is similar to other 
procedures in the requested MS-DRGs;
    C. Both fragmentation and extirpation procedures were evaluated 
using similar PE pivotal trial designs and have similar efficacy 
results;
    D. Both types of procedures have similar overall hospital 
resource utilization;
    E. Medicare cost data do not reflect EKOSTM cost; and
    F. Medicare precedent exists for assignment of new codes to 
higher paying groups.

    Below we provide the commenters' summaries for each of the 
statements listed above which also reflect similar statements or 
sentiments submitted by several of the other commenters.
A. Percutaneous Ultrasonic Fragmentation and Extirpation are Both 
Catheter-Based Procedures That Address Solid Matter in a Body Part
    According to the commenter, clot reduction using percutaneous 
ultrasonic fragmentation is similar to extirpation in many respects. 
The commenter stated these technologies all use percutaneous 
approaches, all treat serious PE, all reduce thrombus burden and all 
treat patients in the inpatient hospital setting with intensive care 
unit (ICU) care. The commenter provided the following table for 
comparison of the different technologies.

[[Page 58562]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.110

    The commenter stated that similarly, procedures using percutaneous 
clot reduction devices for peripheral vascular (PV) procedures exhibit 
many key similarities. All use percutaneous approaches, all manage PV 
thromboemboli, all reduce thrombus burden, and all involve inpatient 
hospital admission with ICU care. The commenter provided the following 
table for comparison.
[GRAPHIC] [TIFF OMITTED] TR18SE20.111

B. Percutaneous Ultrasonic Fragmentation Is Similar to Procedures in 
the Requested MS-DRGs
    According to the commenter, for PE, percutaneous ultrasonic 
fragmentation procedures are clinically similar to procedures that are 
assigned to MS-DRGs 163, 164, and 165. The commenter stated that both 
extirpation codes and percutaneous ultrasonic fragmentation codes are 
reporting services that are intended to reduce clot burden, addressing 
matter in the body. The commenter provided the following list of 
procedure codes describing extirpation of matter from pulmonary 
structures that are currently assigned to MS-DRGs 163, 164, and 165 
that it stated are clinically similar to percutaneous ultrasonic 
fragmentation procedures for PE.
[GRAPHIC] [TIFF OMITTED] TR18SE20.112

    Alternatively, the commenter stated that PE percutaneous ultrasonic 
fragmentation procedures are not clinically similar to other procedures 
assigned to MS-DRGs 166, 167, and 168. According to the commenter, 
percutaneous ultrasonic fragmentation is unlike the other percutaneous 
procedure codes assigned to these MS-DRGs and even opposite to some. 
The commenter noted an example of how occlusion procedures stop flow, 
while percutaneous ultrasonic fragmentation restore flow. The commenter 
provided the following list of procedure codes describing occlusion and 
repair of pulmonary structures that are currently assigned to MS-DRGs 
166, 167, and 168 that it stated are not clinically similar to 
percutaneous ultrasonic fragmentation procedures for a PE.

[[Page 58563]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.113

[GRAPHIC] [TIFF OMITTED] TR18SE20.114

    In addition, the commenter stated that for PV procedures, 
percutaneous ultrasonic fragmentation procedures are clinically similar 
to procedures in MS-DRGs 270, 271, and 272. The commenter reiterated 
that both extirpation codes and fragmentation codes identify services 
that are intended to reduce clot burden, addressing matter in the body. 
The commenter provided the following list of procedure codes describing 
extirpation of matter from PV structures that are currently assigned to 
MS-DRGs 270, 271, and 272 it stated are clinically similar to 
percutaneous ultrasonic fragmentation procedures for PE.
[GRAPHIC] [TIFF OMITTED] TR18SE20.115

    According to the commenter, as it noted with PE, percutaneous 
ultrasonic fragmentation PV procedures are generally unlike the codes 
and even opposite to some of the other ICD-10-PCS procedures in MS-DRGs 
252, 253, and 254. For example, the commenter stated that percutaneous 
ultrasonic fragmentation is not comparable to dilation, which is the 
root operation for balloon angioplasty or vascular stenting and is 
primarily used to address peripheral artery disease, a condition which 
is very different than thrombotic events. The commenter reported that 
percutaneous ultrasonic fragmentation procedures using the 
EKOSTM device typically involve leaving the 
EKOSTM device in the body for multiple hours and in many 
cases overnight, which allows time for the thrombolytic to break apart 
the thrombus with ultrasonic assistance. The commenter noted the 
duration of angioplasty or stenting procedures are typically measured 
in minutes, rather than in hours. The commenter also noted that 
percutaneous ultrasonic fragmentation procedures are not similar to 
release procedures such as a carpal tunnel release procedure, which 
usually takes around ten minutes and involves cutting the carpal 
ligament. Conversely, percutaneous ultrasonic fragmentation catheters 
typically remain in the patient's body for multiple hours or

[[Page 58564]]

overnight and do not cut ligaments, according to the commenter. The 
commenter provided the following list of procedure codes describing 
dilation (angioplasty) and release of PV structures that are currently 
assigned to MS-DRGs 252, 253, and 254 that it stated are not clinically 
similar to percutaneous ultrasonic fragmentation procedures for a PV 
procedure.
[GRAPHIC] [TIFF OMITTED] TR18SE20.116

[GRAPHIC] [TIFF OMITTED] TR18SE20.117

C. Similar PE Pivotal Trial Designs and Efficacy Results
    The commenter stated that pivotal clinical studies for the 
treatment of PE with percutaneous ultrasonic fragmentation using 
EKOSTM and for extirpation using comparable devices are 
consistent, with all designed using the same primary outcome measure. 
According to the commenter, the design of pivotal studies for the 
extirpating devices (FLARE and EXTRACT-PE) closely mirrors that of the 
EKOSTM PE study, SEATTLE II. The commenter provided a table 
of device comparisons that were used in the three pivotal clinical 
trials to assess treatment of PE followed by another table to 
illustrate its findings.
    The commenter stated that the FLARE and EXTRACT-PE trials have 
nearly identical primary outcome measures and comparable results to 
that of the EKOSTM device SEATTLE II study, further 
validating the clinical similarity between the EKOSTM device 
and the comparable extirpating devices. According to the commenter, 
mirroring the EKOSTM SEATTLE II study design validates 
comparability of patients and procedures. The commenter asserted that 
percutaneous ultrasonic fragmentation procedures with the 
EKOSTM device have comparable, and in some cases even 
greater, use of hospital resources than extirpation procedures, with a 
longer length of stay in the SEATTLE II study than extirpation 
procedures in the FLARE study, with multi-day confidence intervals.
D. Similar Hospital Resource Utilization
    The commenter stated that the SEATTLE II pivotal trial demonstrated 
an average length of stay of 8.8  5 days for percutaneous 
ultrasonic fragmentation procedures with the EKOS\TM\ device and the 
FLARE pivotal trial showed the hospital average length of stay of 4.1 
 3.5 days for the FlowTriever[supreg] device. The commenter 
also stated that an analysis of MedPAR

[[Page 58565]]

claims for extirpating PE admissions showed a geometric mean length of 
stay similar to the FLARE study, with length of stay ranging from 2.9 
to 5.1 days across MS-DRGs 163, 164 and 165. The commenter further 
stated that from a hospital resource utilization perspective, the 
SEATTLE II trial demonstrated that percutaneous ultrasonic 
fragmentation procedures with the EKOS\TM\ device involved a length of 
stay greater than or equal to that of the comparable extirpation 
procedures performed with extirpation devices, given multi-day 
confidence intervals. The commenter provided a table to illustrate its 
findings of extirpation procedures performed for PE across MS-DRGs 163, 
164, and 165.
    The commenter also reported that the cost of the percutaneous 
ultrasonic fragmentation procedure performed with the EKOS\TM\ device 
is highly comparable to the cost of the extirpation procedure performed 
with the Indigo[supreg] System, which is assigned to the higher paying 
MS-DRGs. The commenter provided the following table to illustrate its 
findings of the costs for performing a PE procedure among the different 
devices.
[GRAPHIC] [TIFF OMITTED] TR18SE20.118

    According to the commenter, overall, hospital resource utilization 
is comparable: the length of stay of percutaneous ultrasonic 
fragmentation procedures with the EKOS\TM\ device is at least as great 
as if not longer than comparable extirpation procedures based on the 
SEATTLE II study and Medicare claims data, and device costs are similar 
to the Indigo[supreg] System.
E. Medicare Claims Data Do Not Reflect EKOS\TM\ Cost
    The commenter stated that the EKOS\TM\ device obtained FDA 
indications for PV procedures in July 2008 and for PE in May 2014. The 
commenter noted that there has not been ICD-10 procedure coding 
specific to EKOS\TM\, and the American Hospital Association (AHA) 
recommended a combination of codes to describe the use of EKOS\TM\ in 
PE procedures in late 2014:

 6A750Z7 Ultrasound therapy of vessels, single
 3E06317 Introduction of other thrombolytic into central 
artery, percutaneous approach

The commenter conducted its own analysis for the following ICD-10-PCS 
procedure codes describing the use of ultrasound and the percutaneous 
introduction of thrombolytics and noted they found 544 claims, with 408 
of those assigned to MS-DRG 175 (Pulmonary Embolism with MCC or Acute 
Cor Pulmonale) and 116 of those assigned to MS-DRG 176 (Pulmonary 
Embolism without MCC). According to the commenter, while the AHA coding 
recommendation was helpful, it was unable to provide an accurate 
assessment of volumes and costs.
[GRAPHIC] [TIFF OMITTED] TR18SE20.119

F. Medicare Precedent Exists for Assignment of New Codes to Higher 
Paying Groups
    The commenter stated there is precedent for CMS to use its 
discretion to assign new codes to higher paying groups, such as the 
APCs and MS-DRGs. The commenter provided an example of the 2020 
Outpatient Prospective Payment System (OPPS) Proposed Rule and noted 
that CMS proposed assigning two new procedure codes for describing 
percutaneous creation of AV fistula to a lower level endovascular APC 
and after reviewing comments, CMS decided to reconsider this 
recommendation and ultimately assigned the codes to a higher level 
endovascular APC, as noted in the 2020 OPPS final rule.
    Finally, the commenter provided the following table that identifies 
the procedure codes describing fragmentation of pulmonary and 
peripheral vascular structures and the proposed O.R., MDC, and MS-DRG 
assignments for the codes as shown in

[[Page 58566]]

Table 6B--New Procedure Codes associated with the proposed rule. The 
commenter added a column with its requested MS-DRG assignments, as 
shown in the last column to the right.
BILLING CODE 4120-01-P

[[Page 58567]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.120


[[Page 58568]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.121


[[Page 58569]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.122


[[Page 58570]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.123


[[Page 58571]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.124

BILLING CODE 4120-01-C
    Another commenter indicated it was made aware of comments being 
submitted in response to the FY 2021 IPPS/LTCH PPS proposed rule 
regarding fragmentation codes (04FC3ZZ through 04FY3ZZ). This commenter 
noted that

[[Page 58572]]

in each case, the commenter's request was for CMS to revise the MS-DRG 
assignment of the fragmentation codes listed in the FY 2021 IPPS/LTCH 
PPS proposed rule, from MS-DRGs 252, 253 and 254 to MS-DRGs 270, 271 
and 272, which include extirpation procedures, by stating that 
fragmentation procedures are clinically and economically similar to 
extirpation procedures. The commenter stated it disagreed with the 
comparison provided in these comments and specifically with the comment 
that intravascular lithotripsy (IVL) fragmentation is more like 
extirpation of matter than like other intraluminal balloon-based 
procedures. This commenter further disagreed that fragmentation and 
extirpation are of similar complexity or accomplish the same treatment 
intent in peripheral vascular disease, especially for patients with 
critical limb ischemia. The commenter requested that CMS maintain its 
current proposed assignments of the new ICD-10-PCS codes for IVL 
procedures (04FC3ZZ through 04FY3ZZ) to the MS-DRGs as described in the 
proposed rule, and defer any changes to MS-DRG assignments until such 
time that additional long-term clinical and economic data become 
available to evaluate the new IVL procedures described by these new 
codes.
    Response: We appreciate the commenters' feedback on the proposed 
MS-DRG assignments for the procedure codes that capture ultrasound 
accelerated thrombolysis performed with the EkoSonic\TM\ Endovascular 
System (EKOS\TM\), identified as ultrasonic fragmentation procedures as 
displayed in Table 6B.--New Procedure Codes, associated with the 
proposed rule and available via the internet on the CMS web page: 
(https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS). We refer the reader to the table above for the list 
of ICD-10-PCS procedure codes submitted by a commenter that accurately 
identifies the procedure codes describing fragmentation of pulmonary 
and peripheral vascular structures with ultrasound and the proposed 
O.R., MDC, and MS-DRG assignments as shown in Table 6B--New Procedure 
Codes associated with the proposed rule, that are effective October 1, 
2020 for reporting ultrasound assisted thrombolysis.
    As noted in prior rulemaking (85 FR 32543), for new procedure codes 
that have been finalized through the ICD-10 Coordination and 
Maintenance Committee meeting process and are proposed to be classified 
as O.R. procedures or non-O.R. procedures affecting the MS-DRG, our 
clinical advisors recommend the MS-DRG assignment which is then made 
available in association with the proposed rule (Table 6B--New 
Procedure Codes) and subject to public comment. These proposed 
assignments are generally based on the assignment of predecessor codes 
or the assignment of similar codes. Consistent with our established 
process, we examined the MS-DRG assignment for the predecessor codes to 
determine the most appropriate MS-DRG assignment. The predecessor codes 
for the new procedure codes describing fragmentation of pulmonary and 
peripheral vascular structures with ultrasound as shown in the 
September 10, 2019 ICD-10 Coordination and Maintenance Committee 
meeting materials are 6A750Z7 (Ultrasound therapy of other vessels, 
single) and 3E06317 (Introduction of other thrombolytic into central 
artery, percutaneous approach) or 3E05317 (Introduction of other 
thrombolytic into peripheral artery, percutaneous approach). Because 
these procedure codes are designated as non-O.R. they do not impact the 
MS-DRG assignment. Therefore, when any combination of these procedure 
codes is currently reported, case assignment is dependent upon the 
principal diagnosis, any secondary diagnoses, and whether or not any 
other procedures may have been performed and reported on the claim. The 
MS-DRG assignment for cases with a principal diagnosis of PE is 
generally medical MS-DRG 175 (Pulmonary Embolism with MCC or Acute Cor 
Pulmonale) or medical MS-DRG 176 (Pulmonary Embolism without MCC). The 
MS-DRG assignment for cases with a principal diagnosis of DVT is 
generally medical MS-DRG 299, 300, or 301 (Peripheral Vascular 
Disorders with MCC, with CC, and without CC/MCC, respectively). 
Therefore, cases currently reporting the use of ultrasound accelerated 
thrombolysis for PE or DVT would generally be assigned to one of those 
medical MS-DRGs.
    The commenters are correct that there are different types of 
devices available in the treatment of pulmonary embolism (PE) and deep 
venous thrombosis (DVT). The commenters are also correct that some 
devices remove matter (clot, thrombus, etc.) while others fragment 
(break up) matter, with or without the use of thrombolytics. Under the 
ICD-10-PCS procedure classification system there are two root 
operations, extirpation and fragmentation, specifically defined as:

Extirpation: Taking or cutting out solid matter from a body part
Fragmentation: Breaking solid matter in a body part into pieces

that are reported to describe the respective procedure that was 
performed. Because the EKOS\TM\ device fragments matter, procedures 
performed utilizing this device are identified and described by the 
root operation Fragmentation, as shown in the titles of the procedure 
codes listed in the table previously mentioned and discussed above. We 
do not agree that a change in the proposed MS-DRG assignments for the 
procedure codes describing ultrasound assisted thrombolysis with the 
root operation Fragmentation is warranted at this time. We appreciate 
the information provided by the commenters, however, our clinical 
advisors do not believe that the treatment difficulty, resource 
utilization and complexity of service for fragmentation and extirpation 
procedures are similar in the treatment of PE and DVT. In response to 
the commenter's statement that both extirpation codes and percutaneous 
ultrasonic fragmentation codes are reporting services that are intended 
to reduce clot burden, our clinical advisors agree, however, as shown 
above, each of these procedures are defined by clinically distinct 
definitions and objectives, and why there are separate and unique ICD-
10-PCS procedure codes within the classification for reporting 
purposes. Our clinical advisors also do not believe it is appropriate 
to specifically compare the devices being utilized in the performance 
of these distinct procedures in consideration of MS-DRG assignment (as 
the assignment is not related to a new technology add-on payment 
application), rather, the emphasis is on the fragmentation and 
extirpation procedures performed and evaluating the treatment 
difficulty, resource utilization and complexity of service.
    With respect to the commenter's statement that PE percutaneous 
ultrasonic fragmentation procedures are not clinically similar to other 
procedures assigned to MS-DRGs 166, 167, and 168, and PV percutaneous 
ultrasonic fragmentation procedures are not clinically similar to other 
procedures assigned to MS-DRGs 252, 253, and 254, we note that, as 
stated in the ICD-10 MS-DRG Definitions Manual, ``In each MDC there is 
usually a medical and a surgical class referred to as ``other medical 
diseases'' and ``other surgical procedures,'' respectively. The 
``other'' medical and surgical classes are not as precisely defined 
from a clinical perspective. The

[[Page 58573]]

other classes would include diagnoses or procedures which were 
infrequently encountered or not well defined clinically. For example, 
the ``other'' medical class for the Respiratory System MDC would 
contain the diagnoses ``other somatoform disorders'' and ``congenital 
malformation of the respiratory system,'' while the ``other'' surgical 
class for the female reproductive MDC would contain the surgical 
procedures ``excision of liver'' (liver biopsy in ICD-9-CM) and 
``inspection of peritoneal cavity'' (exploratory laparotomy in ICD-9-
CM). The ``other'' surgical category contains surgical procedures 
which, while infrequent, could still reasonably be expected to be 
performed for a patient in the particular MDC. There are, however, also 
patients who receive surgical procedures which are completely unrelated 
to the MDC to which the patient was assigned. An example of such a 
patient would be a patient with a principal diagnosis of pneumonia 
whose only surgical procedure is a destruction of prostate 
(transurethral prostatectomy in ICD-9-CM). Such patients are assigned 
to a surgical class referred to as ``unrelated operating room 
procedures.'' These patients are ultimately never assigned to a well-
defined DRG.'' We further note that MS-DRGs 166, 167, and 168 (Other 
Respiratory System O.R. Procedures with MCC, with CC, and without CC/
MCC, respectively) and MS-DRGs 252, 253, and 254 (Other Vascular 
Procedures with MCC, with CC, and without CC/MCC, respectively) are 
examples of the ``other'' surgical class, therefore it is expected that 
there will be procedures not precisely clinically aligned within the 
definition (logic) of these MS-DRGs.
    We appreciate the commenter's feedback and information pertaining 
to the pivotal trials that have been conducted, however, as stated 
previously, fragmentation and extirpation procedures are clinically 
distinct and separate procedures, uniquely defined within the 
classification, and our clinical advisors do not believe it is 
appropriate to specifically compare the devices being utilized in the 
performance of these distinct procedures with respect to resource 
utilization and in consideration of MS-DRG assignment. As discussed 
earlier in this section, we followed our established process for 
determining the most appropriate MS-DRG assignment for new procedure 
codes.
    We acknowledge the claims analysis conducted by the commenter and 
because the current procedure codes do not uniquely identify and 
describe ultrasound accelerated thrombolysis we concur it is difficult 
to accurately assess the data.
    The ICD-10-CM diagnosis codes that identify pulmonary embolism and 
acute cor pulmonale that are included in the logic for MS-DRGs 175 and 
176 are:
[GRAPHIC] [TIFF OMITTED] TR18SE20.125

    We analyzed claims data from the September 2019 update of the FY 
2019 MedPAR file for cases reporting fragmentation procedures in MS-
DRGs 175 and 176 with a principal diagnosis of PE and procedure codes 
6A750Z7 with 3E06317 to identify the use of fragmentation via 
ultrasound and thrombolytics. Our findings are shown in the following 
table.

[[Page 58574]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.127

    The data demonstrates that the 297 cases reporting a principal 
diagnosis of PE with the use of ultrasound and thrombolytics in MS-DRGs 
175 and 176 (235+62=297) have higher average costs compared to all the 
cases in MS-DRGs 175 and 176 ($21,191 versus $10,515 and $19,035 versus 
$6,268, respectively) and a comparable average length of stay (5.0 days 
versus 5.0 days and 3.8 days versus 3.1 days, respectively).
    The ICD-10-CM diagnosis codes that identify DVT that are included 
in the logic for MS-DRGs 299, 300 and 301 are:
BILLING CODE 4120-01-P

[[Page 58575]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.128


[[Page 58576]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.129


[[Page 58577]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.130

BILLING CODE 4120-01-C
    We also examined claims for cases reporting fragmentation 
procedures in MS-DRGs 299, 300 and 301 with a principal diagnosis of 
DVT and procedure codes 6A750Z7 with 3E06317 to identify the use of 
fragmentation via ultrasound and thrombolytics. Our findings are shown 
in the following table.

[[Page 58578]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.131

    The data demonstrates that the 4 cases reporting a principal 
diagnosis of DVT with the use of ultrasound and thrombolytics in MS-
DRGs 299 and 300 (3+1=4) have higher average costs compared to all the 
cases in MS-DRGs 299 and 300 ($15,942 versus $10,611 and $12,930 versus 
$7,378, respectively) and a comparable average length of stay (3.3 days 
versus 5.2 days and 4.0 days versus 3.9 days, respectively). We note 
that there were no cases found reporting a principal diagnosis of DVT 
with the use of ultrasound and thrombolytics in MS-DRG 301.
    We then analyzed claims data from the September 2019 update of the 
FY 2019 MedPAR data for MS-DRGs 163, 164, and 165 and MS-DRGs 270, 271, 
and 272. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.132

    Overall, the data demonstrates that cases reporting a principal 
diagnosis of PE with ultrasound and thrombolytic (fragmentation) in MS-
DRG 175 have average costs and an average length of stay that are less 
than the average costs and average length of stay of all the cases in 
MS-DRG 163 ($21,191 versus $34,718) and (5.0 days versus 11.6 days). 
The data also demonstrates that cases reporting a principal diagnosis 
of PE with ultrasound and thrombolytic (fragmentation) in MS-DRG 176 
have average costs and an average length of stay that are less than the 
average costs and average length of stay of all the cases in MS-DRG 164 
($19,035 versus $19,120) and (3.8 days versus 5.4 days). We note that 
because MS-DRG 175 is the ``with MCC'' MS-DRG and MS-DRG 176 is the 
``without MCC'' (CC+NonCC) MS-DRG that it's possible a subset of the 62 
cases found reporting a principal diagnosis of PE with ultrasound and 
thrombolytic in MS-DRG 176 did not report a CC and those cases would 
then be compared to MS-DRG 165, however, we were unable to analyze the 
detailed data for the 62 cases.
    The data demonstrates that cases reporting a principal diagnosis of 
DVT with ultrasound and thrombolytic (fragmentation) in MS-DRG 299 have 
average costs and an average length of stay that are less than the 
average costs and average length of stay of all the cases in MS-DRG 270 
($15,942 versus $37,100) and (3.3 days versus 9.4 days). The data also 
demonstrates that cases reporting a principal diagnosis of DVT with 
ultrasound and thrombolytic (fragmentation) in MS-DRG 300 have average 
costs and an average length of stay that are less than the average 
costs and average length of stay of all the cases in MS-DRG 271 
($12,930 versus $28,219) and (4.0 days versus 5.8 days). For these 
reasons, based on the claims analysis, our clinical advisors do not 
support assignment of the new procedure codes describing fragmentation 
via ultrasound accelerated thrombolysis for the treatment of PE to MS-
DRGs 163, 164, and 165 or to MS-DRGs 270, 271, and 272 for the 
treatment of DVT.
    We then analyzed claims data from the September 2019 update of the 
FY 2019 MedPAR data for MS-DRGs 166, 167, and 168 and MS-DRGs 252, 253, 
and 254. Our findings are shown in the following table.

[[Page 58579]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.133

    Overall, the data demonstrates that cases reporting a principal 
diagnosis of PE with ultrasound and thrombolytic (fragmentation) in MS-
DRG 175 have average costs and an average length of stay that are more 
consistent with the average costs and average length of stay of all the 
cases in MS-DRG 166 ($21,191 versus $26,702) and (5.0 days versus 10.3 
days). The data also demonstrates that cases reporting a principal 
diagnosis of PE with ultrasound and thrombolytic (fragmentation) in MS-
DRG 176 have average costs and an average length of stay that are more 
consistent with the average costs and average length of stay of all the 
cases in MS-DRG 167 ($19,035 versus $13,566) and (3.8 days versus 4.9 
days). We note that it's possible that a subset of the 62 cases found 
reporting a principal diagnosis of PE with ultrasound and thrombolytic 
in MS-DRG 176 did not report a CC and those cases would then be 
compared to MS-DRG 168, however, we were unable to analyze the detailed 
data for the 62 cases.
    The data also demonstrates that cases reporting a principal 
diagnosis of DVT with ultrasound and thrombolytic (fragmentation) in 
MS-DRG 299 have average costs and an average length of stay that are 
more consistent with the average costs and average length of stay of 
all the cases in MS-DRG 252 ($15,942 versus $24,369) and (3.3 days 
versus 7.5 days). The data also demonstrates that cases reporting a 
principal diagnosis of DVT with ultrasound and thrombolytic 
(fragmentation) in MS-DRG 300 have average costs and an average length 
of stay that are more consistent with the average costs and average 
length of stay of all the cases in MS-DRG 253 ($12,930 versus $19,316) 
and (4.0 days versus 5.4 days). As previously noted, there were no 
cases found reporting a principal diagnosis of DVT with ultrasound and 
thrombolytic (fragmentation) in MS-DRG 301. For these reasons, our 
clinical advisors stated the claims analysis supports assignment of the 
new procedure codes describing fragmentation via ultrasound accelerated 
thrombolysis for the treatment of PE to MS-DRGs 166, 167, and 168 and 
to MS-DRGs 252, 253, and 254 for the treatment of DVT.
    With respect to the commenter who stated it disagreed with the 
comparison provided in the other comments, specifically for IVL 
fragmentation, we appreciate the commenter's feedback, however, we 
believe that the commenter expressed concerns regarding a different 
subset of procedure codes that are also reported with the root 
operation fragmentation. The procedure codes describing fragmentation 
that are reported to identify an IVL procedure was performed do not 
include the term ``ultrasonic'' that is reported with the 7th digit 
character qualifier value of ``0'' for the ultrasound accelerated 
thrombolysis procedures. Alternatively, the procedure codes describing 
fragmentation that are reported to identify an IVL procedure was 
performed are reported with the 7th digit character qualifier value of 
``Z''.
    After consideration of the public comments we received, and for 
reasons previously discussed, we are finalizing our proposal to assign 
the ultrasound accelerated thrombolysis procedures described by the 
root operation fragmentation and performed for the treatment of PE to 
MS-DRGs 166, 167, and 168 and for the treatment of DVT to MS-DRGs 252, 
253, and 254 as proposed in Table 6B--New Procedure Codes associated 
with the proposed rule, and shown in Table 6B--New Procedure Codes 
associated with this final rule.
    We note that, as stated in prior rule making (84 FR 42148), our 
clinical advisors recognize that MS-DRGs 163, 164, 165, 166, 167, and 
168 may warrant further review and therefore, we plan to begin 
conducting this detailed review beginning with our FY 2022 MS-DRG 
classification analysis of claims data and determine what modifications 
may need to be considered for future rulemaking.
    Comment: A commenter expressed concern that ICD-10-PCS procedure 
code XW0Q316 (Introduction of eladocagene exuparvovec into cranial 
cavity and brain, percutaneous approach, new technology group 6) did 
not have an O.R. procedure status proposed for FY 2021 as displayed in 
Table 6--New Procedure Codes associated with the proposed rule. 
According to the commenter, this new procedure code should have O.R. 
status because it involves traversing the skull in order to place a 
substance within the cranial cavity or brain. The commenter stated that 
the skull must be opened by drilling/cutting a burr hole and that 
although percutaneous (burr hole) procedures are performed through 
smaller openings in the skull than larger open burr hole procedures, 
they nonetheless require drilling through the skull under sterile 
technique with anesthesia for pain control. The commenter also stated 
that specialized equipment for a stereotactic approach, image-guidance 
and/or endoscope is required. Lastly, the commenter reported that other 
percutaneous procedures (including drainages) of the cranial cavities 
and brain have been discussed with CMS and appropriately re-classified 
to OR procedure status.
    Response: We appreciate the commenter's feedback. Consistent with 
our annual process of assigning new procedure codes to MDCs and MS-
DRGs, and designating a procedure as an O.R. or non-O.R. procedure, we 
reviewed the predecessor procedure code assignment. The predecessor 
code for procedure code XW0Q316 is procedure code 3E0Q3GC (Introduction 
of other therapeutic substance into cranial cavity and brain, 
percutaneous approach) which is designated as a non-O.R. procedure. In 
the absence of claims data, our clinical advisors also considered the 
indication for the specific procedure being described by the new 
procedure code, the treatment difficulty, and the resources utilized. 
Upon review, our clinical advisors do not believe that a change in the 
O.R. status for this procedure is warranted at this time.

[[Page 58580]]

    After consideration of the comment we received, we are finalizing 
our proposal to designate procedure code XW0Q316 as non-O.R. for FY 
2021. As claims data becomes available for this procedure we can 
reevaluate for future rule making.
    We are making available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
the following tables associated with this final rule:
     Table 6A--New Diagnosis Codes-FY 2021;
     Table 6B--New Procedure Codes-FY 2021;
     Table 6C--Invalid Diagnosis Codes-FY 2021;
     Table 6E--Revised Diagnosis Code Titles-FY 2021;
     Table 6G.1--Secondary Diagnosis Order Additions to the CC 
Exclusions List-FY 2021;
     Table 6G.2--Principal Diagnosis Order Additions to the CC 
Exclusions List-FY 2021;
     Table 6H.1--Secondary Diagnosis Order Deletions to the CC 
Exclusions List-FY 2021;
     Table 6H.2--Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2021;
     Table 6I--Complete MCC List-FY 2021;
     Table 6I.1--Additions to the MCC List-FY 2021;
     Table 6I.2-Deletions to the MCC List-FY 2021;
     Table 6J--Complete CC List -FY 2021;
     Table 6J.1--Additions to the CC List-FY 2021;
     Table 6J.2--Deletions to the CC List -FY 2021; and
     Table 6K--Complete List of CC Exclusions -FY 2021.14. 
Changes to the Medicare Code Editor (MCE)
    The Medicare Code Editor (MCE) is a software program that detects 
and reports errors in the coding of Medicare claims data. Patient 
diagnoses, procedure(s), and demographic information are entered into 
the Medicare claims processing systems and are subjected to a series of 
automated screens. The MCE screens are designed to identify cases that 
require further review before classification into an MS-DRG.
    As discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42156), 
we made available the FY 2020 ICD-10 MCE Version 37 manual file. The 
manual contains the definitions of the Medicare code edits, including a 
description of each coding edit with the corresponding diagnosis and 
procedure code edit lists. The link to this MCE manual file, along with 
the link to the mainframe and computer software for the MCE Version 37 
(and ICD-10 MS-DRGs) are posted on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we addressed the MCE 
requests we received by the November 1, 2019 deadline. We also 
discussed the proposals we were making based on internal review and 
analysis. In this FY 2021 IPPS/LTCH PPS final rule, we present a 
summation of the comments we received in response to the MCE requests 
and proposals presented based on internal reviews and analyses in the 
proposed rule, our responses to those comments, and our finalized 
policies.
    In addition, as a result of new and modified code updates approved 
after the annual spring ICD-10 Coordination and Maintenance Committee 
meeting, we routinely make changes to the MCE. In the past, in both the 
IPPS proposed and final rules, we have only provided the list of 
changes to the MCE that were brought to our attention after the prior 
year's final rule. We historically have not listed the changes we have 
made to the MCE as a result of the new and modified codes approved 
after the annual spring ICD-10 Coordination and Maintenance Committee 
meeting. These changes are approved too late in the rulemaking schedule 
for inclusion in the proposed rule. Furthermore, although our MCE 
policies have been described in our proposed and final rules, we have 
not provided the detail of each new or modified diagnosis and procedure 
code edit in the final rule. However, we make available the finalized 
Definitions of Medicare Code Edits (MCE) file. Therefore, we are making 
available the FY 2021 ICD-10 MCE Version 38 Manual file, along with the 
link to the mainframe and computer software for the MCE Version 38 (and 
ICD-10 MS-DRGs), on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
a. Age Conflict Edit
    In the MCE, the Age conflict edit exists to detect inconsistencies 
between a patient's age and any diagnosis on the patient's record; for 
example, a 5-year-old patient with benign prostatic hypertrophy or a 
78-year-old patient coded with a delivery. In these cases, the 
diagnosis is clinically and virtually impossible for a patient of the 
stated age. Therefore, either the diagnosis or the age is presumed to 
be incorrect. Currently, in the MCE, the following four age diagnosis 
categories appear under the Age conflict edit and are listed in the 
manual and written in the software program:
     Perinatal/Newborn--Age 0 years only; a subset of diagnoses 
which will only occur during the perinatal or newborn period of age 0 
(for example, tetanus neonatorum, health examination for newborn under 
8 days old).
     Pediatric--Age is 0-17 years inclusive (for example, 
Reye's syndrome, routine child health exam).
     Maternity--Age range is 9-64 years inclusive (for example, 
diabetes in pregnancy, antepartum pulmonary complication).
     Adult--Age range is 15-124 years inclusive (for example, 
senile delirium, mature cataract).
(1) Maternity Diagnoses
    Under the ICD-10 MCE, the Maternity diagnoses category for the Age 
conflict edit considers the age range of 9 to 64 years inclusive. For 
that reason, the diagnosis codes on this Age conflict edit list would 
be expected to apply to conditions or disorders specific to that age 
group only.
    As discussed in section II.D.13. of the preamble of the proposed 
rule and section II.E.13. of this final rule, Table 6A.--New Diagnosis 
Codes, lists the diagnosis codes that have been approved to date which 
will be effective with discharges on and after October 1, 2020. We 
proposed to add the following new ICD-10-CM diagnosis codes listed in 
this section of this rule to the Maternity diagnoses category code list 
under the Age conflict edit.

[[Page 58581]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.134

    In addition, as discussed in section II.D.13. of the preamble of 
the proposed rule and section II.E.13. of this final rule, Table 6C.--
Invalid Diagnosis Codes, lists the diagnosis codes that are no longer 
effective October 1, 2020. Included in this table is ICD-10-CM 
diagnosis code O99.89 (Other specified diseases and conditions 
complicating pregnancy, childbirth and the puerperium) which is 
currently listed on the Maternity diagnoses category code list under 
the Age Conflict edit. We proposed to remove this code from the 
Maternity diagnoses category code list.
    Comment: Commenters agreed with CMS' proposal to add the diagnosis 
codes listed in the previous table to the Maternity diagnoses category 
code list under the Age conflict edit. Commenters also agreed to remove 
ICD-10-CM diagnosis code O99.89 (Other specified diseases and 
conditions complicating pregnancy, childbirth and the puerperium) from 
the Maternity diagnoses category edit code list under the Age Conflict 
edit since it is no longer a valid code effective October 1, 2020.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the diagnosis codes listed in the 
previous table to the Maternity diagnoses category edit code list and 
our proposal to remove ICD-10-CM diagnosis code O99.89 from the 
Maternity diagnoses category edit code list under the ICD-10 MCE 
Version 38, effective October 1, 2020.
(2) Adult Diagnoses
    Under the ICD-10 MCE, the Adult diagnoses category for the Age 
conflict edit considers the age range of 15 to 124 years inclusive. For 
that reason, the diagnosis codes on this Age conflict edit list would 
be expected to apply to conditions or disorders specific to that age 
group only.
    As discussed in section II.D.13. of the preamble of the proposed 
rule and section II.E.13. of this final rule, Table 6A.--New Diagnosis 
Codes, lists the diagnosis codes that have been approved to date which 
will be effective with discharges on and after October 1, 2020. We 
proposed to add the following new ICD-10-CM diagnosis codes to the 
Adult diagnoses category code list under the Age conflict edit.
[GRAPHIC] [TIFF OMITTED] TR18SE20.135

    Comment: Commenters supported the proposal to add the diagnosis 
codes listed in the previous table to the Adult diagnoses category code 
list under the Age conflict edit.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the diagnosis codes listed in the 
previous table to the Adult diagnoses category edit code list under the 
ICD-10 MCE Version 38, effective October 1, 2020.
b. Sex Conflict Edit
    In the MCE, the Sex conflict edit detects inconsistencies between a 
patient's sex and any diagnosis or procedure on the patient's record; 
for example, a male patient with cervical cancer (diagnosis) or a 
female patient with a prostatectomy (procedure). In both instances, the 
indicated diagnosis or the procedure conflicts with the stated sex of 
the patient. Therefore, the patient's diagnosis, procedure, or sex is 
presumed to be incorrect.
(1) Diagnoses for Females Only Edit
    As discussed in section II.D.13. of the preamble of the proposed 
rule and section II.E.13. of this final rule, Table 6A.--New Diagnosis 
Codes, lists the new diagnosis codes that have been approved to date 
which will be effective

[[Page 58582]]

with discharges on and after October 1, 2020. We proposed to add the 
following new ICD-10-CM diagnosis codes listed in this section of this 
rule to the edit code list for the Diagnoses for Females Only edit.
[GRAPHIC] [TIFF OMITTED] TR18SE20.136

    In addition, as discussed in section II.D.13. of the preamble of 
the proposed rule and section II.E.13. of this final rule, Table 6C.--
Invalid Diagnosis Codes, lists the diagnosis codes that are no longer 
effective October 1, 2020. Included in this table are ICD-10-CM 
diagnosis code O99.89 (Other specified diseases and conditions 
complicating pregnancy, childbirth and the puerperium) and ICD-10-CM 
diagnosis code Q51.20 (Other doubling of uterus, unspecified) which are 
currently listed on the Diagnoses for Females Only edit code list. We 
proposed to delete these codes from the Diagnoses for Females Only edit 
code list.
    Comment: Commenters supported the proposal to add the ICD-10-CM 
diagnosis codes listed in the previous table to the Diagnoses for 
Females Only edit code list and to remove ICD-10-CM diagnosis codes 
O99.89 and Q51.20 from the list of diagnosis codes for the Diagnoses 
for Females Only edit code list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to add the diagnosis codes displayed in the 
previous table to the Diagnoses for Females Only edit code list and our 
proposal to remove ICD-10-CM diagnosis code O99.89 and Q51.20 from the 
Diagnoses for Females Only edit code list under the ICD-10 MCE Version 
38, effective October 1, 2020.
(2) Procedures for Females Only Edit
    As discussed in section II.D.13. of the preamble of the proposed 
rule and section II.E.13. of this final rule, Table 6B--New Procedure 
Codes, lists the new procedure codes that have been approved to date 
which will be effective with discharges on and after October 1, 2020. 
We proposed to add the following new ICD-10-PCS procedure codes listed 
in this section of this rule to the edit code list for the Procedures 
for Females Only edit.
[GRAPHIC] [TIFF OMITTED] TR18SE20.137

    Comments: Commenters supported our proposal to add the ICD-10-PCS 
procedure codes listed in the previous table to the edit code list for 
the Procedures for Females Only edit.
    Response: We thank the commenters for their support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to add the ICD-10-PCS procedure codes listed in 
the previous table to the edit code list for the Procedures for Females 
Only edit under the ICD-10 MCE Version 38, effective October 1, 2020.
(3) Procedures for Males Only
    As discussed in section II.D.13. of the preamble of the proposed 
rule and in section II.E.13. of this final rule, Table 6B--New 
Procedure Codes, lists the new procedure codes that have been approved 
to date which will be effective with discharges on and after October 1, 
2020. We proposed to add the following new ICD-10-PCS procedure codes 
listed in this section of this rule to the edit code list for the 
Procedures for Males Only edit.
[GRAPHIC] [TIFF OMITTED] TR18SE20.138

    Comments: Commenters agreed with our proposal to add the ICD-10-PCS 
procedure codes listed in the previous table to the edit code list for 
the Procedures for Males Only edit.
    Response: We appreciate the commenters' support.

[[Page 58583]]

    After consideration of the public comments that we received, we are 
finalizing our proposal to add the ICD-10-PCS procedure codes listed in 
the previous table to the edit code list for the Procedures for Males 
Only edit under the ICD-10 MCE Version 38, effective October 1, 2020.
c. Manifestation Code as Principal Diagnosis Edit
    In the ICD-10-CM classification system, manifestation codes 
describe the manifestation of an underlying disease, not the disease 
itself, and therefore should not be used as a principal diagnosis.
    As discussed in section II.D.13. of the preamble of the proposed 
rule and section II.E.13. of this final rule, Table 6A--New Diagnosis 
Codes, lists the new diagnosis codes that have been approved to date 
which will be effective with discharges on and after October 1, 2020. 
We proposed to add the following new ICD-10-CM diagnosis codes listed 
in this section of this rule to the edit code list for the 
Manifestation Codes Not Allowed as Principal Diagnosis edit code list 
because these codes are describing the manifestation of an underlying 
disease and not the disease itself.
[GRAPHIC] [TIFF OMITTED] TR18SE20.139

    Comment: We received comments in support of our proposal to add the 
codes listed in the previous table to the Manifestation Codes Not 
Allowed as Principal Diagnosis edit code list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to add the ICD-10-CM diagnosis codes listed in 
the previous table to the edit code list for the Manifestation Codes 
Not Allowed as Principal Diagnosis edit under the ICD-10 MCE Version 
38, effective October 1, 2020.
    In addition, as discussed in section II.D.13. of the preamble of 
the proposed rule and in section II.E.13. of this final rule, Table 
6C.--Invalid Diagnosis Codes, lists the diagnosis codes that are no 
longer effective October 1, 2020. Included in this table is ICD-10-CM 
diagnosis code J84.17 (Other interstitial pulmonary diseases with 
fibrosis in diseases classified elsewhere) which is currently listed on 
the Manifestation Codes Not Allowed as Principal Diagnosis edit code 
list. We proposed to delete this code from the Manifestation Codes Not 
Allowed as Principal Diagnosis edit code list.
    Comment: Commenters agreed with the proposal to delete ICD-10-CM 
diagnosis code J84.17 (Other interstitial pulmonary diseases with 
fibrosis in diseases classified elsewhere) from the Manifestation Codes 
Not Allowed as Principal Diagnosis edit code list.
    Response: We appreciate the commenters' support of our proposal.
    After consideration of the public comments that we received, we are 
finalizing our proposal to delete ICD-10-CM diagnosis code J84.17 from 
the Manifestation Codes Not Allowed as Principal Diagnosis edit code 
list under the ICD-10 MCE Version 38, effective October 1, 2020.
d. Unacceptable Principal Diagnosis Edit
    In the MCE, there are select codes that describe a circumstance 
which influences an individual's health status but does not actually 
describe a current illness or injury. There also are codes that are not 
specific manifestations but may be due to an underlying cause. These 
codes are considered unacceptable as a principal diagnosis. In limited 
situations, there are a few codes on the MCE Unacceptable Principal 
Diagnosis edit code list that are considered ``acceptable'' when a 
specified secondary diagnosis is also coded and reported on the claim.
    As discussed in Section II.D.13. of the preamble of the proposed 
rule and section II.E.13. of this final rule, Table 6A.--New Diagnosis 
Codes, lists the new diagnosis codes that have been approved to date 
which will be effective with discharges on and after October 1, 2020. 
We proposed to add the following new ICD-10-CM diagnosis codes listed 
in this section of this rule to the Unacceptable Principal Diagnosis 
edit code list.

[[Page 58584]]

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[GRAPHIC] [TIFF OMITTED] TR18SE20.141

    Comment: Commenters supported our proposal to add the diagnosis 
codes listed in the previous table to the Unacceptable Principal 
Diagnosis edit code list. However, one commenter disagreed with adding 
the diagnosis codes describing Cytokine release syndrome (CRS) (D89.831 
through D89.839) to the Unacceptable Principal Diagnosis edit code 
list. The commenter noted that at the ICD-10 Coordination and 
Maintenance Committee meeting held on September 11-12, 2019, CRS was 
described as a condition that may occur after treatment with some types 
of immunotherapy, such as Chimeric Antigen Receptor (CAR) T-cell 
therapy, and is the most common reaction after CAR T-cell therapy. The 
commenter stated that if CRS is the reason for the admission and is an 
adverse effect of the therapy/drug, the diagnosis code for the CRS must 
be sequenced as the principal diagnosis per coding guidelines, 
therefore, the CRS diagnosis codes should not be included on the 
Unacceptable Principal Diagnosis edit code list. This commenter also 
disagreed with adding diagnosis codes K74.00 (Hepatic fibrosis, 
unspecified), K74.01 (Hepatic fibrosis, early fibrosis), and K74.02 
(Hepatic fibrosis, advanced fibrosis) to the Unacceptable Principal 
Diagnosis edit code list. The commenter noted that hepatic fibrosis may 
be determined to be the underlying cause of symptoms such as weakness, 
nausea, jaundice, or appetite loss in a patient. The commenter also 
stated that the current diagnosis code, K74.0 (Hepatic fibrosis) is not 
on the Unacceptable Principal Diagnosis edit code list, therefore, 
diagnosis codes K74.00, K74.01 and K74.02 should not be included on the 
Unacceptable Principal Diagnosis edit code list. This same commenter 
also disagreed with adding diagnosis codes Z03.821 (Encounter for 
observation for suspected ingested foreign body ruled out), Z03.822 
(Encounter for observation for suspected aspirated (inhaled) foreign 
body ruled out), and Z03.823 (Encounter for observation for suspected 
inserted (injected) foreign body ruled out) to the Unacceptable 
Principal Diagnosis edit code list. The commenter stated that

[[Page 58585]]

current codes in subcategory Z03.8 are only reportable as principal 
diagnosis/first listed except when there are multiple encounters on the 
same day and the medical records for the encounters are combined and 
therefore, diagnosis codes Z03.821, Z03.822, and Z03.823 should not be 
included on the Unacceptable Principal Diagnosis edit code list.
    Response: We appreciate the commenters' feedback on our proposal. 
In response to the commenter who disagreed with our proposal to add the 
diagnosis codes describing Cytokine release syndrome (CRS) (D89.831 
through D89.839) to the Unacceptable Principal Diagnosis edit code 
list, we note that we consulted with the staff at the Centers for 
Disease Control and Prevention's (CDC's) National Center for Health 
Statistics (NCHS) because NCHS has the lead responsibility for the ICD-
10-CM diagnosis codes. The NCHS' staff confirmed that they do not 
consider CAR T-cell therapy to be a drug since it is a gene therapy. 
They noted that the ICD-10-CM Tabular instruction at subcategory 
D89.83- (Cytokine release syndrome) has a ``Code first'' that reads:
    ``Code first underlying cause, such as:

complications following infusion, transfusion and therapeutic injection 
(T80.89-) complications of transplanted organs and tissue (T86.-)''

    They also stated that the intent is for the CRS codes to not be 
reported as a principal diagnosis. Diagnosis codes K74.00 (Hepatic 
fibrosis, unspecified), K74.01 (Hepatic fibrosis, early fibrosis), and 
K74.02 (Hepatic fibrosis, advanced fibrosis) also have a ``Code first'' 
note at the new subcategory K74.0 (Hepatic fibrosis), effective October 
1, 2020. The commenter is correct that currently, diagnosis code K74.0 
is not on the Unacceptable Principal Diagnosis Code list and we note 
that there is not a ``Code first'' note currently at that diagnosis 
code. We point out that diagnosis code K74.0 has been expanded 
effective October 1 and is therefore classified as a subcategory. The 
ICD-10-CM Tabular instruction at new subcategory K74.0 has a ``Code 
first'' note that reads:
    ``Code first underlying liver disease, such as:

nonalcoholic steatohepatitis (NASH) (K75.81)''

    The ``Code first'' note at this subcategory applies to all three 
new diagnosis codes, K74.00, K74.01, and K74.02.
    In response to the commenter's disagreement with adding diagnosis 
codes Z03.821 (Encounter for observation for suspected ingested foreign 
body ruled out), Z03.822 (Encounter for observation for suspected 
aspirated (inhaled) foreign body ruled out), and Z03.823 (Encounter for 
observation for suspected inserted (injected) foreign body ruled out) 
to the Unacceptable Principal Diagnosis edit code list, we note that 
these diagnosis codes were created in response to a request from the 
American Academy of Pediatrics, which indicated that since a child is 
often not able to communicate what occurred, there needs to be a way to 
identify and track these kinds of encounters, therefore, we would not 
expect these codes to be reported in our Medicare claims data for an 
inpatient stay.
    After consideration of the public comments that we received, we are 
finalizing our proposal to add the diagnosis codes listed in the 
previous table to the Unacceptable Principal Diagnosis edit code list 
under the ICD-10 MCE Version 38, effective October 1, 2020.
    In addition, as discussed in section II.D.13. of the preamble of 
the proposed rule and in section II.E.13. of this final rule, Table 
6C.--Invalid Diagnosis Codes, lists the diagnosis codes that are no 
longer effective October 1, 2020. Included in this table are the 
following ICD-10-CM diagnosis codes that are currently listed on the 
Unacceptable Principal Diagnosis edit code list. We proposed to delete 
these codes from the Unacceptable Principal Diagnosis edit code list.
[GRAPHIC] [TIFF OMITTED] TR18SE20.142

    Comment: Commenters agreed with our proposal to remove the codes 
listed in the previous table from the Unacceptable Principal Diagnosis 
edit code list since they are no longer valid effective October 1, 
2020.
    Response: We thank the commenters for their support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to remove the diagnosis codes, as previously 
listed, from the Unacceptable Principal Diagnosis edit code list under 
the ICD-10 MCE Version 38, effective October 1, 2020.
e. Future Enhancement
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38053 through 38054) 
we noted the importance of ensuring accuracy of the coded data from the 
reporting, collection, processing, coverage, payment and analysis 
aspects. Subsequently, in the FY 2019 IPPS/LTCH PPS proposed rule (83 
FR 20235) we stated that we engaged a contractor to assist in the 
review of the limited coverage and non-covered procedure edits in the 
MCE that may also be present in other claims processing systems that 
are utilized by our MACs. The MACs must adhere to criteria specified 
within the National Coverage Determinations (NCDs) and may implement 
their own edits in addition to what is already incorporated into the 
MCE, resulting in duplicate edits. The objective of this review is to 
identify where duplicate edits may exist and to determine what the 
impact might be if these edits were to be removed from the MCE. The 
contractor is continuing to conduct this review.
    We have also noted that the purpose of the MCE is to ensure that 
errors and inconsistencies in the coded data are recognized during 
Medicare claims processing. As we indicated in the FY

[[Page 58586]]

2019 IPPS/LTCH PPS final rule (83 FR 41228), we are considering whether 
the inclusion of coverage edits in the MCE necessarily aligns with that 
specific goal because the focus of coverage edits is on whether or not 
a particular service is covered for payment purposes and not whether it 
was coded correctly.
    As we continue to evaluate the purpose and function of the MCE with 
respect to ICD-10, we encourage public input for future discussion. As 
we have discussed in prior rulemaking, we recognize a need to further 
examine the current list of edits and the definitions of those edits. 
We continue to encourage public comments on whether there are 
additional concerns with the current edits, including specific edits or 
language that should be removed or revised, edits that should be 
combined, or new edits that should be added to assist in detecting 
errors or inaccuracies in the coded data. Comments should be directed 
to the MS-DRG Classification Change Mailbox located at 
[email protected] by November 1, 2020.
15. Changes to Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different MS-DRG within the MDC to which the principal diagnosis 
is assigned. Therefore, it is necessary to have a decision rule within 
the GROUPER by which these cases are assigned to a single MS-DRG. The 
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function. 
Application of this hierarchy ensures that cases involving multiple 
surgical procedures are assigned to the MS-DRG associated with the most 
resource-intensive surgical class.
    A surgical class can be composed of one or more MS-DRGs. For 
example, in MDC 11, the surgical class ``kidney transplant'' consists 
of a single MS-DRG (MS-DRG 652) and the class ``major bladder 
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655). 
Consequently, in many cases, the surgical hierarchy has an impact on 
more than one MS-DRG. The methodology for determining the most 
resource-intensive surgical class involves weighting the average 
resources for each MS-DRG by frequency to determine the weighted 
average resources for each surgical class. For example, assume surgical 
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To 
determine whether surgical class A should be higher or lower than 
surgical class B in the surgical hierarchy, we would weigh the average 
costs of each MS-DRG in the class by frequency (that is, by the number 
of cases in the MS-DRG) to determine average resource consumption for 
the surgical class. The surgical classes would then be ordered from the 
class with the highest average resource utilization to that with the 
lowest, with the exception of ``other O.R. procedures'' as discussed in 
this final rule.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower-weighted MS-DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER search for the procedure in the 
most resource-intensive surgical class, in cases involving multiple 
procedures, this result is sometimes unavoidable. We note that, 
notwithstanding the foregoing discussion, there are a few instances 
when a surgical class with a lower average cost is ordered above a 
surgical class with a higher average cost. For example, the ``other 
O.R. procedures'' surgical class is uniformly ordered last in the 
surgical hierarchy of each MDC in which it occurs, regardless of the 
fact that the average costs for the MS-DRG or MS-DRGs in that surgical 
class may be higher than those for other surgical classes in the MDC. 
The ``other O.R. procedures'' class is a group of procedures that are 
only infrequently related to the diagnoses in the MDC, but are still 
occasionally performed on patients with cases assigned to the MDC with 
these diagnoses. Therefore, assignment to these surgical classes should 
only occur if no other surgical class more closely related to the 
diagnoses in the MDC is appropriate.
    A second example occurs when the difference between the average 
costs for two surgical classes is very small. We have found that small 
differences generally do not warrant reordering of the hierarchy 
because, as a result of reassigning cases on the basis of the hierarchy 
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered 
below it.
    Based on the changes that we proposed to make in the FY 2021 IPPS/
LTCH PPS proposed rule, as discussed in section II.E.2.b. of the 
preamble of this final rule, we proposed to revise the surgical 
hierarchy for the Pre-MDC MS-DRGs as follows: In the Pre-MDC MS-DRGs we 
proposed to sequence proposed new Pre-MDC MS-DRG 018 (Chimeric Antigen 
Receptor (CAR) T-cell Immunotherapy) above Pre-MDC MS-DRGs 001 and 002 
(Heart Transplant or Implant of Heart Assist System with and without 
MCC, respectively). We also note that, as discussed in section 
II.D.2.b. of the preamble of the proposed rule and in section II.E.2.b. 
of this final rule, we proposed to revise the title for Pre-MDC MS-DRG 
016 to ``Autologous Bone Marrow Transplant with CC/MCC''. In addition, 
based on the changes that we proposed to make as discussed in section 
II.D.8.a. of the preamble of the proposed rule and in section II.E.8.a. 
of this final rule, we also proposed to sequence proposed new Pre-MDC 
MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with Hemodialysis) 
above Pre-MDC MS-DRG 008 (Simultaneous Pancreas/Kidney Transplant) and 
below Pre-MDC MS-DRG 007 (Lung Transplant).
    As discussed in section II.D.4. of the preamble of the proposed 
rule and section II.E.4. of this final rule, we proposed to delete MS-
DRGs 129 (Major Head and Neck Procedures with CC/MCC or Major Device) 
and MS-DRG 130 (Major Head and Neck Procedures without CC/MCC), MS-DRGs 
131 and 132 (Cranial and Facial Procedures with CC/MCC and without CC/
MCC, respectively), and MS-DRGs 133 and 134 (Other Ear, Nose, Mouth and 
Throat O.R. Procedures with CC/MCC and without CC/MCC, respectively). 
Based on the changes we proposed to make for those MS-DRGs in MDC 03, 
we proposed to revise the surgical hierarchy for MDC 03 (Diseases and 
Disorders of the Ear, Nose, Mouth and Throat) as follows: In MDC 03, we 
proposed to sequence proposed new MS-DRGs 140, 141, and 142 (Major Head 
and Neck Procedures with MCC, with CC, and without CC/MCC, 
respectively) above new MS-DRGs 143, 144, and 145 (Other Ear, Nose, 
Mouth and Throat O.R. Procedures with MCC, with CC, and without CC/MCC, 
respectively). We also proposed to sequence proposed new MS-DRGs 143, 
144, and 145 above MS-DRGs 135 and 136 (Sinus and Mastoid Procedures 
with CC/MCC and without CC/MCC, respectively). We also note that, based 
on the changes that we proposed to make, as discussed in section 
II.D.7.b. of the preamble of the proposed rule and section II.E.7.b. of 
this final rule, we proposed to revise the surgical hierarchy for MDC 
08 (Diseases and

[[Page 58587]]

Disorders of the Musculoskeletal System and Connective Tissue) as 
follows: In MDC 08, we proposed to sequence proposed new MS-DRGs 521 
and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture with 
and without MCC, respectively) above MS-DRGs 469 (Major Hip and Knee 
Joint Replacement or Reattachment of Lower Extremity with MCC or Total 
Ankle Replacement) and 470 (Major Hip and Knee Joint Replacement or 
Reattachment of Lower Extremity without MCC). We further note that, 
based on the changes we proposed to make, as discussed in section 
II.D.8.a. of the preamble of the proposed rule and section II.E.8.a. of 
this final rule, we proposed to revise the surgical hierarchy for MDC 
11 (Diseases and Disorders of the Kidney and Urinary Tract) as follows: 
In MDC 11, we proposed to sequence proposed new MS-DRGs 650 and 651 
(Kidney Transplant with Hemodialysis with and without MCC, 
respectively) above MS-DRG 652 (Kidney Transplant).
    Our proposal for Appendix D MS-DRG Surgical Hierarchy by MDC and 
MS-DRG of the ICD-10 MS-DRG Definitions Manual Version 38 is 
illustrated in the following tables.
[GRAPHIC] [TIFF OMITTED] TR18SE20.143

    Comment: Commenters supported our proposal to sequence proposed new 
Pre-MDC MS-DRG 018 above Pre-MDC MS-DRGs 001 and 002. Commenters also 
supported our proposal to sequence proposed new Pre-MDC MS-DRG 019 
above Pre-MDC MS-DRG 008 and below Pre-MDC MS-DRG 007.
    Response: We appreciate the commenters' support. As discussed in 
section II.E.2.b. of the preamble of this final rule, we are finalizing 
our proposal to create new Pre-MDC MS-DRG 018. In addition, as 
discussed in section II.E.8.a. of the preamble of this final rule, we 
are finalizing our proposal to create new Pre-MDC MS-DRG 019.
    Comment: Commenters agreed with our proposal to sequence proposed 
new MS-DRGs 140, 141, and 142 above

[[Page 58588]]

proposed new MS-DRGs 143, 144, and 145 and our proposal to sequence 
proposed new MS-DRGs 143, 144, and 145 above MS-DRGs 135 and 136 in MDC 
03.
    Response: We thank the commenters for their support. As discussed 
in section II.E.4. of the preamble of this final rule, we are 
finalizing our proposal to create new MS-DRGs 140, 141, and 142 and new 
MS-DRGs 143, 144, and 145.
    Comment: Commenters supported our proposal to sequence proposed new 
MS-DRGs 521 and 522 above MS-DRGs 469 and 470 in MDC 08.
    Response: We appreciate the commenters' support. As discussed in 
section II.E.7.b. of the preamble of this final rule, we are finalizing 
our proposal to create new MS-DRGs 521 and 522.
    Comment: Commenters agreed with our proposal to sequence proposed 
new MS-DRGs 650 and 651 above MS-DRG 652 (Kidney Transplant) in MDC 11.
    Response: We thank the commenters for their support. As discussed 
in section II.E.8.a. of the preamble of this final rule, we are 
finalizing our proposal to create new MS-DRGs 650 and 651.
    After consideration of the public comments we received, we are 
finalizing the proposed changes as illustrated in the tables above for 
the surgical hierarchy within Appendix D MS-DRG Surgical Hierarchy by 
MDC and MS-DRG of the ICD-10 MS-DRG Definitions Manual Version 38 for 
FY 2021.
    16. Maintenance of the ICD-10-CM and ICD-10-PCS Coding Systems
    In September 1985, the ICD-9-CM Coordination and Maintenance 
Committee was formed. This is a Federal interdepartmental committee, 
co-chaired by the CDC National Center for Health Statistics (NCHS) and 
CMS, charged with maintaining and updating the ICD-9-CM system. The 
final update to ICD-9-CM codes was made on October 1, 2013. Thereafter, 
the name of the Committee was changed to the ICD-10 Coordination and 
Maintenance Committee, effective with the March 19-20, 2014 meeting. 
The ICD-10 Coordination and Maintenance Committee addresses updates to 
the ICD-10-CM and ICD-10-PCS coding systems. The Committee is jointly 
responsible for approving coding changes, and developing errata, 
addenda, and other modifications to the coding systems to reflect newly 
developed procedures and technologies and newly identified diseases. 
The Committee is also responsible for promoting the use of Federal and 
non-Federal educational programs and other communication techniques 
with a view toward standardizing coding applications and upgrading the 
quality of the classification system.
    The official list of ICD-9-CM diagnosis and procedure codes by 
fiscal year can be found on the CMS website at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The official 
list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS website 
at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
    The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM 
diagnosis codes included in the Tabular List and Alphabetic Index for 
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index 
for Procedures.
    The Committee encourages participation in the previously mentioned 
process by health-related organizations. In this regard, the Committee 
holds public meetings for discussion of educational issues and coding 
changes. These meetings provide an opportunity for representatives of 
recognized organizations in the coding field, such as the American 
Health Information Management Association (AHIMA), the American 
Hospital Association (AHA), and various physician specialty groups, as 
well as individual physicians, health information management 
professionals, and other members of the public, to contribute ideas on 
coding matters. After considering the opinions expressed at the public 
meetings and in writing, the Committee formulates recommendations, 
which then must be approved by the agencies.
    The Committee presented proposals for coding changes for 
implementation in FY 2021 at a public meeting held on September 10-11, 
2019, and finalized the coding changes after consideration of comments 
received at the meetings and in writing by November 08, 2019.
    The Committee held its 2020 meeting on March 17-18, 2020. The 
deadline for submitting comments on these code proposals was April 17, 
2020. It was announced at this meeting that any new diagnosis and 
procedure codes for which there was consensus of public support and for 
which complete tabular and indexing changes would be made by June 2020 
would be included in the October 1, 2020 update to the ICD-10-CM 
diagnosis and ICD-10-PCS procedure code sets. As discussed in earlier 
sections of the preamble of this final rule, there are new, revised, 
and deleted ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes 
that are captured in Table 6A--New Diagnosis Codes, Table 6B--New 
Procedure Codes, Table 6C.--Invalid Diagnosis Codes, and Table 6E--
Revised Diagnosis Code Titles for this final rule, which are available 
via the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. The code 
titles are adopted as part of the ICD-10 (previously ICD-9-CM) 
Coordination and Maintenance Committee process. Therefore, although we 
make the code titles available for the IPPS proposed rule, they are not 
subject to comment in the proposed rule. Because of the length of these 
tables, they are not published in the Addendum to the proposed or final 
rule. Rather, they are available via the internet as discussed in 
section VI. of the Addendum to the proposed rule and this final rule.
    Live Webcast recordings of the discussions of the diagnosis and 
procedure codes at the Committee's September 10-11, 2019 meeting and a 
recording of the virtual meeting held on March 17-18, 2020 can be 
obtained from the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials. The materials for the discussions 
relating to diagnosis codes at the September 10-11, 2019 meeting and 
March 17-18, 2020 meeting can be found at: http://www.cdc.gov/nchs/icd/icd10cm_maintenance.html. These websites also provide detailed 
information about the Committee, including information on requesting a 
new code, attending or participating in a Committee meeting, timeline 
requirements and meeting dates.
    We encourage commenters to address suggestions on coding issues 
involving diagnosis codes via Email to: [email protected].
    Questions and comments concerning the procedure codes should be 
submitted via Email to: [email protected].
    Comment: A commenter stated that there was a need to establish and 
adhere to principles of greater transparency through making coding 
proposals and revisions public. The commenter also recommended that 
information be provided to entities that submit similar or related 
coding requests to enable more efficient and in depth public discussion 
and that reasonable notice is provided along with timely and accurate 
agendas when a coding change is accepted for discussion so that key 
stakeholders are able to participate in public meetings. The commenter 
also

[[Page 58589]]

suggested that clear and timely transcripts or recordings of such 
meetings should always be made publicly available as well as any 
written comments that are provided following public meetings so that 
stakeholders can understand the different perspectives under 
consideration. According to the commenter, these improvements would 
allow for timely and knowledgeable participation by experts in the 
field, enabling CMS staff to have the background and understanding of 
the current trajectory of treatment options to be reflected in their 
recommended policies.
    Response: As noted earlier in this section, the ICD-10 Coordination 
and Maintenance Committee is co-chaired by the NCHS/CDC, and CMS. The 
NCHS has lead responsibility for the ICD-10-CM diagnosis classification 
while CMS has lead responsibility for the ICD-10-PCS procedure 
classification. While it is an interdepartmental committee, each 
organization has their own established processes in responding to 
requests for coding updates and communicating with the requestors. With 
regard to the commenter's recommendation that information be provided 
to entities who submit similar or related coding requests to enable 
more efficient and in depth public discussion, CMS currently, and has 
historically informed requestors of similar or related coding requests 
to provide those requestors with the option and opportunity to 
collaborate on a joint proposal if they choose to do so. In response to 
the commenter's recommendation that reasonable notice is provided along 
with timely and accurate agendas when a coding change (proposal) is 
accepted for discussion so that key stakeholders are able to 
participate in public meetings, we note that notice of topics being 
considered for discussion is provided in an announcement that is 
published in the Federal Register two months in advance of each ICD-10 
Coordination and Maintenance Committee meeting. For example, on January 
30, 2020, the Federal Register Notice announcing the March 17-18, 2020 
committee meetings was published with the tentative agenda items listed 
for both diagnosis and procedure code topics. This notice is located 
at: https://www.federalregister.gov/documents/2020/01/30/2020-01756/national-center-for-health-statistics-nchs-icd-10-coordination-and-maintenance-candm-committee. The agenda is considered tentative leading 
up to the meeting date as requestors may decide to withdraw their topic 
request or other topics that were not yet finalized for that specific 
meeting at the time of the development of the Federal Register Notice 
may subsequently be added to the final agenda. Upon receipt of a 
procedure code request, CMS immediately acknowledges receipt of the 
request and communicates to the requestor that additional follow up 
will occur once an analyst has been assigned. In addition, CMS provides 
information via Email communication in a letter to each requestor 
outlining the meeting process and, beginning in 2019, CMS initiated 
standard pre-meeting conference calls with requestors to discuss their 
procedure code topic request in more detail in advance of the meeting. 
Also, prior to the committee meeting, we make the procedure code topic 
meeting materials publicly available, commonly referred to as the 
``Agenda and Handout'' packet on our website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials. Lastly, once the 
meeting has concluded, CMS sends a follow-up letter to the requestor 
informing them of next steps in the process so they can anticipate what 
to expect.
    In response to the commenter's recommendation that clear and timely 
transcripts or recordings of such meetings should always be made 
publicly available, as well as any written comments that are provided 
following public meetings so that stakeholders can understand the 
different perspectives under consideration, we note that we announce 
during the meeting that a link to the recording (or webcast) will be 
made publicly available on both the CDC and CMS web pages following the 
meeting, along with the slides that were presented. This information is 
generally posted no later than one week following the meeting and 
additional details regarding each organization's website where 
materials are posted is also included in our IPPS rule as discussed 
earlier in this section. With respect to making written comments that 
are received after the meeting publicly available so that stakeholders 
can understand different perspectives, we will take that into 
consideration for the future. We note that some organizations, such as 
the AHIMA, routinely display the comments they have submitted in 
response to code proposals on their website. Therefore, in response to 
the commenter's concern, we believe that the processes we currently 
have in place enable the CMS staff to have the background and 
understanding of the current trajectory of treatment options to be 
considered in our proposed policies.
    In the September 7, 2001 final rule implementing the IPPS new 
technology add-on payments (66 FR 46906), we indicated we would attempt 
to include proposals for procedure codes that would describe new 
technology discussed and approved at the Spring meeting as part of the 
code revisions effective the following October.
    Section 503(a) of Public Law 108-173 included a requirement for 
updating diagnosis and procedure codes twice a year instead of a single 
update on October 1 of each year. This requirement was included as part 
of the amendments to the Act relating to recognition of new technology 
under the IPPS. Section 503(a) of Public Law 108-173 amended section 
1886(d)(5)(K) of the Act by adding a clause (vii) which states that the 
Secretary shall provide for the addition of new diagnosis and procedure 
codes on April 1 of each year, but the addition of such codes shall not 
require the Secretary to adjust the payment (or diagnosis-related group 
classification) until the fiscal year that begins after such date. This 
requirement improves the recognition of new technologies under the IPPS 
by providing information on these new technologies at an earlier date. 
Data will be available 6 months earlier than would be possible with 
updates occurring only once a year on October 1.
    While section 1886(d)(5)(K)(vii) of the Act states that the 
addition of new diagnosis and procedure codes on April 1 of each year 
shall not require the Secretary to adjust the payment, or DRG 
classification, under section 1886(d) of the Act until the fiscal year 
that begins after such date, we have to update the DRG software and 
other systems in order to recognize and accept the new codes. We also 
publicize the code changes and the need for a mid-year systems update 
by providers to identify the new codes. Hospitals also have to obtain 
the new code books and encoder updates, and make other system changes 
in order to identify and report the new codes.
    Comment: A commenter suggested that CMS consider accelerating the 
ICD-10 coding timeline for novel indications to address rare and unmet 
clinical needs, such as expediting the implementation of innovative 
diagnosis codes for new or emerging therapeutic areas. The commenter 
provided an example of how the Food and Drug Administration's (FDA's) 
accelerated approval pathways, such as Breakthrough Designation, play 
an important role in providing priority review for products that 
address significant unmet need and have compelling clinical data. 
According to the commenter, after FDA-approval,

[[Page 58590]]

however, patients are often still unable to access these therapies if 
the disease does not yet have an appropriate ICD-10 diagnosis code. The 
commenter stated that a lack of accurate ICD-10 coding may delay 
patient access to treatment as providers engage in the time-consuming 
process of demonstrating their patients' diagnosis to payers, which the 
commenter stated typically results in ongoing appeals and exception 
requests. The commenter stated this is particularly concerning in 
patient populations with rare diseases experiencing progressive, and 
oftentimes fatal, conditions.
    The commenter acknowledged that CMS may grant implementation 
exceptions for codes capturing new technology and understands that 
topics presented during the fall meeting are considered for April 1 
implementation if there is a strong and convincing case made by the 
requester at the Committee's public meeting. However, relying on this 
rationale, the commenter stated their belief that it is critical to 
establish a process for expedited assignment of new ICD-10 diagnosis 
codes for therapeutic areas that have medications under review via an 
accelerated FDA review. According to the commenter, without timely 
assignment of ICD-10 diagnosis codes, access to new products may be 
delayed or denied, and resources appropriated by Congress and used by 
FDA for its accelerated approval pathways go to waste. The commenter 
encouraged CMS to revise and update the ICD-10 process to ensure timely 
access to these innovative products.
    Response: As stated earlier in this section, the ICD-10 
Coordination and Maintenance Committee meeting is co-chaired by CDC/
NCHS and CMS with the CDC/NCHS having lead responsibility for the ICD-
10-CM diagnosis classification. Requests for new diagnosis codes must 
be submitted to [email protected] for consideration. Also, as 
previously noted, section 503(a) of Public Law 108-173 amended section 
1886(d)(5)(K) of the Act by adding a clause (vii) which states that the 
Secretary shall provide for the addition of new diagnosis and procedure 
codes on April 1 of each year. As discussed in the FY 2021 IPPS/LTCH 
PPS proposed rule (85 FR 32559), the CDC/NCHS implemented new ICD-10-CM 
diagnosis codes U07.0 (Vaping-related disorder) and U07.1, (COVID-19) 
for reporting effective April 1, 2020. Therefore, with respect to the 
commenter's concerns, we believe there are existing processes in place 
to implement diagnosis codes in an expedited manner, however, we also 
encourage the commenter to contact CDC/NCHS directly for additional 
information and further discussion of any remaining concerns.
    The ICD-10 (previously the ICD-9-CM) Coordination and Maintenance 
Committee holds its meetings in the spring and fall in order to update 
the codes and the applicable payment and reporting systems by October 1 
of each year. Items are placed on the agenda for the Committee meeting 
if the request is received at least 3 months prior to the meeting. This 
requirement allows time for staff to review and research the coding 
issues and prepare material for discussion at the meeting. It also 
allows time for the topic to be publicized in meeting announcements in 
the Federal Register as well as on the CMS website. A complete addendum 
describing details of all diagnosis and procedure coding changes, both 
tabular and index, is published on the CMS and NCHS websites in June of 
each year. Publishers of coding books and software use this information 
to modify their products that are used by health care providers. This 
5-month time period has proved to be necessary for hospitals and other 
providers to update their systems.
    A discussion of this timeline and the need for changes are included 
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance 
Committee Meeting minutes. The public agreed that there was a need to 
hold the fall meetings earlier, in September or October, in order to 
meet the new implementation dates. The public provided comment that 
additional time would be needed to update hospital systems and obtain 
new code books and coding software. There was considerable concern 
expressed about the impact this April update would have on providers.
    In the FY 2005 IPPS final rule, we implemented section 
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 
108-173, by developing a mechanism for approving, in time for the April 
update, diagnosis and procedure code revisions needed to describe new 
technologies and medical services for purposes of the new technology 
add-on payment process. We also established the following process for 
making these determinations. Topics considered during the Fall ICD-10 
(previously ICD-9-CM) Coordination and Maintenance Committee meeting 
are considered for an April 1 update if a strong and convincing case is 
made by the requestor at the Committee's public meeting. The request 
must identify the reason why a new code is needed in April for purposes 
of the new technology process. The participants at the meeting and 
those reviewing the Committee meeting materials and live webcast are 
provided the opportunity to comment on this expedited request. All 
other topics are considered for the October 1 update. Participants at 
the Committee meeting are encouraged to comment on all such requests.
    There were not any requests submitted for an expedited April 1, 
2020 implementation of a new code at the September 10-11, 2019 
Committee meeting. However, as announced by the CDC on December 9, 
2019, a new ICD-10 emergency code was established by the World Health 
Organization (WHO) in response to recent occurrences of vaping related 
disorders. Consistent with this update, the CDC/NCHS implemented a new 
ICD-10-CM diagnosis code, U07.0 (Vaping-related disorder) for U.S. 
reporting of vaping-related disorders effective April 1, 2020. In 
addition, as announced by the CDC, a new emergency code was established 
by the WHO on January 31, 2020, in response to the 2019 Novel 
Coronavirus (2019-nCoV) disease outbreak that was declared a public 
health emergency of international concern. Consistent with this update, 
the CDC/NCHS implemented a new ICD-10-CM diagnosis code, U07.1 (COVID-
19) for U.S. reporting of the 2019 Novel Coronavirus disease effective 
April 1, 2020. We refer the reader to the CDC web page at https://www.cdc.gov/nchs/icd/icd10cm.htm for additional details regarding the 
implementation of these new diagnosis codes.
    We provided the MS-DRG assignments for these codes effective with 
discharges on and after April 1, 2020, consistent with our established 
process for assigning new diagnosis codes. Specifically, we review the 
predecessor diagnosis code and MS-DRG assignment most closely 
associated with the new diagnosis code, and consider other factors that 
may be relevant to the MS-DRG assignment, including the severity of 
illness, treatment difficulty, and the resources utilized for the 
specific condition/diagnosis. We note that this process does not 
automatically result in the new diagnosis code being assigned to the 
same MS-DRG as the predecessor code. Effective with discharges on and 
after April 1, 2020, diagnosis code U07.0 is assigned to MDC 04 
(Diseases and Disorders of the Respiratory System) in MS-DRGs 205 and 
206 (Other Respiratory System Diagnoses with and without MCC, 
respectively), consistent with the assignment of the predecessor 
diagnosis code. Effective with discharges on and after April 1, 2020, 
diagnosis code U07.1 is assigned to MDC 04 in MS-DRGs 177, 178 and 179

[[Page 58591]]

(Respiratory Infections and Inflammations with MCC, with CC, and 
without CC/MCC, respectively), MDC 15 (Newborns and Other Neonates with 
Conditions Originating in Perinatal Period) in MS-DRG 791 (Prematurity 
with Major Problems) and MS-DRG 793 (Full Term Neonate with Major 
Problems), and MDC 25 (Human Immunodeficiency Virus Infections) in MS-
DRGs 974, 975, and 976 (HIV with Major Related Condition with MCC, with 
CC, and without CC/MCC, respectively).
    These assignments for diagnosis codes U07.0 and U07.1 are reflected 
in Table 6A- New Diagnosis Codes associated with the proposed rule and 
this final rule (which is available via the internet on the CMS website 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS). We also noted that Change Request (CR) 11623, 
Transmittal 4499, titled ``Update to the International Classification 
of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM) for 
Vaping Related Disorder'', was issued on January 24, 2020 (available 
via the internet on the CMS website at: https://www.cms.gov/files/document/r4499cp.pdf) regarding the release of an updated version of 
the ICD-10 MS-DRG Grouper and Medicare Code Editor (MCE) software, 
Version 37.1, to be effective with discharges on or after April 1, 2020 
reflecting new diagnosis code U07.0. The updated software, along with 
the updated ICD-10 MS-DRG V37.1 Definitions Manual and the Definitions 
of Medicare Code Edits V37.1 manual was made available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software. In response to 
the implementation of diagnosis code U07.1 (COVID-19), we subsequently 
released a new updated version of the ICD-10 MS-DRG Grouper and 
Medicare Code Editor (MCE) software, Version 37.1 R1, effective with 
discharges on or after April 1, 2020 reflecting this new code, which 
replaced the ICD-10 MS-DRG Grouper and Medicare Code Editor (MCE) 
software, Version 37.1 that reflected diagnosis code U07.0 (Vaping-
related disorder). The updated software, along with the updated ICD-10 
MS-DRG V37.1 R1 Definitions Manual and the Definitions of Medicare Code 
Edits V37.1 R1 manual are available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    In response to the COVID-19 pandemic and new treatments that have 
followed, on July 30, 2020 we announced the implementation of 12 new 
ICD-10-PCS procedure codes to identify the introduction or infusion of 
therapeutics for treating hospital inpatients with COVID-19. These 
procedure codes will afford the healthcare industry the ability to 
track the use of these drugs and their effectiveness in the inpatient 
setting, effective with discharges on and after August 1, 2020. The 12 
new ICD-10-PCS procedure codes listed in this section of this rule are 
designated as non-O.R. and do not affect any MDC or MS-DRG assignment 
as shown in the following table.

[[Page 58592]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.144

    We also note that Change Request (CR) 11623, Transmittal 10317, 
titled ``Update to the International Classification of Diseases, Tenth 
Revision, (ICD-10) Diagnosis Codes for Vaping Related Disorder and 
Diagnosis and Procedure Codes for the 2019 Novel Coronavirus (COVID-
19)'', was issued on August 21, 2020 (available via the internet on the 
CMS website at: https://www.cms.gov/files/document/r10317OTN.pdf)
    In response to the implementation of these procedure codes, we 
subsequently released a new updated version of the ICD-10 MS-DRG 
Grouper and Medicare Code Editor (MCE) software, Version 37.2, 
effective with discharges on or after August 1, 2020 reflecting these 
new codes, which replaced the ICD-10 MS-DRG Grouper and Medicare Code 
Editor (MCE) software, Version 37.1 R1 that reflected diagnosis codes 
U07.0 (Vaping-related disorder) and U07.1 (COVID-19). The updated 
software, along with the updated ICD-10 MS-DRG V37.2 Definitions Manual 
and the Definitions of Medicare Code Edits V37.2 manual are available 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
    ICD-9-CM addendum and code title information is published on the 
CMS website at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. ICD-10-CM and 
ICD-10-PCS addendum and code title information is published on the CMS 
website at: http://www.cms.gov/Medicare/Coding/ICD10/index.html. CMS 
also sends copies of all ICD-10-CM and ICD-10-PCS coding changes to its 
Medicare contractors for use in updating their systems and providing 
education to providers.
    Information on ICD-10-CM diagnosis codes, along with the Official 
ICD-10-CM Coding Guidelines, can also be found on the CDC website at: 
http://

[[Page 58593]]

www.cdc.gov/nchs/icd/icd10.htm. Additionally, information on new, 
revised, and deleted ICD-10-CM diagnosis and ICD-10-PCS procedure codes 
is provided to the AHA for publication in the Coding Clinic for ICD-10. 
AHA also distributes coding update information to publishers and 
software vendors.
    The following chart shows the number of ICD-10-CM and ICD-10-PCS 
codes and code changes since FY 2016 when ICD-10 was implemented.
[GRAPHIC] [TIFF OMITTED] TR18SE20.145

    As mentioned previously, the public is provided the opportunity to 
comment on any requests for new diagnosis or procedure codes discussed 
at the ICD-10 Coordination and Maintenance Committee meeting.
17. Replaced Devices Offered Without Cost or With a Credit
a. Background
    In the FY 2008 IPPS final rule with comment period (72 FR 47246 
through 47251), we discussed the topic of Medicare payment for devices 
that are replaced without cost or where credit for a replaced device is 
furnished to the hospital. We implemented a policy to reduce a 
hospital's IPPS payment for certain MS-DRGs where the implantation of a 
device that subsequently failed or was recalled determined the base MS-
DRG assignment. At that time, we specified that we will reduce a 
hospital's IPPS payment for those MS-DRGs where the hospital received a 
credit for a replaced device equal to 50 percent or more of the cost of 
the device.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 
51557), we clarified this policy to state that the policy applies if 
the hospital received a credit equal to 50 percent or more of the cost 
of the replacement device and issued instructions to hospitals 
accordingly.
b. Changes for FY 2021
    As discussed in the FY 2021 IPPS/LTCH proposed rule (84 FR 32560 
through 32564) for FY 2021, we proposed to delete MS-DRGs 129 and 130, 
add new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures with 
MCC, with CC, and without CC/MCC, respectively) and to reassign a 
subset of the procedures currently assigned to MS-DRGs 129 and 130 to 
new MS-DRGs 140 through 142. Additionally, we proposed to create new 
MS-DRGs 521 and 522 (Hip Replacement with Principal Diagnosis of Hip 
Fracture with and without MCC, respectively) and to assign a subset of 
the procedures currently assigned to MS-DRGs 469 and 470 to new MS-DRGs 
521 and 522. (We note that in the proposed rule, we inadvertently 
referred to these as MS-DRGs 551 and 552.)
    As stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24409), 
we generally map new MS-DRGs onto the

[[Page 58594]]

list when they are formed from procedures previously assigned to MS-
DRGs that are already on the list. Currently, MS-DRGs 129, 130, 469 and 
470 are on the list of MS-DRGs subject to the policy for payment under 
the IPPS for replaced devices offered without cost or with a credit as 
shown in the table in this section of this rule. Therefore, we proposed 
that if the applicable MS-DRG changes are finalized, in addition to 
deleting MS-DRGs 129 and 130, we also would add new MS-DRGs 140, 141, 
142, 521 and 522 to the list of MS-DRGs subject to the policy for 
payment under the IPPS for replaced devices offered without cost or 
with a credit and make conforming changes as reflected in the table. We 
also proposed to continue to include the existing MS-DRGs currently 
subject to the policy as also displayed in the table in this section of 
this rule.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR18SE20.146


[[Page 58595]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.147


[[Page 58596]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.148

BILLING CODE 4120-01-C
    As discussed in section II.E.5.a. of the preamble of this final 
rule, we are finalizing our proposal to delete MS-DRGs 129 and 130, add 
new MS-DRGs 140, 141, and 142, and to reassign a subset of the 
procedures currently assigned to MS-DRGs 129 and 130 to new MS-DRGs 140 
through 142. Additionally, we are finalizing our proposal to create new 
MS-DRGs 521 and 522 and to reassign a subset of the procedures 
currently assigned to MS-DRGs 469 and 470 to new MS-DRGs 521 and 522. 
We did not receive any public comments opposing our proposal to delete 
MS-DRGs 129 and 130. Additionally, we did not receive any public 
comments opposing our proposal to add MS-DRGs 140, 141, 142, 521 and 
522 to the policy for replaced devices offered without cost or with 
credit as reflected in the previous table or to continue to include the 
existing MS-DRGs currently subject to the policy. Therefore, we are 
finalizing the list of MS-DRGs in the table included in the proposed 
rule and in this rule that will be subject to the replaced devices 
offered without cost or with a credit policy effective October 1, 2020.
    The final list of MS-DRGs subject to the IPPS policy for replaced 
devices offered without cost or with a credit will be issued to 
providers in the form of a Change Request (CR).
18. Out of Scope Public Comments Received
    We received public comments on MS-DRG related issues that were 
outside the scope of the proposals included in the FY 2021 IPPS/LTCH 
PPS proposed rule.
    Because we consider these public comments to be outside the scope 
of the proposed rule, we are not addressing them in this final rule. As 
stated in section II.E.1.b. of the preamble of this final rule, we 
encourage individuals with comments about MS-DRG classifications to 
submit these comments no later than November 1, 2020 so that they can 
be considered for possible inclusion in the annual proposed rule. We 
will consider these public comments for possible proposals in future 
rulemaking as part of our annual review process.
E. Recalibration of the FY 2021 MS-DRG Relative Weights
1. Data Sources for Developing the Relative Weights
    Consistent with our established policy, in developing the MS-DRG 
relative weights for FY 2021, we proposed to use two data sources: 
Claims data and cost report data. The claims data source is the MedPAR 
file, which includes fully coded diagnostic and procedure data for all 
Medicare inpatient hospital bills. The FY 2019 MedPAR data used in this 
final rule include discharges occurring on October 1, 2018, through 
September 30, 2019, based on bills received by CMS through March 31, 
2019, from all hospitals subject to the IPPS and short-term, acute care 
hospitals in Maryland (which at that time were under a waiver from the 
IPPS). The FY 2019 MedPAR file used in calculating the relative weights 
includes data for approximately 9,218,950 Medicare discharges from IPPS 
providers. Discharges for Medicare beneficiaries enrolled in a Medicare 
Advantage managed care plan are excluded from this analysis. These 
discharges are excluded when the MedPAR ``GHO Paid'' indicator field on 
the claim record is equal to ``1'' or when the MedPAR DRG payment 
field, which represents the total payment for the claim, is equal to 
the MedPAR ``Indirect Medical Education (IME)'' payment field, 
indicating that the claim was an ``IME only'' claim submitted by a 
teaching hospital on behalf of a beneficiary enrolled in a Medicare 
Advantage managed care plan. In addition, the March 31, 2020 update of 
the FY 2019 MedPAR file complies with version 5010 of the X12 HIPAA 
Transaction and Code Set Standards, and includes a variable called 
``claim type.'' Claim type ``60'' indicates that the claim was an 
inpatient claim paid as fee-for-service. Claim types ``61,'' ``62,'' 
``63,'' and ``64'' relate to encounter claims, Medicare Advantage IME 
claims, and HMO no-pay claims. Therefore, the calculation of the 
relative weights for FY 2021 also excludes claims with claim type 
values not equal to ``60.'' The data exclude CAHs, including hospitals 
that subsequently became CAHs after the period from which the data were 
taken. We note that the FY 2021 relative weights are based on the ICD-
10-CM diagnosis codes and ICD-10-PCS procedure codes from the FY 2019 
MedPAR claims data, grouped through the ICD-10 version of the FY 2021 
GROUPER (Version 38).
    The second data source used in the cost-based relative weighting 
methodology is the Medicare cost report data files from the HCRIS. 
Normally, we use the HCRIS dataset that is 3 years prior to the IPPS 
fiscal year. Specifically, we used cost report data from the March 31, 
2020 update of the FY 2018 HCRIS for calculating the FY 2021 cost-based 
relative weights.
2. Methodology for Calculation of the Relative Weights
a. General
    In this final rule, as we proposed, we calculated the FY 2021 
relative weights based on 19 CCRs, as we did for FY 2020. The 
methodology we proposed to use to calculate the FY 2021 MS-DRG cost-
based relative weights based on claims data in the FY 2019 MedPAR file 
and data from the FY 2018 Medicare cost reports is as follows:
     To the extent possible, all the claims were regrouped 
using the FY 2021 MS-DRG classifications discussed in sections II.B. 
and II.F. of the preamble of this final rule.
     The transplant cases that were used to establish the 
relative weights for heart and heart-lung, liver and/or intestinal, and 
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) 
were limited to those Medicare-approved transplant centers that have 
cases in the FY 2019 MedPAR file.

[[Page 58597]]

(Medicare coverage for heart, heart-lung, liver and/or intestinal, and 
lung transplants is limited to those facilities that have received 
approval from CMS as transplant centers.)
     Organ acquisition costs for kidney, heart, heart-lung, 
liver, lung, pancreas, and intestinal (or multivisceral organs) 
transplants continue to be paid on a reasonable cost basis. Because 
these acquisition costs are paid separately from the prospective 
payment rate, it is necessary to subtract the acquisition charges from 
the total charges on each transplant bill that showed acquisition 
charges before computing the average cost for each MS-DRG and before 
eliminating statistical outliers.
     Claims with total charges or total lengths of stay less 
than or equal to zero were deleted. Claims that had an amount in the 
total charge field that differed by more than $30.00 from the sum of 
the routine day charges, intensive care charges, pharmacy charges, 
implantable devices charges, supplies and equipment charges, therapy 
services charges, operating room charges, cardiology charges, 
laboratory charges, radiology charges, other service charges, labor and 
delivery charges, inhalation therapy charges, emergency room charges, 
blood and blood products charges, anesthesia charges, cardiac 
catheterization charges, CT scan charges, and MRI charges were also 
deleted.
     At least 92.8 percent of the providers in the MedPAR file 
had charges for 14 of the 19 cost centers. All claims of providers that 
did not have charges greater than zero for at least 14 of the 19 cost 
centers were deleted. In other words, a provider must have no more than 
five blank cost centers. If a provider did not have charges greater 
than zero in more than five cost centers, the claims for the provider 
were deleted.
     Statistical outliers were eliminated by removing all cases 
that were beyond 3.0 standard deviations from the geometric mean of the 
log distribution of both the total charges per case and the total 
charges per day for each MS-DRG.
     Effective October 1, 2008, because hospital inpatient 
claims include a POA indicator field for each diagnosis present on the 
claim, only for purposes of relative weight-setting, the POA indicator 
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have 
an ``N'' (No) or a ``U'' (documentation insufficient to determine if 
the condition was present at the time of inpatient admission) in the 
POA field.
    Under current payment policy, the presence of specific HAC codes, 
as indicated by the POA field values, can generate a lower payment for 
the claim. Specifically, if the particular condition is present on 
admission (that is, a ``Y'' indicator is associated with the diagnosis 
on the claim), it is not a HAC, and the hospital is paid for the higher 
severity (and, therefore, the higher weighted MS-DRG). If the 
particular condition is not present on admission (that is, an ``N'' 
indicator is associated with the diagnosis on the claim) and there are 
no other complicating conditions, the DRG GROUPER assigns the claim to 
a lower severity (and, therefore, the lower weighted MS-DRG) as a 
penalty for allowing a Medicare inpatient to contract a HAC. While the 
POA reporting meets policy goals of encouraging quality care and 
generates program savings, it presents an issue for the relative 
weight-setting process. Because cases identified as HACs are likely to 
be more complex than similar cases that are not identified as HACs, the 
charges associated with HAC cases are likely to be higher as well. 
Therefore, if the higher charges of these HAC claims are grouped into 
lower severity MS-DRGs prior to the relative weight-setting process, 
the relative weights of these particular MS-DRGs would become 
artificially inflated, potentially skewing the relative weights. In 
addition, we want to protect the integrity of the budget neutrality 
process by ensuring that, in estimating payments, no increase to the 
standardized amount occurs as a result of lower overall payments in a 
previous year that stem from using weights and case-mix that are based 
on lower severity MS-DRG assignments. If this would occur, the 
anticipated cost savings from the HAC policy would be lost.
    To avoid these problems, we reset the POA indicator field to ``Y'' 
only for relative weight-setting purposes for all claims that otherwise 
have an ``N'' or a ``U'' in the POA field. This resetting ``forced'' 
the more costly HAC claims into the higher severity MS-DRGs as 
appropriate, and the relative weights calculated for each MS-DRG more 
closely reflect the true costs of those cases.
    In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 
and subsequent fiscal years, we finalized a policy to treat hospitals 
that participate in the Bundled Payments for Care Improvement (BPCI) 
initiative the same as prior fiscal years for the IPPS payment modeling 
and ratesetting process without regard to hospitals' participation 
within these bundled payment models (77 FR 53341 through 53343). 
Specifically, because acute care hospitals participating in the BPCI 
Initiative still receive IPPS payments under section 1886(d) of the 
Act, we include all applicable data from these subsection (d) hospitals 
in our IPPS payment modeling and ratesetting calculations as if the 
hospitals were not participating in those models under the BPCI 
initiative. We refer readers to the FY 2013 IPPS/LTCH PPS final rule 
for a complete discussion on our final policy for the treatment of 
hospitals participating in the BPCI initiative in our ratesetting 
process. For additional information on the BPCI initiative, we refer 
readers to the CMS' Center for Medicare and Medicaid Innovation's 
website at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the preamble of the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53341 through 53343).
    The participation of hospitals in the BPCI initiative concluded on 
September 30, 2018. The participation of hospitals in the BPCI Advanced 
model started on October 1, 2018. The BPCI Advanced model, tested under 
the authority of section 1115A of the Act, is comprised of a single 
payment and risk track, which bundles payments for multiple services 
beneficiaries receive during a Clinical Episode. Acute care hospitals 
may participate in BPCI Advanced in one of two capacities: As a model 
Participant or as a downstream Episode Initiator. Regardless of the 
capacity in which they participate in the BPCI Advanced model, 
participating acute care hospitals will continue to receive IPPS 
payments under section 1886(d) of the Act. Acute care hospitals that 
are Participants also assume financial and quality performance 
accountability for Clinical Episodes in the form of a reconciliation 
payment. For additional information on the BPCI Advanced model, we 
refer readers to the BPCI Advanced web page on the CMS Center for 
Medicare and Medicaid Innovation's website at: https://innovation.cms.gov/initiatives/bpci-advanced/. Consistent with our 
policy for FY 2020, and consistent with how we have treated hospitals 
that participated in the BPCI Initiative, for FY 2021, we continue to 
believe it is appropriate to include all applicable data from the 
subsection (d) hospitals participating in the BPCI Advanced model in 
our IPPS payment modeling and ratesetting calculations because, as 
noted previously, these hospitals are still receiving IPPS payments 
under section 1886(d) of the Act. Consistent with FY 2020 IPPS/LTCH PPS 
final rule, we also proposed to include all applicable data from 
subsection (d) hospitals participating in

[[Page 58598]]

the Comprehensive Care for Joint Replacement (CJR) Model in our IPPS 
payment modeling and ratesetting calculations.
    The charges for each of the 19 cost groups for each claim were 
standardized to remove the effects of differences in area wage levels, 
IME and DSH payments, and for hospitals located in Alaska and Hawaii, 
the applicable cost-of-living adjustment. Because hospital charges 
include charges for both operating and capital costs, we standardized 
total charges to remove the effects of differences in geographic 
adjustment factors, cost-of-living adjustments, and DSH payments under 
the capital IPPS as well. Charges were then summed by MS-DRG for each 
of the 19 cost groups so that each MS-DRG had 19 standardized charge 
totals. Statistical outliers were then removed. These charges were then 
adjusted to cost by applying the national average CCRs developed from 
the FY 2018 cost report data.
    The 19 cost centers that we used in the relative weight calculation 
are shown in a supplemental data file posted via the internet on the 
CMS website for this final rule and available at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. The supplemental data file shows the 
lines on the cost report and the corresponding revenue codes that we 
used to create the 19 national cost center CCRs. We stated in the 
proposed rule that, if we receive comments about the groupings in this 
supplemental file, we may consider these comments as we finalize our 
policy. However, we did not receive any comments on the groupings in 
this table, and therefore, we are finalizing the groupings as proposed.
    We invited public comments on our proposals related to 
recalibration of the FY 2021 relative weights and the changes in 
relative weights from FY 2020.
    Comment: A commenter requested an explanation for the 187 discharge 
difference in total discharges in Table 7A and Table 7B (proposed Table 
7A for Grouper V37 included 9,127,118 discharges, yet proposed Table 7B 
for Grouper V38 included 9,126,931 discharges).
    Response: The discharge difference arises from the proposed 
modification to our relative weight methodology to account for the 
clinical trial CAR T-cell therapy cases(85 FR 32566). In the proposed 
rule's Table 7B, proposed MS-DRG 018 showed only the 116 non-clinical 
trial discharges for CAR-T cell therapy cases, under the proposed 
relative weight calculation discussed in the next section. The 187 
discharges the commenter referenced were clinical trial CAR T-cell 
therapy cases, which are not included in the calculation of the average 
cost for MS-DRG 018. In addition, these cases are not included in 
calculating the average and percentile lengths of stay data for MS-DRG 
018, so they are not included in the number of discharges in Table 7B.
    In the proposed rule, we noted that in the FY 2020 IPPS/LTCH PPS 
final rule, we adopted a temporary one-time measure for FY 2020 for an 
MS-DRG where the FY 2018 relative weight declined by 20 percent from 
the FY 2017 relative weight, and the FY 2020 relative weight would have 
declined by 20 percent or more from the FY 2019 relative weight, which 
was maintained at the FY 2018 relative weight. For an MS-DRG meeting 
this criterion, the FY 2020 relative weight was set equal to the FY 
2019 relative weight, which in turn had been set equal to the FY 2018 
relative weight (84 FR 42167). For FY 2020, the only MS-DRG meeting 
this criterion was MS-DRG 215. We invited public comments on the 
proposed FY 2021 weight for MS-DRG 215 (Other Heart Assist System 
Implant) as set forth in Table 5 associated with the proposed rule, 
including comments on whether we should consider a policy under 
sections 1886(d)(4)(B) and (C) of the Act similar to the measure 
adopted in the FY 2020 IPPS/LTCH PPS final rule to maintain the FY 2021 
relative weight equal to the FY 2020 relative weight for MS-DRG 215, or 
an alternative approach such as averaging the FY 2020 relative weight 
and the otherwise applicable FY 2021 weight.
    Comment: Commenters supported a policy that would either maintain 
the FY 2021 relative weight equal to the FY 2020 relative weight for 
MS-DRG 215, or average the FY 2020 relative weight and the otherwise 
applicable FY 2021 weight. Commenters stated that heart assist devices 
are lifesaving devices that are implanted in patients undergoing high 
risk procedures or are in cardiogenic shock, and that there have been 
extensive coding changes such that hospitals are still not correctly 
reporting their costs. Commenters stated that the proposed relative 
weight would result in a payment that would be significantly below the 
cost incurred by providers to provide these procedures and could 
thereby limit access to Medicare beneficiaries. Commenters indicated 
that CMS had the authority to adjust the relative weights to ensure 
appropriate payment to providers for heart assist devices.
    Some commenters requested that CMS consider this approach in any 
situation when the relative weight for an MS-DRG is drastically reduced 
in a given year, particularly when it follows a significant decline in 
prior years. Some commenters pointed to MS-DRGs 796 (Vaginal Delivery 
with Sterilization/D&C with MCC) and 933 (Extensive Burns or Full 
Thickness Burns with MV >96 hrs without Skin Graft), which also have 
significant decreases relative to FY 2020.
    Response: As we indicated in the FY 2018 IPPS/LTCH final rule (82 
FR 38103), and in response to similar comments in the FY 2019 IPPS/LTCH 
PPS final rule (83 FR 41273) and the FY 2020 IPPS/LTCH final rule (84 
FR 42167), we do not believe it is normally appropriate to address 
relative weight fluctuations that appear to be driven by changes in the 
underlying data. Nevertheless, after reviewing the comments received 
and the data used in our ratesetting calculations, we acknowledge an 
outlier circumstance where the weight for MS-DRG 215 is seeing a 
significant reduction for each of the 4 years since CMS began using the 
ICD-10 data in calculating the relative weights. While we would 
ordinarily consider this weight change to be appropriately driven by 
the underlying data, given the comments received, and in an abundance 
of caution because this may be the MS-DRG assigned when a hospital 
provides temporary right ventricular support for up to 14 days in 
critical care patients for the treatment of acute right heart failure 
or decompensation caused by complications related to COVID-19, 
including pulmonary embolism, we are adopting a temporary one-time 
measure for FY 2021 for MS-DRG 215. Specifically, we will set the 2021 
relative weight for MS-DRG 215 equal to the average of the FY 2020 
relative weight and the otherwise applicable FY 2021 weight.
    With regard to the commenters who raised concerns about other MS-
DRGs with significant reductions relative to FY 2020, the other MS-DRGs 
are low volume in our claims data, and therefore typically experience a 
greater degree of year-to-year variation. For example, while MS-DRGs 
796 and 933 would have significant decreases relative to FY 2020, those 
MS-DRGs experienced considerable increases between FY 2019 and FY 2020. 
We acknowledge the longstanding concerns related to low volume MS-DRGs 
and will take into consideration the unique issues relating to such MS-
DRGs and the stability of their weights for future rulemaking.
    Comment: Some commenters requested that CMS adopt a permanent 
solution to stabilize payment for MS-

[[Page 58599]]

DRG 215, in addition to adopting a hold-harmless or blended rate to 
stabilize the relative weight for MS-DRG 215, effective with discharges 
beginning October 1, 2020 for FY 2021. Specifically, the commenters 
suggested that CMS reassign cases reporting procedure code 02HA3RJ 
(Insertion of short-term external heart assist system into heart, 
intraoperative, percutaneous approach) from MS-DRG 215 to MS-DRGs 216, 
217, and 218 (Cardiac Valve and Other Major Cardiothoracic Procedures 
with Cardiac Catheterization with MCC, with CC, and without CC/MCC, 
respectively). According to the commenters, these cases are more 
clinically aligned with MS-DRGs 216, 217, and 218 and this reassignment 
would improve the long-term stability of the heart assist MS-DRGs 
including MS-DRG 215. The commenters also noted that reassigning the 
cases reporting heart assist system procedures performed 
intraoperatively from MS-DRG 215 into MS-DRGs 216, 217, and 218 in the 
FY 2021 IPPS/LTCH PPS final rule would be consistent with CMS precedent 
and authority.
    Response: We note that we did not propose any changes to the 
assignment of heart assist devices and need additional time to fully 
analyze this request. Therefore, we are not making changes in this 
final rule to the assignment of cases reporting heart assist system 
procedures performed intraoperatively, and we will consider this issue 
in future rulemaking.
b. Relative Weight Calculation for New MS-DRG 018 for CAR T-cell 
Therapy
    As discussed in section II.E.2.b. of this final rule, we proposed, 
and are finalizing, to create new MS-DRG 018 for cases that include 
procedures describing CAR T-cell therapies, which are currently 
reported using ICD-10-PCS procedure codes XW033C3 or XW043C3. As 
discussed in section IV.I. of this final rule, given the high cost of 
the CAR T-cell product, we proposed, and are finalizing, a differential 
payment for cases where the CAR T-cell product is provided without cost 
as part of a clinical trial to ensure that the payment amount for CAR 
T-cell therapy clinical trial cases appropriately reflects the relative 
resources required for providing CAR T-cell therapy as part of a 
clinical trial.
    We stated in the proposed rule that we also believe it would be 
appropriate to modify our existing relative weight methodology to 
ensure that the relative weight for new MS-DRG 018 appropriately 
reflects the relative resources required for providing CAR T-cell 
therapy outside of a clinical trial, while still accounting for the 
clinical trial cases in the overall average cost for all MS-DRGs. 
Specifically, we proposed that clinical trial claims that group to new 
MS-DRG 018 would not be included when calculating the average cost for 
new MS-DRG 018 that is used to calculate the relative weight for this 
MS-DRG, so that the relative weight reflects the costs of the CAR T-
cell therapy drug. Consistent with our analysis of the FY 2019 MedPAR 
claims data as discussed in section IV.I. of this final rule, we 
identified clinical trial claims as claims that contain ICD-10-CM 
diagnosis code Z00.6 or contain standardized drug charges of less than 
$373,000, which is the average sales price of KYMRIAH and YESCARTA, 
which are the two CAR T-cell biological products licensed to treat 
relapsed/refractory large B-cell lymphoma as of the time of the 
development of the proposed rule and this final rule. We also proposed 
to calculate the following adjustment to account for the CAR T-cell 
therapy cases identified as clinical trial cases in calculating the 
national average standardized cost per case that is used to calculate 
the relative weights for all MS-DRGs and for purposes of budget 
neutrality and outlier simulations:
     Calculate the average cost for cases to be assigned to new 
MS-DRG 018 that contain ICD-10-CM diagnosis code Z00.6 or contain 
standardized drug charges of less than $373,000.
     Calculate the average cost for cases to be assigned to new 
MS-DRG 018 that do not contain ICD-10-CM diagnosis code Z00.6 or 
standardized drug charges of at least $373,000.
     Calculate an adjustor by dividing the average cost 
calculated in step 1 by the average cost calculated in step 2.
     Apply the adjustor calculated in step 3 to the cases 
identified in step 1 as clinical trial cases, then add this adjusted 
case count to the non-clinical trial case count prior to calculating 
the average cost across all MS-DRGs.
    Each year, when we calculate the relative weights, we use a 
transfer-adjusted case count for each MS-DRG, which accounts for 
payment adjustments resulting from our postacute care transfer policy. 
This process is described in the FY 2006 IPPS/LTCH PPS final rule (70 
FR 47697). We proposed to apply this adjustor to the case count for MS-
DRG 018 in a similar manner. We proposed to first calculate the 
transfer-adjusted case count for MS-DRG 018, and then further adjust 
the transfer-adjusted case count by the adjustor described previously. 
Then, we proposed to use this adjusted case count for MS-DRG 018 in 
calculating the national average cost per case, which is used in the 
calculation of the relative weights. Based on the December 2019 update 
of the FY 2019 MedPAR file, we estimated that the average costs of CAR 
T-cell therapy cases identified as clinical trial cases were 15% of the 
average costs of the CAR T-cell therapy cases identified as non-
clinical trial cases, and therefore, in calculating the national 
average cost per case for purposes of the proposed rule, each case 
identified as a clinical trial case was adjusted to 0.15. We indicated 
that we expected to recalculate this proposed adjustor for the CAR T 
cell therapy clinical trial cases for the final rule based on the 
updated data available. We also noted that we were applying this 
proposed adjustor for CAR T-cell therapy clinical trial cases for 
purposes of budget neutrality and outlier simulations, as discussed 
further in section II.A. of the Addendum to the proposed rule and this 
final rule.
    We invited public comments on our proposal.
    Comment: A commenter expressed concern with our methodology to 
divide cases into clinical trial and non-clinical trial cohorts, 
stating that both criteria used to identify clinical trial cases, the 
presence of ICD-10-CM diagnosis code Z00.6 or standardized drug charges 
of less than $373,000, are problematic given the inconsistency of 
charging practices for CAR T-cell therapies and the application of ICD-
10-CM diagnosis code Z00.6 in all clinical trial cases. This commenter 
noted that it is possible that some cases were excluded as clinical 
trial cases when the hospital actually incurred the full cost of the 
drug. This commenter suggested that these criteria may have resulted in 
a lower average adjusted cost for non-clinical trial cases below the 
cost of the drug.
    Some commenters also raised issues in the context of the payment 
adjustment for CAR T-cell clinical trial cases regarding two relatively 
less frequent scenarios. Commenters stated that when CAR T-cell therapy 
products are used out of specification (also termed expanded access), 
hospitals do not incur the cost of the CAR T-cell therapy product, but 
the claim would not include ICD-10-CM diagnosis code Z00.6 because the 
case is not part of a clinical trial. Commenters identified an 
additional scenario, in which the CAR T-cell therapy product is 
purchased in the usual manner, but the case involves a clinical trial 
of another drug, in which case ICD-10-CM diagnosis code Z00.6 would be 
included on the claim.

[[Page 58600]]

    Response: We believe that given the available data, our methodology 
to divide cases into clinical trial and non-clinical trial cohorts 
provides reasonable estimates on average of the costs for clinical 
trial and non-clinical trial cases. We note that in the MedPAR data 
used in the proposed rule, there were only two cases that were flagged 
as clinical trials that contained drug charges of more than $373,000. 
The average drug charge of these two cases was less than the average 
drug charge for all cases that were identified as non-clinical trial 
cases. Had we instead assumed that these cases were not clinical trial 
cases for CAR T-cell therapies, and included these two cases in the 
calculation of the relative weight, the relative weight would have been 
slightly lower, rather than higher as the commenter suggested. With 
respect to the concern about hospital charging practices, we reiterate 
our earlier response that there is nothing that precludes hospitals 
from setting their drug charges consistent with their CCRs.
    In response to commenters who raised issues in the context of the 
payment adjustment for CAR T-cell clinical trial cases regarding two 
scenarios, as discussed elsewhere in this final rule, we are adjusting 
our proposed policy for the payment adjustment for CAR T-cell clinical 
trial cases to address these scenarios. Similarly, we are adjusting our 
methodology here such that (a) when the CAR T-cell therapy product is 
purchased in the usual manner, but the case involves a clinical trial 
of a different product, the claim will be included when calculating the 
average cost for cases not determined to be clinical trial cases to the 
extent such cases can be identified in the historical data, and (b) 
when there is expanded access use of immunotherapy, these cases will be 
included when calculating the average cost for cases determined to be 
clinical trial cases to the extent such cases can be identified in the 
historical data. To the best of our knowledge there are no claims in 
the historical data used in the calculation of the adjustment for cases 
involving a clinical trial of a different product, and to the extent 
the historical data contain claims for cases involving expanded access 
use of immunotherapy we believe those claims would have drug charges 
less than $373,000.
    Comment: Some commenters asked whether standardized drug charges 
included charges for revenue center 891 in addition to charges from 
revenue centers 025X, 026X, and 63X. Several commenters questioned 
whether charges for revenue center 891 were included in CMS' 
calculation of standardized drug charges given that the MedPAR data 
dictionary seems to indicate that charges from revenue codes 081X-089X 
are excluded from ratesetting. Commenters stated that it would be 
incorrect to exclude charges in revenue center 891, since they would 
include CAR T product charges. Another commenter asked that CMS include 
claims with charges of greater than $373,000 in revenue center 891 in 
identifying claims that were not part of a clinical trial. One 
commenter requested that CMS apply a series of steps to determine 
whether charges in revenue center 891 were related to CAR T-cell 
therapy product acquisition.
    Response: We appreciate commenters bringing this issue to our 
attention. We agree with commenters that while revenue centers 081X-
089X are typically excluded from ratesetting, charges from revenue 
center 891 should be included in our calculation of standardized drug 
charges for MS-DRG 018. Therefore, for cases that group to MS-DRG 018, 
we will consider the charges reported in revenue center 891 to be 
related to CAR T-cell therapy product acquisition and include these 
charges in determining whether the case contains standardized drug 
charges of at least $373,000 and therefore should be determined to be 
non-clinical trial case for purposes of this modified relative weight 
methodology. We note that the same trims used in calculating the 
standardized drug costs would apply to determine whether or not a given 
case is determined to be a clinical trial case for purposes of these 
modifications to the relative weight methodology.
    After consideration of public comments received, we are finalizing 
our proposal to not include claims determined to be clinical trial 
claims that group to new MS-DRG 018 when calculating the average cost 
for new MS-DRG 018 that is used to calculate the relative weight for 
this MS-DRG, with the additional refinements that (a) when the CAR T-
cell therapy product is purchased in the usual manner, but the case 
involves a clinical trial of a different product, the claim will be 
included when calculating the average cost for new MS-DRG 018 to the 
extent such claims can be identified in the historical data, and (b) 
when there is expanded access use of immunotherapy, these cases will 
not be included when calculating the average cost for new MS-DRG 018 to 
the extent such claims can be identified in the historical data. We are 
also finalizing our proposal to calculate the adjustment described 
above to account for the CAR T-cell therapy cases determined to be 
clinical trial cases, with the additional refinement of including 
revenue center 891 in our calculation of standardized drug charges for 
MS-DRG 018. Applying this finalized methodology, based on the March 
2020 update of the FY 2019 MedPAR file, we estimate that the average 
costs of CAR T-cell therapy cases determined to be clinical trial cases 
($46,0662) are 17 percent of the average costs of CAR T cell therapy 
cases determined to be non-clinical trial cases ($276,042), and 
therefore, in calculating the national average cost per case for 
purposes of this final rule, each case identified as a clinical trial 
case was adjusted to 0.17. We also note that we are applying this 
finalized adjustor for cases determined to be CAR T-cell therapy 
clinical trial cases for purposes of budget neutrality and outlier 
simulations, as discussed further in section II.A. of the Addendum to 
the this final rule.
3. Development of National Average CCRs
    We developed the national average CCRs as follows:
    Using the FY 2018 cost report data, we removed CAHs, Indian Health 
Service hospitals, all-inclusive rate hospitals, and cost reports that 
represented time periods of less than 1 year (365 days). We included 
hospitals located in Maryland because we include their charges in our 
claims database. Then we created CCRs for each provider for each cost 
center (see the supplemental data file for line items used in the 
calculations) and removed any CCRs that were greater than 10 or less 
than 0.01. We normalized the departmental CCRs by dividing the CCR for 
each department by the total CCR for the hospital for the purpose of 
trimming the data. Then we took the logs of the normalized cost center 
CCRs and removed any cost center CCRs where the log of the cost center 
CCR was greater or less than the mean log plus/minus 3 times the 
standard deviation for the log of that cost center CCR. Once the cost 
report data were trimmed, we calculated a Medicare-specific CCR. The 
Medicare-specific CCR was determined by taking the Medicare charges for 
each line item from Worksheet D-3 and deriving the Medicare-specific 
costs by applying the hospital-specific departmental CCRs to the 
Medicare-specific charges for each line item from Worksheet D-3. Once 
each hospital's Medicare-specific costs were established, we summed the 
total Medicare-specific costs and divided by the sum of the total 
Medicare-specific charges to produce national average, charge-weighted 
CCRs.

[[Page 58601]]

    After we multiplied the total charges for each MS-DRG in each of 
the 19 cost centers by the corresponding national average CCR, we 
summed the 19 ``costs'' across each MS-DRG to produce a total 
standardized cost for the MS-DRG. The average standardized cost for 
each MS-DRG was then computed as the total standardized cost for the 
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The 
average cost for each MS-DRG was then divided by the national average 
standardized cost per case to determine the relative weight.
    The FY 2021 cost-based relative weights were then normalized by an 
adjustment factor of 1.819227 so that the average case weight after 
recalibration was equal to the average case weight before 
recalibration. The normalization adjustment is intended to ensure that 
recalibration by itself neither increases nor decreases total payments 
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
    The 19 national average CCRs for FY 2021 are as follows:
    [GRAPHIC] [TIFF OMITTED] TR18SE20.149
    
    Since FY 2009, the relative weights have been based on 100 percent 
cost weights based on our MS-DRG grouping system.
    When we recalibrated the DRG weights for previous years, we set a 
threshold of 10 cases as the minimum number of cases required to 
compute a reasonable weight. We proposed to use that same case 
threshold in recalibrating the MS-DRG relative weights for FY 2021. 
Using data from the FY 2019 MedPAR file, there were 7 MS-DRGs that 
contain fewer than 10 cases. For FY 2021, because we do not have 
sufficient MedPAR data to set accurate and stable cost relative weights 
for these low-volume MS-DRGs, we proposed to compute relative weights 
for the low-volume MS-DRGs by adjusting their final FY 2020 relative 
weights by the percentage change in the average weight of the cases in 
other MS-DRGs from FY 2020 to FY 2021. The crosswalk table is as 
follows.

[[Page 58602]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.150

    After consideration of the comments we received, we are finalizing 
our proposals, with the modifications for recalibrating the relative 
weights for FY 2021 for MS-DRG 018 by including the charges reported in 
revenue center 891 in determining whether the case should be determined 
to be a non-clinical trial case, and for MS-DRG 215 by setting the 
relative weight equal to the average of the FY 2020 relative weight and 
the otherwise applicable FY 2021 weight.
F. Add-On Payments for New Services and Technologies for FY 2021
1. Background
    Sections 1886(d)(5)(K) and (L) of the Act establish a process of 
identifying and ensuring adequate payment for new medical services and 
technologies (sometimes collectively referred to in this section as 
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the 
Act specifies that a medical service or technology will be considered 
new if it meets criteria established by the Secretary after notice and 
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act 
specifies that a new medical service or technology may be considered 
for new technology add-on payment if, based on the estimated costs 
incurred with respect to discharges involving such service or 
technology, the DRG prospective payment rate otherwise applicable to 
such discharges under this subsection is inadequate. We note that, 
beginning with discharges occurring in FY 2008, CMS transitioned from 
CMS- DRGs to MS-DRGs. The regulations at 42 CFR 412.87 implement these 
provisions and Sec.  412.87(b) specifies three criteria for a new 
medical service or technology to receive the additional payment: (1) 
The medical service or technology must be new; (2) the medical service 
or technology must be costly such that the DRG rate otherwise 
applicable to discharges involving the medical service or technology is 
determined to be inadequate; and (3) the service or technology must 
demonstrate a substantial clinical improvement over existing services 
or technologies. In addition, certain transformative new devices and 
Qualified Infectious Disease Products may qualify under an alternative 
inpatient new technology add-on payment pathway, as set forth in the 
regulations at Sec.  412.87(c) and (d). In this rule, we highlight some 
of the major statutory and regulatory provisions relevant to the new 
technology add-on payment criteria, as well as other information. For a 
complete discussion on the new technology add-on payment criteria, we 
refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51572 
through 51574) and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42288 
through 42300).
a. New Technology Add On Payment Criteria
(1) Newness Criterion
    Under the first criterion, as reflected in Sec.  412.87(b)(2), a 
specific medical service or technology will be considered ``new'' for 
purposes of new medical service or technology add-on payments until 
such time as Medicare data are available to fully reflect the cost of 
the technology in the MS-DRG weights through recalibration. We note 
that we do not consider a service or technology to be new if it is 
substantially similar to one or more existing technologies. That is, 
even if a medical product receives a new FDA approval or clearance, it 
may not necessarily be considered ``new'' for purposes of new 
technology add-on payments if it is ``substantially similar'' to 
another medical product that was approved or cleared by FDA and has 
been on the market for more than 2 to 3 years. In the FY 2010 IPPS/RY 
2010 LTCH PPS final rule (74 FR 43813 through 43814), we established 
criteria for evaluating whether a new technology is substantially 
similar to an existing technology, specifically: (1) Whether a product 
uses the same or a similar mechanism of action to achieve a therapeutic 
outcome; (2) whether a product is assigned to the same or a different 
MS-DRG; and (3) whether the new use of the technology involves the 
treatment of the same or similar type of disease and the same or 
similar patient population. If a technology meets all three of these 
criteria, it would be considered substantially similar to an existing 
technology and would not be considered ``new'' for purposes of new 
technology add-on payments. For a detailed discussion of the criteria 
for substantial similarity, we refer readers to the FY 2006 IPPS final 
rule (70 FR 47351 through 47352), and the FY 2010 IPPS/LTCH PPS final 
rule (74 FR 43813 through 43814).
(2) Cost Criterion
a. Overview
    Under the second criterion, Sec.  412.87(b)(3) further provides 
that, to be eligible for the add-on payment for new medical services or 
technologies, the MS-DRG prospective payment rate otherwise applicable 
to discharges involving the new medical service or technology must be 
assessed for adequacy. Under the cost criterion, consistent with the 
formula specified in section 1886(d)(5)(K)(ii)(I) of the Act, to assess 
the adequacy of payment for a new technology paid under the applicable 
MS-DRG prospective payment rate, we evaluate whether the charges for 
cases involving the new

[[Page 58603]]

technology exceed certain threshold amounts. The MS-DRG threshold 
amounts generally used in evaluating new technology add-on payment 
applications for FY 2021 are presented in a data file that is 
available, along with the other data files associated with the FY 2020 
IPPS/LTCH PPS final rule and correction notice, on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. However, we refer readers to section 
II.G.1.a.(2)b. of the preamble of this final rule where we discuss our 
final policy to apply the proposed threshold value for new MS-DRG 018 
in evaluating the cost criterion for the CAR T-cell therapy 
technologies for purposes of FY 2021 new technology add-on payments.
    As finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41275), 
beginning with FY 2020, we include the thresholds applicable to the 
next fiscal year (previously included in Table 10 of the annual IPPS/
LTCH PPS proposed and final rules) in the data files associated with 
the prior fiscal year. Accordingly, the final thresholds for 
applications for new technology add-on payments for FY 2022 are 
presented in a data file that is available on the CMS website, along 
with the other data files associated with this FY 2021 final rule, by 
clicking on the FY 2021 IPPS Final Rule Home Page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. We note that, under our final policy discussed 
in section II.G.1.a.(2).b. of the preamble of this final rule, 
beginning with FY 2022, we will use the proposed threshold values 
associated with the proposed rule for that fiscal year to evaluate the 
cost criterion for all applications for new technology add-on payments 
and previously approved technologies that may continue to receive new 
technology add-on payments, if those technologies would be assigned to 
a proposed new MS-DRG for that same fiscal year. In the September 7, 
2001 final rule that established the new technology add-on payment 
regulations (66 FR 46917), we discussed that applicants should submit a 
significant sample of data to demonstrate that the medical service or 
technology meets the high-cost threshold. Specifically, applicants 
should submit a sample of sufficient size to enable us to undertake an 
initial validation and analysis of the data. We also discussed in the 
September 7, 2001 final rule (66 FR 46917) the issue of whether the 
Health Insurance Portability and Accountability Act (HIPAA) Privacy 
Rule at 45 CFR parts 160 and 164 applies to claims information that 
providers submit with applications for new medical service or 
technology add-on payments. We refer readers to the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51573) for complete information on this issue.
b. Cost Threshold Evaluation for Proposed New MS-DRG Reassignment
    In the FY 2021 IPPS/LTCH PPS proposed rule, we made proposals 
relating to our evaluation of the cost criterion for technologies that 
are proposed to be assigned to a new MS-DRG (85 FR 32643 and 32644 and 
32650 and 32651). We noted that, as we have discussed in prior 
rulemaking with regard to the potential creation of a new MS-DRG for 
CAR T-cell therapies (83 FR 41172), if a new MS-DRG for CAR T-cell 
therapies were to be created, then consistent with section 
1886(d)(5)(K)(ix) of the Act, there may no longer be a need for a new 
technology add-on payment under section 1886(d)(5)(K)(ii)(III) of the 
Act. Section 1886(d)(5)(K)(ix) of the Act requires that, before 
establishing any add-on payment for a new medical service or 
technology, the Secretary shall seek to identify one or more DRGs 
associated with the new technology, based on similar clinical or 
anatomical characteristics and the costs of the technology and shall 
assign the new technology into a DRG where the average costs of care 
most closely approximate the costs of care using the new technology. As 
discussed in previous rulemaking (71 FR 47996), no add-on payment will 
be made if the new technology is assigned to a DRG that most closely 
approximates its costs.
    In the proposed rule, we referred readers to the FY 2016 IPPS/LTCH 
PPS final rule (80 FR 49481 and 49482), where we discussed whether the 
WATCHMAN[supreg] System met the cost criterion for a new technology 
add-on payment. Specifically, we discussed whether the threshold value 
associated with a proposed new MS-DRG should be considered in 
determining whether the applicant meets the cost criterion. We also 
discussed instances in the past where the coding associated with a new 
technology application is included in a finalized policy to change one 
or more MS-DRGs. For example, in the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53360 through 53362), we described the cost analysis for the 
Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm Endovascular 
Graft, which was identified by ICD-9-CM procedure code 39.78 
(Endovascular implantation of branching or fenestrated graft(s) in 
aorta). In that same rule, we finalized a change to the assignment of 
that procedure code, reassigning it from MS- DRGs 252, 253, and 254 to 
MS-DRGs 237 and 238. Because of that change, we determined that, for FY 
2013, in order for the Zenith[supreg] Fenestrated Abdominal Aortic 
Aneurysm Endovascular Graft to meet the cost criteria, it must 
demonstrate that the average case weighted standardized charge per case 
exceeded the thresholds for MS-DRGs 237 and 238. We noted that, in that 
example, MS-DRGs 237 and 238 existed previously; therefore, thresholds 
that were 75 percent of one standard deviation beyond the geometric 
mean standardized charge for these MS-DRGs were available to the public 
in Table 10 at the time the application was submitted. (We note that 
for fiscal years prior to FY 2020, Table 10 included the cost 
thresholds used to evaluate applications for new technology add-on 
payments for the next fiscal year.) We stated in the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24460) that in the case of WATCHMAN[supreg] 
System, if MS-DRGs 273 and 274 were to be finalized for FY 2016, we 
recognized that thresholds that are 75 percent of one standard 
deviation beyond the geometric mean standardized charge would not have 
been available at the time the application was submitted. We stated our 
belief that it could be appropriate for the applicant to demonstrate 
that the average case weighted standardized charge per case exceeded 
these thresholds for MS-DRGs 273 and 274, for which this technology 
would be reassigned. Accordingly, we made available supplemental 
threshold values on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech that were 
calculated using the data used to generate the FY 2015 IPPS/LTCH PPS 
Table 10 and reassigned the procedure codes, in accordance with the 
finalized policies discussed in section II.G.3.b. of the preamble of 
the FY 2016 IPPS/LTCH PPS final rule.
    We also noted that in the FY 2016 IPPS/LTCH PPS proposed rule, we 
invited public comments on whether considering these supplemental 
threshold values as part of the cost criterion evaluation for this 
application was appropriate and also on how to address similar future 
situations in a broader policy context should they occur. After 
consideration of the comments, in the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49482) we stated that we agreed with the commenters that we 
should evaluate the cost threshold in effect at the time the new

[[Page 58604]]

technology add-on payment application is submitted to determine if an 
applicant exceeds the cost threshold. We stated that we agreed with 
commenters that this policy is most predictable for applicants. We also 
stated that we were maintaining our current policy to use the 
thresholds issued with each final rule for the upcoming fiscal year 
when making a determination to continue add-on payments for those new 
technologies that were approved for new technology add-on payments from 
the prior fiscal year.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we noted that at the 
time of the FY 2016 final rule, in applying this policy, we did not 
anticipate the onset of new, extremely high cost, technologies such as 
CAR T-cell therapy, nor such significant variance between the 
thresholds at the time of application and the thresholds based on the 
finalized MS-DRG assignment for the upcoming year. For example, in the 
FY 2016 final rule, the difference between the MS-DRG threshold amount 
for MS-DRGs 237 ($121,777) and 238 ($87,602) set forth in Table 10 
associated with the FY 2015 final rule, and the supplemental MS- DRG 
threshold amount based on the proposed new MS-DRGs 273 ($95,542) and 
274 ($77,230), was $26,235 and $10,372 respectively. By comparison, 
based on the data file released with the FY 2020 final rule (and 
corresponding correction notice) for FY 2021 applications, the 
threshold amount for MS-DRG 016 is $170,573. However, the threshold 
amount for proposed new MS-DRG 018 (in the data file released with this 
proposed rule) is $1,237,393, which is more than 7 times greater.
    We stated that in light of the development of new technologies, 
such as CAR T-cell therapies, and the more substantial shifts in the 
MS-DRG threshold amounts that may result from the reassignment of new 
technologies for the upcoming fiscal year, we believe it is appropriate 
to revisit the policy described in the FY 2016 final rule. We stated 
that while we continue to believe that predictability for applicants is 
important, we also believe payment accuracy is equally important. We 
stated our belief that it is necessary to balance predictability with a 
more accurate evaluation of whether a new technology meets the new 
technology add-on payment cost criterion by using threshold values that 
are consistent with how the cases involving the use of the new 
technology will be paid for in the upcoming fiscal year. We proposed to 
revise our policy in situations when the procedure coding associated 
with a new technology application is proposed to be assigned to a 
proposed new MS-DRG. Specifically, we proposed that effective for FY 
2022, for applications for new technology add-on payments and 
previously approved technologies that may continue to receive new 
technology add-on payments, the proposed threshold for a proposed new 
MS-DRG for the upcoming fiscal year would be used to evaluate the cost 
criterion for technologies that would be assigned to a proposed new MS-
DRG. For example, consider a technology that would be coded using 
procedure codes assigned to MS-DRG ABC at the time of its application 
for FY 2022, and then the procedure coding associated with the new 
technology was proposed to be assigned to a proposed new MS-DRG XYZ in 
the FY 2022 proposed rule. Instead of using the threshold for MS-DRG 
ABC based on the data file released with the FY 2021 final rule for FY 
2022 applications, we proposed to use the proposed threshold for the 
newly proposed MS-DRG XYZ based on the data file released with the FY 
2022 proposed rule, which would otherwise contain the proposed 
thresholds for FY 2023 applications. We stated our belief that using 
the proposed rule thresholds for the proposed new MS-DRG would further 
promote payment accuracy by using the latest data available to assess 
how the technology would be paid for in the upcoming fiscal year, if 
the proposed reassignment to the new MS-DRG was finalized, while also 
providing the applicant and the public adequate time to analyze whether 
the technology meets the cost criterion using these proposed thresholds 
and to provide public comment following the proposed rule.
    In the FY 2021 proposed rule, we stated that we believe it is 
important that the cost criterion be applied in a manner that 
accurately reflects the anticipated payment for the technology. In 
assessing the adequacy of the otherwise applicable MS-DRG payment rate 
for a high cost new technology, where the reassignment of such a 
technology to a proposed new MS-DRG may result in a substantial change 
in the MS-DRG threshold amounts, we stated our belief that it is 
necessary to evaluate that technology using the proposed thresholds for 
the newly proposed MS-DRG to which the technology would be reassigned.
    We also stated that we believe this policy is consistent with 
section 1886(d)(5)(K)(ix) of the Act which, as previously noted, 
requires that before establishing any add-on payment for a new medical 
service or technology, the Secretary seek to identify one or more DRGs 
associated with the new technology, based on similar clinical or 
anatomical characteristics and the costs of the technology, and assign 
the new technology into a DRG where the average costs of care most 
closely approximate the costs of care using the new technology. This 
provision further states that no add-on payment will be made with 
respect to such new technology. As we have noted in prior rulemaking 
with regard to the CAR T cell therapies (83 FR 41172), if a new MS-DRG 
were to be created, then consistent with section 1886(d)(5)(K)(ix) of 
the Act, there may no longer be a need for a new technology add-on 
payment under section 1886(d)(5)(K)(ii)(III) of the Act. For these 
reasons, we also proposed, for purposes of FY 2021 new technology add-
on payments, to evaluate the cost criterion for the CAR T-cell therapy 
technologies using the proposed threshold for the newly proposed MS-DRG 
to which the procedure codes describing the use of the CAR T-cell 
therapies would be assigned in FY 2021 (MS-DRG 018). We noted that this 
proposed policy would apply to the new FY 2021 CAR T-cell therapy 
applications, KTE-X19 and Liso-cel, and those CAR T-cell therapies 
previously approved for new technology add-on payments, KYMRIAH[supreg] 
and YESCARTA[supreg] (we note that KTE-X19 and Liso-cel did not meet 
the July 1 deadline as specified in Sec.  412.87(e)). As discussed in 
section II.E.2.b. of the preamble of this final rule, we are finalizing 
our proposal to create a new MS-DRG 018 for cases reporting ICD-10-PCS 
procedure codes XW033C3 or XW043C3 for FY 2021.
    Comment: We did not receive any comments specifically regarding our 
proposal that, effective for FY 2022, for applications for new 
technology add-on payments and previously approved technologies that 
may continue to receive new technology add-on payments, the proposed 
threshold for a proposed new MS-DRG for the upcoming fiscal year would 
be used to evaluate the cost criterion for technologies that would be 
assigned to a proposed new MS-DRG. We also did not receive any comments 
specifically on our proposal to apply this policy, effective for FY 
2021, for purposes of evaluating the cost criterion for the CAR-T cell 
therapy technologies using the proposed threshold for the newly 
proposed MS-DRG to which the procedure codes describing the use of the 
CAR-T cell therapies would be assigned in FY 2021 (MS-DRG 018).
    Several commenters, who were also applicants for new technology 
add-on payments for FY 2021, disagreed with

[[Page 58605]]

CMS's position that their technologies would not meet the cost 
criterion based on the MS-DRG 018 threshold amount of $1,237,393. These 
commenters presented updated cost analyses that they believe 
demonstrate that the applicant technology meets the cost criterion. One 
commenter stated that the proposed cost threshold for MS-DRG 018 is 
inaccurate. Specifically, the commenter believed that $913,244, which 
CMS cited as the standardized charge per case for DRG 018, is based on 
the standard deviation charges for those cases, and that the actual 
average standardized charge per case, according to the FY 2021 Proposed 
BOR file for Version 38 of the MS-DRGs is $1,387,946.33, which exceeds 
the cost threshold for MS-DRG 018. This commenter urged CMS to audit 
its calculations and then reapply the new cost threshold to current new 
technology add-on payment applicants.
    Response: We thank the commenters for their input. We have reviewed 
the data and agree that we inadvertently used the wrong value for the 
average case-weighted standardized charge from the FY 2021 Proposed BOR 
File. The commenter is correct that using the arithmetic mean charge of 
$1,387,946.33 would exceed the proposed threshold for new MS-DRG 018 of 
$1,237,393.
    We noted in the FY 2021 IPPS/LTCH PPS proposed rule that, if 
finalized, this policy would apply to the new FY 2021 CAR T-cell 
therapy applications, KTE-X19 and Liso-cel., and those CAR T-cell 
therapies previously approved for new technology add-on payments, 
KYMRIAH[supreg] and YESCARTA[supreg]. However, we note that neither 
Kite Pharma (the applicant for KTE-X19) nor Juno Therapeutics, a 
Bristol-Myers Squibb Company (the applicant for Liso-cel) received FDA 
approval for their therapies by July 1, and therefore, these 
technologies were not eligible for consideration for new technology 
add-on payments for FY 2021. We also note, as discussed later in this 
rule, that KYMRIAH[supreg] and YESCARTA[supreg] are no longer 
considered ``new'' for purposes of new technology add-on payments for 
FY 2021. Accordingly, we are not applying this policy to evaluate the 
cost criterion for CAR T-cell therapy technologies using the proposed 
threshold for MS-DRG 018 to which the procedure codes describing the 
use of the CAR T-cell therapies will be assigned beginning in FY 2021.
    As discussed in the preamble of the proposed rule and this final 
rule, while we continue to believe that predictability for applicants 
is important, we also believe payment accuracy is equally important. In 
order to promote payment accuracy, as previously discussed, and after 
consideration of the comments received, we are finalizing our proposal 
to use the proposed threshold for the upcoming fiscal year for any 
proposed new MS-DRG to evaluate the cost criterion for technologies 
that would be assigned to the proposed new MS-DRG, beginning with FY 
2022 new technology add-on payments for all applicants and previously 
approved technologies that may continue to receive new technology add-
on payments in FY 2022. As we have noted in prior rulemaking with 
regard to the CAR T cell therapies (83 FR 41172), if a new MS-DRG were 
to be created, then consistent with section 1886(d)(5)(K)(ix) of the 
Act, there may no longer be a need for a new technology add-on payment 
under section 1886(d)(5)(K)(ii)(III) of the Act.
    Finally, amidst our work on payment accuracy and coverage for CAR-
T, we have heard from stakeholders that cell therapy goes beyond CAR-T 
to include Tumor-Infiltrating Lymphocyte (TIL) Therapy and Engineered T 
Cell Receptor (TCR) Therapy. While all of these treatments are 
autologous, CAR-T is currently limited to liquid tumors, and we foresee 
the need to address solid tumor treatments such as TIL and TCR in the 
near future. As the process and decisions on these issues take time, we 
plan to continue to engage with stakeholders to understand the needs 
necessary for patients and providers to get appropriate access as 
quickly as possible to these potentially lifesaving treatments. Our 
processes continue to evolve as innovative treatments evolve.
c. Substantial Clinical Improvement Criterion
    Under the third criterion at Sec.  412.87(b)(1), a medical service 
or technology must represent an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries. In the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42288 through 42292) we prospectively codified in our 
regulations at Sec.  412.87(b) the following aspects of how we evaluate 
substantial clinical improvement for purposes of new technology add-on 
payments under the IPPS:
     The totality of the circumstances is considered when 
making a determination that a new medical service or technology 
represents an advance that substantially improves, relative to services 
or technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries.
     A determination that a new medical service or technology 
represents an advance that substantially improves, relative to services 
or technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries means--
    ++ The new medical service or technology offers a treatment option 
for a patient population unresponsive to, or ineligible for, currently 
available treatments;
    ++ The new medical service or technology offers the ability to 
diagnose a medical condition in a patient population where that medical 
condition is currently undetectable, or offers the ability to diagnose 
a medical condition earlier in a patient population than allowed by 
currently available methods, and there must also be evidence that use 
of the new medical service or technology to make a diagnosis affects 
the management of the patient;
    ++ The use of the new medical service or technology significantly 
improves clinical outcomes relative to services or technologies 
previously available as demonstrated by one or more of the following: A 
reduction in at least one clinically significant adverse event, 
including a reduction in mortality or a clinically significant 
complication; a decreased rate of at least one subsequent diagnostic or 
therapeutic intervention; a decreased number of future hospitalizations 
or physician visits; a more rapid beneficial resolution of the disease 
process treatment including, but not limited to, a reduced length of 
stay or recovery time; an improvement in one or more activities of 
daily living; an improved quality of life; or, a demonstrated greater 
medication adherence or compliance; or
    ++ The totality of the circumstances otherwise demonstrates that 
the new medical service or technology substantially improves, relative 
to technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries.
     Evidence from the following published or unpublished 
information sources from within the United States or elsewhere may be 
sufficient to establish that a new medical service or technology 
represents an advance that substantially improves, relative to services 
or technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries: Clinical trials, peer reviewed journal 
articles; study results; meta-analyses; consensus statements; white 
papers; patient surveys; case studies; reports; systematic literature 
reviews; letters from major healthcare associations;

[[Page 58606]]

editorials and letters to the editor; and public comments. Other 
appropriate information sources may be considered.
     The medical condition diagnosed or treated by the new 
medical service or technology may have a low prevalence among Medicare 
beneficiaries.
     The new medical service or technology may represent an 
advance that substantially improves, relative to services or 
technologies previously available, the diagnosis or treatment of a 
subpopulation of patients with the medical condition diagnosed or 
treated by the new medical service or technology.
    We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for 
additional discussion of the evaluation of substantial clinical 
improvement for purposes of new technology add-on payments under the 
IPPS.
    We note, consistent with the discussion in the FY 2003 IPPS Final 
Rule (67 FR 50015), although we are affiliated with FDA and we do not 
question FDA's regulatory responsibility for decisions related to 
marketing authorization (for example, approval, clearance, etc.), we do 
not use FDA criteria to determine what drugs, devices, or technologies 
qualify for new technology add-on payments under Medicare. Our criteria 
do not depend on the standard of safety and efficacy on which FDA 
relies but on a demonstration of substantial clinical improvement in 
the Medicare population (particularly patients over age 65).
d. Alternative Inpatient New Technology Add-on Payment Pathway
    Under Sec.  412.87(c) and (d) of the regulations, beginning with 
applications for new technology add-on payments for FY 2021, certain 
transformative new devices and Qualified Infectious Disease Products 
(QIDPs) may qualify for the new technology add-on payment under an 
alternative pathway, as described in this section. We refer the reader 
to the FY 2020 IPPS/LTCH PPS final rule for complete discussion on this 
policy (84 FR 42292 through 42297). We note, in section II.G.9.b. of 
this preamble, we discuss our final policy to expand our current 
alternative new technology add-on payment pathway for QIDPs to include 
products approved under the Limited Population Pathway for 
Antibacterial and Antifungal Drugs (LPAD) pathway. In addition, we are 
finalizing our policy to refer more broadly to ``certain antimicrobial 
products'' rather than specifying the particular FDA programs for 
antimicrobial products (that is, QIDPs and LPADs) that are the subject 
of the alternative new technology add-on payment pathway. (We refer the 
reader to section II.G.9.b. of this preamble below for a complete 
discussion regarding this final policy.) We note that a technology is 
not required to have the specified FDA designation at the time the new 
technology add-on payment application is submitted. CMS will review the 
application based on the information provided by the applicant under 
the alternative pathway specified by the applicant. However, to receive 
approval for the new technology add-on payment under that alternative 
pathway, the technology must have the applicable designation and meet 
all other requirements in the regulations in Sec.  412.87(c) and (d), 
as applicable.
(1) Alternative Pathway for Certain Transformative New Devices
    For applications received for new technology add-on payments for FY 
2021 and subsequent fiscal years, if a medical device is part of FDA's 
Breakthrough Devices Program and received FDA marketing authorization, 
it will be considered new and not substantially similar to an existing 
technology for purposes of the new technology add-on payment under the 
IPPS, and will not need to meet the requirement under Sec.  
412.87(b)(1) that it represent an advance that substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries. This policy is codified at Sec.  
412.87(c). Under this alternative pathway, a medical device that has 
received FDA marketing authorization (that is, has been approved or 
cleared by, or had a De Novo classification request granted by, FDA) 
and that is part of FDA's Breakthrough Devices Program will need to 
meet the cost criterion under Sec.  412.87(b)(3), as reflected in Sec.  
412.87(c)(3), and will be considered new as reflected in Sec.  
412.87(c)(2). We note, in section II.G.8. of the preamble of this final 
rule, we are clarifying our policy that a new medical device under this 
alternative pathway must receive marketing authorization for the 
indication covered by the Breakthrough Devices Program designation. (We 
refer the reader to section II.G.8. of this preamble below for a 
complete discussion regarding this clarification.)
(2) Alternative Pathway for Qualified Infectious Disease Products 
(QIDPs)
    For applications received for new technology add-on payments for FY 
2021 and subsequent fiscal years, if a technology is designated by FDA 
as a QIDP and received FDA marketing authorization, it will be 
considered new and not substantially similar to an existing technology 
for purposes of new technology add-on payments and will not need to 
meet the requirement that it represent an advance that substantially 
improves, relative to technologies previously available, the diagnosis 
or treatment of Medicare beneficiaries. We codified this policy at 
Sec.  412.87(d). Under this alternative pathway for QIDPs, a medical 
product that has received FDA marketing authorization and is designated 
by FDA as a QIDP will need to meet the cost criterion under Sec.  
412.87(b)(3), as reflected in Sec.  412.87(d)(3), and will be 
considered new as reflected in Sec.  412.87(d)(2).
    We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for 
complete discussion on this policy (84 FR 42292 through 42297). We 
note, in section II.G.9.b. of the preamble of this final rule, we are 
clarifying a new medical product seeking approval for the new 
technology add-on payment under the alternative pathway for QIDPs must 
receive marketing authorization for the indication covered by the QIDP 
designation. (We refer the reader to section II.G.9.b. of this preamble 
below for a complete discussion regarding this clarification.)
e. Additional Payment for New Medical Service or Technology
    The new medical service or technology add-on payment policy under 
the IPPS provides additional payments for cases with relatively high 
costs involving eligible new medical services or technologies, while 
preserving some of the incentives inherent under an average-based 
prospective payment system. The payment mechanism is based on the cost 
to hospitals for the new medical service or technology. For discharges 
occurring before October 1, 2019, under Sec.  412.88, if the costs of 
the discharge (determined by applying CCRs as described in Sec.  
412.84(h)) exceed the full DRG payment (including payments for IME and 
DSH, but excluding outlier payments), Medicare made an add-on payment 
equal to the lesser of: (1) 50 percent of the costs of the new medical 
service or technology; or (2) 50 percent of the amount by which the 
costs of the case exceed the standard DRG payment.
    Beginning with discharges on or after October 1, 2019, for the 
reasons discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 
through 42300), we finalized an increase in the new technology add-on 
payment percentage, as reflected at Sec.  412.88(a)(2)(ii). 
Specifically, for a new technology other than a medical product 
designated by FDA as a QIDP, beginning

[[Page 58607]]

with discharges on or after October 1, 2019, if the costs of a 
discharge involving a new technology (determined by applying CCRs as 
described in Sec.  412.84(h)) exceed the full DRG payment (including 
payments for IME and DSH, but excluding outlier payments), Medicare 
will make an add-on payment equal to the lesser of: (1) 65 percent of 
the costs of the new medical service or technology; or (2) 65 percent 
of the amount by which the costs of the case exceed the standard DRG 
payment. For a new technology that is a medical product designated by 
FDA as a QIDP, beginning with discharges on or after October 1, 2019, 
if the costs of a discharge involving a new technology (determined by 
applying CCRs as described in Sec.  412.84(h)) exceed the full DRG 
payment (including payments for IME and DSH, but excluding outlier 
payments), Medicare will make an add-on payment equal to the lesser of: 
(1) 75 percent of the costs of the new medical service or technology; 
or (2) 75 percent of the amount by which the costs of the case exceed 
the standard DRG payment. As set forth in Sec.  412.88(b)(2), unless 
the discharge qualifies for an outlier payment, the additional Medicare 
payment will be limited to the full MS-DRG payment plus 65 percent (or 
75 percent for a medical product designated by FDA as a QIDP) of the 
estimated costs of the new technology or medical service.
    We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42297 through 42300) for complete discussion on the increase in the new 
technology add on payment beginning with discharges on or after October 
1, 2019. We note, in section II.G.9.b. of the preamble of this final 
rule, we discuss our final policy to increase the new technology add-on 
payment percentage to 75 percent for products approved under FDA's LPAD 
pathway. (We refer the reader to section II.G.9.b. of this preamble 
below for a complete discussion regarding this final policy.)
    Section 503(d)(2) of Public Law 108-173 provides that there shall 
be no reduction or adjustment in aggregate payments under the IPPS due 
to add-on payments for new medical services and technologies. 
Therefore, in accordance with section 503(d)(2) of Public Law 108-173, 
add-on payments for new medical services or technologies for FY 2005 
and subsequent years have not been subjected to budget neutrality.
f. Evaluation of Eligibility Criteria for New Medical Service or 
Technology Applications
    In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we 
modified our regulations at Sec.  412.87 to codify our longstanding 
practice of how CMS evaluates the eligibility criteria for new medical 
service or technology add-on payment applications. That is, we first 
determine whether a medical service or technology meets the newness 
criterion, and only if so, do we then make a determination as to 
whether the technology meets the cost threshold and represents a 
substantial clinical improvement over existing medical services or 
technologies. We amended Sec.  412.87(c) to specify that all applicants 
for new technology add-on payments must have FDA approval or clearance 
by July 1 of the year prior to the beginning of the fiscal year for 
which the application is being considered. We note, in section 
II.G.9.c. of the preamble of this final rule, we discuss our finalized 
process by which a technology for which an application for new 
technology add-on payments is submitted under the alternative pathway 
for certain antimicrobial products would receive conditional approval 
for such payment, provided the product receives FDA marketing 
authorization by July 1 of the year for which the new technology add-on 
payment application was submitted. (We refer the reader to section 
II.G.9.c. of this preamble of this final rule for a complete discussion 
regarding this final policy.)
g. Council on Technology and Innovation (CTI)
    The Council on Technology and Innovation at CMS oversees the 
agency's cross-cutting priority on coordinating coverage, coding and 
payment processes for Medicare with respect to new technologies and 
procedures, including new drug therapies, as well as promoting the 
exchange of information on new technologies and medical services 
between CMS and other entities. The CTI, composed of senior CMS staff 
and clinicians, was established under section 942(a) of Public Law 108-
173. The Council is co-chaired by the Director of the Center for 
Clinical Standards and Quality (CCSQ) and the Director of the Center 
for Medicare (CM), who is also designated as the CTI's Executive 
Coordinator.
    The specific processes for coverage, coding, and payment are 
implemented by CM, CCSQ, and the local Medicare Administrative 
Contractors (MACs) (in the case of local coverage and payment 
decisions). The CTI supplements, rather than replaces, these processes 
by working to assure that all of these activities reflect the agency-
wide priority to promote high-quality, innovative care. At the same 
time, the CTI also works to streamline, accelerate, and improve 
coordination of these processes to ensure that they remain up to date 
as new issues arise. To achieve its goals, the CTI works to streamline 
and create a more transparent coding and payment process, improve the 
quality of medical decisions, and speed patient access to effective new 
treatments. It is also dedicated to supporting better decisions by 
patients and doctors in using Medicare-covered services through the 
promotion of better evidence development, which is critical for 
improving the quality of care for Medicare beneficiaries.
    To improve the understanding of CMS' processes for coverage, 
coding, and payment and how to access them, the CTI has developed an 
``Innovator's Guide'' to these processes. The intent is to consolidate 
this information, much of which is already available in a variety of 
CMS documents and in various places on the CMS website, in a user 
friendly format. This guide was published in 2010 and is available on 
the CMS website at: https://www.cms.gov/Medicare/Coverage/CouncilonTechInnov/Downloads/Innovators-Guide-Master-7-23-15.pdf.
    As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we 
invite any product developers or manufacturers of new medical services 
or technologies to contact the agency early in the process of product 
development if they have questions or concerns about the evidence that 
would be needed later in the development process for the agency's 
coverage decisions for Medicare.
    The CTI aims to provide useful information on its activities and 
initiatives to stakeholders, including Medicare beneficiaries, 
advocates, medical product manufacturers, providers, and health policy 
experts. Stakeholders with further questions about Medicare's coverage, 
coding, and payment processes, or who want further guidance about how 
they can navigate these processes, can contact the CTI at 
[email protected].
h. Application Information for New Medical Services or Technologies
    Applicants for add-on payments for new medical services or 
technologies for FY 2022 must submit a formal request, including a full 
description of the clinical applications of the medical service or 
technology and the results of any clinical evaluations demonstrating 
that the new medical service or technology represents a substantial 
clinical improvement (unless the application is under one of the 
alternative pathways as previously

[[Page 58608]]

described), along with a significant sample of data to demonstrate that 
the medical service or technology meets the high-cost threshold. 
Complete application information, along with final deadlines for 
submitting a full application, will be posted as it becomes available 
on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested 
parties to identify the new medical services or technologies under 
review before the publication of the proposed rule for FY 2022, the CMS 
website also will post the tracking forms completed by each applicant. 
We note that the burden associated with this information collection 
requirement is the time and effort required to collect and submit the 
data in the formal request for add-on payments for new medical services 
and technologies to CMS. The aforementioned burden is subject to the 
PRA and approved under OMB control number 0938-1347.
    As discussed previously, in the FY 2020 IPPS/LTCH PPS final rule, 
we adopted an alternative inpatient new technology add-on payment 
pathway for certain transformative new devices and for Qualified 
Infectious Disease Products, as set forth in the regulations at Sec.  
412.87(c) and (d). The change in burden associated with these changes 
to the new technology add-on payment application process were discussed 
in a revision of the information collection requirement (ICR) request 
currently approved under OMB control number 0938-1347. In accordance 
with the implementing regulations of the PRA, we detailed the revisions 
of the ICR and published the required 60-day notice on August 15, 2019 
(84 FR 41723) and 30-day notice on December 17, 2019 (84 FR 68936) to 
solicit public comments. The ICR is currently pending OMB approval.
2. Public Input Before Publication of a Notice of Proposed Rulemaking 
on Add-On Payments
    Section 1886(d)(5)(K)(viii) of the Act, as amended by section 
503(b)(2) of Pub. L. 108-173, provides for a mechanism for public input 
before publication of a notice of proposed rulemaking regarding whether 
a medical service or technology represents a substantial clinical 
improvement or advancement. The process for evaluating new medical 
service and technology applications requires the Secretary to--
     Provide, before publication of a proposed rule, for public 
input regarding whether a new service or technology represents an 
advance in medical technology that substantially improves the diagnosis 
or treatment of Medicare beneficiaries;
     Make public and periodically update a list of the services 
and technologies for which applications for add-on payments are 
pending;
     Accept comments, recommendations, and data from the public 
regarding whether a service or technology represents a substantial 
clinical improvement; and
     Provide, before publication of a proposed rule, for a 
meeting at which organizations representing hospitals, physicians, 
manufacturers, and any other interested party may present comments, 
recommendations, and data regarding whether a new medical service or 
technology represents a substantial clinical improvement to the 
clinical staff of CMS.
    In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2021 prior 
to publication of the FY 2021 IPPS/LTCH PPS proposed rule, we published 
a notice in the Federal Register on October 8, 2019 (84 FR 53732), and 
held a town hall meeting at the CMS Headquarters Office in Baltimore, 
MD, on December 16, 2019. In the announcement notice for the meeting, 
we stated that the opinions and presentations provided during the 
meeting would assist us in our evaluations of applications by allowing 
public discussion of the substantial clinical improvement criterion for 
the FY 2021 new medical service and technology add-on payment 
applications before the publication of the FY 2021 IPPS/LTCH PPS 
proposed rule.
    We stated in the FY 2021 IPPS/LTCH PPS proposed rule that 
approximately 100 individuals registered to attend the town hall 
meeting in person, while additional individuals listened over an open 
telephone line. We also live-streamed the town hall meeting and posted 
the morning and afternoon sessions of the town hall on the CMS YouTube 
web page at: https://www.youtube.com/watch?v=4z1AhEuGHqQ and https://www.youtube.com/watch?v=m26Xj1EzbIY, respectively. We considered each 
applicant's presentation made at the town hall meeting, as well as 
written comments submitted on the applications that were received by 
the due date of January 3, 2020, in our evaluation of the new 
technology add-on payment applications for FY 2021 in the development 
of the FY 2021 IPPS/LTCH PPS proposed rule.
    In response to the published notice and the December 16, 2019 New 
Technology Town Hall meeting, we received written comments regarding 
the applications for FY 2021 new technology add-on payments. We also 
noted in the FY 2021 IPPS/LTCH PPS proposed rule that we do not 
summarize comments that are unrelated to the ``substantial clinical 
improvement'' criterion. As explained earlier and in the Federal 
Register notice announcing the New Technology Town Hall meeting (84 FR 
53732 through 53734), the purpose of the meeting was specifically to 
discuss the substantial clinical improvement criterion in regard to 
pending new technology add-on payment applications for FY 2021. 
Therefore, we did not summarize those written comments in the proposed 
rule that are unrelated to the substantial clinical improvement 
criterion. In section II.G.5. of the preamble of the FY 2021 IPPS/LTCH 
PPS proposed rule (85 FR 32581 through 32678), we summarized comments 
regarding individual applications, or, if applicable, indicated that 
there were no comments received in response to the New Technology Town 
Hall meeting notice or New Technology Town Hall meeting, at the end of 
each discussion of the individual applications.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and 
Technologies
    As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49434), 
the ICD-10-PCS includes a new section containing the new Section ``X'' 
codes, which began being used with discharges occurring on or after 
October 1, 2015. Decisions regarding changes to ICD-10-PCS Section 
``X'' codes will be handled in the same manner as the decisions for all 
of the other ICD-10-PCS code changes. That is, proposals to create, 
delete, or revise Section ``X'' codes under the ICD-10-PCS structure 
will be referred to the ICD-10 Coordination and Maintenance Committee. 
In addition, several of the new medical services and technologies that 
have been, or may be, approved for new technology add-on payments may 
now, and in the future, be assigned a Section ``X'' code within the 
structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS 
website at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html, including guidelines for ICD-10-PCS Section ``X'' codes. 
We encourage providers to view the material provided on ICD-10-PCS 
Section ``X'' codes.

[[Page 58609]]

4. FY 2021 Status of Technologies Approved for FY 2020 New Technology 
Add-On Payments
    In section II.G.4. of the proposed rule (85 FR 32572 through 
32580), we discussed the proposed FY 2021 status of 18 technologies 
approved for FY 2020 new technology add-on payments. In general, we 
extend new technology add-on payments for an additional year only if 
the 3-year anniversary date of the product's entry onto the U.S. market 
occurs in the latter half of the upcoming fiscal year. We refer readers 
to a table at the end of this section summarizing for FY 2021 the name 
of each technology, newness start date, whether we are continuing or 
discontinuing the add-on payment for FY 2021, relevant final rule 
citations, final maximum add-on payment amount and coding assignments.
a. KYMRIAH[supreg] (Tisagenlecleucel) and YESCARTA[supreg] 
(Axicabtagene Ciloleucel)
    Two manufacturers, Novartis Pharmaceuticals Corporation and Kite 
Pharma, Inc., submitted separate applications for new technology add-on 
payments for FY 2019 for KYMRIAH[supreg] (tisagenlecleucel) and 
YESCARTA[supreg] (axicabtagene ciloleucel), respectively. Both of these 
technologies are CD-19- directed T-cell immunotherapies used for the 
purposes of treating patients with aggressive variants of non-Hodgkin 
lymphoma (NHL). On May 1, 2018, Novartis Pharmaceuticals Corporation 
received FDA approval for KYMRIAH[supreg]'s second indication, the 
treatment of adult patients with relapsed or refractory (r/r) large B-
cell lymphoma after two or more lines of systemic therapy including 
diffuse large B-cell lymphoma (DLBCL) not otherwise specified, high 
grade B-cell lymphoma and DLBCL arising from follicular lymphoma. On 
October 18, 2017, Kite Pharma, Inc. received FDA approval for the use 
of YESCARTA[supreg] indicated for the treatment of adult patients with 
r/r large B-cell lymphoma after two or more lines of systemic therapy, 
including DLBCL not otherwise specified, primary mediastinal large B-
cell lymphoma, high grade B-cell lymphoma, and DLBCL arising from 
follicular lymphoma. With respect to the newness criterion, because 
potential cases representing patients who may be eligible for treatment 
using KYMRIAH[supreg] and YESCARTA[supreg] would group to the same MS-
DRGs (because the same ICD-10-CM diagnosis codes and ICD-10-PCS 
procedures codes are used to report treatment using either 
KYMRIAH[supreg] or YESCARTA[supreg]), and because we believed that 
these technologies are intended to treat the same or similar disease in 
the same or similar patient population, and are purposed to achieve the 
same therapeutic outcome using the same or similar mechanism of action, 
we considered these two technologies to be substantially similar to 
each other. We refer readers to the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41285 through 41286) and FY 2020 IPPS/LTCH/PPS final rule (84 FR 
42185 through 42187) for a complete discussion. We stated in the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41285 through 41286) and FY 2020 
IPPS/LTCH PPS final rule (84 FR 42185 through 42186) that in accordance 
with our policy, since we consider the technologies to be substantially 
similar to each other, it is appropriate to use the earliest market 
availability date submitted as the beginning of the newness period for 
both technologies. According to the applicant for YESCARTA[supreg], the 
first commercial shipment of YESCARTA[supreg] was received by a 
certified treatment center on November 22, 2017. Therefore, based on 
our policy, with regard to both technologies, we stated that the 
beginning of the newness period would be November 22, 2017. 
KYMRIAH[supreg] and YESCARTA[supreg] were approved for new technology 
add-on payments for FY 2019 (83 FR 41299). We refer readers to section 
II.H.5.a. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41283 through 41299) and section II.H.4.d. of the preamble of the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42185 through 42187) for a 
complete discussion of the new technology add-on payment application, 
coding and payment amount for KYMRIAH[supreg] and YESCARTA[supreg] for 
FY 2019 and FY 2020.
    Our policy is that a medical service or technology may continue to 
be considered ``new'' for purposes of new technology add-on payments 
within 2 or 3 years after the point at which data begin to become 
available reflecting the inpatient hospital code assigned to the new 
service or technology. Our practice has been to begin and end new 
technology add-on payments on the basis of a fiscal year, and we have 
generally followed a guideline that uses a 6-month window before and 
after the start of the fiscal year to determine whether to extend the 
new technology add-on payment for an additional fiscal year. In 
general, we extend new technology add-on payments for an additional 
year only if the 3-year anniversary date of the product's entry onto 
the U.S. market occurs in the latter half of the fiscal year (70 FR 
47362).
    With regard to the newness criterion for KYMRIAH[supreg] and 
YESCARTA[supreg], as discussed in the FY 2019 IPPS/LTCH PPS final rule, 
according to the applicant for YESCARTA[supreg], the first commercial 
shipment of YESCARTA[supreg] was received by a certified treatment 
center on November 22, 2017. As previously stated, we use the earliest 
market availability date submitted as the beginning of the newness 
period for both KYMRIAH[supreg] and YESCARTA[supreg]. Therefore, we 
consider the beginning of the newness period for both KYMRIAH[supreg] 
and YESCARTA[supreg] to commence November 22, 2017. Because the 3-year 
anniversary date of the entry of the technology onto the U.S. market 
(November 22, 2020) will occur in the first half of FY 2021, we 
proposed to discontinue new technology add-on payments for this 
technology for FY 2021. We invited public comments on our proposal to 
discontinue new technology add-on payments for KYMRIAH[supreg] and 
YESCARTA[supreg] for FY 2021.
    Comment: Commenters supported CMS' proposal to discontinue new 
technology add-on payments for KYMRIAH[supreg] and YESCARTA[supreg] for 
FY 2021. One commenter expressed support for CMS's proposal to either 
continue or discontinue new technology add-on payments based on the 
anniversary date of the product's entry on the market, noting the 
exception of products that enter the U.S. market in the latter half of 
the fiscal year.
    We also received comments that were not supportive of the proposal. 
According to these commenters, the removal of new technology add-on 
payment eligibility for KYMRIAH[supreg] and YESCARTA[supreg] will widen 
the gap between therapy cost and reimbursement. According to the 
commenters, reimbursement provided through a new MS-DRG payment will 
not fully compensate providers for the extraordinarily high cost of the 
treatment and the expanding gaps between reimbursement and total cost 
of care may create barriers to this innovative treatment for Medicare 
beneficiaries. Another commenter offered that CMS has the authority to 
extend new technology add-on payments for CAR T-cell products into FY 
2021 as the third program year. According to the commenter, although 
November 22, 2017 was the date the first FDA-approved CAR T-cell 
product was delivered for use to an approved facility, there were very 
few facilities even able to conduct these procedures, and of those, 
several were unwilling to do so due to the high cost of the product and 
low likelihood of getting paid for it. As such, the commenter indicated 
that November 22, 2017 is not the date to

[[Page 58610]]

most appropriately coincide with when the market was fully formed for 
CAR T-cell products and procedures, particularly within the Medicare 
beneficiary patient population. According to the commenter, a more 
appropriate date to describe when the market was fully formed, 
consisting of buyers and sellers of CAR T-cell products, was October 1, 
2018, with the inclusion of CAR T-cell therapies within MS-DRG 016 for 
FY 2019. The commenter explained that they believe this date is the 
more appropriate ``first year'' of new technology add-on payment 
eligibility under the newness criterion, in which case the third year 
begins in full with the start of FY 2021. According to the commenter, 
even if CMS is unwilling or unable to consider this alternate 
conception of ``market availability'' and adjust the CAR T-cell newness 
date accordingly, CMS nonetheless retains the authority to simply waive 
its informal, internal ``six months'' policy and grant new technology 
add-on payment participation for the entirety of FY 2021 as the third 
(and final) new technology add-on payment year for KYMRIAH[supreg] and 
YESCARTA[supreg]. Another commenter provided support for the extension 
of the new technology add-on payment to KYMRIAH[supreg] and 
YESCARTA[supreg] for another year but suggested that all CAR T-cell 
product that becomes FDA-approved automatically receive new technology 
add-on payment as well. Finally, other commenters stated a general 
support for a continuation of new technology add-on payments for all 
FDA approved CAR T-cell therapies for FY 2021.
    Response: We thank the commenters for their input and suggestions. 
While we appreciate the commenters' concerns, with regard to the 
technology's newness, as discussed in the FY 2005 IPPS final rule (69 
FR 49003), the timeframe that a new technology can be eligible to 
receive new technology add-on payments begins when data become 
available. Section 412.87(b)(2) states that a medical service or 
technology may be considered new within 2 or 3 years after the point at 
which data begin to become available reflecting the inpatient hospital 
code assigned to the new service or technology (depending on when a new 
code is assigned and data on the new service or technology become 
available for DRG recalibration). Section 412.87(b)(2) also states that 
after CMS has recalibrated the DRGs, based on available data, to 
reflect the costs of an otherwise new medical service or technology, 
the medical service or technology will no longer be considered ``new'' 
under the criterion of the section.
    With respect to the comment that CMS should consider the date when 
the market was ``fully formed'' as the start of the newness period, we 
note that while CMS may consider a documented delay in a technology's 
availability on the U.S. market in determining when the newness period 
begins, under our historical policy, we do not consider how frequently 
the medical service or technology has been used in our determination of 
newness (70 FR 47349). Similarly, our policy for determining whether to 
extend new technology add-on payments for a third year generally 
applies regardless of the claims volume for the technology after the 
start of the newness period. As discussed in the FY 2006 IPPS final 
rule (70 FR 47349), we do not believe that case volume is a relevant 
consideration for making the determination as to whether a product is 
``new.'' Consistent with the statute, a technology no longer qualifies 
as ``new'' once it is more than 2 to 3 years old, irrespective of how 
frequently it has been used in the Medicare population. Therefore, if a 
product is more than 2 to 3 years old, we consider its costs to be 
included in the MS-DRG relative weights whether its use in the Medicare 
population has been frequent or infrequent.
    For these reasons, we do not agree that we should use October 1, 
2018 as the start of the newness period or otherwise modify our policy 
for determining whether to extend new technology add-on payments for a 
third year in considering whether to continue new technology add-on 
payments for FY 2021 for KYMRIAH[supreg] and YESCARTA[supreg]. 
Therefore, KYMRIAH[supreg] and YESCARTA[supreg] are no longer 
considered ``new'' for purposes of new technology add-on payments for 
FY 2021. We are finalizing our proposal to discontinue new technology 
add-on payments for KYMRIAH[supreg] and YESCARTA[supreg] for FY 2021.
    As discussed in section II.E.2.b. of the preamble of this final 
rule, currently procedures involving CAR T-cell therapies are 
identified with ICD-10-PCS procedure codes XW033C3 (Introduction of 
engineered autologous chimeric antigen receptor t-cell immunotherapy 
into peripheral vein, percutaneous approach, new technology group 3) 
and XW043C3 (Introduction of engineered autologous chimeric antigen 
receptor t-cell immunotherapy into central vein, percutaneous approach, 
new technology group 3), which became effective October 1, 2017. As 
discussed in section II.E.2.b. of the preamble of this final rule, we 
are finalizing our proposal to create a new MS-DRG 018 for cases 
reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 for FY 2021. We 
also refer readers to section II.G.1.a.(2).b. of the preamble of this 
final rule for a complete discussion of our final policy that, 
effective for FY 2022, for applications for new technology add-on 
payments and for previously approved technologies that may continue to 
receive new technology add-on payments, the proposed threshold for the 
upcoming fiscal year for a proposed new MS-DRG would be used to 
evaluate the cost criterion for any new technologies that would be 
assigned to a proposed new MS-DRG. As we also discuss in section 
II.G.1.a.(2)b. of the preamble of this final rule, in the proposed rule 
we stated that in light of the significant variance in the threshold 
amount for proposed new MS-DRG 018 for cases involving CAR T-cell 
therapies, we proposed to apply this policy in evaluating the CAR T-
cell therapy technologies for FY 2021 new technology add-on payments. 
We stated that this would include both the new FY 2021 CAR T-cell 
therapy applications and those CAR T-cell therapy technologies 
previously approved for new technology add-on payments, KYMRIAH[supreg] 
and YESCARTA[supreg]. Therefore, in the proposed rule we stated that 
even if KYMRIAH[supreg] and/or YESCARTA[supreg] were still considered 
new and within the 3-year anniversary date of the entry of the 
technology onto the U.S. market, in determining whether these 
technologies would continue to be eligible for the new technology add-
on payment, we proposed to evaluate whether they meet the cost 
criterion using the proposed threshold for the proposed new MS-DRG 018 
for FY 2021 payment.
    Per the applicants' cost analyses in the FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41291), the final inflated average case-weighted 
standardized charge per case for KYMRIAH[supreg] and YESCARTA[supreg] 
is $39,723 (not including the charges related to the technology) and 
$118,575 (not including the charges related to the technology), 
respectively. However, we stated in the proposed rule that we now have 
cases involving the use of CAR T-cell therapy within the FY 2019 MedPAR 
data that we believe represent cases that would be eligible for 
KYMRIAH[supreg] and YESCARTA[supreg] and which can be used to estimate 
the average standardized charge per case for purposes of the proposed 
rule. This charge information from the FY 2019 MedPAR data can be found 
in the FY 2021 Proposed Before Outliers Removed

[[Page 58611]]

(BOR) File (available on the CMS website) for Version 38 of the MS- 
DRGs. We stated that based on information from the FY 2021 Proposed BOR 
File for Version 38 of the MS-DRGs, the standardized charge per case 
for MS-DRG 018 is $913,224. The average case-weighted threshold amount 
based on the proposed new MS-DRG 018 is $1,237,393. We stated that 
because this estimated average case-weighted standardized charge per 
case for KYMRIAH[supreg] and YESCARTA[supreg] ($913,224) does not 
exceed the average case-weighted threshold amount for proposed new MS-
DRG 018 ($1,237,393), we did not believe that the technology would meet 
the cost criterion and, as previously stated, proposed to discontinue 
new technology add-on payments for this technology for FY 2021. We 
invited public comment on our proposals.
    Comment: According to one commenter, CMS' calculations explained in 
the proposal may be based on an inappropriate figure. According to the 
commenter, $913,244 was cited as the standardized charge per case for 
MS-DRG 018; however, based on a review of information released with the 
proposed rule, this figure is the standard deviation charges for those 
cases, rather than the average standardized charge. According to the 
commenter, the actual average standardized charge per case, according 
to the FY 2021 Proposed BOR file for Version 38 of the MS-DRGs is 
$1,387,946.33, which exceeds the cost threshold for MS-DRG 018. The 
commenter encouraged CMS to re-run its calculations and to clarify this 
issue and the amounts in the final rule.
    Response: We reviewed the data and agree we inadvertently used the 
wrong value for the average case-weighted standardized charge from the 
FY 2021 Proposed BOR File. The commenter is correct that using the 
arithmetic mean charge of $1,387,946.33 would exceed the proposed 
threshold for new MS-DRG 018 of $1,237,393. As previously noted, 
KYMRIAH[supreg] and YESCARTA[supreg] are no longer considered ``new'' 
for purposes of new technology add-on payments for FY 2021 and 
therefore, as previously stated, we are finalizing our proposal to 
discontinue new technology add-on payments for KYMRIAH[supreg] and 
YESCARTA[supreg] for FY 2021.
b. VYXEOS\TM\ (Daunorubicin and Cytarabine) Liposome for Injection
    Jazz Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for the VYXEOS\TM\ technology for FY 2019. 
VYXEOS\TM\ was approved by FDA on August 3, 2017, for the treatment of 
adults with newly diagnosed therapy-related acute myeloid leukemia (t-
AML) or AML with myelodysplasia-related changes (AML- MRC). CMS 
approved VYXEOS\TM\ for new technology add on payments for FY 2019 (83 
FR 41299). We refer readers to section II.H.5.b. of the preamble of the 
FY 2019 IPPS/LTCH PPS final rule (83 FR 41299 through 41305) and 
section II.H.4.e. of the preamble of the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42187 through 42188) for a complete discussion of the new 
technology add on payment application, coding, and payment amount for 
VYXEOS\TM\ for FY 2019 and FY 2020.
    With regard to the newness criterion for VYXEOS\TM\, we consider 
the beginning of the newness period to commence when VYXEOS\TM\ was 
approved by FDA (August 3, 2017). Because the 3-year anniversary date 
of the entry of the VYXEOS\TM\ onto the U.S. market (August 3, 2020) 
will occur in FY 2020, we proposed to discontinue new technology add-on 
payments for this technology for FY 2021. We invited public comments on 
our proposal to discontinue new technology add-on payments for 
VYXEOS\TM\ for FY 2021.
    Comment: A commenter supported CMS' proposal to discontinue new 
technology add-on payments for VYXEOS\TM\ for FY 2021.
    Response: We appreciate the commenter's support. After 
consideration of the public comments we received, we are finalizing our 
proposal to discontinue new technology add-on payments for VYXEOS\TM\ 
for FY 2021.
c. VABOMERE\TM\ (Meropenem and Vaborbactam)
    Melinta Therapeutics, Inc., submitted an application for new 
technology add-on payments for VABOMERE\TM\ for FY 2019. VABOMERE\TM\ 
is indicated for use in the treatment of adult patients who have been 
diagnosed with complicated urinary tract infections (cUTIs), including 
pyelonephritis caused by designated susceptible bacteria. VABOMERE\TM\ 
received FDA approval on August 29, 2017 and was approved for new 
technology add on payments for FY 2019 (83 FR 41311). We refer readers 
to section II.H.5.c. of the preamble of the FY 2019 IPPS/LTCH PPS final 
rule (83 FR 41305 through 41311) and section II.H.4.f. of the preamble 
of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42188 through 42189) for 
a complete discussion of the new technology add on payment application, 
coding, and payment amount for VABOMERE\TM\ for FY 2019 and FY 2020.
    With regard to the newness criterion for VABOMERE\TM\, we consider 
the beginning of the newness period to commence when VABOMERE\TM\ 
received FDA approval (August 29, 2017). Because the 3-year anniversary 
date of the entry of VABOMERE\TM\ onto the U.S. market (August 29, 
2020) will occur in FY 2020, we proposed to discontinue new technology 
add-on payments for this technology for FY 2021. We invited public 
comments on our proposal to discontinue new technology add-on payments 
for VABOMERE\TM\ for FY 2021.
    Comment: Several commenters, including the applicant, did not 
support CMS' proposal to discontinue new technology add-on payments for 
FY 2021 for VABOMERE\TM\. Commenters highlighted the global health 
crisis of antimicrobial resistance and corresponding importance of add-
on payments for maintaining adequate patient access to novel 
antibiotics that are effective against multidrug resistant gram-
negative bacteria. Some commenters acknowledged the infrequent use of 
VABOMERE\TM\ due to antibiotic stewardship considerations, but 
nonetheless expressed concern about the cost burden of novel agents 
like VABOMERE\TM\ in light of limited treatment options. A few 
commenters urged CMS to consider the data limitations regarding the 
infrequent use of novel antibiotics and their dispersion across many 
MS-DRGs as justification for continuing add-on payments for 
VABOMERE\TM\ for purposes of additional data collection and further 
opportunity for relevant MS-DRGs to adjust to the availability of 
VABOMERE\TM\. A commenter, who is also the applicant, suggested that 
without appropriate reimbursement for novel antibiotics, such as 
VABOMERE\TM\, it is unlikely that manufacturers will continue investing 
in these vitally necessary products.
    Several commenters described what they asserted was the particular 
value of VABOMERE\TM\ during the current public health emergency, as 
extended hospital stays and prolonged ventilator use for many COVID-19 
patients can increase the risk of multidrug resistant bacterial 
infections. A commenter, who is also the applicant, suggested that CMS 
employ all of the tools within its authority to address the 
unprecedented financial challenges health care providers are facing as 
a result of the economic crisis caused by the COVID-19 pandemic and 
ensuing public health emergency, including, at a minimum, ensuring 
eligibility continues for the maximum period of time permitted by 
statute (currently, a full three years) for

[[Page 58612]]

qualified infectious disease products (QIDPs), including VABOMERE\TM\. 
The applicant also encouraged CMS to implement a DRG carve-out policy 
for QIDPs that would provide for payment of QIDPs at 100 percent of ASP 
under the IPPS, which it asserted would improve the balance of 
incentives for providers who are treating patients with resistant 
infections, maintain the sustainability of companies that develop and 
commercialize QIDPs, as well as spur innovation in this critically 
important area affecting clinical outcomes and public health.
    Response: We thank the commenters for their comments. While we 
appreciate the commenters' concerns, with regard to the technology's 
newness, as discussed in the FY 2005 IPPS final rule (69 FR 49003), the 
timeframe that a new technology can be eligible to receive new 
technology add-on payments begins when data become available. Section 
412.87(b)(2) states that a medical service or technology may be 
considered new within 2 or 3 years after the point at which data begin 
to become available reflecting the inpatient hospital code assigned to 
the new service or technology (depending on when a new code is assigned 
and data on the new service or technology become available for DRG 
recalibration). Section 412.87(b)(2) also states that after CMS has 
recalibrated the DRGs, based on available data, to reflect the costs of 
an otherwise new medical service or technology, the medical service or 
technology will no longer be considered ``new'' under the criterion of 
the section.
    In addition, and as discussed in the FY 2006 IPPS final rule (70 FR 
47349), we do not believe that case volume is a relevant consideration 
for making the determination as to whether a product is ``new.'' 
Consistent with the statute, a technology no longer qualifies as 
``new'' once it is more than 2 to 3 years old, irrespective of how 
frequently it has been used in the Medicare population, or how many MS-
DRGs the technology may be spread across. Therefore, if a product is 
more than 2 to 3 years old, we consider its costs to be included in the 
MS-DRG relative weights whether its use in the Medicare population has 
been frequent or infrequent. Additionally, we did not propose any 
policies relating to a DRG carve-out for QIDPs but appreciate the 
commenter's suggestion.
    Based on the reasons stated above, VABOMERE\TM\ is no longer 
considered ``new'' for purposes of new technology add-on payments for 
FY 2021. We are finalizing our proposal to discontinue new technology 
add-on payments for VABOMERE\TM\ for FY 2021.
d. remed[emacr][supreg] System
    Respicardia, Inc. submitted an application for new technology add-
on payments for the remed[emacr][supreg] System for FY 2019. The 
remed[emacr][supreg] System is indicated for use as a transvenous 
phrenic nerve stimulator in the treatment of adult patients who have 
been diagnosed with moderate to severe central sleep apnea (CSA). On 
October 6, 2017, the remed[emacr][supreg] System was approved by FDA. 
The remed[emacr][supreg] System was approved for new technology add on 
payments for FY 2019. We refer readers to section II.H.5.d. of the 
preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41311 through 
41320) and section II.H.4.g. of the preamble of the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42189 through 42190) for a complete discussion of 
the new technology add on payment application, coding and payment 
amount for the remed[emacr][supreg] System for FY 2019 and FY 2020.
    With regard to the newness criterion for the remed[emacr][supreg] 
System, as we have discussed in prior rulemaking, we consider the 
beginning of the newness period to commence when the 
remed[emacr][supreg] System was approved by FDA on October 6, 2017. 
However, as we summarized in the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42189 through 42190), a commenter on the FY 2020 IPPS/LTCH PPS 
proposed rule, who was also the applicant, believed that the newness 
period for the remed[emacr][supreg] System should start on February 1, 
2018, instead of the FDA approval date of October 6, 2017. The 
commenter stated that due to the required build out of operational and 
commercial capabilities, the remed[emacr][supreg] System was not 
commercially available upon FDA approval and the first case involving 
its use did not occur until February 1, 2018. The commenter asserted 
that the date of the first implant should mark the start of the newness 
period since before that, the technology was not commercially 
available. In response to that comment, we indicated that we would 
consider the additional information the applicant provided when 
proposing whether to continue new technology add-on payments for the 
remed[emacr][supreg] System for FY 2021.
    As we have discussed in prior rulemaking (77 FR 53348), generally, 
our policy is to begin the newness period on the date of FDA approval 
or clearance or, if later, the date of availability of the product on 
the U.S. market. With regard to the commenter's assertion that the date 
of the first implant should mark the start of the newness period, we 
note that while we may consider a documented delay in a technology's 
availability on the U.S. market in determining when the newness period 
begins, under our historical policy, we do not consider how frequently 
the medical service or technology has been used in our determination of 
newness (70 FR 47349). As we discussed in the proposed rule, without 
additional information from the applicant, we cannot determine a 
newness date based on such a documented delay in commercial 
availability (and not the first case involving use of the 
remed[emacr][supreg] System on February 1, 2018). However, even if we 
were to consider the newness period to commence on February 1, 2018, as 
recommended by the commenter, such that the 3-year anniversary date of 
the entry of the remed[emacr][supreg] System onto the U.S. market would 
be February 1, 2021 rather than October 6, 2020, that 3-year 
anniversary date would still occur within the first half of FY 2021. 
Because the 3-year anniversary date of the entry of the 
remed[emacr][supreg] System onto the U.S. market will occur in the 
first half of FY 2021, we proposed to discontinue new technology add-on 
payments for this technology for FY 2021. We invited public comments on 
our proposal to discontinue new technology add-on payments for the 
remed[emacr][supreg] System for FY 2021.
    Comment: A commenter supported CMS' proposal to discontinue new 
technology add-on payments for FY 2021 for the remed[emacr][supreg] 
System.
    Response: We appreciate the commenter's support.
    Comment: A commenter did not support CMS' proposal to discontinue 
new technology add-on payments for FY 2021 for the remed[emacr][supreg] 
System. The commenter, who was also the applicant, requested that CMS 
extend for one additional year all new technology add-on payments set 
to expire at the end of FY 2020 due to the extraordinary circumstances 
of the COVID-19 public health emergency. They expressed concerns that 
the public health emergency dramatically limited availability of the 
remed[emacr][supreg] System since March 2020, when most elective 
procedures were halted across the United States. The commenter stated 
that the reduced access to new technologies for Medicare beneficiaries 
should be factored into consideration of the newness period expiration 
date.
    Response: We thank the commenter for their comments. While we 
appreciate the commenter's concerns, with regard to the technology's

[[Page 58613]]

newness, as discussed in the FY 2005 IPPS final rule (69 FR 49003), the 
timeframe that a new technology can be eligible to receive new 
technology add-on payments begins when data become available. Section 
412.87(b)(2) states that a medical service or technology may be 
considered new within 2 or 3 years after the point at which data begin 
to become available reflecting the inpatient hospital code assigned to 
the new service or technology (depending on when a new code is assigned 
and data on the new service or technology become available for DRG 
recalibration). Section 412.87(b)(2) also states that after CMS has 
recalibrated the DRGs, based on available data, to reflect the costs of 
an otherwise new medical service or technology, the medical service or 
technology will no longer be considered ``new'' under the criterion of 
the section. In addition, CMS's policy for determining whether to 
extend new technology add-on payments for a third year generally 
applies regardless of the claims volume for the technology. As 
discussed in the FY 2006 IPPS final rule (70 FR 47349) and earlier in 
this section, we do not believe that case volume is a relevant 
consideration for making the determination as to whether a product is 
``new.'' Consistent with the statute, a technology no longer qualifies 
as ``new'' once it is more than 2 to 3 years old, irrespective of how 
frequently it has been used in the Medicare population. Therefore, if a 
product is more than 2 to 3 years old, we consider its costs to be 
included in the MS-DRG relative weights whether its use in the Medicare 
population has been frequent or infrequent.
    Based on the reasons stated above, the remed[emacr][supreg] System 
is no longer considered ``new'' for purposes of new technology add-on 
payments for FY 2021. We are finalizing our proposal to discontinue new 
technology add-on payments for the remed[emacr][supreg] System for FY 
2021.
e. ZEMDRI\TM\ (Plazomicin)
    Achaogen, Inc. submitted an application for new technology add-on 
payments for ZEMDRI\TM\ (plazomicin) for FY 2019. According to the 
applicant, ZEMDRI\TM\ is a next generation aminoglycoside antibiotic, 
which has been found in vitro to have enhanced activity against many 
multidrug resistant (MDR) gram-negative bacteria. The applicant 
received approval from FDA on June 25, 2018, for use in the treatment 
of adults who have been diagnosed with cUTIs, including pyelonephritis. 
ZEMDRI\TM\ was approved for new technology add on payments for FY 2019 
(83 FR 41334). We refer readers to section II.H.5.f. of the preamble of 
the FY 2019 IPPS/LTCH PPS final rule (83 FR 41326 through 41334) and 
section II.H.4.h. of the preamble of the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42190 through 42191) for a complete discussion of the new 
technology add on payment application, coding and payment amount for 
ZEMDRI\TM\ for FY 2019 and FY 2020.
    With regard to the newness criterion for ZEMDRI\TM\, we consider 
the beginning of the newness period to commence when ZEMDRI\TM\ was 
approved by FDA on June 25, 2018. As discussed previously in this 
section, in general, we extend new technology add-on payments for an 
additional year only if the 3-year anniversary date of the product's 
entry onto the U.S. market occurs in the latter half of the upcoming 
fiscal year. Because the 3-year anniversary date of the entry of 
ZEMDRI\TM\ onto the U.S. market (June 25, 2021) will occur in the 
second half of FY 2021, we proposed to continue new technology add-on 
payments for this technology for FY 2021. We proposed that the maximum 
new technology add-on payment amount for a case involving the use of 
ZEMDRI\TM\ would remain at $4,083.75 for FY 2021 (we refer readers to 
the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the 
calculation of the new technology add on payment amount for 
ZEMDRI\TM\). Cases involving ZEMDRI\TM\ that are eligible for new 
technology add-on payments are identified by ICD-10-PCS procedure codes 
XW033G4 (Introduction of Plazomicin anti-infective into peripheral 
vein, percutaneous approach, new technology group 4) or XW043G4 
(Introduction of Plazomicin antiinfective into central vein, 
percutaneous approach, new technology group 4). We invited public 
comments on our proposal to continue new technology add-on payments for 
ZEMDRI\TM\ for FY 2021.
    Comment: A commenter supported CMS' proposal to continue new 
technology add-on payments for ZEMDRI\TM\ for FY 2021.
    Response: We appreciate the commenter's support. After 
consideration of the public comments we received, we are finalizing our 
proposal to continue new technology add-on payments for ZEMDRI\TM\ for 
FY 2021. The maximum new technology add-on payment amount for a case 
involving the use of ZEMDRI\TM\ will remain at $4,083.75 for FY 2021; 
that is, 75 percent of the average cost of the technology.
f. GIAPREZA\TM\ (angiotensin II)
    The La Jolla Pharmaceutical Company submitted an application for 
new technology add-on payments for GIAPREZA\TM\ for FY 2019. 
GIAPREZA\TM\, a synthetic human angiotensin II, is administered through 
intravenous infusion to raise blood pressure in adult patients who have 
been diagnosed with septic or other distributive shock. GIAPREZA\TM\ 
was granted a Priority Review designation under FDA's expedited program 
and received FDA approval on December 21, 2017, for the use in the 
treatment of adults who have been diagnosed with septic or other 
distributive shock as an intravenous infusion to increase blood 
pressure. GIAPREZA\TM\ was approved for new technology add on payments 
for FY 2019 (83 FR 41342). We refer readers to section II.H.5.g. of the 
preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41334 through 
41342) and section II.H.4.i. of the preamble of the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42191) for a complete discussion of the new 
technology add on payment application, coding and payment amount for 
GIAPREZA\TM\ for FY 2019 and FY 2020.
    With regard to the newness criterion for GIAPREZA\TM\, we consider 
the beginning of the newness period to commence when GIAPREZA\TM\ was 
approved by FDA (December 21, 2017). As discussed previously in this 
section, in general, we extend new technology add-on payments for an 
additional year only if the 3-year anniversary date of the product's 
entry onto the U.S. market occurs in the latter half of the upcoming 
fiscal year. Because the 3-year anniversary date of the entry of 
GIAPREZA\TM\ onto the U.S. market (December 21, 2020) will occur in the 
first half of FY 2021, we proposed to discontinue new technology add-on 
payments for this technology for FY 2021. We invited public comments on 
our proposal to discontinue new technology add-on payments for 
GIAPREZA\TM\ for FY 2021.
    Comment: A commenter supported CMS' proposal to discontinue new 
technology add-on payments for GIAPREZA\TM\ for FY 2021.
    Response: We appreciate the commenter's support. After 
consideration of the public comments we received, we are finalizing our 
proposal to discontinue new technology add-on payments for GIAPREZA\TM\ 
for FY 2021.
g. Cerebral Protection System (Sentinel[supreg] Cerebral Protection 
System)
    Claret Medical, Inc. submitted an application for new technology 
add-on

[[Page 58614]]

payments for the Cerebral Protection System (Sentinel[supreg] Cerebral 
Protection System) for FY 2019. According to the applicant, the 
Sentinel Cerebral Protection System is indicated for the use as an 
embolic protection (EP) device to capture and remove thrombus and 
debris while performing transcatheter aortic valve replacement (TAVR) 
procedures. The device is percutaneously delivered via the right radial 
artery and is removed upon completion of the TAVR procedure. The De 
Novo request for the Sentinel[supreg] Cerebral Protection System was 
granted by FDA on June 1, 2017. The Sentinel Cerebral Protection System 
was approved for new technology add on payments for FY 2019 (83 FR 
41348). We refer readers to section II.H.5.h. of the preamble of the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41342 through 41348) and section 
II.H.4.j. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42191 through 42192) for a complete discussion the new technology 
add on payment application, coding, and payment amount for the 
Sentinel[supreg] Cerebral Protection System for FY 2019 and FY 2020.
    With regard to the newness criterion for the Sentinel[supreg] 
Cerebral Protection System, we consider the beginning of the newness 
period to commence when FDA granted the De Novo request for the 
Sentinel[supreg] Cerebral Protection System (June 1, 2017). Because the 
3-year anniversary date of the entry of the Sentinel[supreg] Cerebral 
Protection System onto the U.S. market (June 1, 2020) will occur in FY 
2020, we proposed to discontinue new technology add-on payments for 
this technology for FY 2021. We invited public comments on our proposal 
to discontinue new technology add-on payments for the Sentinel[supreg] 
Cerebral Protection System for FY 2021.
    Comment: A commenter supported CMS' proposal to discontinue new 
technology add-on payments for the Sentinel[supreg] Cerebral Protection 
System for FY 2021.
    Response: We appreciate the commenter's support. After 
consideration of the public comments we received, we are finalizing our 
proposal to discontinue new technology add-on payments for the 
Sentinel[supreg] Cerebral Protection System for FY 2021.
h. The AQUABEAM System (Aquablation)
    PROCEPT BioRobotics Corporation submitted an application for new 
technology add-on payments for the AQUABEAM System (Aquablation) for FY 
2019. According to the applicant, the AQUABEAM System is indicated for 
the use in the treatment of patients experiencing lower urinary tract 
symptoms caused by a diagnosis of benign prostatic hyperplasia (BPH). 
FDA granted the AQUABEAM System's De Novo request on December 21, 2017, 
for use in the resection and removal of prostate tissue in males 
suffering from lower urinary tract symptoms (LUTS) due to benign 
prostatic hyperplasia. The AQUABEAM System was approved for new 
technology add on payments for FY 2019 (83 FR 41355). We refer readers 
to section II.H.5.i. of the preamble of the FY 2019 IPPS/LTCH PPS final 
rule (83 FR 41348 through 41355) and section II.H.4.k. of the preamble 
of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42192 through 42193) for 
a complete discussion of the new technology add on payment application, 
coding, and payment for the AQUABEAM System for FY 2019 and FY 2020.
    With regard to the newness criterion for the AQUABEAM System, we 
consider the beginning of the newness period to commence on the date 
FDA granted the De Novo request (December 21, 2017). As discussed 
previously in this section, in general, we extend new technology add-on 
payments for an additional year only if the 3-year anniversary date of 
the product's entry onto the U.S. market occurs in the latter half of 
the upcoming fiscal year. Because the 3-year anniversary date of the 
entry of the AQUABEAM System onto the U.S. market (December 21, 2020) 
will occur in the first half of FY 2021, we proposed to discontinue new 
technology add-on payments for this technology for FY 2021. We invited 
public comments on our proposal to discontinue new technology add-on 
payments for the AQUABEAM System for FY 2021.
    Comment: A commenter supported CMS' proposal to discontinue new 
technology add-on payments for the AQUABEAM System for FY 2021.
    Response: We appreciate the commenter's support. After 
consideration of the public comments we received, we are finalizing our 
proposal to discontinue new technology add-on payments for the AQUABEAM 
System for FY 2021.
i. AndexXa\TM\ (coagulation factor Xa (recombinant), inactivated-zhzo)
    Portola Pharmaceuticals, Inc. (Portola) submitted an application 
for new technology add-on payments for FY 2019 for the use of 
AndexXa\TM\ (coagulation factor Xa (recombinant), inactivated-zhzo). 
AndexXa\TM\ received FDA approval on May 3, 2018, and is indicated for 
use in the treatment of patients who are receiving treatment with 
rivaroxaban and apixaban, when reversal of anticoagulation is needed 
due to life-threatening or uncontrolled bleeding. AndexXa\TM\ was 
approved for new technology add on payments for FY 2019 (83 FR 41362). 
We refer readers to section II.H.5.j. of the preamble of the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41355 through 41362) and section 
II.H.4.k. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42193 through 42194) for a complete discussion of the new technology 
add on payment application, coding, and payment amount for AndexXa\TM\ 
for FY 2019 and FY 2020.
    With regard to the newness criterion for AndexXa\TM\, we consider 
the beginning of the newness period to commence when AndexXa\TM\ 
received FDA approval (May 3, 2018). As discussed previously in this 
section, in general, we extend new technology add-on payments for an 
additional year only if the 3-year anniversary date of the product's 
entry onto the U.S. market occurs in the latter half of the upcoming 
fiscal year. Because the 3-year anniversary date of the entry of 
AndexXa\TM\ onto the U.S. market (May 3, 2021) will occur in the second 
half of FY 2021, we proposed to continue new technology add-on payments 
for this technology for FY 2021. We proposed that the maximum new 
technology add-on payment for a case involving AndexXa\TM\ would remain 
at $18,281.25 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH 
PPS final rule for complete discussion of the calculation of the new 
technology add on payment amount for AndexXa\TM\). Cases involving the 
use of AndexXa\TM\ that are eligible for new technology add-on payments 
are identified by ICD-10-PCS procedure codes XW03372 (Introduction of 
inactivated coagulation factor Xa into peripheral vein, percutaneous 
approach, new technology group 2) or XW04372 (Introduction of 
inactivated coagulation factor Xa into central vein, percutaneous 
approach, new technology group 2). We invited public comments on our 
proposal to continue new technology add-on payments for AndexXa\TM\ for 
FY 2021.
    Comment: Several commenters, including the applicant, supported 
CMS' proposal to continue new technology add-on payments for FY 2021 
for AndexXa\TM\.
    Response: We appreciate the commenters' support. After 
consideration of the public comments we received, we are finalizing our 
proposal to continue new technology add-on payments for AndexXa\TM\ for 
FY 2021. The maximum new technology

[[Page 58615]]

add-on payment amount for a case involving AndexXa\TM\ will remain at 
$18,281.25 for FY 2021; that is, 65 percent of the average cost of the 
technology.
j. AZEDRA[supreg] (iobenguane Iodine-131) Solution
    Progenics Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for AZEDRA[supreg] (iobenguane Iodine-131) 
for FY 2020. AZEDRA[supreg] is a drug solution formulated for 
intravenous (IV) use in the treatment of patients who have been 
diagnosed with obenguane avid malignant and/or recurrent and/or 
unresectable pheochromocytoma and paraganglioma (PPGL). AZEDRA was 
approved by FDA on July 30, 2018, as a radioactive therapeutic agent 
indicated for the treatment of adult and pediatric patients 12 years 
and older with iobenguane scan positive, unresectable, locally advanced 
or metastatic pheochromocytoma or paraganglioma who require systemic 
anticancer therapy. AZEDRA[supreg] was approved for new technology add 
on payments for FY 2020. We refer readers to section II.H.5.a. of the 
preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42194 through 
42201) for a complete discussion of the new technology add on payment 
application, coding and payment amount for AZEDRA[supreg] for FY 2020.
    With regard to the newness criterion for AZEDRA[supreg], we 
consider the beginning of the newness period to commence when 
AZEDRA[supreg] was approved by FDA (July 30, 2018). As discussed 
previously in this section, in general, we extend new technology add-on 
payments for an additional year only if the 3-year anniversary date of 
the product's entry onto the U.S. market occurs in the latter half of 
the upcoming fiscal year. Because the 3-year anniversary date of the 
entry of AZEDRA[supreg] onto the U.S. market (July 30, 2021) will occur 
in the second half of FY 2021, we proposed to continue new technology 
add-on payments for this technology for FY 2021. We proposed that the 
maximum new technology add-on payment for a case involving 
AZEDRA[supreg] would remain at $98,150 for FY 2021 (we refer readers to 
the FY 2020 IPPS/LTCH PPS final rule for complete discussion of the 
calculation of the new technology add on payment amount for 
AZEDRA[supreg]). Cases involving the use of AZEDRA[supreg] that are 
eligible for new technology add-on payments are identified by ICD-10-
PCS procedure codes XW033S5 (Introduction of Iobenguane I-131 
antineoplastic into peripheral vein, percutaneous approach, new 
technology group 5), and XW043S5 (Introduction of Iobenguane I-131 
antineoplastic into central vein, percutaneous approach, new technology 
group 5). We invited public comments on our proposal to continue new 
technology add-on payments for AZEDRA[supreg] for FY 2021.
    Comment: Several commenters supported CMS' proposal to continue new 
technology add-on payments for FY 2021 for AZEDRA[supreg].
    Response: We appreciate the commenters' support. After 
consideration of the public comments we received, we are finalizing our 
proposal to continue new technology add-on payments for AZEDRA[supreg] 
for FY 2021. The maximum new technology add-on payment amount for a 
case involving AZEDRA[supreg] will remain at $98,150.00 for FY 2021; 
that is, 65 percent of the average cost of the technology.
k. CABLIVI[supreg] (caplacizumab-yhdp)
    The Sanofi Company submitted an application for new technology add-
on payments for CABLIVI[supreg] (caplacizumab-yhdp) for FY 2020. The 
applicant described CABLIVI[supreg] as a humanized bivalent nanobody 
consisting of two identical building blocks joined by a tri alanine 
linker, which is administered through intravenous and subcutaneous 
injection to inhibit microclot formation in adult patients who have 
been diagnosed with acquired thrombotic thrombocytopenic purpura 
(aTTP). CABLIVI[supreg] received FDA approval on February 6, 2019, for 
the treatment of adult patients with acquired aTTP, in combination with 
plasma exchange and immunosuppressive therapy. CABLIVI[supreg] was 
approved for new technology add on payments for FY 2020. We refer 
readers to section II.H.5.b. of the preamble of the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42201 through 42208) for a complete discussion of 
the new technology add on payment application, coding, and payment 
amount for CABLIVI[supreg] for FY2020.
    With regard to the newness criterion for CABLIVI[supreg], we 
consider the beginning of the newness period to commence when 
CABLIVI[supreg] was approved by FDA (February 6, 2019). Because the 3-
year anniversary date of the entry of CABLIVI[supreg] onto the U.S. 
market (February 6, 2022) will occur after FY 2021, we proposed to 
continue new technology add-on payments for this technology for FY 
2021. We proposed that the maximum new technology add-on payment for a 
case involving CABLIVI[supreg] would remain at $33,215 for FY 2021 (we 
refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete 
discussion of the calculation of the new technology add on payment 
amount for CABLIVI[supreg]). Cases involving the use of CABLIVI[supreg] 
that are eligible for new technology add-on payments are identified by 
ICD-10-PCS procedure codes XW013W5 (Introduction of Caplacizumab into 
subcutaneous tissue, percutaneous approach, new technology group 5), 
XW033W5 (Introduction of Caplacizumab into peripheral vein, 
percutaneous approach, new technology group 5) and XW043W5 
(Introduction of Caplacizumab into central vein, percutaneous approach, 
new technology group 5). We invited public comments on our proposal to 
continue new technology add-on payments for CABLIVI[supreg] for FY 
2021.
    Comment: A commenter supported CMS' proposal to continue new 
technology add-on payments for CABLIVI[supreg] for FY 2021.
    Response: We appreciate the commenter's support. After 
consideration of the public comments we received, we are finalizing our 
proposal to continue new technology add-on payments for CABLIVI[supreg] 
for FY 2021. The maximum new technology add-on payment amount for a 
case involving CABLIVI[supreg] will remain at $33,215 for FY 2021; that 
is, 65 percent of the average cost of the technology.
l. ELZONRIS\TM\ (tagraxofusp-erzs)
    Stemline Therapeutics submitted an application for new technology 
add-on payments for ELZONRIS\TM\ for FY 2020. ELZONRIS\TM\ 
(tagraxofusp-erzs) is a targeted therapy for the treatment of blastic 
plasmacytoid dendritic cell neoplasm (BPDCN) administered via infusion. 
On December 21, 2018, FDA approved ELZONRIS\TM\ for the treatment of 
blastic plasmacytoid dendritic cell neoplasm in adults and in pediatric 
patients 2 years old and older. ELZONRIS\TM\ was approved for new 
technology add on payments for FY 2020. We refer readers to section 
II.H.5.e. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42231 through 42237) for a complete discussion of the new technology 
add on payment application, coding and payment amount for ELZONRIS\TM\ 
for FY 2020.
    With regard to the newness criterion for ELZONRIS\TM\, we consider 
the beginning of the newness period to commence when ELZONRIS\TM\ was 
approved by FDA (December 21, 2018). Because the 3-year anniversary 
date of the entry of ELZONRIS\TM\ onto the U.S. market (December 21, 
2021) will occur after FY 2021, we proposed to continue new technology 
add-on payments for

[[Page 58616]]

this technology for FY 2021. We proposed that the maximum new 
technology add-on payment for a case involving ELZONRIS\TM\ would 
remain at $125,448.05 for FY 2021 (we refer readers to the FY 2020 
IPPS/LTCH PPS final rule for complete discussion of the calculation of 
the new technology add on payment amount for ELZONRIS\TM\). Cases 
involving the use of ELZONRIS\TM\ that are eligible for new technology 
add-on payments are identified by ICD-10-PCS procedure codes XW033Q5 
(Introduction of Tagraxofusp-erzs antineoplastic into peripheral vein, 
percutaneous approach, new technology, group 5) and XW043Q5 
(Introduction of Tagraxofusp-erzs antineoplastic into central vein, 
percutaneous approach, new technology group 5). We invited public 
comments on our proposal to continue new technology add-on payments for 
ELZONRIS\TM\ for FY 2021.
    Comment: A commenter supported CMS' proposal to continue new 
technology add-on payments for ELZONRIS\TM\ for FY 2021.
    Response: We appreciate the commenter's support. After 
consideration of the public comments we received, we are finalizing our 
proposal to continue new technology add-on payments for ELZONRIS\TM\ 
for FY 2021. The maximum new technology add-on payment amount for a 
case involving ELZONRIS\TM\ will remain at $125,448.05 for FY 2021; 
that is, 65 percent of the average cost of the technology.
m. Balversa\TM\ (Erdafitinib)
    Johnson & Johnson Health Care Systems, Inc. (on behalf of Janssen 
Oncology, Inc.) submitted an application for new technology add-on 
payments for Balversa\TM\ for FY 2020. Balversa\TM\ is indicated for 
the second line treatment of adult patients who have been diagnosed 
with locally advanced or metastatic urothelial carcinoma whose tumors 
exhibit certain fibroblast growth factor receptor (FGFR) genetic 
alterations as detected by an FDA-approved test, and who have disease 
progression during or following at least one line of prior chemotherapy 
including within 12 months of neoadjuvant or adjuvant chemotherapy. 
Balversa\TM\ received FDA approval on April 12, 2019. Balversa\TM\ was 
approved for new technology add on payments for FY 2020. We refer 
readers to section II.H.5.f. of the preamble of the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42237 through 42242) for a complete discussion of 
the new technology add on payment application, coding and payment 
amount for Balversa\TM\ for FY 2020.
    With regard to the newness criterion for Balversa\TM\, we consider 
the beginning of the newness period to commence when Balversa\TM\ was 
approved by FDA (April 12, 2019). Because the 3-year anniversary date 
of the entry of Balversa\TM\ onto the U.S. market (April 12, 2022) will 
occur after FY 2021, we proposed to continue new technology add-on 
payments for this technology for FY 2021. We proposed that the maximum 
new technology add-on payment for a case involving Balversa\TM\ would 
remain at $3,563.23 for FY 2021 (we refer readers to the FY 2020 IPPS/
LTCH PPS final rule for complete discussion of the calculation of the 
new technology add on payment amount for Balversa\TM\). Cases involving 
the use of Balversa\TM\ that are eligible for new technology add-on 
payments are identified by ICD-10-PCS procedure code XW0DXL5 
(Introduction of Erdafitinib antineoplastic into mouth and pharynx, 
external approach, new technology group 5). We invited public comments 
on our proposal to continue new technology add-on payments for 
Balversa\TM\ for FY 2021.
    Comment: A commenter supported CMS' proposal to continue new 
technology add-on payments for Balversa\TM\ for FY 2021.
    Response: We appreciate the commenter's support. After 
consideration of the public comments we received, we are finalizing our 
proposal to continue new technology add-on payments for Balversa\TM\ 
for FY 2021. The maximum new technology add-on payment amount for a 
case involving Balversa\TM\ will remain at $3,563.23 for FY 2021; that 
is, 65 percent of the average cost of the technology.
n. ERLEADA\TM\ (Apalutamide)
    Johnson & Johnson Health Care Systems Inc., on behalf of Janssen 
Products, LP, Inc., submitted an application for new technology add-on 
payments for ERLEADA\TM\ (apalutamide) for FY 2020. This oral drug is 
an androgen receptor inhibitor approved by FDA on February 14, 2018, 
for the treatment of patients who have been diagnosed with non-
metastatic castration-resistant prostate cancer (nmCRPC). ERLEADA\TM\ 
was approved for new technology add on payments for FY 2020. We refer 
readers to section II.H.5.g. of the preamble of the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42242 through 42247) for a complete discussion of 
the new technology add on payment application, coding and payment 
amount for ERLEADA\TM\ for FY 2020.
    With regard to the newness criterion for ERLEADA\TM\, we consider 
the beginning of the newness period to commence when ERLEADA\TM\ was 
approved by FDA (February 14, 2018). As discussed previously in this 
section, in general, we extend new technology add-on payments for an 
additional year only if the 3-year anniversary date of the product's 
entry onto the U.S. market occurs in the latter half of the upcoming 
fiscal year. Because the 3-year anniversary date of the entry of 
ERLEADA\TM\ onto the U.S. market (February 14, 2021) will occur in the 
first half of FY 2021, we proposed to discontinue new technology add-on 
payments for this technology for FY 2021. We invited public comments on 
our proposal to discontinue new technology add-on payments for 
ERLEADA\TM\ for FY 2021.
    Comment: A commenter supported CMS' proposal to discontinue new 
technology add-on payments for ERLEADA\TM\ for FY 2021.
    Response: We appreciate the commenter's support. After 
consideration of the public comments we received, we are finalizing our 
proposal to discontinue new technology add-on payments for ERLEADA\TM\ 
for FY 2021.
o. SPRAVATO\TM\ (Esketamine)
    Johnson & Johnson Health Care Systems, Inc., on behalf of Janssen 
Pharmaceuticals, Inc., submitted an application for new technology add-
on payments for SPRAVATO\TM\ (Esketamine) nasal spray for FY 2020. The 
FDA-approved indication for SPRAVATO\TM\ is treatment resistant 
depression (TRD). SPRAVATO\TM\ Nasal Spray was approved by FDA March 5, 
2019. SPRAVATO\TM\ was approved for new technology add on payments for 
FY 2020. We refer readers to section II.H.5.h. of the preamble of the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42247 through 42256) for a 
complete discussion of the new technology add on payment application, 
coding and payment amount for SPRAVATO\TM\ for FY 2020.
    With regard to the newness criterion for SPRAVATO\TM\, we consider 
the beginning of the newness period to commence when SPRAVATO\TM\ was 
approved by FDA (March 5, 2019). Because the 3-year anniversary date of 
the entry of SPRAVATO\TM\ onto the U.S. market (March 5, 2022) will 
occur after FY 2021, we proposed to continue new technology add-on 
payments for this technology for FY 2021. We proposed that the maximum 
new technology add-

[[Page 58617]]

on payment for a case involving SPRAVATO\TM\ would remain at $1,014.79 
for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule 
for complete discussion of the calculation of the new technology add on 
payment amount for SPRAVATO\TM\).
    In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19329), we noted 
that the applicant had submitted a request to the ICD-10 Coordination 
and Maintenance Committee for approval for a unique ICD-10-PCS 
procedure code to specifically identify cases involving the use of 
SPRAVATO\TM\, beginning in FY 2020. As of the time of the development 
of the FY 2020 IPPS/LTCH PPS final rule, a unique ICD-10-PCS procedure 
code to specifically identify cases involving the use of SPRAVATO\TM\ 
had not yet been finalized in response to the applicant's request. 
Therefore, we stated that cases reporting SPRAVATO\TM\ would be 
identified by ICD-10-PCS procedure code 3E097GC (Introduction of other 
therapeutic substance into nose, via natural or artificial opening) for 
FY 2020. Subsequent to the FY 2020 IPPS/LTCH PPS final rule, a unique 
ICD-10-PCS procedure code to specifically identify cases involving the 
use of SPRAVATO\TM\ was finalized, effective October 1, 2020. As a 
result, cases involving the use of SPRAVATO\TM\ that are eligible for 
new technology add-on payments would be identified by ICD-10-PCS 
procedure code XW097M5 (Introduction of Esketamine Hydrochloride into 
nose, via natural or artificial opening, new technology group 5) for FY 
2021. Because new ICD-10-PCS procedure code XW097M5 is not effective 
until October 1, 2020, ICD-10-PCS procedure code 3E097GC is the only 
code available to report the use of the SPRAVATO\TM\ for FY 2020. For 
FY 2021, beginning with discharges on or after October 1, 2020, cases 
involving SPRAVATO\TM\ that are eligible for new technology add-on 
payments will be identified using the new ICD-10-PCS procedure code 
XW097M5 (that is effective for FY 2021). We invited public comments on 
our proposal to continue new technology add-on payments for 
SPRAVATO\TM\ for FY 2021.
    Comment: A commenter supported CMS' proposal to continue new 
technology add-on payments for SPRAVATO\TM\ for FY 2021.
    Response: We appreciate the commenter's support. After 
consideration of the public comments we received, we are finalizing our 
proposal to continue new technology add-on payments for SPRAVATO\TM\ 
for FY 2021. The maximum new technology add-on payment amount for a 
case involving SPRAVATO\TM\ will remain at $1,014.79 for FY 2021; that 
is, 65 percent of the average cost of the technology.
p. XOSPATA[supreg] (gilteritinib)
    Astellas Pharma U.S., Inc. submitted an application for new 
technology add-on payments for XOSPATA[supreg] (gilteritinib) for FY 
2020. XOSPATA[supreg] received FDA approval November 28, 2018 and is 
indicated for the treatment of adult patients who have been diagnosed 
with relapsed or refractory acute myeloid leukemia (AML) with a FMS-
like tyrosine kinase 3 (FLT3) mutation as detected by an FDA approved 
test. XOSPATA[supreg] was approved for new technology add on payments 
for FY 2020. We refer readers to section II.H.5.i. of the preamble of 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42256 through 42260) for a 
complete discussion of the new technology add on payment application, 
coding and payment amount for XOSPATA[supreg].
    With regard to the newness criterion for XOSPATA[supreg], we 
consider the beginning of the newness period to commence when 
XOSPATA[supreg] was approved by FDA (November 28, 2018). Because the 3-
year anniversary date of the entry of XOSPATA[supreg] onto the U.S. 
market (November 28, 2021) will occur after FY 2021, we proposed to 
continue new technology add-on payments for this technology for FY 
2021. We proposed that the maximum new technology add-on payment for a 
case involving XOSPATA[supreg] would remain at $7,312.50 for FY 2021 
(we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete 
discussion of the calculation of the new technology add on payment 
amount for XOSPATA[supreg]). Cases involving the use of XOSPATA[supreg] 
that are eligible for new technology add-on payments are identified by 
ICD-10-PCS procedure code XW0DXV5 (Introduction of Gilteritinib 
antineoplastic into mouth and pharynx, external approach, new 
technology group 5). We invited public comments on our proposal to 
continue new technology add-on payments for XOSPATA[supreg] for FY 
2021.
    Comment: A commenter supported CMS' proposal to continue new 
technology add-on payments for XOSPATA[supreg] for FY 2021.
    Response: We appreciate the commenter's support. After 
consideration of the public comments we received, we are finalizing our 
proposal to continue new technology add-on payments for XOSPATA[supreg] 
for FY 2021. The maximum new technology add-on payment amount for a 
case involving XOSPATA[supreg] will remain at $7,312.50 for FY 2021; 
that is, 65 percent of the average cost of the technology.
q. JAKAFI \TM\ (ruxolitinib)
    Incyte Corporation submitted an application for new technology add-
on payments for JAKAFI \TM\ (ruxolitinib) for FY 2020. According to the 
applicant, JAK inhibition represents a therapeutic approach for the 
treatment of acute graft-versus-host disease (aGVHD) in patients who 
have had an inadequate response to corticosteroids. JAKAFI \TM\ 
received FDA approval on May 24, 2019 for the treatment of steroid-
refractory aGVHD in adult and pediatric patients 12 years and older. 
JAKAFI \TM\ was approved for new technology add on payments for FY 
2020. We refer readers to section II.H.5.k. of the preamble of the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42265 through 42273) for a 
complete discussion of the new technology add on payment application, 
coding and payment amount for JAKAFI \TM\ for FY 2020.
    With regard to the newness criterion for JAKAFI \TM\, we consider 
the beginning of the newness period to commence when JAKAFI \TM\ was 
approved by FDA (May 24, 2019). Because the 3-year anniversary date of 
the entry of JAKAFI \TM\ onto the U.S. market (May 24, 2022) will occur 
after FY 2021, we proposed to continue new technology add-on payments 
for this technology for FY 2021. We proposed that the maximum new 
technology add-on payment for a case involving JAKAFI \TM\ would remain 
at $3,977.06 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS 
final rule for complete discussion of the calculation of the new 
technology add on payment amount for JAKAFI \TM\). Cases involving the 
use of JAKAFI \TM\ that are eligible for new technology add-on payments 
are identified by ICD-10-PCS procedure code XW0DXT5 (Introduction of 
Ruxolitinib into mouth and pharynx, external approach, new technology 
group 5). We invited public comments on our proposal to continue new 
technology add-on payments for JAKAFI \TM\ for FY 2021.
    Comment: Several commenters supported our proposal to continue new 
technology add-on payments for JAKAFI \TM\ for FY 2021.
    One commenter, who was also the applicant, presented results from a 
randomized, open-label, multicenter, Phase 3 REACH 2 study comparing 
ruxolitinib (JAKAFITM) with the investigator's choice of 
therapy in patients with steroid-refractory Grade II-IV aGVHD. The 
applicant stated that these results were published in May

[[Page 58618]]

2020 and reinforced findings from the previously reported Phase 2 
REACH1 study. The applicant noted that the REACH2 study met its primary 
endpoint of overall response rate (ORR) at Day 28 with ruxolitinib 
treatment (62.3% [96/154]) compared to control therapy (39.4% [61/155]) 
and that no new safety signals were observed. According to the 
applicant, the most common adverse events up to Day 28 seen with 
JAKAFITM were thrombocytopenia, anemia, and cytomegalovirus 
infection. The applicant concluded that these data further support CMS' 
assessment that JAKAFITM met the substantial clinical 
improvement criterion in FY 2020.
    The same commenter provided updated cost information and requested 
that we revise the maximum add-on payment amount for 
JAKAFITM to account for an increase in the Wholesale 
Acquisition Cost, which is currently $13,504 per 60 tablets. The 
commenter stated that per the FY 2020 IPPS final rule, CMS calculated 
the maximum new technology add-on payment using the WAC for 60 
JAKAFITM tablets, determining the per tablet amount, 
multiplying that figure by two (as JAKAFITM is taken twice 
daily), and using a 14 day anticipated duration. Under this 
methodology, the average cost of JAKAFITM per case would 
change from $6,118.56 to $6,301.86 ($13,504/60 * 2 * 14), and limiting 
the maximum add-on payment to the lesser of 65% of the cost of the 
technology or 65% of the amount by which the costs of the case exceed 
the MS-DRG payment would result in a maximum payment of $4,096.21 for 
JAKAFITM for FY 2021.
    Response: We appreciate the commenters' support and the updated 
cost information submitted by the applicant.
    After consideration of the public comments we received, we are 
finalizing our proposal, with modification, to continue new technology 
add-on payments for JAKAFI \TM\ for FY 2021. Based on the applicant's 
updated cost information, the maximum new technology add-on payment for 
a case involving the use of JAKAFITM is $4,096.21 for FY 
2021; that is, 65 percent of the average cost of the technology.
r. T2Bacteria[supreg] Panel (T2Bacteria Test Panel)
    T2Biosystems, Inc. submitted an application for new technology add-
on payments for the T2Bacteria Test Panel (T2Bacteria[supreg] Panel) 
for FY 2020. The T2Bacteria[supreg] Panel received 510(k) clearance 
from FDA on May 24, 2018 for use as an aid in the diagnosis of 
bacteremia, bacterial presence in the blood, which is a precursor for 
sepsis. Per the FDA-cleared indication, results from the 
T2Bacteria[supreg] Panel are not intended to be used as the sole basis 
for diagnosis, treatment, or other patient management decisions in 
patients with suspected bacteremia. Concomitant blood cultures are 
necessary to recover organisms for susceptibility testing or further 
identification, and for organisms not detected by the 
T2Bacteria[supreg] Panel. The T2Bacteria[supreg] Panel was approved for 
new technology add on payments for FY 2020. We refer readers to section 
II.H.5.m. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42278 through 42288) for a complete discussion of the new technology 
add on payment application, coding and payment amount for the 
T2Bacteria[supreg] Panel for FY 2020.
    With regard to the newness criterion for the T2Bacteria [supreg] 
Panel, we consider the beginning of the newness period to commence when 
the T2Bacteria [supreg] Panel was cleared by FDA (May 24, 2018). As 
discussed previously in this section, in general, we extend new 
technology add-on payments for an additional year only if the 3-year 
anniversary date of the product's entry onto the U.S. market occurs in 
the latter half of the upcoming fiscal year. Because the 3-year 
anniversary date of the entry of the T2Bacteria [supreg] Panel onto the 
U.S. market (May 24, 2021) will occur in the second half of FY 2021, we 
proposed to continue new technology add-on payments for this technology 
for FY 2021. We proposed that the maximum new technology add-on payment 
for a case involving the T2Bacteria [supreg] Panel would remain at 
$97.50 for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final 
rule for complete discussion of the calculation of the new technology 
add on payment amount for the T2Bacteria [supreg] Panel). Cases 
involving the use of the T2Bacteria [supreg] Panel that are eligible 
for new technology add-on payments are identified by ICD-10-PCS 
procedure code XXE5XM5 (Measurement of infection, whole blood nucleic 
acid-base microbial detection, new technology group 5). We invited 
public comments on our proposal to continue new technology add-on 
payments for the T2Bacteria [supreg] Panel for FY 2021.
    Comment: Several commenters expressed support for our proposed 
continuation of new technology add-on payments for the T2Bacteria 
[supreg] Panel for FY 2021. One commenter, who was also the applicant, 
stated that continuation of these payments for a second year is not 
only consistent with CMS' longstanding definition of newness but is 
also critical to increasing beneficiary access to the T2Bacteria 
[supreg] Panel. The commenter noted that sepsis is the most expensive 
U.S. hospital-treated condition, representing $23.7 billion in 
healthcare costs per year and contributing to greater than 35% of 
inpatient deaths, many of them Medicare beneficiaries. The commenter 
concluded that, by enabling greater clinician access to the T2Bacteria 
[supreg] Panel, CMS is playing a significant role in making sure 
Medicare beneficiaries receive the most effective therapy for the 
pathogen that they are infected with, reducing length-of-stay in the 
hospital and saving lives.
    Response: We appreciate the commenters' support. After 
consideration of the public comments we received, we are finalizing our 
proposal to continue new technology add-on payments for the T2Bacteria 
[supreg] Panel for FY 2021. The maximum new technology add-on payment 
amount for a case involving the T2Bacteria [supreg] Panel will remain 
at $97.50 for FY 2021; that is, 65 percent of the average cost of the 
technology.
BILLING CODE 4120-01-P

[[Page 58619]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.151


[[Page 58620]]


BILLING CODE 4120-01-C
5. FY 2021 Applications for New Technology Add-On Payments (Traditional 
Pathway)
    We received 17 applications for new technology add-on payments for 
FY 2021. In accordance with the regulations under Sec.  412.87(e), 
applicants for new technology add-on payments must have FDA approval or 
clearance by July 1 of the year prior to the beginning of the fiscal 
year for which the application is being considered. Two applicants 
withdrew their applications prior to the issuance of the proposed rule. 
Three applicants, Accelerate Diagnostics, Inc (the applicant for 
Accelerate PhenoTest TM BC kit), Kite Pharma (the applicant 
for KTE-X19) and Juno Therapeutics, a Bristol-Myers Squibb Company (the 
applicant for Liso-cel) did not meet the deadline of July 1 for FDA 
approval or clearance of the technology and, therefore, the 
technologies are not eligible for consideration for new technology add-
on payments for FY 2021. We note that we did receive some comments 
requesting that CMS extend the July 1 deadline for applications to 
receive FDA marketing authorization for FY 2021 due to the COVID-19 
public health emergency. The July 1 deadline for FDA approval or 
clearance for consideration of new technology add-on payment 
applications, as set forth in the regulations at Sec.  412.87(e), 
continues to apply to applications for new technology add-on payments 
for FY 2021, subject to our proposed conditional approval process for 
certain antimicrobial products. A discussion of the remaining 12 
applications, which met this deadline, is presented in this final rule.
b. BioFire [supreg] FilmArray [supreg] Pneumonia Panel
    BioFire Diagnostics, LLC submitted an application for new 
technology add-on payments for the BioFire [supreg] FilmArray [supreg] 
Pneumonia Panel for FY 2021. According to the applicant, the BioFire 
[supreg] FilmArray [supreg] Pneumonia Panel identifies 33 clinically 
relevant targets, including bacterial and viral targets, from sputum 
(including endotracheal aspirate) and bronchoalveolar lavage (including 
mini-BAL) samples in about an hour. The applicant also stated that for 
15 bacteria, the BioFire [supreg] FilmArray [supreg] Pneumonia Panel 
provides semi-quantitative results, which may help determine whether an 
organism is a colonizer or a pathogen.
    According to the applicant, lower respiratory tract infections are 
a leading cause of morbidity and mortality. The applicant stated that 
world-wide, they are the leading cause of infectious disease death and 
the 5th leading overall cause of death.\2\ The applicant also asserted 
that in the United States, community acquired pneumonia (CAP) is the 
second most common cause of hospitalization and the most common 
infectious disease cause of death.3 4 The applicant also 
stated that in addition to CAP, Hospital-acquired Pneumonia (HAP) and 
Ventilator-associated Pneumonia (VAP) are the most common hospital 
acquired infections (HAI) accounting for 22 percent of all HAIs.\5\ 
According to the applicant, HAP and VAP are of particular concern for 
patients admitted to intensive care units (ICUs) where mortality rates 
can be up to 50 percent.6 7
---------------------------------------------------------------------------

    \2\ Troeger, C., Forouzanfar, M., Rao, P.C., Khalil, I., Brown, 
A., Swartz, S., Fullman, N., Mosser, J., Thompson, R.L., Reiner Jr, 
R.C. and Abajobir, A., ``Estimates of the global, regional, and 
national morbidity, mortality, and aetiologies of lower respiratory 
tract infections in 195 countries: A systematic analysis for the 
Global Burden of Disease Study 2015,'' The Lancet Infectious 
Diseases, 2017, vol. 17(11), pp.1133-1161.
    \3\ Xu, J. Murphy SL, Kochanek KD, Bastian BA, ``Deaths: Final 
Data for 2013'' Natl Vital Stat Rep, 2016, vol. 64(2), p. 1.
    \4\ Pfuntner, A., Wier, L. M., & Stocks, C. ``Most frequent 
conditions in US hospitals, 2011,'' Healthcare Cost and Utilization 
Project (HCUP) Statistical Brief #162, 2013.
    \5\ Magill,.S., Edwards, J.R., Bamberg, W., Beldavs, Z.G., 
Dumyati, G., Kainer, M.A., Lynfield, R., Maloney, M., McAllister-
Hollod, L., Nadle, J. and Ray, S.M., ``Multistate point-prevalence 
survey of health care-associated infections,'' N. Engl. J. of Med., 
2014, vol. 370(13), pp.1198-1208.
    \6\ Sopena, N., Sabri[agrave], M. and Neunos 2000 Study Group, 
``Multicenter study of hospital-acquired pneumonia in non-ICU 
patients,'' Chest, 2005, vol. 127(1), pp. 213-219.
    \7\ Esperatti, M., Ferrer, M., Giunta, V., Ranzani, O.T., 
Saucedo, L.M., Bassi, G.L., Blasi, F., Rello, J., Niederman, M.S. 
and Torres, A., ``Validation of predictors of adverse outcomes in 
hospital-acquired pneumonia in the ICU,'' Crit. Care Med., 2013. 
Vol. 41(9), pp.2151-2161.
---------------------------------------------------------------------------

    According to the applicant, timely administration of effective 
antibiotics is essential for ensuring a good prognosis. The applicant 
stated that mortality increases for each hour of delay in initiating 
antibiotic therapy for hospitalized pneumonia patients,8 9 
and ideally, antimicrobial therapy would be pathogen-specific and 
guided by the results of microbiology tests. However, the applicant 
stated that current microbiologic methods are slow and fail to identify 
a causative pathogen in over 50 percent of patients, even when 
comprehensive methods are used.\10\ As a result, the applicant noted 
that current guidelines recommend empiric treatment with broad spectrum 
antibiotics,\11\ and that broad-spectrum antibiotics lead to overuse of 
antibiotics, which increases the risk of an antibiotic related adverse 
event (for example, diarrhea, allergic reactions, C. difficile 
infection) for the patient and contributes to the well-known problem of 
antimicrobial resistance. In addition, the applicant noted that 6-15 
percent of hospitalized patients with CAP fail to respond to the 
initial antibiotic treatment, in part due to ineffective antibiotic 
therapy.12 13 14 15
---------------------------------------------------------------------------

    \8\ Benenson, R., Magalski, A., Cavanaugh, S. and Williams, E., 
``Effects of a pneumonia clinical pathway on time to antibiotic 
treatment, length of stay, and mortality,'' Acad. Emerg. Med., 1999, 
vol. 6(12), pp.1243-1248.
    \9\ Houck, P.M., Bratzler, D.W., Nsa, W., Ma, A. and Bartlett, 
J.G., ``Timing of antibiotic administration and outcomes for 
Medicare patients hospitalized with community-acquired pneumonia,'' 
Arch. Intern. Med., 2004, vol. 164(6), pp.637-644.
    \10\ Jain, S., Self, W.H., Wunderink, R.G., Fakhran, S., Balk, 
R., Bramley, A.M., Reed, C., Grijalva, C.G., Anderson, E.J., 
Courtney, D.M. and Chappell, J.D., ``Community-acquired pneumonia 
requiring hospitalization among US adults,'' N. Engl. J. Med., 2015, 
vol. 373(5), pp.415-427.
    \11\ Kalil, A.C., Metersky, M.L., Klompas, M., Muscedere, J., 
Sweeney, D.A., Palmer, L.B., Napolitano, L.M., O'Grady, N.P., 
Bartlett, J.G., Carratal[agrave], J. and El Solh, A.A., ``Management 
of adults with hospital-acquired and ventilator-associated 
pneumonia: 2016 clinical practice guidelines by the Infectious 
Diseases Society of America and the American Thoracic Society,'' 
Clin. Infect. Dis., 2016, vol. 63(5), pp.e61-e111.
    \12\ Ros[oacute]n, B., Carratala, J., Fern[aacute]ndez-
Sab[eacute], N., Tubau, F., Manresa, F. and Gudiol, F., ``Causes and 
factors associated with early failure in hospitalized patients with 
community-acquired pneumonia,'' Arch. Intern. Med., 2004, vol. 
164(5), pp.502-508.
    \13\ Menendez, R., Torres, A., Zalacain, R., Aspa, J., 
Villasclaras, J.M., Border[iacute]as, L., Moya, J.B., Ruiz-Manzano, 
J., de Castro, FR, Blanquer, J. and P[eacute]rez, D., ``Risk factors 
of treatment failure in community acquired pneumonia: Implications 
for disease outcome,'' Thorax, 2004. Vol. 59(11), pp. 960-965.
    \14\ Arancibia, F., Ewig, S., Martinez, J.A., Ruiz, M., Bauer, 
T., Marcos, M.A., Mensa, J. and Torres, A., ``Antimicrobial 
treatment failures in patients with community-acquired pneumonia: 
Causes and prognostic implications,'' Am. J. Respir. Crit. Care 
Med., 2000, vol. 162(1), pp.154-160.
    \15\ Men[eacute]ndez, R., Torres, A., Rodr[iacute]guez de 
Castro, F., Zalaca[iacute]n, R., Aspa, J., Mart[iacute]n 
Villasclaras, J.J., Border[iacute]as, L., Ben[iacute]tez, J.M.M., 
Ruiz-Manzano, J., Blanquer, J. and P[eacute]rez, D., ``Reaching 
stability in community-acquired pneumonia: The effects of the 
severity of disease, treatment, and the characteristics of 
patients,'' Clin. Infect. Dis., 2004, vol. 39(12), pp.1783-1790.
---------------------------------------------------------------------------

    According to the applicant, there are three current methods for 
determining the causative organism of pneumonia: bacterial culture, lab 
developed and commercial singleplex PCR (polymerase chain reaction) 
tests, and off-label use of upper respiratory multiplex syndromic 
panels.
    According to the applicant, semi-quantitative bacterial culture is 
routinely performed on lower respiratory specimens. The applicant 
explained that a calibrated loop is used to spread sample on 
appropriate media. A quadrant streak method is generally employed and, 
depending on how many of the quadrants the organism grows in, 
determines its semi-quantification.

[[Page 58621]]

According to the applicant, normal flora will often grow in all 4 
quadrants and technicians must differentiate between potential 
pathogens and normal flora, and potential pathogens are picked from the 
plate and isolated on another media plate. According to the applicant, 
after growing isolate, final identification and susceptibility is 
performed.
    According to the applicant, there are also FDA and lab-developed 
tests for single targets that cause pneumonia. The applicant stated 
that these are for the more serious pathogens (for example, Methicillin 
resistant Staphylococcus aureus, MRSA) or fastidious organisms (for 
example, Mycobacterium tuberculosis). According to the applicant, these 
tests range from sample-to-answer (Cepheid [supreg] Xpert [supreg] MTB/
RIF) to lab-developed tests that are often multi-step and multiple 
pieces of equipment that require isolating nucleic acid from a sample 
and then adding appropriate reagents to perform a PCR assay on the 
isolated nucleic acid.
    According to the applicant, a number of academic hospital labs have 
also performed off-label validation of commercially available 
respiratory panels designed for upper respiratory syndromes. The 
applicant stated that these tests are used primarily on BAL specimens 
for the rapid detection of viral causes of Pneumonia.
    With respect to the newness criterion, the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel received FDA clearance via 510(k) on 
November 9, 2018, based on a determination of substantial equivalence 
to a legally marketed predicate device (Curetis UnyveroTM). 
According to the applicant, the Pneumonia Panel was launched globally 
on December 11, 2018. According to the applicant, there was a delay 
between FDA clearance date and U.S. market availability (global launch 
date) in order to satisfy documentation requirements in preparation of 
the global launch. The applicant stated that it has been granted a 
Proprietary Laboratory Analyses (PLA) code by the American Medical 
Association; PLA Code 0151U was published on October 1, 2019 and became 
effective on January 1, 2020. According to the applicant, the PLA code 
assigned to the BioFire[supreg] FilmArray[supreg] Pneumonia Panel 
uniquely identifies this test and no other technologies use this code. 
The applicant submitted a request for approval for a unique ICD-10-PCS 
code for the administration of the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel beginning in FY 2021 and was granted approval for the 
following procedure code effective October 1, 2020: XXEBXQ6 
(Measurement of infection, lower respiratory fluid nucleic acid-base 
microbial detection, new technology group 6).
    As discussed previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would not be considered ``new'' 
for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or similar mechanism of action to achieve a therapeutic outcome, 
according to the applicant, the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel is the only sample-to-answer, rapid (~1 hour), and 
comprehensive molecular panel available for the diagnosis of the major 
bacterial and viral causes of infectious pneumonia. The applicant 
further explained that the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel is also the only semi-quantitative molecular solution available 
for rapidly diagnosing infectious causes of pneumonia. The applicant 
noted that this important feature allows labs and clinicians to better 
differentiate whether an organism is normal flora or the cause of the 
patient's illness. The applicant asserted that the current best 
practice is standard culture technique, discussed previously. The 
applicant further stated that other comprehensive molecular 
technologies include Curetis UnyveroTM which is a multi-step 
process, only has bacterial targets, and only provides qualitative 
results for all of its targets.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant stated that potential 
cases representing patients who may be eligible for treatment involving 
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel would be assigned 
to the same MS-DRGs as cases representing patients who receive 
diagnostic information from competing technologies.
    With respect to the third criterion, whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, according to the 
applicant, the BioFire[supreg] FilmArray[supreg] Pneumonia Panel is the 
only FDA cleared comprehensive molecular panel approved for use on both 
sputum (including endotracheal aspirate) and bronchoalveolar lavage 
(including mini-BAL) samples allowing for diagnosis of pneumonia in 
hospital, community, and ventilator associated populations. The 
applicant stated that the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel is also the only molecular panel that detects both bacterial and 
viral causes of lower respiratory infections and pneumonia.
    In addition, the applicant added that the ability of the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel to detect pathogens 
and related susceptibility traits is a unique feature of the panel that 
differentiates it from existing respiratory panels that have been 
designed and approved for use on upper respiratory specimens and not 
lower respiratory specimens. The applicant stated that Furukawa, D., et 
al., evaluated the ability of the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel to detect pathogens and related susceptibility traits, 
specifically looking at the impact of MRSA detection, and showed that 
the BioFire[supreg] FilmArray[supreg] Pneumonia panel has the potential 
to significantly expedite time to MRSA results allowing for rapid 
escalation or de-escalation of therapy.\16\
---------------------------------------------------------------------------

    \16\ Furukawa, D., Kim, B., Jeng, A., BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel: A Powerful Rapid Diagnostic Test 
for Antimicrobial Stewardship. Poster presented at Infectious 
Disease Week; 2019 October 2-6. Washington, DC.
---------------------------------------------------------------------------

    We stated in the proposed rule that based on the applicant's 
statements as presented previously, we are concerned there is 
insufficient information to determine whether the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel mechanism of action is different from 
existing products. In the FDA decision summary, the test is described 
as a multiplex nucleic acid test, or PCR accompanied by the applicant's 
software. However, it is unclear from the new technology add-on payment 
application how the mechanism of action is new or different from other 
products that utilize PCR. While the applicant described this test as 
the only sample-to-answer, rapid (~1 hour), and comprehensive molecular 
panel available for the diagnosis of the major causes of infectious 
pneumonia and as also semi-quantitative, and further described another 
comprehensive molecular product (Curetis UnyveroTM) as 
having only bacterial targets and providing only qualitative results 
for all of its targets, we stated that we are uncertain how the 
underlying mechanism of action of the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel is different from existing PCR-based tests. 
Additionally, based on the information provided by the applicant, we 
stated that it appears as though the product does not treat a different 
disease or population compared to other products. Finally, with respect 
to the Furukawa study, which the applicant cited to support that the 
BioFire has the potential to specifically expedite time to MRSA results 
allowing for rapid escalation or de-escalation of therapy,

[[Page 58622]]

we noted that the study authors also concluded that the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel ``has good agreement with SOC for 
detection of bacteria and viruses'' and that the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel ``detects additional S. aureus 
bacteria not reported by SOC,'' but that ``[a]dditional S. aureus 
detection are more likely to be at low concentration and are of unclear 
clinical significance.'' We invited public comments on whether the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel is substantially 
similar to other technologies and whether the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel meets the newness criterion.
    We did not receive any public comments on whether the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel meets the newness 
criterion. We continue to have the same concerns as summarized in the 
proposed rule that the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel is substantially similar to other products that are currently 
available on the U.S. market. Despite the information the applicant 
previously submitted with its application describing the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel as the only sample-
to-answer, rapid (~1 hour), and comprehensive molecular panel available 
for the diagnosis of the major causes of infectious pneumonia and as 
also semi-quantitative, it remains unclear how the mechanism of action 
is specifically new or different from other products that utilize PCR. 
Moreover, it appears that the patient population of cases that may be 
eligible for tests using the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel also currently has access to other PCR-based tests and 
similar technologies that are also used in the testing of similar 
conditions. Therefore, we are unable to determine that the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel meets the newness 
criterion.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that the technology meets the cost 
criterion.
    The applicant stated that it used 2018 data from Definitive Health 
Care at defhc.com, and that it searched these data for cases in MS-DRGs 
193, 194, and 195 (Simple Pneumonia and Pleurisy with MCC, with CC, and 
without CC/MCC, respectively), which resulted in 297,956 cases. The 
applicant indicated that the data was from proprietary data drawn from 
one hospital in Indianapolis in 2018. However, the scope of the data as 
described by the applicant is unclear to us, as it seems unlikely that 
a single hospital in Indiana would have observed 297, 956 cases of 
simple pneumonia in 1 year. It is also not clear how these cases 
correspond to any of the later steps in the cost analysis. For example, 
the applicant did not indicate whether the charge values from the data 
are based on the same 297,956 cases identified in the three MS-DRGs.
    In its analysis, the applicant stated that no charges were removed 
for any prior technologies as the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel does not eliminate culture testing of specimens. The 
applicant standardized the charges and then inflated the charges. The 
applicant reported using an inflation factor of 5.50 percent based on 
the charge inflation factor published by CMS in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42629). The applicant appears to have made a 
minor error in this inflation factor, since the actual, 1-year 
inflation factor in the FY 2020 IPPS/LTCH PPS final rule was 5.4 
percent. To estimate the cost of the technology, the applicant used the 
per-test list price cost of the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel. The applicant indicated that it did not incorporate an 
estimate of technician time spent administering the test, asserting 
that ``2-5 minutes of technician time is nearly obsolete due to ease of 
use of the test.'' The applicant also indicated that it did not 
incorporate an estimate of instrumentation cost into its costing of the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel, noting that ``a 
number of'' labs already have sufficient instrumentation to run the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel test. The applicant 
added charges for the BioFire[supreg] FilmArray[supreg] Pneumonia Panel 
based on an estimated range of projected patient charges for the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel technology. The 
applicant stated that the charge to the patient varies by location and 
the methodology of the hospital or lab charge master. The applicant 
noted that the estimate was based on patient charges for other 
BioFire[supreg] products that had been reported by hospitals and 
reference labs. Based on this analysis, the applicant computed a final 
inflated average case-weighted standardized charge per case of $78,156, 
as compared to an average case-weighted threshold amount of $42,812. 
Because the final inflated average case-weighted standardized charge 
per case exceeded the average case-weighted threshold amount, the 
applicant asserted that the technology meets the cost criterion.
    We stated in the proposed rule that we are concerned that many of 
the calculated values in the applicant's analysis, such as the average-
cost-per case, unweighted and unstandardized, were reportedly based on 
proprietary claims data that came from one hospital in Indianapolis. We 
are concerned that an analysis based on one hospital would not 
adequately represent the cost of cases using the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel as the data could be skewed or biased 
based on one hospital. We stated in the proposed rule that we are also 
concerned with the lack of description of how the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel maps to the three MS-DRGs for simple 
pneumonia (that is, MS-DRGs 193, 194 and 195); for example, whether the 
analysis included all the cases in these MS-DRGs or was limited to 
specific cases. We note there are several additional pneumonia-related 
MS-DRGs to which we believe potential cases that may be eligible for 
the use of the product could be mapped, but which were not included in 
the cost analysis; for example, MS-DRGs 177, 178 and 179 (Respiratory 
Infections and Inflammations with MCC, with CC, and without CC/MCC, 
respectively) and MS-DRGs 974, 975, and 976 (HIV with Major Related 
Condition with MCC, with CC, and without CC/MCC, respectively). We 
invited public comments on whether the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel meets the cost criterion.
    We did not receive any public comments on whether the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel meets the cost 
criterion. We continue to have the same concerns regarding the cost 
analysis for the BioFire[supreg] FilmArray[supreg] Pneumonia Panel as 
summarized previously. We remain concerned that many of the calculated 
values in the applicant's analysis would not adequately represent the 
cost of cases using the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel as they are based on proprietary claims data that came from one 
hospital. We also continue to be concerned with the lack of description 
of how the BioFire[supreg] FilmArray[supreg] Pneumonia Panel maps to 
the three MS-DRGs for simple pneumonia (that is, MS-DRGs 193, 194 and 
195); for example, whether the analysis included all the cases in these 
MS-DRGs or was limited to specific cases. Therefore, we are unable to 
determine that the BioFire[supreg] FilmArray[supreg] Pneumonia Panel 
meets the cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that data from studies conducted with the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel show that it can 
detect major causes of pneumonia with a high degree of sensitivity and 
specificity in a clinically relevant timeframe. The applicant explained 
that results from the BioFire[supreg] FilmArray[supreg]

[[Page 58623]]

Pneumonia Panel also have the potential to impact antibiotic usage and 
lead to improved stewardship and possible cost savings.
    The applicant submitted four studies presented as posters at 
national conferences to support its assertion that the product 
represents a substantial clinical improvement, noting that data for 
this test is still new and has not yet been published in academic 
journals.
    According to the applicant, Buchan, et al. compared the results of 
conventional testing (bacterial culture and clinician directed 
molecular testing for viruses and atypical bacteria) with the results 
from the BioFire[supreg] FilmArray[supreg] Pneumonia Panel for 259 BAL 
and 48 sputum samples.\17\ We note that in their poster, Buchan, et al. 
specified that conventional testing specifically included bacterial 
culture and PCR based on clinician order. Also, while Buchan, et al. 
did report on the BAL specimens, the poster did not appear to report 
information regarding sputum samples. According to Buchan, et al., 
specimens were obtained from inpatients aged 18 years and older with 
symptoms of respiratory tract infection at 8 hospitals in the U.S. 
Chart review was conducted to determine type and duration of antibiotic 
therapy for each subject. According to the applicant, at least one 
bacterial pathogen was identified by standard methods and by the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel for 23 percent of 
BALs samples (n=60) and 35 percent (n=17) of sputum samples; however, 
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel detected a 
bacterial pathogen in an additional 15 percent (n=40) of BAL samples 
and 21 percent (n=10) of the sputum samples. For the 259 BAL samples, 
75 bacteria were identified by both standard methods and by the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel. The applicant noted 
that the BioFire[supreg] FilmArray[supreg] Pneumonia Panel identified 
an additional 84 bacteria, with the most common detections for 
Staphylococcus aureus (N=21), Haemophilus influenzea (n=19), Moxaella 
catarrhalis (n=8), Pseudomonas aeruginosa (n=6) and Klebsiella oxytoca 
(n=6). The applicant also explained that an evaluation of the medical 
and laboratory records for the affected patients found that 50 percent 
had been on antibiotics within 72 hours of samples collection, 42 
percent of the organisms may have been present in the culture but were 
not reported (due either to low quantification (<10\4\ cfu/mL) or the 
presence of mixed colonies) and only 8 percent of the detections were 
unexplained.
---------------------------------------------------------------------------

    \17\ Buchan, B.W., Windham, S., Faron, M.L., et al. Clinical 
Evaluation and Potential Impact of a Semi-Quantitative Multiplex 
Molecular Assay for the Identification of Pathogenic Bacteria and 
Viruses in Lower Respiratory Specimens. Poster presented at American 
Thoracic Society; 2018 May 02. San Diego, CA.
---------------------------------------------------------------------------

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

    \18\ Ibid.
---------------------------------------------------------------------------

    According to the applicant, the ability of the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel to impact patient management has been 
evaluated by two different groups (Buchan, et al. and Enne, et al). The 
applicant stated that Buchan, et al. performed a theoretical outcomes 
analysis by using the result of the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel to modify antimicrobial therapy and then judge if the 
modification was correct using the final microbiology results. The 
applicant explained that in this analysis of 243 BAL samples, 68 
percent (n=165) could have had an antibiotic adjustment; 48 percent 
(n=122) would have had antibiotics appropriately de-escalated or 
discontinued, 31 percent (n=78) would have had no change, and 2 percent 
(n=5) would have had appropriate escalation or initiation of 
antibiotics.\19\ Alternately, 17 percent (n=42) would have received 
inappropriate escalation and 2 percent (n=6) would have received 
inappropriate de-escalation when compared to culture results. The 
applicant summarized that the most common de-escalations occurred due 
to discontinuation of vancomycin due to non-detection of MRSA (35 
percent) and discontinuation of piperacillin/tazobactam due to non-
detection of Enterobacteriaceae (23 percent). According to the 
applicant, the de-escalation due to non-detection of these pathogens is 
possible because the increased sensitivity of the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel for detection of bacterial pathogen 
provides a high negative predictive value for these non-detections. The 
applicant explained that the authors estimated the results could have 
potentially saved >18,000 antibiotic hours equating to an average of 
6.5 days/patient (we note that in the poster by Buchan, et al., they 
reported an average of 6.2 d/patient rather than 6.5 mentioned in the 
application).\20\
---------------------------------------------------------------------------

    \19\ Ibid.
    \20\ Ibid.
---------------------------------------------------------------------------

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

[[Page 58624]]

study authors also reported that routine microbiology and Curetis 
UnyveroTM detected a potential pathogen in 41.7 percent and 
59.2 percent of specimens respectively, whereas BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel detected a potential pathogen in 66.7 
percent of respiratory samples from patients enrolled in the study. The 
applicant stated that these study results indicate that the test 
results of the BioFire[supreg] FilmArray[supreg] Pneumonia Panel 
provide information that can lead to more targeted and effective 
therapy in a shorter period of time, and may help to improve patient 
outcomes.
---------------------------------------------------------------------------

    \21\ Enne, V.I., Baldan, R., Russell, C., et al. INHALE WP2: 
Appropriateness of Antimicrobial Prescribing for Hospital-acquired 
and Ventilator-associated Pneumonia (HAP/VAP) in UK ICUs assessed 
against PCR-based Molecular Diagnostic Tests. Poster presented at 
European Congress of Clinical Microbiology and Infectious Disease; 
2019 April 13-16. Amsterdam, Netherlands
---------------------------------------------------------------------------

    The applicant also submitted Rand et al., which conducted a 
retrospective analysis of BAL (n=197) and endotracheal aspirates (n=93) 
samples from 270 unique hospitalized patients that were collected and 
stored at -70[deg] C until thawed and tested on the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel compared to routine microbiology 
results.\22\ Patient data were extracted from the electronic medical 
record. Cultures were performed by standard methods and identified by 
Vitek II and mass spectrometry. The applicant explained that the 
authors found a high correlation between standard methods and 
BioFire[supreg] FilmArray[supreg] results and that the authors 
concluded the BioFire[supreg] FilmArray[supreg] Pneumonia Panel would 
have had a significant impact on time to result which could potentially 
lead to more rapid and appropriate use of antibiotics. The applicant 
also noted that the authors found significant association with 
clinical/outcome variables and that the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel's semi-quantification was ``at least 
as strong'' as standard culture methods, which according to the 
applicant, have been developed and improved over decades.
---------------------------------------------------------------------------

    \22\ Rand, K.H., Beal S.G., Cherabuddi, K., et al. Relationship 
of a Multiplex Molecular Pneumonia Panel (PP) Results with Hospital 
Outcomes and Clinical Variables. Poster presented at Infectious 
Disease Week; 2019 October 2-6. Washington, DC.
---------------------------------------------------------------------------

    The applicant also submitted White, et al., which conducted a 
comparison of the BioFire[supreg] FilmArray[supreg] Pneumonia Panel on 
sputum samples to a multi-test diagnostic bundle for patients admitted 
from the emergency department (ED) with community acquired pneumonia 
(CAP).\23\ We note that White, et al. specifically described the 
diagnostic bundle as including the following: (1) Blood Cultures; (2) 
Sputum culture and sensitivity; (3) Urine antigens: Legionella and S. 
pneumoniae; (4) Nasal swab (NS) PCR for MRSA and S. pneumoniae; (5) 
FilmArray (Biofire) PCR Panel (NS): Detects 17 viruses, 4 bacteria. Of 
585 enrolled patients, 278 were evaluable. The applicant explained that 
the authors found that the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel detected a higher rate of potential pathogens than the multi-test 
bundle (90.6 percent versus 81 percent). The applicant also noted that 
the authors determined that the urine antigen testing, S. aureus and S. 
pnuemoniae, and PCR upper respiratory panel use could be eliminated for 
this sample/patient type in the future.\24\
---------------------------------------------------------------------------

    \23\ White, E., Ferdosian, S., Gelfer, G., et al. Sputum 
FilmArray Pneumonia Panel Outperforms A Diagnostic Bundle in 
Hospitalized CAP Patients. Poster presented at Infectious Disease 
Week; 2019 October 2-6. Washington, DC
    \24\ Ibid.
---------------------------------------------------------------------------

    The applicant also submitted a poster by Furukawa, et al. which 
reported a retrospective case review of 43 samples (17 used for 
clinical use and 26 obtained randomly by microbiology lab) in which 
BioFire[supreg] FilmArray[supreg] Multiplex PCR was utilized.\25\ 
According to the applicant, initial use of BioFire FilmArray Pneumonia 
panel had 100 percent intervention rate leading to de-escalation or 
prevention of inappropriate antibiotics and the authors found that 
there was a low risk of unnecessary antibiotics being administered due 
to the increased sensitivity of the BioFire[supreg] FilmArray[supreg] 
Pneumonia panel. The applicant added that the authors believe that with 
additional data they may be able to discontinue empiric broad spectrum 
coverage due to the rapid and sensitive nature of the BioFire FilmArray 
Pneumonia Panel. The applicant also noted that they have a number of 
ongoing prospective studies being conducted to further support their 
claims.
---------------------------------------------------------------------------

    \25\ Furukawa, D., Kim, B., Jeng, A., BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel: A Powerful Rapid Diagnostic Test 
for Antimicrobial Stewardship. Poster presented at Infectious 
Disease Week; 2019 October 2-6. Washington, DC.
---------------------------------------------------------------------------

    The applicant asserted that Buchan, et al. and Rand, et al. support 
their claim of decreased time to actionable results based on: (1) The 
conclusion in Buchan, et al., that greater than 60 percent of patients 
potentially could have had an antibiotic adjustment 3-4 days earlier 
than standard methods based on BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel results, and (2) the conclusion in Rand, et al., that 
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel would have a 
major impact on the time to report potential pathogens that may cause 
Pneumonia in intubated/ICU patients.
    The applicant asserted that Buchan, et al., and Enne, et al. 
support their claim of improved antibiotic stewardship. The applicant 
pointed to the conclusions in Buchan, et al., that >60 percent of 
patients potentially could have had an antibiotic adjustment with 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel results and 50 
percent of potential antibiotic adjustments from BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel testing were discontinuation or 
narrowing, as well as the estimate that the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel results enabled >18,000 antibiotic 
hours saved on 243 patients. The applicant pointed to Enne, et al. for 
the results that of the 27 percent of patients who had negative 
outcomes, 15.6 percent had a pathogen resistant to initial therapy 
based on culture and 41.9 percent were resistant to initial therapy 
based on BioFire[supreg] FilmArray[supreg] Pneumonia Panel results 
(p=0.029).
    The applicant asserted that White, et al. and Enne, et al. support 
its claim of increased diagnostic yield because White, et al. concluded 
that of patients with a final diagnosis of pneumonia, BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel detected a potential pathogen in 90.6 
percent compared to 81 percent with standard methods, and Enne, et al. 
reported that routine methods detected a pathogen in 41.7 percent of 
specimens compared to the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel which detected a pathogen in 66.7 percent of specimens.
    In summary, the applicant explained that lower respiratory tract 
infections are a common and serious health care problem, current 
diagnostic tests are slow and do not identify a causative pathogen in 
over 50 percent of patients, and the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel is an easy-to-use multiplex panel that has been shown 
to increase diagnostic yield and significantly decrease time to results 
when compared to standard testing both because of improved test 
sensitivity and because it includes assays for typical bacteria, 
viruses and selected antibiotic resistance genes. According to the 
applicant, retrospective review of BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel and patient data indicates a potential to impact 
antibiotic utilization to ensure patients are on appropriate therapy in 
a timely manner. The applicant also noted that molecular testing for 
pneumonia is relatively new and there is a lot to learn about how to 
best use these tests, and that there are currently several prospective 
studies underway to clarify the role that this tool may play in 
improving the outcomes for patients with pneumonia, reducing use of 
unnecessary antibiotics, improving targeted therapy and potentially 
reducing health care costs due to more directed and efficient patient

[[Page 58625]]

management. According to the applicant, early theoretical outcomes 
evaluations provide reason to be optimistic.
    We noted in the proposed rule that the studies the applicant 
submitted to support its assertions regarding substantial clinical 
improvement were presented only as posters, and that information 
pertaining to full manuscripts with further study details were not 
provided. We stated that it is also unclear if the studies described in 
the posters have been submitted for peer-reviewed publication or 
whether full manuscripts with detailed methods and data tables are 
available.
    We stated in the proposed rule that we are concerned that the 
studies do not appear to be designed or powered to be able to show 
conclusive evidence of clinical impact. In particular, the studies 
appear to describe analysis of clinical results for patients and state 
that there is potential for the results to impact clinical decisions 
about antimicrobial therapy. However, it appears the applicant did not 
submit evidence of the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel product in real-world, prospective use (randomized or non-
randomized) with actual antimicrobial decisions or effect on patient 
management. This may require larger sample sizes. We stated that we are 
also concerned that only one study provided by the applicant (Enne, et 
al.) compared BioFire[supreg] FilmArray[supreg] Pneumonia Panel to 
Curetis UnyveroTM, which is another PCR-based technology, 
and that a statistical difference was not reported between BioFire and 
Unyvero for the outcomes reported in the poster. While we understand 
that Curetis UnyveroTM may be somewhat slower than 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel and does not include 
viruses, the clinical impact of the differences between these two 
products is unclear. We stated that we are also uncertain how Buchan, 
et al. calculated their estimate that >18,000 antibiotic hours were 
saved on 243 patients using the BioFire[supreg] FilmArray[supreg] 
Pneumonia Panel results. The applicant stated that there are currently 
several prospective studies underway to clarify the role that this tool 
may play in improving the outcomes for patients with pneumonia, 
reducing use of unnecessary antibiotics, improving targeted therapy and 
potentially reducing health care costs due to more directed and 
efficient patient management; however, data or results from those 
studies were not included with the application. We invited public 
comment on whether the BioFire[supreg] FilmArray[supreg] Pneumonia 
Panel meets the substantial clinical improvement criterion.
    Comment: One commenter suggested that the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel, as well as other rapid infectious 
diseases diagnostics tests, be evaluated based on their clinical 
improvements over historical microbiology testing methods as opposed to 
other rapid tests currently in the marketplace.
    Response: We appreciate the commenter's input and suggestion. We 
note that consistent with our current approach in evaluating the new 
technology add-on payment substantial clinical improvement criterion we 
accept a wide range of data and other evidence to support the 
conclusion of substantial clinical improvement, including data 
regarding historical technologies and currently available technologies. 
We refer the commenter to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42289 through 42292) for further discussion of the substantial clinical 
improvement criterion as well as to the regulations at Sec.  412.87(b). 
For the purposes of evaluating whether the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel meets the substantial clinical 
improvement criterion, data regarding both historical technologies and 
currently available technologies were considered.
    We did not receive any public comments addressing the concerns we 
indicated in the proposed rule regarding whether the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel meets the substantial clinical 
improvement criterion. Accordingly, after consideration of the public 
comment we received, we are unable to determine that the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel represents a 
substantial clinical improvement over the currently available 
technologies.
    After consideration of the information previously submitted in the 
BioFire[supreg] FilmArray[supreg] Pneumonia Panel application and 
previously summarized in this final rule, and the public comment we 
received, we are unable to determine that the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel meets the newness, cost and 
substantial clinical improvement criteria. Therefore, we are not 
approving new technology add-on payments for the BioFire[supreg] 
FilmArray[supreg] Pneumonia Panel for FY 2021.
c. ContaCT
    Viz.ai Inc. submitted an application for new technology add-on 
payments for ContaCT for FY 2021. The individual components of ContaCT 
are currently marketed by Viz.ai, Inc. under the tradenames ``Viz LVO'' 
(for the algorithm), ``Viz Hub'' (for the text messaging and calling 
platform), and ``Viz View'' (for the mobile image viewer). According to 
the applicant, ContaCT is a radiological computer-assisted triage and 
notification software system intended for use by hospital networks and 
trained clinicians. The applicant asserted that ContaCT analyzes 
computed tomography angiogram (CTA) images of the brain acquired in the 
acute setting, sends notifications to a neurovascular specialist(s) 
that a suspected large vessel occlusion (LVO) has been identified, and 
recommends review of those images.
    The applicant asserted early notification of the stroke team can 
reduce time to treatment and increase access to effective specialist 
treatments, like mechanical thrombectomy. Specifically, the applicant 
asserted that shortening the time to identification of LVO is critical 
because the efficacy of thrombectomy in patients with acute ischemic 
stroke decreases as the time from symptom onset to treatment increases. 
The applicant also asserted in a condition like stroke, where 1.9 
million neurons die every minute and for which 34 percent of patients 
hospitalized are under the age of 65, reducing time to treatment 
results in reduced disability.\26\ The applicant asserted ContaCT 
streamlines the standard workflow using artificial intelligence to 
substantially shorten the period of time between when a patient 
receives a stroke CT/CTA and when the patient is referred to a stroke 
neurologist and neurointerventional surgeon.
---------------------------------------------------------------------------

    \26\ Hall MJ, Levant S, DeFrances CJ. Hospitalization for stroke 
in U.S. hospitals, 1989-2009. NCHS data brief, no 95. Hyattsville, 
MD: National Center for Health Statistics. 2012. https://www.cdc.gov/nchs/data/databriefs/db95.pdf.
---------------------------------------------------------------------------

    With respect to the newness criterion, according to the applicant, 
FDA granted marketing authorization to ContaCT on February 13, 2018 
under the de novo pathway, which is only available to devices of a new 
type with low-to-moderate risk for which there are no legally marketed 
predicates, and classified it as a Class II medical device. We note 
that FDA issued a de novo order memorandum describing ContaCT as ``an 
artificial intelligence algorithm [used] to analyze images for findings 
suggestive of a pre-specified clinical condition and to notify an 
appropriate medical specialist of these findings in parallel to 
standard of care image interpretation.'' The order specified that 
``identification of suspected findings is not for diagnostic use beyond 
notification.''

[[Page 58626]]

    The applicant asserted that ContaCT was not available immediately 
after FDA's marketing authorization due to establishing Quality 
Management Systems and processes for distributing ContaCT as well as 
staff training and installation. Per the applicant, ContaCT was not 
commercially available until October 2018. The applicant submitted a 
request for approval for a unique ICD-10-PCS procedure code for the 
administration of ContaCT beginning in FY 2021 and was granted approval 
for the following procedure code effective October 1, 2020: 4A03X5D 
(Measurement of arterial flow, intracranial, external approach).
    As discussed above, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would not be considered ``new'' 
for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, the 
applicant asserted no existing technology is comparable to ContaCT. The 
applicant further asserted, because of the technology's novelty, the 
product was reviewed under FDA's de novo pathway. The applicant first 
outlined the clinical workflow for patients presenting to a hospital 
with signs or symptoms of LVO prior to the availability of ContaCT:
    1--Patient presents with stroke/suspected stroke to hospital 
emergency department (ED).
    2--Patient receives stroke CT/CTA imaging after brief initial 
evaluation by hospital ED physician.
    3--Technologist processes and reconstructs the CT/CTA imaging and 
manually routes to hospital picture archiving and communication system 
(PACS).
    4--Radiologist reads CT/CTA imaging.
    5--If needed, a neuroradiology consult is sought.
    6--A radiological diagnosis of LVO is made.
    7--The radiologist informs hospital ED physician of positive LVO 
either verbally or in the radiologist report.
    8--ED physician performs comprehensive exam and refers the patient 
to a stroke neurologist.
    9--The stroke neurologist reviews the CT/CTA imaging and clinical 
history and determines whether to prescribe or recommend prescription 
of thrombolysis with tissue plasminogen activator (tPA).
    10--The stroke neurologist refers the patient to a 
neurointerventional surgeon. Together they decide whether the patient 
is a candidate for mechanical thrombectomy.
    11--If appropriate, the patient proceeds to treatment with 
mechanical thrombectomy.
    The applicant asserted that facilities utilizing the ContaCT system 
can substantially shorten the period of time between when the patient 
receives stroke CT/CTA imaging (step 2) and when the patient is 
referred to a stroke neurologist and neurointerventional surgeon (steps 
9 and 10). They further asserted that ContaCT streamlines this workflow 
using artificial intelligence to analyze CTA images of the brain 
automatically and notifies the stroke neurologist and 
neurointerventional surgeon that a suspected LVO has been identified, 
and then enables them to review imaging and make a treatment decision 
faster. The applicant concluded that shortening the time to 
identification of LVO is critical because the efficacy of thrombectomy 
in patients with acute ischemic stroke decreases as the time from 
symptom onset to treatment increases.
    With regard to the second criterion, whether the technology is 
assigned to the same or a different MS-DRG, the applicant did not 
specifically address whether the technology meets this criterion. 
However, we believe that cases involving the use of the technology 
would be assigned to the same MS-DRGs as cases without the technology 
where the patient moves through the hospital according to the 
traditional workflow outlined above.
    With regard to the third criterion, whether the use of the new 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, the applicant also 
did not specifically address whether the technology meets this 
criterion. However, we stated in the proposed rule that we believe 
cases involving the use of the technology would treat the same or 
similar type of disease and the same or similar patient population as 
the traditional workflow outlined above.
    We noted that the applicant described ContaCT's mechanism of action 
as shortening the time to identification of LVO through artificial 
intelligence (AI). Specifically, the applicant asserted that facilities 
utilizing the ContaCT system can substantially shorten the period of 
time between when the patient receives stroke CT/CTA imaging and when 
the patient is referred to a stroke neurologist and neurointerventional 
surgeon. We stated in the proposed rule that we were unclear as to 
whether the streamlining of hospital workflow would represent a unique 
mechanism of action. Rather, we stated that it seems that the mechanism 
of action for ContaCT would be the use of AI to analyze images and 
notify physicians rather than streamlining hospital workflow. However, 
we also referred the reader to our discussion below and in the proposed 
rule regarding our concerns with respect to general parameters for 
identifying a unique mechanism of action based on the use of AI, an 
algorithm and/or software.
    To the extent that the applicant asserted that streamlined hospital 
workflow through the use of ContaCT represents a unique mechanism of 
action, we stated in the proposed rule that it was unclear to us the 
degree to which ContaCT changes the traditional workflow. Per the FDA, 
``ContaCT is limited to analysis of imaging data and should not be used 
in-lieu of full patient evaluation or relied upon to confirm 
diagnosis.'' \27\ We stated that it was unclear to CMS how ContaCT 
shortens time to treatment via AI if the CT machine still performs the 
scanning and clinicians are still needed to view the images to diagnose 
an LVO and perform a full patient evaluation for the best course of 
treatment. The applicant also indicated to CMS that the use of ContaCT 
is not automatic, and the E.R. physician must submit an order to 
utilize it specifically when suspecting an LVO. We stated that we were 
unclear how ContaCT streamlines the workflow for stroke treatment via 
AI if it is not to be used for diagnostic purposes per the FDA and 
still requires personnel to order the scan and make the diagnosis.
---------------------------------------------------------------------------

    \27\ U.S. Food and Drug Administration, DEN170073. Evaluation of 
Automatic Class III Designation for ContaCT Decision Summary.
---------------------------------------------------------------------------

    We stated in the proposed rule that we were also generally 
concerned as to whether the use of AI, an algorithm or software, which 
are not tangible, may be considered or used to identify a unique 
mechanism of action. In addition, we questioned how updates to AI, an 
algorithm or software would affect an already approved technology or a 
competing technology, including whether software changes for an already 
approved technology could be considered a new mechanism of action. We 
also questioned whether, if there were competing technologies to an 
already approved AI new technology, an improved algorithm by a 
competitor would represent a unique mechanism of action if the outcome 
is the same as the technology first approved. We welcomed comments from 
the public regarding the general parameters for identifying a unique 
mechanism of

[[Page 58627]]

action based on the use of AI, an algorithm and/or software.
    We also invited public comments on whether the applicant meets the 
newness criterion, including specifically with respect to the mechanism 
of action.
    Comment: The applicant submitted a comment to address newness 
concerns raised by CMS in the proposed rule. The applicant asserted 
that there was a brief delay in the availability of ContaCT due to 
establishing Quality Management Systems (QMS) and processes for 
distributing ContaCT. Because of this delay, the first hospital 
installation of ContaCT was not completed until January 2019. According 
to the applicant, because the commercial use of ContaCT did not begin 
at the start of FY 2019, the Medicare data which is used to set FY 2021 
MS-DRG relative weights (data from FY 2019 October 1, 2018 through 
September 30, 2019), do not reflect fully the cost of the technology. 
Therefore, the applicant believed that the newness period should begin 
on the date the first installation was completed, rather than the date 
of commercial availability noted in the FY 2019 IPPS/LTCH PPS proposed 
rule (85 FR 32601), which was October 2018.
    The applicant asserted that no existing technology is comparable to 
ContaCT. According to the applicant, with regard to the first criterion 
for newness, ContaCT does not use the same or a similar mechanism of 
action as compared to an existing technology. The applicant stated that 
ContaCT was reviewed through FDA's de novo pathway, which is only 
available to novel medical devices that have not previously been 
classified by the FDA. With regard to the second criterion for newness, 
the applicant stated that ContaCT is used in cases of stroke and 
suspected stroke. Consequently, stroke and suspected stroke cases in 
which ContaCT is used are expected to be assigned to the same DRGs as 
stroke and suspected stroke cases without the technology. With regard 
to the third criterion for newness, the applicant stated that cases in 
which ContaCT is used are expected to be the same or similar to cases 
without the technology.
    With respect to the first substantial similarity criterion, the 
applicant asserted that computer-assisted triage and notification is 
the mechanism of action for ContaCT and that the mechanism of action 
for ContaCT is not AI per se. According to the applicant, AI is a 
necessary component of ContaCT, but is not sufficient to achieve 
therapeutic effect. Furthermore, the applicant stated that under 42 CFR 
412.87(b)(2) and CMS criteria for evaluating a technology with respect 
to newness, there are no requirements that a new technology have a 
specific type of mechanism of action to be eligible for new technology 
add-on payments.
    The applicant expressed concern that CMS is questioning whether AI, 
an algorithm or software may never be considered a unique mechanism of 
action, because such technology may simulate human intelligence or 
human processes that already exist. According to the applicant, CMS has 
defined an existing technology as another FDA approved or cleared 
technology. Human intelligence and human processes are not FDA approved 
or cleared technologies and, therefore, should not be used as a 
comparator to evaluate whether ContaCT, or any technology, meets the 
definition of newness. The applicant stated that, as for other new 
technologies, comparators for AI, algorithm or software-based devices 
should be other FDA approved or cleared technologies. More broadly, the 
applicant urged CMS not to make a broad determination that technologies 
that use AI, an algorithm or software to achieve a therapeutic effect 
are ineligible for new technology add-on payments. They stated CMS 
should evaluate each new technology individually with respect to 
whether it meets the established criteria.
    In addressing CMS concerns about whether software changes for an 
already approved technology could be considered a new mechanism of 
action, the applicant stated that an update to the ContaCT algorithm 
that does not alter this mechanism of action would have the same or a 
similar mechanism of action. In addressing CMS concerns about whether 
an improved algorithm by a competitor would represent a unique 
mechanism of action if the outcome is the same as the technology first 
approved, the applicant likewise stated that a different technology 
that shortens time to notification in patients with acute ischemic 
stroke caused by large vessel occlusions by using an AI algorithm to 
identify suspected LVO, triage patients and notify the stroke team more 
rapidly would likely be determined to have a mechanism of action that 
is the same or similar to ContaCT.
    In addition, the applicant stated that the newness of the overall 
mechanism of action or the means by which a product achieves the 
therapeutic outcome should be assessed, rather than the newness of the 
individual inputs or components. They provided an example from FY 2017 
when CMS determined MIRODERM not to be ``new'' because the product 
achieved the intended therapeutic outcome, wound healing, in the same 
way as other acellular skin substitutes by providing a scaffold of 
collagen with a mix of matrix proteins (81 FR 56893). The applicant 
stated that CMS acknowledged that MIRODERM matrix proteins were 
different from the proteins found in other acellular skin substitutes, 
but the determination of newness was based on MIRODERM's overall 
mechanism of action--a collagen scaffold that promotes wound healing. 
Just as in the MIRODERM example where the matrix proteins were not 
sufficient to establish the technology as new, changes to the AI, 
algorithm and/or software would not be sufficient to establish future 
computer-aided triage and notification systems for large vessel 
occlusion ischemic stroke as new if these involve essentially the same 
mechanism of action as ContaCT. The applicant thus argued that 
technologies that utilize AI, an algorithm and/or software should be 
evaluated for newness in the same way as CMS evaluates any other 
medical device applying for new technology add-on payments.
    Other commenters responded to CMS' concerns about whether the 
applicant meets the newness criterion. In response to our stated 
uncertainty regarding how ContaCT streamlines the workflow for stroke 
treatment via AI if it is not to be used for diagnostic purposes per 
the FDA and still requires personnel to order the scan and make the 
diagnosis, a commenter responded that ContaCT will enhance, not 
replace, human action as it relates to patient outcomes, and asserted 
that all innovation will be based upon AI in some fashion moving 
forward. Another commenter responded to our concerns as to whether the 
use of AI, an algorithm or software may be considered or used to 
identify a unique mechanism of action and also how updates to AI, an 
algorithm or software would affect an already approved technology or a 
competing technology for purposes of new technology add-on payments. 
The commenter stated that technologies that utilize AI, an algorithm 
and/or software may be evaluated for newness in the same way CMS 
evaluates any other medical device applying for new technology add-on 
payments. Such a technology would not be new if there is an existing 
FDA-approved technology that has been on the market for more than 2 to 
3 years and that has the same mechanism of action, is assigned to the 
same DRGs, or is used in the same or similar type of disease and 
patient population. The commenter further suggested that this apply to 
both incremental changes to

[[Page 58628]]

the same device as well as to competing devices. The commenter urged 
CMS to consider that evaluating technologies that use AI, an algorithm 
and/or software is no different than evaluating other technologies for 
purposes of new technology add-on payments. They stated that 
technologies are not required to have a specific type of mechanism of 
action to be eligible for add-on payment, and as such, each submission 
must be evaluated independently.
    Response: After considering the comments received regarding the new 
technology add-on payment application for ContaCT, we agree that 
ContaCT does not use the same or a similar mechanism of action to 
achieve a therapeutic outcome when compared to existing treatments 
because there are currently no FDA approved or cleared technologies 
that use computer-assisted triage and notification to rapidly detect an 
LVO and shorten time to notification. Therefore, we believe that 
ContaCT is not substantially similar to an existing technology and 
meets the newness criterion. We consider the beginning of the newness 
period to commence on October 1, 2018. We have previously stated in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53348) and FY 2019 IPPS/LTCH 
PPS final rule (83 FR 41313), generally, our policy is to begin the 
newness period on the date of FDA approval or clearance or, if later, 
the date of availability of the product on the U.S. market. Without 
additional information, we continue to believe that the newness period 
for ContaCT begins on October 1, 2018. We may consider any further 
information that may be provided regarding the date of availability in 
future rulemaking.
    We will continue to consider the issues related to determining 
newness for technologies that use AI, an algorithm or software, 
including devices classified as radiological computer aided triage and 
notification software, as discussed in the proposed rule, including how 
these technologies may be considered or used to identify a unique 
mechanism of action, how updates to AI, an algorithm or software would 
affect an already approved technology or a competing technology, 
whether software changes for an already approved technology could be 
considered a new mechanism of action, and whether an improved algorithm 
by competing technologies would represent a unique mechanism of action 
if the outcome is the same as an already approved AI new technology, as 
we gain more experience in this area.
    With respect to the cost criterion, the applicant provided the 
following analysis. First, the applicant extracted claims from the FY 
2018 MedPAR dataset. The applicant explained that many patients present 
to the emergency department with signs or symptoms suggesting an LVO. 
That presentation would be the basis for ordering a CTA with ContaCT 
added. Of these patients, some will be identified as stroke and LVO, 
some as stroke but not from an LVO, and others will have diagnoses 
completely unrelated to stroke. As a result, according to the 
applicant, there may be a very broad range of principal diagnoses and 
MS-DRGs representing patients who would be eligible for and receive a 
CTA with ContaCT. The applicant noted that it used admitting diagnoses 
codes rather than principal or secondary diagnosis codes to identify 
cases of stroke due to LVO, stroke not due to LVO, and no stroke. The 
applicant utilized a multi-step approach:
     Step 1: The applicant first extracted claims from the 
stroke-related MS-DRGs (023, 024, 061, 062, 063, 064, 065, 066, 067, 
068, and 069).
     Step 2: The applicant analyzed the admitting diagnosis on 
claims extracted in Step 1 to identify the reason for admission. The 
applicant found that the top five admitting diagnoses for patients in 
the stroke-related MS-DRGs included: Cerebral infarction, unspecified 
(I63.9), transient cerebral ischemic attack, unspecified (G45.9), 
slurred speech (R4781), aphasia (R4701), and facial weakness (R29.810).
     Step 3: The applicant identified all MS-DRGs assigned to 
the admitting diagnosis codes identified in Step 2 to identify ContaCT 
cases that did not map to one of the stroke MS-DRGs.
     Step 4: The applicant identified a list of unique MS-DRGs 
and admitting diagnosis code combinations to which cases involving 
ContaCT would map. The applicant stated that it reviewed with clinical 
experts the MS-DRG and admitting diagnosis combinations and eliminated 
any that were unlikely to include the use of ContaCT.
    The applicant identified a total of 375,925 cases across 143 MS-
DRGs, with approximately 66 percent of cases mapping to MS-DRGs 039, 
057, 064, 065, 066, 069 and 312. The average unstandardized case-
weighted charge per case was $52,001. The applicant noted it did not 
remove any charges for a prior technology, as it asserted that no other 
technology is comparable to ContaCT. Based on the results of a research 
study,\28\ the applicant assumed ContaCT cases resulting in mechanical 
thrombectomy would have charges reduced by 38% as a result of reduced 
specialty care days and therefore removed the related charges, which 
only affected cases mapping to MS-DRGs 023, 024, 025, and 026. The 
applicant standardized the charges and applied an inflation factor of 
11.1 percent, which is the same inflation factor used by CMS to update 
the outlier threshold in the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42629), to update the charges from FY 2018 to FY 2020.
---------------------------------------------------------------------------

    \28\ Goldstein ED, Schnusenberg L, Mooney L, et al. Reducing 
Door-to- Reperfusion Time for Mechanical Thrombectomy With a 
Multitiered Notification System for Acute Ischemic Stroke. Mayo Clin 
Proc Innov Qual Outcomes. 2018;2(2): 119-128.
---------------------------------------------------------------------------

    The applicant then added the charges for the new technology. The 
applicant explained it calculated the cost per patient by dividing the 
total overall cost of ContaCT per year per hospital by the number of 
total estimated cases for which ContaCT was used at each hospital that 
currently subscribes to ContaCT (based on the estimated number of cases 
receiving CTA), and averaging across all such hospitals. The following 
is the methodology the applicant used to determine the cost per case:
     Step 1: The applicant first determined the estimated total 
cases (both Medicare and non-Medicare) for each current subscriber 
hospital. The applicant explained it used total cases for both Medicare 
and non-Medicare cases since the cost per case is not specific to 
Medicare cases. In order to determine total cases, which include both 
Medicare and non-Medicare cases, the applicant divided the total 
Medicare cases per subscriber hospital from the FY 2018 MedPAR data by 
the percentage of Medicare beneficiaries (71 percent) in the CONTACT 
FDA research study (for example, 1,136 Medicare cases divided by 0.71 
equals 1,600 total Medicare and non-Medicare cases).
     Step 2: To analyze actual rates (percentages) of CTA 
across subscriber hospital cases, the applicant first used the 
beneficiary ID in the FY 2018 SAF data set to find matching physician 
claims in the carrier file for CT and CTA services with a site of 
service of 21 (Inpatient hospital) or 23 (emergency department) and a 
date of service consistent with the inpatient stay. The applicant then 
calculated provider-specific CTA rates (percentages) for each 
subscriber hospital. The applicant dropped five hospitals with a low 
volume of Medicare inpatient stays that had no matching services in the 
carrier file. The applicant calculated an average CTA rate of 21.6 
percent across all hospitals that subscribe to ContaCT.

[[Page 58629]]

     Step 3: The applicant determined the estimated total 
number of cases that received CTA for each current subscriber hospital 
by multiplying the total cases (Medicare and non-Medicare) for each 
subscriber hospital in step 1 by the provider-specific CTA rate 
calculated in Step 2. In cases where a provider had fewer than 11 cases 
in the carrier file or where a provider had a CTA rate that was an 
outlier, the applicant multiplied the total cases for the provider by 
the average CTA rate of 21.6 percent.
     Step 4: The applicant then calculated the cost per year 
per hospital. If a hospital had multiple sites under the same CCN, the 
applicant multiplied the total overall cost of ContaCT per hospital by 
the number of sites. For example, if the cost for ContaCT was $25,000 
per year and Hospital A had only one site under its CCN, then the total 
cost for ContaCT for Hospital A would be $25,000. However, if Hospital 
B had three sites under its CCN, then the total cost for ContaCT for 
Hospital B would be $75,000 per year ($25,000 x 3).
     Step 5: The applicant then divided the cost per year per 
hospital by the total cases that received CTA for each customer 
hospital in Step 3 to determine the estimated cost per case for each 
customer hospital. If Hospital A from the example in Step 4 had 50 
patients, then the total hospital cost per case would be $500 per 
patient ($25,000/50). If Hospital B (with three sites under its CCN) 
also had 50 patients, then the total hospital cost per case would be 
$1,500 per patient ($75,000/50).
     Step 6: The applicant averaged the cost per case across 
all hospitals to determine the average cost per patient. The average 
cost per case across Hospital A and Hospital B in the previous example 
would be $1,000.
     Step 7: To convert the cost of the technology in Step 6 to 
charges, the applicant divided the average cost per patient by the 
national average cost-to-charge (CCR) of 0.14 for the Radiology cost 
center from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179). 
Although the applicant submitted data related to the cost of the 
technology, the applicant noted that the cost of the technology was 
proprietary information.
    The applicant calculated a case-weighted threshold amount of 
$51,358 and a final inflated average case-weighted standardized charge 
per case of $62,006. Based on this analysis, the applicant asserted 
that ContaCT meets the cost criterion because the final inflated 
average case-weighted standardized charge per case exceeds the case-
weighted threshold amount.
    The applicant submitted three additional cost analyses to 
demonstrate that it meets the cost criterion using the same methodology 
above but with limits on the cases. The first alternative limited the 
analysis to only those cases in the primary stroke-related MS-DRGs 023, 
024, 061, 062, 063, 064, 065, 066, 067, 068, and 069. This first 
alternative method resulted in a case-weighted threshold of $53,885 and 
a final inflated average case weighted standardized charge per case of 
$62,175. The second alternative limited the analysis to cases in MDC 01 
(Diseases and Disorders of the Nervous System) with the following MS-
DRGs:
[GRAPHIC] [TIFF OMITTED] TR18SE20.152

    This second alternative method resulted in a case-weighted 
threshold of $55,053 and a final inflated average case weighted 
standardized charge per case of $63,741. The third alternative limited 
cases to MS-DRGs where the total volume of cases was greater than 100. 
This third alternative method resulted in a case-weighted threshold of 
$49,652 and a final inflated average case-weighted standardized charge 
per case of $59,365. Across all cost-analysis methods, the applicant 
maintained that the technology meets the cost criterion because the 
final inflated average case-weighted standardized charge per case 
exceeds the average case-weighted threshold amount.
    We noted in the proposed rule that we believe a case weight would 
provide more accuracy in determining the average cost per case as 
compared to the average of costs per case across all hospitals that was 
used by the applicant in Step 6 as summarized previously. We therefore 
computed a case-weighted cost per case across all current subscriber 
hospitals. We then inflated the case-weighted cost per case to a charge 
based on Step 7 above and used this amount in the comparison of the 
case-weighted threshold amount to the final inflated average case-
weighted standardized charge per case (rather than the applicant's 
average cost per case). In all the scenarios above, the final inflated 
average case-weighted standardized charge per case exceeded the case-
weighted threshold amount by an average of $2,961.
    We stated in the proposed rule that we had the following concerns 
regarding whether the technology meets the cost criterion. The 
applicant used a single list price of ContaCT per hospital

[[Page 58630]]

with a cost per patient that can vary based on the volume of cases. We 
stated that we were concerned that the cost per patient varies based on 
the utilization of the technology by the hospitals. The cost per 
patient could be skewed by the small number of hospitals utilizing the 
technology and their low case volumes. It is possible, if hospitals 
with large patient populations adopt ContaCT, the cost per patient 
would be significantly lower.
    We stated in the proposed rule that an alternative to the 
applicant's calculation may be a methodology that expands the 
applicant's sample from total cases (which include both Medicare and 
non-Medicare cases) receiving CTA at subscriber hospitals in Step 1 to 
all inpatient hospitals for the use of ContaCT (and then using the same 
steps after Step 1 for the rest of the analysis). In this alternative, 
the applicant would continue to extract cases representing patients 
that are eligible for the use of ContaCT from MedPAR, but the cost per 
patient would be determined by dividing the overall cost per year per 
hospital by the average number of patients eligible for the use of 
ContaCT across all such hospitals. For example, if the cost for ContaCT 
is $25,000 per year and the average hospital has 500 patients who are 
eligible to receive ContaCT per year, then under this alternative 
methodology, the total cost per patient would be $50 ($25,000/500).
    We noted in the proposed rule that if ContaCT were to be approved 
for new technology add-on payments for FY 2021, we believed the cost 
per case from the cost analysis above may also be used to determine the 
maximum new technology add-on payment (that is, 65 percent of the cost 
determined above). We stated that we understood there are unique 
circumstances to determining a cost per case for a technology that 
utilizes a subscription for its cost. We welcomed comments from the 
public as to the appropriate method to determine a cost per case for 
such technologies, including comments on whether the cost per case 
should be estimated based on subscriber hospital data as described 
previously, and if so, whether the cost analysis should be updated 
based on the most recent subscriber data for each year for which the 
technology may be eligible for the new technology add-on payment.
    We also invited public comments on whether the applicant meets the 
cost criterion.
    Comment: One commenter, who was also the applicant, maintained that 
ContaCT met the cost criterion and submitted two additional analyses 
following CMS' suggestions in the FY 2021 IPPS/LTCH PPS Proposed Rule.
    First, the applicant updated its cost analyses to include all IPPS 
hospitals, utilizing the same methodology described in detail in the 
proposed rule. Under this methodology, the cost per patient is 
calculated by dividing the total overall cost of ContaCT per year per 
hospital by the number of total estimated cases for which ContaCT would 
be used at each hospital (based on the estimated number of cases 
receiving CTA), and then averaging across all such hospitals. The 
applicant's updated cost analysis included 3,035 Medicare provider 
numbers representing 3,062 general acute care hospitals. The updated 
analysis yielded a final inflated average case-weighted standardized 
charge per case of $71,568, which exceeded the threshold amount of 
$51,358.
    The applicant also updated the three alternative analyses (which 
used the same methodology as above but limited the cases included) to 
include all IPPS hospitals. The parameters of these analyses were 
discussed in detail in the proposed rule (85 FR 32602 through 32603). 
Per the applicant, the first alternative analysis resulted in a case-
weighted threshold of $53,885 and a final inflated average case-
weighted standardized charge per case of $71,736; the second 
alternative analysis resulted in a case-weighted threshold of $55,053 
and a final inflated average case weighted standardized charge per case 
of $73,302; and the third resulted in a case-weighted threshold of 
$49,652 and a final inflated average case-weighted standardized charge 
per case of $68,925. In all three alternative analyses, the final 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount, meeting the cost criterion.
    The applicant also calculated a case-weighted average cost per case 
for each of the analyses above in response to CMS' suggestion that a 
case-weighted average cost per case would be more accurate compared to 
the average of costs per case across all hospitals, as the applicant 
had done initially. The applicant analyzed the average number of 
patients eligible to receive ContaCT per hospital among subscribers and 
compared it to the average number of patients eligible to receive 
ContaCT among all IPPS hospitals. The applicant found that, among 
ContaCT subscribers, the average number of patients eligible to receive 
ContaCT per Medicare provider number and per hospital are 141 and 121, 
respectively. In contrast, among all IPPS hospitals, the applicant 
found that the average number of patients eligible to receive ContaCT 
per Medicare provider number and per hospital are 99 and 82, 
respectively. The applicant concluded that ContaCT subscribers have a 
higher average number of patients eligible to receive ContaCT compared 
to all IPPS hospitals, and that the cost per patient for ContaCT is 
skewed to yield a higher cost per patient across all IPPS hospitals 
than among ContaCT subscribers alone. The applicant noted that the cost 
per patient among ContaCT subscribers is lower than if all IPPS 
hospitals adopted ContaCT, and that expanding the analyses above to 
include all IPPS hospitals increased the cost per patient.
    Per the applicant, ContaCT would meet the cost criterion in each of 
these average number of patients eligible to receive ContaCT across all 
cost-analysis methods. Using a case-weighted cost per case, the 
applicant also met the cost criterion across all cost-analysis methods, 
as the final inflated average case-weighted standardized charge per 
case exceeded the average case-weighted threshold amount.
    The applicant also noted that technologies sold on a subscription 
basis are provided to the customer at a recurring price at regular 
intervals. As a result, the cost per unit for a subscription technology 
is directly impacted not only by the price, but how frequently the 
customer utilizes the technology, in that customers with low 
utilization of a subscription-based technology have a higher cost per 
unit than customers with high utilization. The commenter stated that, 
because the overall cost per unit of subscription technologies is 
determined by each customer's ratio of price to utilization, an 
analysis that requires an estimate of cost per unit should be limited 
to subscribers. The commenter believed that including estimates of cost 
per unit for potential customers that do not currently subscribe to the 
technology may result in a cost-per-case that does not reflect the 
actual costs of current users. The commenter recommended that the cost 
per unit of technologies sold on a subscription basis, like ContaCT, 
should be based on data from current subscribers only. However, the 
applicant agreed with CMS that yearly updates to the cost per unit 
analysis are reasonable to reflect changes in subscribers and thus the 
overall cost per unit.
    The commenter offered several examples of how its recommendation is 
consistent with CMS' methodology in calculating costs across a variety 
of payment systems and programs. The commenter noted that CMS considers 
only costs from hospitals for cases billed

[[Page 58631]]

to Medicare when setting MS-DRG relative weights. In addition, if a 
hospital does not provide the type of care described by a specific MS-
DRG, CMS does not attempt to estimate what the cost and MS-DRG relative 
weights might be if a broader range of hospitals delivered that type of 
care. The commenter stated that another example is the average sales 
price methodology used by CMS to determine payment for certain 
separately payable products, which includes only data from actual 
customer sales. The commenter noted that although the unit price for 
these products often varies based on utilization, with customers with 
low utilization paying more per unit than customers with higher 
utilization, CMS does not attempt to calculate average sales price by 
forecasting how future customers may alter the current average sales 
price. The applicant concluded that, consistent with these examples, 
the cost per unit for subscription technologies should be based on data 
from current subscribers only and yearly updates are reasonable.
    Response: After consideration of the applicant's updated cost 
analyses for ContaCT, we agree that the average case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount in all scenarios. Therefore, ContaCT meets the cost 
criterion for FY 2021. CMS will continue to consider the issues 
relating to calculation of the cost per unit of technologies sold on a 
subscription basis as we gain more experience in this area.
    With respect to the substantial clinical improvement criterion, 
according to the applicant, ContaCT represents an advance that 
substantially improves the ability to diagnose a large vessel occlusion 
stroke earlier by automatically identifying suspected disease in CTA 
images and notifying the neurovascular specialist directly in parallel 
to the standard of care. The applicant further asserted a major 
limitation in the traditional acute stroke workflow is the time delay 
from initial image acquisition of a suspected LVO patient (CT, CT 
angiography, and CT perfusion), notification of the interventional 
team, and execution of an endovascular thrombectomy. The time from 
stroke onset to reperfusion (when blood supply returns to tissue after 
a period of ischemia or lack of oxygen) is negatively correlated with 
the probability of an independent functional status.\29\ The applicant 
stated the time from initial presentation to eventual reperfusion can 
be long, resulting in poor outcomes, using the existing standard of 
care. The median onset-to-revascularization time has been reported as 
202.0 minutes for patients presenting directly to interventional 
centers (or comprehensive stroke centers), and 311.5 minutes for 
patients that initially presented to a non-interventional center.\30\ 
The applicant further stated that part of that time is the time from 
initial CTA to the time that the neurovascular specialist is notified 
of a possible LVO (the CTA to notification time). A retrospective study 
examined work-flow for stroke patients and demonstrated an initial CT 
to CSC (Comprehensive Stroke Center) notification time per standard of 
care >60 minutes in patients transferred for endovascular reperfusion 
in acute ischemic stroke.\31\
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    \29\ Khatri P, Abruzzo T, Yeatts SD, et al. Good clinical 
outcome after ischemic stroke with successful revascularization is 
time-dependent. Neurology. 2009; 73(13):1066-1072.
    \30\ Froehler MT, Saver JL, Zaidat 00, et al. Interhospital 
transfer before thrombectomy is associated with delayed treatment 
and worse outcome in the STRATIS registry. Circulation. 2017; 
136(24):2311-2321.
    \31\ Sun CH, Nogueira J, Glenn RG, et al. Picture-to-puncture: A 
novel time metric to enhance outcomes in patients transferred for 
endovascular reperfusion in acute ischemic stroke. Circulation. 
2013; 127:1139-1148.
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    The applicant asserted that ContaCT facilitates a workflow parallel 
to the standard of care workflow and results in a notified specialist 
entering the workflow earlier. In the applicant's study to support the 
De Novo request, ContaCT's performance was compared with standard of 
care workflow, demonstrating that ContaCT resulted in faster specialist 
notification. According to the applicant, the average time to 
specialist notification for ContaCT was 7.32 minutes [95% CI: 5.51, 
9.13] whereas time to notification for standard of care workflow was 
58.72 minutes [95% CI: 46.21, 71.23]. The applicant also asserted that 
ContaCT saved an average of 51.4 minutes, an improvement that could 
markedly improve time to intervention for LVO patients. In addition, 
the applicant noted that the standard deviation was reduced from 41.14 
minutes in the standard of care workflow to 5.95 minutes with ContaCT, 
demonstrating ContaCT's potential to reduce variation in care and 
patient outcome across geographies and time of day.\32\
---------------------------------------------------------------------------

    \32\ U.S. Food and Drug Administration (FDA). Center for Devices 
and Radiological Health. Evaluation of Automatic Class III 
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073). 
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

    To support the applicant's assertion that ContaCT substantially 
improves the ability to diagnose a large vessel occlusion stroke 
earlier, the applicant presented a multicenter prospective 
observational trial, DISTINCTION, which is ongoing and compares a 
prospective cohort of patients in which ContaCT is used (intervention 
arm) to a retrospective cohort in which ContaCT was not used (control 
arm). Patients are also segmented based on whether they initially 
present to a non-interventional center or an interventional center. Per 
the applicant, early data from one non-interventional hospital in the 
Erlanger Health System indicates that for the control arm the median 
time from CTA to clinician notification was 59.0 minutes. For the 
intervention arm, early data indicates that the median time from CTA to 
clinician notification was 5.3 minutes. The applicant stated that these 
early data indicate time savings of approximately 53 minutes, which is 
consistent with the 51.4 minute time savings demonstrated in the 
studies sponsored/conducted by the De Novo requester.\33\
---------------------------------------------------------------------------

    \33\ U.S. Food and Drug Administration (FDA). Center for Devices 
and Radiological Health. Evaluation of Automatic Class III 
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073). 
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

    Next, the applicant presented the Automated Large Artery Occlusion 
Detection In Stroke Imaging Study (ALADIN), a multicenter retrospective 
analysis of CTAs randomly picked from a retrospective cohort of acute 
ischemic stroke patients, with and without anterior circulation LVOs, 
admitted at three tertiary stroke centers, from 2014-2017. Per the 
applicant, ALADIN evaluated ContaCT's performance characteristics 
including area under the curve, sensitivity, specificity, positive 
predictive value, negative predictive value, and processing or running 
time. The applicant asserted that, through this study, researchers 
concluded that the ContaCT algorithm may permit early and accurate 
identification of LVO stroke patients and timely notification to 
emergency teams, enabling quick decision-making for reperfusion 
therapies or transfer to specialized centers if 
needed.34 35 36
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    \34\ Barreira C, Bouslama M, Lim J, et al. E-108 ALADIN study: 
Automated large artery occlusion detection in stroke iaging study--a 
multicenter analysis. J Neurointerv Surg. 2018;10(Suppl 2):A101-
A102.
    \35\ Barreira C, Bouslama M, Haussen D, et al. Abstract WP61: 
Automated large artery occlusion detection in stroke imaging--ALADIN 
study. Stroke. 2018;49:AWP61.
    \36\ Rodrigues GM, Barreira CM, Bouslama M, et al. Automated 
large artery occlusion detection in stroke imaging study (ALADIN). 
Abstract WP71: Multicenter ALADIN: Automated large artery occlusion 
detection in stroke imaging using artificial intelligence. Stroke. 
30 Jan 2019;50:AWP71.

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[[Page 58632]]

    According to the applicant, the use of ContaCT to facilitate a 
faster diagnosis and treatment decision directly affects management of 
the patient by enabling early notification of the neurovascular 
specialist and faster time to treatment utilizing mechanical 
thrombectomy to remove the large vessel occlusion. The applicant stated 
that mechanical thrombectomy with stent retrievers is one of the 
standards of care for treatment of acute ischemic stroke patients 
caused by LVO and that mechanical thrombectomy therapy is highly time-
critical with each minute saved in onset-to-treatment time resulting in 
a reported average of 4.2 days of extra healthy life.\37\ According to 
the applicant, the use of ContaCT affects the management of the patient 
by facilitating early identification of patients with suspected LVO and 
early notification of the neurovascular specialist. The applicant 
asserted that this may affect the management of the patient in two 
ways. First, it may offer improved access to mechanical thrombectomy 
for patients who would otherwise not have access because of factors 
such as time of day and the specialty capabilities of the hospital they 
are in, and second, it may involve the neurovascular team earlier, 
decreasing the time to thrombectomy. The applicant stated that ContaCT 
saved an average of 51.4 minutes in time to notification relative to 
standard of care workflow and reduced standard deviation in time to 
notification from 41.14 minutes (standard of care workflow) to 5.95 
minutes (ContaCT).\38\ Furthermore, the applicant stated that ContaCT 
could markedly improve time to intervention for LVO patients and has 
the potential to reduce variation in care and patient outcome across 
geographies and time of day.
---------------------------------------------------------------------------

    \37\ Fransen PS, Berkhemer OA, Lingsma HF, et al. Time to 
reperfusion and treatment effect for acute ischemic stroke: A 
randomized clinical trial. JAMA Neurol. 2016;73:190-196 ; Meretoja 
A, Keshtkaran M, Tatlisumak T, Donnan GA and Churilov L. 
Endovascular therapy for ischemic stroke: save a minute-save a week. 
Neurology. 2017;88(22):2123-2127.
    \38\ U.S. Food and Drug Administration (FDA). Center for Devices 
and Radiological Health. Evaluation of Automatic Class III 
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073). 
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

    The applicant stated that according to five clinical trials, the 
clinical efficacy of endovascular mechanical thrombectomy has been 
demonstrated for patients with LVO strokes up to 6 hours after onset of 
stroke.\39\ The applicant also stated that two meta-analyses of these 
randomized trials have been completed.\40\ Campbell et al. performed a 
patient-level pre-specified pooled meta-analysis of four randomized 
clinical trials which concluded that thrombectomy for large vessel 
ischemic stroke is safe and highly effective at reducing disability. 
Goyal et al. pooled and analyzed patient-level data from all five 
trials. Per the applicant, the results indicated that mechanical 
thrombectomy leads to significantly reduced disability. According to 
the applicant, together, these five randomized trials and two meta-
analyses, have demonstrated that treatment for intracranial large 
vessel occlusion with mechanical thrombectomy with stent retrievers is 
the standard of care.
---------------------------------------------------------------------------

    \39\ Berkhemer OA, Fransen PS, Beumer D, et al. MR CLEAN 
Investigators. A randomized trial of intraarterial treatment for 
acute ischemic stroke. N Engl J Med. 2015;372:11-20.doi: 10.1056/
NEJMoa1411587; Campbell BCV, Mitchell PJ, Kleinig TJ, et al. 
Endovascular therapy for ischemic stroke with perfusion-imaging 
selection. N Engl J Med. 2015;372(11):1009-1018; Jovin TG, Chamorro 
A, Cobo E, de Miquel MA, Molina CA, Rovira A, et al.; REVASCAT Trial 
Investigators. Thrombectomy within 8 hours after symptom onset in 
ischemic stroke. N Engl J Med. 2015;372(24):2296-2306.
    \40\ Campbell BC, Hill MD, Rubiera M et al. Safety and efficacy 
of solitaire stent thrombectomy: Individual patient data meta-
analysis of randomized trials. Stroke. 2016;47(3):798-806; Goyal M, 
Menon BK, van Zwam WH, et al. Endovascular thrombectomy after large-
vessel ischaemic stroke: A meta-analysis of individual patient data 
from five randomised trials. Lancet N Am Ed. 2016;387(10029):1723-
1731.
---------------------------------------------------------------------------

    The applicant also asserted that real world evidence further 
supports the efficacy of mechanical thrombectomy. Data from the STRATIS 
registry (Systematic Evaluation of Patients Treated With 
Neurothrombectomy Devices for Acute Ischemic Stroke), which 
prospectively enrolled patients treated in the United States with a 
Solitaire Revascularization Device and Mindframe Capture Low Profile 
Revascularization Device within 8 hours from symptom onset, was 
compared with the interventional cohort from the patient-level meta-
analysis from Campbell et al. to assess whether similar process 
timelines and technical and functional outcomes could be achieved in a 
large real-world cohort as in the randomized trials. The article 
concluded that the results indicate randomized trials can be reproduced 
in the real world (Mueller-Kronast et al., 2017).\41\
---------------------------------------------------------------------------

    \41\ Mueller-Kronast NH, Zaidat OO, Froehler MT, et al. 
Systematic evaluation of patients treated with neurothrombectomy 
devices for acute ischemic stroke: primary results of the STRATIS 
registry. Stroke. 2017;48(10):2760-2768.
---------------------------------------------------------------------------

    The applicant stated that based on these data, U.S. clinical 
guidelines now recommend mechanical thrombectomy for the treatment of 
large vessel occlusion strokes when performed <=6 hours from symptom 
onset. The American Stroke Association/American Heart Association (ASA/
AHA) ``2018 Guidelines for the Early Management of Patients With Acute 
Ischemic Stroke'' recommended mechanical thrombectomy with a stent 
retriever in patients that meet the following criteria: (1) Prestroke 
modified Rankin Scale (mRS) 0-1; (2) causative occlusion of the 
internal carotid artery (ICA) or middle cerebral artery (MCA) segment 1 
(M1); (3) age >=18; (4) National Institute of Health Stroke Scale 
(NIHSS) >=6; (5) Alberta Stroke Program Early CT Score (ASPECTS) >=6; 
and (6) treatment can be initiated within 6 hours of symptom onset 
(Powers et al., 2018). The ASA/AHA notes the need for expeditious 
treatment with both intravenous thrombolysis and mechanical 
thrombectomy.\42\
---------------------------------------------------------------------------

    \42\ Powers WJ, Rabinstein AA, Ackerson T et al. On behalf of 
the American Heart Association Stroke Council. 2018 Guidelines for 
the early management of patients with acute ischemic stroke: A 
guideline for healthcare professionals from the American Heart 
Association/American Stroke Association. Stroke. 2018;49:e46-e110.
---------------------------------------------------------------------------

    The applicant also stated that recently, randomized trials have 
demonstrated the clinical efficacy of mechanical thrombectomy for large 
vessel occlusion strokes for select patients from 6 to 24 hours after 
symptom onset.\43\ Among patients with acute stroke who were last known 
well 6 to 24 hours earlier and who had a mismatch between clinical 
deficit and infarct, outcomes for disability at 90 days were better 
with thrombectomy plus standard care compared with standard care alone.
---------------------------------------------------------------------------

    \43\ Albers GW, Marks MP, Kemp S, et al. Thrombectomy for stroke 
at 6 to 16 hours with selection by perfusion imaging. N Engl J Med. 
2018;378(8):708-718; Nogueira RG, Jadhav AP, Haussen DC, et al. 
Thrombectomy 6 to 24 hours after stroke with a mismatch between 
deficit and infarct. N Engl J Med. 2018;378(1):11-21.
---------------------------------------------------------------------------

    The applicant asserted that the use of ContaCT reduces time to 
treatment by notifying the stroke team faster than the standard of care 
and enabling the team to diagnose and treat the patient earlier, which 
is known to improve clinical outcomes in stroke, and that mechanical 
thrombectomy has been shown to reduce disability, reduce length of stay 
and recovery time (Campbell et al., 2017).\44\
---------------------------------------------------------------------------

    \44\ Campbell BCV, Mitchell PJ, Churilov L, et al. Endovascular 
Thrombectomy for Ischemic Stroke Increases Disability-Free Survival, 
Quality of Life, and Life Expectancy and Reduces Cost. Front Neurol. 
2017;8:657.

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[[Page 58633]]

    According to the applicant, other studies have also demonstrated 
that time to reperfusion is a predictor of patient outcomes. The 
applicant asserted that several major randomized controlled trials for 
mechanical thrombectomy have demonstrated improvements in functionality 
with faster time to reperfusion. The primary outcome of some of these 
trials was the modified Rankin scale (mRs) score, a categorical scale 
measure of functional outcome, with scores ranging from 0 (no symptoms) 
to 6 (death) at 90 days.\45\ Pooled patient-level data from these five 
trials demonstrated that in the mechanical thrombectomy group the odds 
of better disability outcomes at 90 days (mRS scale distribution) 
declined with longer time from symptom onset to expected arterial 
puncture. Among the mechanical thrombectomy plus medical therapy group 
patients in whom substantial reperfusion was achieved, delays in 
reperfusion times were associated with increased levels of 3-month 
disability.\46\
---------------------------------------------------------------------------

    \45\ Berkhemer OA, Fransen PS, Beumer D, et al. MR CLEAN 
Investigators. A randomized trial of intraarterial treatment for 
acute ischemic stroke. N Engl J Med. 2015;372:11-20.doi: 10.1056/
NEJMoa1411587; Campbell BCV, Mitchell PJ, Kleinig TJ, et al. 
Endovascular therapy for ischemic stroke with perfusion-imaging 
selection. N Engl J Med. 2015;372(11):1009-1018; Goyal M, Demchuk 
AM, Menon BK, Eesa M, Rempel JL, Thornton J, et al.; ESCAPE Trial 
Investigators. Randomized assessment of rapid endovascular treatment 
of ischemic stroke. N Engl J Med. 2015;372(11):1019-1030; Jovin TG, 
Chamorro A, Cobo E, de Miquel MA, Molina CA, Rovira A, et al.; 
REVASCAT Trial Investigators. Thrombectomy within 8 hours after 
symptom onset in ischemic stroke. N Engl J Med. 2015;372(24):2296-
2306; Saver JL, Goyal M, Bonafe A, Diener HC, Levy EI, Pereira VM, 
et al.; SWIFT PRIME Investigators. Stent-retriever thrombectomy 
after intravenous t-PA vs. t-PA alone in stroke. N Engl J Med. 2015 
Jun 11;372(24):2285-95.
    \46\ Saver JL, Goyal M, van der Lugt A, et al.; HERMES 
Collaborators. Time to treatment with endovascular thrombectomy and 
outcomes from ischemic stroke: a meta-analysis. JAMA. 2016;316:1279-
1288.
---------------------------------------------------------------------------

    The applicant referred to the American Stroke Association/American 
Heart Association (ASA/AHA) ``2018 Guidelines for the Early Management 
of Patients With Acute Ischemic Stroke,'' which recognized that the 
benefit of mechanical thrombectomy is time dependent, with earlier 
treatment within the therapeutic window leading to bigger proportional 
benefits. The guidelines also state that any cause for delay to 
mechanical thrombectomy, including observing for a clinical response 
after intravenous alteplase, should be avoided.\47\
---------------------------------------------------------------------------

    \47\ Powers WJ, Rabinstein AA, Ackerson T et al. On behalf of 
the American Heart Association Stroke Council. 2018 Guidelines for 
the early management of patients with acute ischemic stroke: A 
guideline for healthcare professionals from the American Heart 
Association/American Stroke Association. Stroke. 2018;49:e46-e110.
---------------------------------------------------------------------------

    The applicant asserted that the phrase ``time is brain'' emphasizes 
that human nervous tissue is rapidly lost as stroke progresses. Per the 
applicant, recent advances in quantitative neurostereology and stroke 
neuroimaging permit calculation of just how much brain is lost per unit 
time in acute ischemic stroke. To illustrate this point, the applicant 
stated that in the event of a large vessel acute ischemic stroke, the 
typical patient loses 1.9 million neurons, 13.8 billion synapses, and 
12 km (7 miles) of axonal fibers each minute in which stroke is 
untreated. Furthermore, for each hour in which treatment fails to 
occur, the brain loses as many neurons as it does in almost 3.6 years 
of normal aging.\48\ The applicant asserted that given the time-
dependent nature of treatment in acute ischemic stroke patients, 
ContaCT could play a critical role in preserving human nervous tissue, 
as the application results in faster detection in more than 95 percent 
of cases and saves an average of 51.4 minutes in time to 
notification.\49\
---------------------------------------------------------------------------

    \48\ Saver JL. Time is brain--quantified. Stroke. 2006 
Jan;37(1):263-6.
    \49\ U.S. Food and Drug Administration (FDA). Center for Devices 
and Radiological Health. Evaluation of Automatic Class III 
Designation for Contact. Decision Memorandum No. 170073 (DEN170073). 
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

    We stated in the proposed rule that we had the following concerns 
regarding whether the technology meets the substantial clinical 
improvement criterion. The applicant provided a total of 19 articles 
specifically for the purposes of addressing the substantial clinical 
improvement criterion: four retrospective studies/analyses, nine 
randomized clinical trials (RCTs), three meta-analyses, one registry, 
one guideline, and one systematic review.
    The four retrospective studies/analyses included the FDA decision 
memorandum, a single site of a RCT, and two abstracts related to the 
Automated Large Artery Occlusion Detection in Stroke Imaging (ALADIN) 
study. The applicant stated that the studies sponsored/conducted by the 
De Novo requester indicated that ContaCT substantially shortens the 
time to notifying the specialist for LVO cases as compared with the 
standard of care. However, the sample size was limited to only 85 out 
of 300 patients having sufficient data of CTA to notification time 
available. To calculate the sensitivity and specificity of ContaCT, 
neuro-radiologists reviewed images and established the empirical 
evidence. Specifically, the sensitivity and specificity was 87.8 
percent (95% CI: 81.2-92.5%) and 89.6 percent (83.7-93.9%), 
respectively. In the proposed rule, we stated that we had concerns 
regarding whether this represents a substantial clinical improvement, 
as ContaCT missed approximately 12 percent of images with a true LVO 
and incorrectly identified approximately 10 percent as having an LVO. 
Additionally, the small sample size of less than 100 raises concerns 
for generalizability. Additionally, we agree with the FDA that ContaCT 
is limited to analysis of imaging data and should not be used in lieu 
of full patient evaluation or relied upon to make or confirm 
diagnosis.\50\
---------------------------------------------------------------------------

    \50\ U.S. Food and Drug Administration (FDA). Center for Devices 
and Radiological Health. Evaluation of Automatic Class III 
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073). 
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

    With respect to the study that was a single site of an RCT \51\ 
presented by the applicant, the study conducted a retrospective review 
of the time between an initial CT at an outside hospital and the 
notification to the comprehensive stroke center. This retrospective 
analysis was conducted for one site enrolled in one of the RCTs 
(unspecified). The authors noted there was substantial difference in 
the time between initial CT at the outside hospital to comprehensive 
stroke center notification, due to multiple factors, including delays 
in neurological assessments, interpretation of imaging, utilization of 
advance modality imaging, and determination of tPA effectiveness. 
Specifically, the authors noted in their study that obtainment of 
advanced imaging contributed to a 57-minute delay in decision making 
without substantial benefits in patient outcome. We stated in the 
proposed rule that it was unclear whether and how this time delay and 
the utilization of faster notification would affect the clinical 
outcome of patients.
---------------------------------------------------------------------------

    \51\ Sun CH, Nogueira J, Glenn RG, et al. Picture-to-puncture: A 
novel time metric to enhance outcomes in patients transferred for 
endovascular reperfusion in acute ischemic stroke. Circulation. 
2013;127:1139-1148.
---------------------------------------------------------------------------

    The applicant also submitted two separate abstracts for a 
retrospective analysis of the ALADIN study, which only provide interim 
results. The applicant noted for the primary analysis, the algorithm 
obtained sensitivity of 0.97 and specificity of 0.52, with a positive 
predictive value (PPV) of 0.74 and negative predictive (NPV) of 0.91, 
and overall accuracy of

[[Page 58634]]

0.78. For the secondary analysis, which included analysis of additional 
(secondary) vessels, the algorithm obtained sensitivity of 0.92 and 
specificity of 0.75, with a PPV of 0.92 and NPV of 0.75, and overall 
accuracy of 0.88. In the proposed rule, we stated that we were 
concerned both that these are only partial results as it is not clear 
what the full outcome of the ALADIN study will indicate, and also that 
the initial overall accuracy of ContaCT varied by 10 percent between 
the types of strokes.
    The RCTs included the following: (1) Multicenter Randomized 
Clinical Trial of Endovascular Treatment of Acute Ischemic Stroke in 
the Netherlands (MR CLEAN);(2) Thrombolysis in Emergency Neurological 
Deficits--Intra-Arterial (EXTEND-IA) Trial; (3) The Endovascular 
Treatment for Small Core and Anterior Circulation Proximal Occlusion 
with Emphasis on Minimizing CT to Recanalization Times (ESCAPE) trial; 
(4) Randomized Trial of Revascularization with Solitaire FR Device 
versus Best Medical Therapy in the Treatment of Acute Stroke Due to 
Anterior Circulation Large Vessel Occlusion Presenting within Eight 
Hours of Symptom Onset (REVASCAT); (5) Solitaire with the Intention for 
Thrombectomy as Primary Endocascular Treatment (SWIFT PRIME) trial; (6) 
Endovascular Therapy Following Imaging Evaluation for Ischemic Stroke; 
(7) DWI or CTP Assessment with Clinical Mismatch in the Triage of Wake-
Up and Late Presenting Strokes Undergoing Neurointervention with Trevo 
(DAWN) trial; and (8) Interventional Manage of Stroke (IMS) Phase I and 
II trials. The MR CLEAN trial, EXTEND-IA trial, ESCAPE trial, REVASCAT 
trial, SWIFT PRIME trial, Endovascular Therapy Following Imaging 
Evaluation for Ischemic Stroke trial, and DAWN were all multicenter 
prospective RCTs evaluating a treatment group of either a microcatheter 
with a thrombolytic agent or mechanical thrombectomy versus a control 
group of the standard of care. These RCTs were evaluating the outcomes 
from specific treatment for patients who suffered from various strokes 
and not the time of imaging to treatment. While each study may have 
included a time-element as an experimental analysis or additional end-
point, we stated that we are unsure how they support the use of ContaCT 
as a substantial clinical improvement over existing technologies. Also, 
while the IMS trials provided evidence to support a positive clinical 
outcome following technically successful angiographic reperfusion using 
time from stroke onset to procedure termination, they did not specify 
which part of the overall standard of care treatment affected an 
increase or decrease of time. The three meta-analyses utilized data 
from the RCTs. The Safety and Efficacy of Solitaire Stent Thrombectomy 
examined four trials, ESCAPE, REVASCAT, SWIFT PRIME, and EXTEND-IA. The 
Highly Effective Reperfusion evaluated in Multiple Endovascular Stroke 
Trials (HERMES) collaboration authored two of the three meta-analyses. 
The HERMES collaboration examined data and results from five RCTs, MR 
CLEAN, ESCAPE, REVASCAT, SWIFT PRIME, and EXTEND-IA. These meta-
analyses confirmed the results of each of the individual RCTs of the 
benefits of thrombectomy versus the standard of care. However, we 
stated that we have concerns as to whether these meta-analyses, along 
with the RCTs, indicate a substantial clinical improvement with shorter 
notification times of an LVO.
    Two articles submitted by the applicant evaluated data using the 
STRATIS registry. One article \52\ evaluated the use of mechanical 
thrombectomy in consecutive patients with acute ischemic stroke because 
of LVO in the anterior circulation. The two groups consisted of (1) 
patients who presented directly to a comprehensive stroke center; and 
(2) patients who were transferred to a comprehensive stroke center. 
This study identified a difference of 124 minutes between groups, which 
was primarily related to longer door-to-tPA times at nonenrolling 
hospitals, delay between IV-tPA and departure from the initial 
hospital, and length of transport time. The author's primary outcome 
was functional status at 90 days, which found those with shorter time 
to treatment achieved better functional independence at 90 days. There 
was no difference in mortality in the two groups. While this article 
supports that shorter time to treatment may increase positive clinical 
outcomes for functional status, the study indicated time to departure 
from the non-enrolling hospital and transfer time as primary reasons in 
delayed thrombectomy treatment. These two time lapses include multiple 
covariates; for example, the distance between the facilities and the 
response of available transport (for example, ambulance). We stated in 
the proposed rule that these potential confounders raise questions as 
to the use of ContaCT shortening time to treatment.
---------------------------------------------------------------------------

    \52\ Froehler MT, Saver JL, Zaidat 00, et al. Interhospital 
transfer before thrombectomy is associated with delayed treatment 
and worse outcome in the STRATIS registry. Circulation. 2017; 
136(24):2311-2321.
---------------------------------------------------------------------------

    Lastly, the applicant submitted the AHA/ASA guidelines and a 
systematic literature review as support for clinical improvement. We 
stated that we are concerned the guidelines do not support a finding of 
substantial clinical improvement for ContaCT because the guidelines are 
for the current standard of care. The systematic literature review 
identified the quantitative estimates of the pace of neural circuity 
loss in human ischemic stroke. While this supports the urgency of 
stroke care, we stated that we were unsure how it demonstrates a 
substantial clinical improvement in how ContaCT supports the urgency of 
stroke care.
    We invited public comment as to whether ContaCT meets the 
substantial clinical improvement criterion.
    Comment: In addressing substantial clinical improvement concerns 
raised by CMS in the proposed rule, the applicant summarized additional 
clinical evidence demonstrating ContaCT reduces time to notification, 
and that the device also reduces time to treatment and improves 
clinical outcomes.
    With respect to improved clinical outcomes, the applicant described 
a study submitted for publication that used a prospectively-maintained 
database of patients undergoing thrombectomy for LVO and assessed the 
impact of ContaCT implementation on door-to-treatment time and patient 
outcomes for all patients who presented to a Primary Stroke Center 
currently utilizing ContaCT in the Mount Sinai Health System in New 
York and who subsequently underwent mechanical thrombectomy. To 
evaluate impact in a controlled fashion, data from pre-ContaCT 
implementation (October 1, 2018 to March 15, 2019) and post-ContaCT 
implementation (October 1, 2019 to March 15, 2020) were compared from a 
total of 42 patients who met the inclusion criteria. According to the 
applicant, the study investigators found that the post-ContaCT cohort 
had significantly better clinical outcomes and level of disability, as 
measured by a lower 5-day NIH Stroke Scores (NIHSS) and lower discharge 
modified Rankin Score (mRS) scores compared to the pre-ContaCT cohort, 
10.78 vs. 21.93 (p=0.02) and 2.92 vs. 4.62 (p=0.03), respectively. The 
post-ContaCT cohort also demonstrated significantly lower median 90-day 
mRS scores compared to the pre-ContaCT cohort (3 vs. 5; p=0.02). In 
addition to these outcome measures, the post-ContaCT cohort also had 
significantly shorter median door-to-interventional radiologist (INR)

[[Page 58635]]

notification time (21.5 vs. 36 minutes, p=0.02) and shorter median 
door-to-puncture time (165 vs. 185 minutes, p=0.20).
    With respect to shorter time to treatment, the applicant summarized 
unpublished data from three distinct single center, retrospective 
investigator-initiated reviews from hospital systems that have 
implemented ContaCT in Colorado, Georgia, and Tennessee. The three 
reviews evaluated ContaCT's impact on the time from hospital arrival 
(Door) to skin puncture (Puncture), or DTSP, for LVO patients initially 
presenting to the clinical site.
    At the first site, 32 patients initially presented to the emergency 
department at SkyRidge Medical Center in Colorado. Patients included in 
the analysis were divided into two cohorts. The pre-ContaCT cohort 
included the 16 thrombectomy patients immediately preceding ContaCT 
implementation and the post-ContaCT cohort included the 16 thrombectomy 
patients immediately after ContaCT implementation. Overall, ContaCT 
implementation resulted in an average reduction in door-to-puncture 
time of 24 minutes. Additionally, ContaCT implementation resulted in 
statistically significant improvements in the percentage of patients 
with door to puncture times of less than 90 minutes (p=0.013) and less 
than 60 minutes (p=.005). After installing ContaCT, 94 percent of 
thrombectomy cases had DTSP <90 minutes (p=0.013).
    At the second site, 120 patients initially presented to the 
emergency department at Wellstar Hospital in Georgia. Patients included 
in the analysis were divided into two cohorts. Patients from pre-
ContaCT implementation (July 2018 through June 2019) and patients from 
post-ContaCT implementation (July 2019 to June 2020) were compared. 
Overall, ContaCT implementation resulted in an average reduction in 
door to puncture time of 30 minutes (p=0.01).
    At the third site, 46 patients initially presented to a Primary 
Stroke Center currently utilizing ContaCT in the Methodist LeBonheur 
Healthcare System in Tennessee. Patients included in the analysis were 
divided into two cohorts: Patients with LVOs identified by ContaCT and 
patients with LVOs not identified by ContaCT. Overall, ContaCT 
implementation resulted in an average reduction in door-to-puncture 
time of 44 minutes (p=0.03).
    With respect to shorter time to notification, the applicant 
described data maintained by Viz.ai indicating that real-world 
performance of ContaCT is consistent with the results achieved in the 
FDA clinical study. Across 4,763 patients analyzed by ContaCT in the 
past six months, the median time from CT angiogram to notification of 
the specialist was 4.31 minutes. This compares with 5.6 minutes in the 
ContaCT cohort (compared with 58.7 minutes in the standard of care 
cohort) in the FDA clinical trial. The percentage of notifications 
viewed by the specialist within five minutes was 90 percent in the same 
cohort of patients.
    In addressing concerns raised by CMS in the proposed rule regarding 
whether the clinical study supporting the applicant's De Novo request 
for ContaCT represents a substantial clinical improvement, the 
applicant stated that the sensitivity and specificity (87% and 90%, 
respectively) of ContaCT are consistent with the performance 
characteristic for other diagnostic services that inform clinical care 
and that no tests have perfect performance. Moreover, the applicant 
stated that because ContaCT is a triage and notification system, no 
harm is expected to result from false positives or false negatives. 
ContaCT will triage and alert on false positives resulting in an 
earlier read of the CT angiogram image than what otherwise would be and 
are quickly reviewed and appropriately triaged to non-treatment. False 
negatives, when no alert is sent, are managed exactly the same as 
today's standard of care without ContaCT, as no alert is sent in the 
standard of care. The applicant noted the benefit for patients with LVO 
that are correctly identified by ContaCT (true positives).
    In addressing concerns raised by CMS in the proposed rule regarding 
whether the results of the clinical study supporting the applicant's De 
Novo request for ContaCT are generalizable, the applicant stated that 
data maintained by Viz.ai (and referenced above) suggest that real-
world performance of ContaCT is even faster than what was found in the 
FDA clinical trial. According to the applicant, these internal data are 
supported by the additional clinical evidence provided to CMS that 
demonstrate not only does ContaCT reduce time to notification of the 
neurointerventionalist, it reduces time to treatment and improves 
clinical outcomes as demonstrated by lower 5-day NIHSS and lower 
discharge mRS.
    The applicant also addressed concerns noted by CMS that results 
provided in the new technology application from the ALADIN study were 
partial results and showed somewhat more variable accuracy estimates 
than the FDA study. The applicant stated that complete results from the 
ALADIN study were unnecessary to support the performance of the ContaCT 
system as the primary objective of the ALADIN study was to fine-tune 
and optimize the ContaCT algorithm prior to the FDA study. According to 
the applicant, the best and most reliable data on the performance of 
the ContaCT device is the data from the pivotal study conducted for and 
submitted to the FDA as part of the de novo classification request.
    In the proposed rule, CMS pointed to the multiple steps and 
variables that impact time to treatment and clinical outcomes in LVO, 
questioning the ability of ContaCT to shorten time to treatment. In 
their comment, the applicant stated that the existence of other 
variables that impact time to treatment and clinical outcomes does not 
preclude clinical benefits from one variable, such as time to 
notification. The applicant stated that alerting the stroke specialist 
earlier than the standard of care enables them to make treatment 
decisions earlier, shortening the amount of time to treatment and 
improving clinical outcomes.
    The applicant also addressed CMS' concern about whether and how 
utilization of faster analysis and notification of suspected LVOs 
derived from CTA images would affect the clinical outcome of patients, 
considering evidence demonstrating that obtainment of advanced imaging 
like CTA contributed to a 57-minute delay in decision making.\53\ The 
applicant stated that AHA's ``2019 Update to the 2018 Guidelines for 
the Early Management of Patients With Acute Ischemic Stroke'' recommend 
vessel imaging, such as CTA, for patients with suspected LVOs.\54\ 
Furthermore, according to the applicant, the AHA's broad 
recommendations supporting vessel imaging are consistent with 
requirements of pivotal trials for mechanical thrombectomy, all of 
which required noninvasive CTA or MR angiography (MRA) diagnosis of LVO 
as an inclusion criterion. Additionally, secondary analyses from the 
Interventional Management of Stroke (IMS) III Trial, which helped 
established vessel imaging as standard of care in

[[Page 58636]]

stroke imaging,\55\ found that use of CTA with or without CT perfusion 
did not delay IV-tPA or endovascular therapy as compared to non-
contrast CT in the IMS III trial.\56\
---------------------------------------------------------------------------

    \53\ Sun CH, Nogueira J, Glenn RG, et al. Picture-to-puncture: A 
novel time metric to enhance outcomes in patients transferred for 
endovascular reperfusion in acute ischemic stroke. Circulation. 
2013;127:1139-1148.
    \54\ Powers WJ, Rabinstein AA, Ackerson T, et al; on behalf of 
the American Heart Association Stroke Council. Guidelines for the 
early management of patients with acute ischemic stroke: 2019 update 
to the 2018 guidelines for the early management of acute ischemic 
stroke: A guideline for healthcare professionals from the American 
Heart Association/American Stroke Association. Stroke. 2019;50:e344-
e418.
    \55\ Menon BK, Qazi E, Nambiar V, et al.; for the Interventional 
Management of Stroke III Investigators. Differential effect of 
baseline computed tomographic angiography collaterals on clinical 
outcome in patients enrolled in the Interventional Management of 
Stroke III Trial. Stroke. 2015; 46:1239-1244.
    \56\ Vagal A, Foster LD, Menon B, et al. Multimodal CT Imaging: 
Time to Treatment and Outcomes in the IMS III Trial. AJNR Am J 
Neuroradiol. 2016;37(8):1393-1398.
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    Finally, with regards to CMS' concerns about whether ContaCT 
provides substantial clinical improvement, the applicant stated that 
all available clinical guidelines support faster time to treatment. 
They reiterated that the importance of time in stroke care is well 
established, and that reducing time to treatment improves clinical 
outcomes. They asserted that the new clinical evidence provided in 
their comment demonstrated the direct effect that ContaCT has on both 
time to treatment and patient outcomes and they maintained that these 
data are consistent with a well-established body of evidence that 
reduced time to notification and treatment of LVO improves outcomes in 
patients with ischemic stroke.
    We also received comments from many other commenters expressing 
their support for new technologies that reduce time to treatment for 
stroke patients, noting that rapid identification and treatment of 
these patients at comprehensive stroke centers offers the possibility 
to minimize the stroke burden and deficit and maximize the potential of 
a good outcome and return to function. Several commenters also 
recognized that rapid triaging of stroke patients has been endorsed as 
a best practice in published clinical guidelines. Some commenters 
supported the use of AI in the care of stroke patients and neuroscience 
patients generally, but did not endorse a particular technology, 
device, product, or manufacturer.
    Several commenters noted their direct experience with ContaCT upon 
implementation of the new technology at their hospitals, asserting that 
communication between all providers involved in the acute care of 
patients with stroke has significantly improved. A commenter stated 
that the ContaCT triage and notification system directly saved the 
lives of many patients at their hospital. The commenter referenced that 
their hospital team performed analyses which demonstrated that the use 
of the ContaCT system resulted in a statistically significant 
improvement on transfer patient outcomes. Another commenter experienced 
with the ContaCT system stated it led to a dramatic improvement in 
patient workflow for acute stroke patients and has significantly 
decreased door-in door-out times for patients needing emergent 
treatment who present to spoke hospitals, improved decision times for 
``go'' or ``no go'' for endovascular therapy at patients presenting to 
both spoke and hub hospitals, and has led to improved overall outcomes 
of patients.
    Some commenters stated that rapid identification of stroke patients 
is especially pressing at smaller hospitals that are trying their best 
to transfer stroke patients to the nearest stroke center. A commenter 
noted that the reduction of time to treatment by ContaCT is leading to 
better outcomes clinically, less societal drain of resources, and fewer 
financial burdens to families requiring the incomes of the patients 
suffering from stroke disability. Another commenter asserted that if 
ContaCT receives approval for add-on payments, more hospitals would be 
able to implement this technology and, as a result, more patients would 
have access to life saving treatment, leading to a significant 
reduction of disability from stroke. According to the commenter, 
allowing hospitals to receive reimbursement for ContaCT would not only 
benefit communities in large metro areas but, more importantly, in 
rural areas where access to stroke care and technology is limited due 
to limited resources.
    Response: We appreciate the commenters' input, including the 
additional information and analysis provided by the applicant in 
response to our concerns regarding substantial clinical improvement. 
After reviewing the additional clinical information and other analysis 
submitted by the applicant in response to our concerns raised in the 
proposed rule, we have determined that ContaCT represents a substantial 
clinical improvement over existing technologies because, based on the 
information provided by the applicant, the technology shortens time to 
notification, which has been shown in some instances to be critical in 
improving long-term outcomes in the treatment of stroke.
    After consideration of the public comments we received, we have 
determined that ContaCT meets all of the criteria for approval for new 
technology add-on payments. Therefore, we are approving new technology 
add-on payments for ContaCT for FY 2021. Cases involving the use of 
ContaCT that are eligible for new technology add-on payments will be 
identified by ICD-10-PCS procedure code 4A03X5D.
    In its application, the applicant stated that the cost per patient 
of ContaCT will vary based on the number of cases. As discussed 
previously, per the applicant, the cost per patient is calculated based 
on the annual list price of ContaCT multiplied by the number of 
subscribers, and divided by the number of ContaCT cases across such 
subscribers. We noted that, if ContaCT were to be approved for new 
technology add-on payments for FY 2021, we believed the cost per case 
from the applicant's original cost analysis above may also be used to 
determine the maximum new technology add-on payment (that is, 65 
percent of the cost determined above). The applicant estimated that the 
average cost of ContaCT to the hospital is $1,600 based on customer 
data. Under Sec.  412.88(a)(2), we limit new technology add-on payments 
to the lesser of 65 percent of the costs of the new medical service or 
technology, or 65 percent of the amount by which the costs of the case 
exceed the MS-DRG payment. As a result, the maximum new technology add-
on payment for a case involving the use of ContaCT is $1,040 for FY 
2021.
d. Supersaturated Oxygen (SSO2) Therapy (DownStream[supreg] 
System)
    TherOx, Inc. submitted an application for new technology add-on 
payments for Supersaturated Oxygen (SSO2) Therapy (the 
TherOx DownStream[supreg] System) for FY 2021. We note that the 
applicant previously submitted an application for new technology add-on 
payments for FY 2019, which was withdrawn prior to the issuance of the 
FY 2019 IPPS/LTCH PPS final rule. We also note that the applicant again 
submitted an application for new technology add-on payments for FY 
2020, but CMS was unable to determine that SSO2 Therapy 
represents a substantial clinical improvement over the currently 
available therapies used to treat STEMI patients.
    Per the applicant, The DownStream[supreg] System is an adjunctive 
therapy that creates and superoxygenated arterial blood and delivers it 
directly to reperfused areas of myocardial tissue which may be at risk 
after an acute myocardial infarction (AMI), or heart attack. Per FDA, 
SSO2 Therapy is indicated for the preparation and delivery 
of SuperSaturated Oxygen Therapy (SSO2 Therapy) to targeted 
ischemic regions perfused by the patient's left anterior descending 
coronary artery immediately following revascularization by means of

[[Page 58637]]

percutaneous coronary intervention (PCI) with stenting that has been 
completed within 6 hours after the onset of anterior acute myocardial 
infarction (AMI) symptoms caused by a left anterior descending artery 
infarct lesion. The applicant stated that the net effect of the 
SSO2 Therapy is to reduce the size of the infarction and, 
therefore, lower the risk of heart failure and mortality, as well as 
improve quality of life for STEMI patients.
    SSO2 Therapy consists of three main components: The 
DownStream[supreg] System; the DownStream cartridge; and the 
SSO2 delivery catheter. The DownStream[supreg] System and 
cartridge function together to create an oxygen-enriched saline 
solution called SSO2 solution from hospital-supplied oxygen 
and physiologic saline. A small amount of the patient's blood is then 
mixed with the SSO2 solution, producing oxygen-enriched 
hyperoxemic blood, which is delivered to the left main coronary artery 
(LMCA) via the delivery catheter at a flow rate of 100 ml/min. The 
duration of the SSO2 Therapy is 60 minutes and the infusion 
is performed in the catheterization laboratory. The oxygen partial 
pressure (pO2) of the infusion is elevated to ~1,000 mmHg, 
therefore providing oxygen locally to the myocardium at a hyperbaric 
level for 1 hour. After the 60-minute SSO2 infusion is 
complete, the cartridge is unhooked from the patient and discarded per 
standard practice. Coronary angiography is performed as a final step 
before removing the delivery catheter and transferring the patient to 
the intensive care unit (ICU).
    The applicant for the SSO2 Therapy received premarket 
approval from FDA on April 2, 2019. FDA noted the applicant must 
conduct ``a post-approval study to confirm the safety and effectiveness 
of the TherOx DownStream System for use of delivery of SuperSaturated 
Oxygen Therapy (SSO2 Therapy) to targeted ischemic regions 
of the patient's coronary vasculature in qualifying anterior acute 
myocardial infarction (AMI) patients who have undergone successful 
percutaneous coronary intervention (PCI) with stenting within 6 hours 
of experiencing AMI symptoms.'' \57\ The applicant stated that use of 
the SSO2 Therapy can be identified by the ICD-10-PCS 
procedure codes 5A0512C (Extracorporeal supersaturated oxygenation, 
intermittent) and 5A0522C (Extracorporeal supersaturated oxygenation, 
continuous).
---------------------------------------------------------------------------

    \57\ https://www.accessdata.fda.gov/cdrh_docs/pdf17/P170027A.pdf.
---------------------------------------------------------------------------

    As discussed previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would therefore not be considered 
``new'' for purposes of new technology add-on payments. We note that in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42275), we stated that 
based on the information submitted by the applicant as part of its FY 
2020 new technology add-on payment application for SSO2 
Therapy, as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 
19353), and as summarized in the FY 2020 IPPS/LTCH PPS final rule, we 
believe that SSO2 Therapy has a unique mechanism of action 
as it delivers a localized hyperbaric oxygen equivalent to the coronary 
arteries immediately after administering the standard-of-care, PCI with 
stenting, in order to restart metabolic processes within the stunned 
myocardium and reduce infarct size. Therefore, we stated that we 
believe SSO2 Therapy is not substantially similar to 
existing technologies and meets the newness criterion. We also stated 
that we would consider the beginning of the newness period to commence 
when SSO2 Therapy was approved by the FDA on April 2, 2019. 
We refer the reader to the FY 2020 final rule for the complete 
discussion of how SSO2 Therapy meets the newness criterion. 
We invited public comments on whether SSO2 Therapy is 
substantially similar to an existing technology and whether it meets 
the newness criterion for purposes of its application for new 
technology add-on payments for FY 2021.
    Comment: Several commenters, including the applicant, agreed with 
CMS' assessment in the FY 2020 IPPS/LTCH PPS final rule that 
SSO2 Therapy meets the newness criterion and is not 
substantially similar to existing technologies. These commenters stated 
their belief that SSO2 Therapy is a novel and efficacious 
therapy with a unique mechanism of action. The commenters stated that 
the current standard of care does not address myocardial tissue death 
and scarring, which is often linked to increased risk of heart failure 
and long-term mortality.
    Response: We appreciate the commenters' support.
    Based on consideration of the comments received and information 
submitted by the applicant as part of its FY 2021 new technology add-on 
payment application for SSO2 Therapy, as discussed in the 
proposed rule (85 FR 32608-32609) and previously summarized in the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42274-42275), we believe that 
SSO2 Therapy does not use the same or a similar mechanism of 
action to achieve a therapeutic outcome when compared to existing 
treatments. Therefore, we believe that SSO2 Therapy is not 
substantially similar to an existing technology and meets the newness 
criterion. We consider the beginning of the newness period to commence 
when SSO2 Therapy was approved by the FDA on April 2, 2019.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that SSO2 Therapy meets 
the cost criterion. The applicant searched the FY 2018 MedPAR file for 
claims reporting diagnoses of anterior STEMI by ICD-10-CM diagnosis 
codes I21.01 (ST elevation (STEMI) myocardial infarction involving left 
main coronary artery), I21.02 (ST elevation (STEMI) myocardial 
infarction involving left anterior descending coronary artery), or 
I21.09 (ST elevation (STEMI) myocardial infarction involving other 
coronary artery of anterior wall) as a principal diagnosis, which the 
applicant believed would describe potential cases representing 
potential patients who may be eligible for treatment involving the 
SSO2 Therapy. The applicant identified 9,111 cases mapping 
to 4 MS-DRGs, with approximately 95 percent of all potential cases 
mapping to MS-DRG 246 (Percutaneous Cardiovascular Procedures with 
Drug-Eluting Stent with MCC or 4+ Arteries/Stents) and MS-DRG 247 
(Percutaneous Cardiovascular Procedures with -DrugEluting- Stent 
without MCC). The remaining 5 percent of potential cases mapped to MS-
DRG 248 (Percutaneous Cardiovascular Procedures with Non-Drug-Eluting 
Stent with MCC or 4+ Arteries/Stents) and MS-DRG 249 (Percutaneous 
Cardiovascular Procedures with Non-Drug-Eluting Stent without MCC).
    The applicant determined that the average case-weighted 
unstandardized charge per case was $97,049. The applicant then 
standardized the charges. The applicant did not remove charges for the 
current treatment because, as previously discussed, SSO2 
Therapy would be used as an adjunctive treatment option following 
successful PCI with stent placement. The applicant then added charges 
for the technology, which accounts for the use of 1 cartridge per 
patient, to the average charges per case. The applicant did not apply 
an inflation factor to the charges for the technology. The applicant 
also added charges related to the technology, to account for the 
additional supplies used in the administration of SSO2 
Therapy, as well as 70 minutes of procedure room

[[Page 58638]]

time, including technician labor and additional blood tests. The 
applicant inflated the charges related to the technology. In the 
applicant's analysis, the inflated average case-weighted standardized 
charge per case was $150,115 and the average caseweighted- threshold 
amount was $98,332. Because the inflated average case-weighted 
standardized charge per case exceeds the average case-weighted 
threshold amount, the applicant maintained that the technology meets 
the cost criterion.
    We invited public comments on whether the SSO2 Therapy 
meets the cost criterion.
    Comment: One commenter, who is also the applicant, supported CMS' 
conclusion in the FY 2020 IPPS/LTCH PPS final rule that SSO2 
Therapy meets the cost criterion, based on an analysis of the 2017 
MedPAR file which yielded an inflated case-weighted standardized charge 
per case that exceeded the average case-weighted threshold amount. 
Other commenters stated their belief that SSO2 Therapy is 
inadequately paid under the MS-DRGs noted in the application. These 
commenters urged CMS to approve SSO2 Therapy for new 
technology add-on payments to ensure access to Medicare beneficiaries.
    Response: Based on the applicant's cost analysis as previously 
summarized and consideration of the comments received, we agree that 
the average case-weighted standardized charge per case exceeded the 
average case-weighted threshold amount. Therefore, SSO2 
Therapy meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that SSO2 Therapy represents a 
substantial clinical improvement over existing technologies because it 
improves clinical outcomes for STEMI patients as compared to the 
currently available standard-of-care treatment, PCI with stenting 
alone. Specifically, the applicant asserted that: (1) Infarct size 
reduction improves mortality outcomes; (2) infarct size reduction 
improves heart failure outcomes; (3) SSO2 Therapy 
significantly reduces infarct size; (4) SSO2 Therapy 
prevents left ventricular dilation; and (5) SSO2 Therapy 
reduces death and heart failure at 1 year. The applicant highlighted 
the importance of the SSO2 Therapy's mechanism of action, 
which treats hypoxemic damage at the microvascular or microcirculatory 
level. Specifically, the applicant noted that microvascular impairment 
in the myocardium is irreversible and leads to a greater extent of 
infarction. According to the applicant, the totality of the data on 
myocardial infarct size, ventricular remodeling, and clinical outcomes 
strongly supports the substantial clinical benefit of SSO2 
Therapy administration over the SOC.
    As stated above, TherOx, Inc. submitted an application for new 
technology add-on payments for FY 2020 that was denied on the basis of 
substantial clinical improvement. In the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42278), we stated that we were not approving new technology 
add-on payments for SSO2 Therapy for FY 2020 because, after 
consideration of the comments received, we remained concerned that the 
current data did not adequately support a sufficient association 
between the outcome measures of heart failure, rehospitalization, and 
mortality with the use of SSO2 Therapy specifically to 
determine that the technology represents a substantial clinical 
improvement over existing available options. The applicant resubmitted 
its application for new technology add-on payments for FY 2021 with new 
information that, per the applicant, demonstrates that there is an 
unmet medical need for STEMI, and that SSO2 Therapy provides 
a treatment option for a patient population unresponsive to currently 
available treatments. Below we summarize the studies the applicant 
submitted with both its FY 2020 and FY 2021 applications, followed by 
the new information the applicant submitted with its FY 2021 
application to support that the technology represents a substantial 
clinical improvement.
    In the FY 2020 application, as summarized in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42275), and the FY 2021 application, the 
applicant cited an analysis of the Collaborative Organization for 
RheothRx Evaluation (CORE) trial and a pooled patient-level analysis to 
support the claims that infarct size reduction improves mortality and 
heart failure outcomes.
     The CORE trial was a prospective, randomized, double-
blinded, placebo-controlled trial of Poloxamer 188, a novel therapy 
adjunctive to thrombolysis at the time the study was conducted.\58\ The 
applicant sought to relate left ventricular ejection fraction (EF), 
end-systolic volume index (ESVI) and infarct size (IS), as measured in 
a single, randomized trial, to 6-month mortality after myocardial 
infarction treated with thrombolysis. According to the applicant, 
subsets of clinical centers participating in CORE also participated in 
one or two radionuclide sub-studies: (1) Angiography for measurement of 
EF and absolute, count-based LV volumes; and (2) single-photon emission 
computed tomographic sestamibi measurements of IS. These sub-studies 
were performed in 1,194 and 1,181 patients, respectively, of the 2,948 
patients enrolled in the trial. Furthermore, ejection fraction, ESVI, 
and IS, as measured by central laboratories in these sub-studies, were 
tested for their association with 6-month mortality. According to the 
applicant, the results of the study showed that ejection fraction 
(n=1,137; p=0.0001), ESVI (n=945; p=0.055) and IS (n=1,164; p=0.03) 
were all associated with 6-month mortality, therefore, demonstrating 
the relationship between these endpoints and mortality.\59\
---------------------------------------------------------------------------

    \58\ Burns, R.J., Gibbons, R.J., Yi, Q., et al., ``The 
relationships of left ventricular ejection fraction, end-systolic 
volume index and infarct size to six-month mortality after hospital 
discharge following myocardial infarction treated by thrombolysis,'' 
J Am Coll Cardiol, 2002, vol. 39, pp. 30-6.
    \59\ Ibid.
---------------------------------------------------------------------------

     The pooled patient-level analysis was performed from 10 
randomized, controlled trials (with a total of 2,632 patients) that 
used primary PCI with stenting.\60\ The analysis assessed infarct size 
within 1 month after randomization by either cardiac magnetic resonance 
(CMR) imaging or technetium-99m sestamibi single-photon emission 
computed tomography (SPECT), with clinical follow-up for 6 months. 
Infarct size was assessed by CMR in 1,889 patients (71.8 percent of 
patients) and by SPECT in 743 patients (28.2 percent of patients) 
including both inferior wall and more severe anterior wall STEMI 
patients. According to the applicant, median infarct size (or percent 
of left ventricular myocardial mass) was 17.9 percent and median 
duration of clinical follow-up was 352 days. The Kaplan-Meier estimated 
1-year rates of all-cause mortality, re-infarction, and HF 
hospitalization were 2.2 percent, 2.5 percent, and 2.6 percent, 
respectively. The applicant noted that a strong graded response was 
present between infarct size (per 5 percent increase) and the 2 outcome 
measures of subsequent mortality (Cox-adjusted hazard ratio: 1.19 [95 
percent confidence interval: 1.18 to 1.20]; p<0.0001) and 
hospitalization for heart failure (adjusted hazard ratio: 1.20 [95 
percent confidence interval: 1.19 to 1.21]; p<0.0001), independent of 
other baseline factors.\61\ The applicant concluded from this study 
that infarct size, as measured by CMR or technetium-99m sestamibi SPECT 
within 1 month after primary PCI, is strongly associated with all-cause

[[Page 58639]]

mortality and hospitalization for heart failure within 1 year.
---------------------------------------------------------------------------

    \60\ Stone, G.W., Selker, H.P., Thiele, H., et al., 
``Relationship between infarct size and outcomes following primary 
PCI,'' J Am Coll Cardiol, 2016, vol. 67(14), pp. 1674-83.
    \61\ Ibid.
---------------------------------------------------------------------------

    In the FY 2020 application, the applicant also cited the AMIHOT I 
and II studies to support the claim that SSO2 Therapy 
significantly reduces infarct size.
     The AMIHOT I clinical trial was designed as a prospective, 
randomized evaluation of patients who had been diagnosed with AMI, 
including both anterior and inferior patients, and received treatment 
with either PCI with stenting alone or with SSO2 Therapy as 
an adjunct to successful PCI within 24 hours of symptom onset.\62\ The 
study included 269 randomized patients and 3 co-primary endpoints: 
Infarction size reduction, regional wall motion score improvement at 3 
months, and reduction in ST segment elevation. The study was designed 
to demonstrate superiority of the SSO2 Therapy group as 
compared to the control group for each of these endpoints, as well as 
to demonstrate non-inferiority of the SSO2 Therapy group 
with respect to 30-day Major Adverse Cardiac Event (MACE). The 
applicant stated that results for the control versus SSO2 
Therapy group comparisons for the three co-primary effectiveness 
endpoints demonstrated a nominal improvement in the test group, 
although this nominal improvement did not achieve clinical and 
statistical significance in the entire population. The applicant 
further stated that a pre-specified analysis of the SSO2 
Therapy patients who were revascularized within 6 hours of AMI symptom 
onset and who had anterior wall infarction showed a marked improvement 
in all 3 co-primary endpoints as compared to the control group.\63\ Key 
safety data revealed no statistically significant differences in the 
composite primary endpoint of 1-month (30 days) MACE rates between the 
SSO2 Therapy and control groups. MACE includes the combined 
incidence of death, re-infarction, target vessel revascularization, and 
stroke. In total, 9/134 (6.7 percent) of the patients in the 
SSO2 Therapy group and 7/135 (5.2 percent) of the patients 
in the control group experienced 30-day MACE (p=0.62).\64\
---------------------------------------------------------------------------

    \62\ O'Neill, W.W., Martin, J.L., Dixon, S.R., et al., ``Acute 
Myocardial Infarction with Hyperoxemic Therapy (AMIHOT), J Am Coll 
Cardiol, 2007, vol. 50(5), pp. 397-405.
    \63\ Ibid.
    \64\ Ibid.
---------------------------------------------------------------------------

     The AMIHOT II trial randomized 301 patients who had been 
diagnosed with and were receiving treatment for anterior AMI with 
either PCI plus the SSO2 Therapy or PCI alone.\65\ The 
AMIHOT II trial had a Bayesian statistical design that allows for the 
informed borrowing of data from the previously completed AMIHOT I 
trial. The primary efficacy endpoint of the study required proving 
superiority of the infarct size reduction, as assessed by Tc-99m 
Sestamibi SPECT imaging at 14 days post PCI/stenting, with the use of 
SSO2 Therapy as compared to patients who were receiving 
treatment involving PCI with stenting alone. The primary safety 
endpoint for the AMIHOT II trial required a determination of non-
inferiority in the 30-day MACE rate, comparing the SSO2 
Therapy group with the control group, within a safety delta of 6.0 
percent.\66\ Endpoint evaluation was performed using a Bayesian 
hierarchical model that evaluated the AMIHOT II result conditionally in 
consideration of the AMIHOT I 30-day MACE data. According to the 
applicant, the results of the AMIHOT II trial showed that the use of 
SSO2 therapy, together with PCI and stenting, demonstrated a 
relative reduction of 26 percent in the left ventricular infarct size 
and absolute reduction of 6.5 percent compared to PCI and stenting 
alone.\67\
---------------------------------------------------------------------------

    \65\ Stone, G.W., Martin, J.L., de Boer, M.J., et al., ``Effect 
of Supersaturated Oxygen Delivery on Infarct Size after Percutaneous 
Coronary Intervention in Acute Myocardial Infarction,'' Circ 
Cardiovasc Intervent, 2009, vol. 2, pp. 366-75.
    \66\ Ibid.
    \67\ Ibid.
---------------------------------------------------------------------------

    Next, to support the claim that SSO2 Therapy prevents 
left ventricular dilation, the applicant cited the Leiden study, which 
represents a single-center, sub-study of AMIHOT I patients treated at 
Leiden University in the Netherlands. The study describes outcomes of 
randomized selective treatment with intracoronary aqueous oxygen (AO), 
the therapy delivered by SSO2 Therapy, versus standard care 
in patients who had acute anterior wall myocardial infarction within 6 
hours of onset. Of the 50 patients in the sub-study, 24 received 
treatment using adjunctive AO and 26 were treated according to standard 
care after PCI, with no significant differences in baseline 
characteristics between groups. LV volumes and function were assessed 
by contrast echocardiography at baseline and 1 month. According to the 
applicant, the results demonstrated that treatment with aqueous oxygen 
prevents LV remodeling, showing a reduction in LV volumes (3 percent 
decrease in LV end-diastolic volume and 11 percent decrease in LV end-
systolic volume) at 1 month as compared to baseline in AO-treated 
patients, as compared to increasing LV volumes (14 percent increase in 
LV end diastolic volume and 18 percent increase in LV end-systolic 
volume) at 1 month in control patients.\68\ The results also show that 
treatment using AO preserves LV ejection fraction at 1 month, with AO-
treated patients experiencing a 10 percent increase in LV ejection 
fraction as compared to a 2 percent decrease in LV ejection fraction 
among patients in the control group.\69\
---------------------------------------------------------------------------

    \68\ Warda, H.M., Bax, J.J., Bosch, J.G., et al., ``Effect of 
intracoronary aqueous oxygen on left ventricular remodeling after 
anterior wall ST-elevation acute myocardial infarction,'' Am J 
Cardiol, 2005, vol. 96(1), pp. 22-4.
    \69\ Ibid.
---------------------------------------------------------------------------

    Finally, to support the claim that SSO2 Therapy reduces 
death and heart failure at 1 year, the applicant submitted the results 
from the IC-HOT clinical trial, which was designed to confirm the 
safety and efficacy of the use of the SSO2 Therapy in those 
individuals presenting with a diagnosis of anterior AMI, who have 
undergone successful PCI with stenting of the proximal and/or mid left 
anterior descending artery within 6 hours of experiencing AMI symptoms. 
It is an IDE, nonrandomized, single arm study. The study primarily 
focused on safety, utilizing a composite endpoint of 30-day Net Adverse 
Clinical Events (NACE). A maximum observed event rate of 10.7 percent 
was established based on a contemporary PCI trial of comparable 
patients who had been diagnosed with anterior wall STEMI. The results 
of the IC-HOT trial exhibited a 7.1 percent observed NACE rate, meeting 
the study endpoint. Notably, no 30-day mortalities were observed, and 
the type and frequency of 30-day adverse events occurred at similar or 
lower rates than in contemporary STEMI studies of PCI-treated patients 
who had been diagnosed with anterior AMI.\70\ Furthermore, according to 
the applicant, the results of the IC-HOT study supported the 
conclusions of effectiveness established in AMIHOT II with a measured 
30-day median infarct size = 19.4 percent (as compared to the AMIHOT II 
SSO2 Therapy group infarct size = 20.0 percent).\71\ The 
applicant stated that notable measures include 4-day microvascular 
obstruction (MVO), which has been shown to be an independent predictor 
of outcomes, 4-day and 30-day left ventricular end diastolic and end 
systolic volumes, and

[[Page 58640]]

30-day infarct size.\72\ The applicant also stated that the IC-HOT 
study results exhibited a favorable MVO as compared to contemporary 
trial data, and decreasing left ventricular volumes at 30 days, 
compared to contemporary PCI populations that exhibit increasing left 
ventricular size.\73\ The applicant asserted that the IC-HOT clinical 
trial data continue to demonstrate the substantial clinical benefit of 
the use of SSO2 Therapy as compared to SOC, PCI with 
stenting alone.
---------------------------------------------------------------------------

    \70\ David, SW, Khan, Z.A., Patel, N.C., et al., ``Evaluation of 
intracoronary hyperoxemic oxygen therapy in acute anterior 
myocardial infarction: The IC-HOT study,'' Catheter Cardiovasc 
Interv, 2018, pp. 1-9.
    \71\ Ibid.
    \72\ Ibid.
    \73\ Ibid.
---------------------------------------------------------------------------

    The applicant also performed controlled studies in both porcine and 
canine AMI models to determine the safety, effectiveness, and mechanism 
of action of the SSO2 Therapy.74 75 According to 
the applicant, the key summary points from these animal studies are:
---------------------------------------------------------------------------

    \74\ Spears, J.R., Henney, C., Prcevski, P., et al., ``Aqueous 
Oxygen Hyperbaric Reperfusion in a Porcine Model of Myocardial 
Infarction,'' J Invasive Cardiol, 2002, vol. 14(4), pp. 160-6.
    \75\ Spears, J.R., Prcevski, P., Xu, R., et al., ``Aqueous 
Oxygen Attenuation of Reperfusion Microvascular Ischemia in a Canine 
Model of Myocardial Infarction,'' ASAIO J, 2003, vol. 49(6), pp. 
716-20.
---------------------------------------------------------------------------

     SSO2 Therapy administration post-AMI acutely 
improves heart function as measured by left ventricular ejection 
fraction (LVEF) and regional wall motion as compared with non-treated 
control subjects.
     SSO2 Therapy administration post-AMI results in 
tissue salvage, as determined by post-sacrifice histological 
measurements of the infarct size. Control animals exhibit larger 
infarcts than the SSO2-treated animals.
     SSO2 Therapy has been shown to be non-toxic to 
the coronary arteries, myocardium, and end organs in randomized, 
controlled swine studies with or without induced acute myocardial 
infarction.
     SSO2 Therapy administration post-AMI has 
exhibited regional myocardial blood flow improvement in treated animals 
as compared to controls.
     A significant reduction in myeloperoxidase (MPO) levels in 
the SSO2-treated animals versus controls, which indicate 
improvement in underlying myocardial hypoxia.
     Transmission electron microscopy (TEM) photographs showing 
amelioration of endothelial cell edema and restoration of capillary 
patency in ischemic zone cross-sectional histological examination of 
the SSO2-treated animals, while non-treated controls exhibit 
significant edema and vessel constriction at the microvascular level.
    In the FY 2020 final rule (84 FR 42278), after consideration of all 
the information from the applicant, as well as the public comments we 
received, we stated that we were unable to determine that 
SSO2 Therapy represented a substantial clinical improvement 
over the currently available therapies used to treat STEMI patients. We 
stated that we remained concerned that the current data does not 
adequately support a sufficient association between the outcome 
measures of heart failure, rehospitalization, and mortality with the 
use of SSO2 Therapy specifically to determine that the 
technology represented a substantial clinical improvement over existing 
available options. Therefore, we did not approve new technology add-on 
payments for SSO2 Therapy for FY 2020.
    For FY 2021, the applicant submitted new information that, 
according to the applicant, demonstrates that there is an unmet medical 
need for STEMI, and that SSO2 Therapy provides a treatment 
option for a patient population unresponsive to currently available 
treatments. The applicant presented this information in the context of 
CMS's concerns as identified in the FY 2020 IPPS/LTCH PPS proposed and 
final rules, specifically that (1) it is unclear whether use of the 
SSO2 Therapy would demonstrate the same clinical improvement 
as compared to the current standard of care; (2) that the current data 
does not adequately support a sufficient association between the 
outcome measures of heart failure, rehospitalization, and mortality 
with the use of SSO2 Therapy, and (3) that SSO2 
may not provide long-term clinical benefits in patients with AMI. Below 
we summarize this information, which the applicant believes addresses 
these concerns.
    With regard to CMS's concern that it is unclear whether use of 
SSO2 Therapy would demonstrate the same clinical improvement 
as compared to the current standard-of care, the applicant restated our 
concern as whether ``these data [AMIHOT I and AMIHOT II are] adequate 
to show the relevant outcomes in the control (standard of care 
percutaneous coronary intervention (PCI))''. In response to this 
concern, the applicant asserted that patient outcomes post-PCI have 
remained relatively stable over the past 10 years and there is a strong 
clinical need for new therapies like SSO2 in addition to PCI 
in the management of patients with anterior STEMI to reduce the risk 
and severity of heart failure and death. To support its assertion of an 
unmet clinical need for anterior wall STEMI treatment, the applicant 
presented data from multiple references to illustrate the following:
     A plateau in STEMI 1-year mortality rates at 10 percent 
with the advent of drug-eluting stents, according to reports from the 
SWEDEHEART registry. This statistic is in agreement with the 9% 1 year 
STEMI mortality rate following PCI reported in a 2015 paper by Bullock 
et al.\76\
---------------------------------------------------------------------------

    \76\ Bulluck H, Yellon DM, and Hausenloy DJ. Reducing myocardial 
infarct size: Challenges and future opportunities. Heart 
2016;102:341-48.
---------------------------------------------------------------------------

     No improvement in U.S. in-hospital post-PCI STEMI 
mortality rates between 2001 and 2011 based on work done by Sugiyama et 
al.\77\
---------------------------------------------------------------------------

    \77\ Sugiyama T, Hasegawa K, Kobayashi Y, Takahashi O, Fukui T, 
Tsugawa Y. Differential time trends of outcomes and costs of care 
for acute myocardial infarction hospitalizations by ST elevation and 
type of intervention in the United States, 2001-2011. J AmHeart 
Assoc. 2015;4:e001445. doi:10.1161/JAHA.114.001445.
---------------------------------------------------------------------------

     No decrease in one-year mortality risk as illustrated by 
Kalesan et al.,\78\ a meta-analysis of 15 clinical trials totaling 
7,867 patients that compared outcomes data for STEMI patients treated 
with bare metal stents versus drug eluting stents.\79\
---------------------------------------------------------------------------

    \78\ Kalesan B, Pilgrim T, Heinimann K, et al. Comparison of 
drug-eluting stents with bare metal stents in patients with ST-
segment elevation myocardial infarction. Eur Heart J 2012;33:977-87.
    \79\ Id.
---------------------------------------------------------------------------

     A markedly higher one-year mortality rate at 19.4% for the 
Medicare population as compared to the total population of PCI-treated 
anterior wall STEMI patients, according to the most recent Medicare 
Standard Analytic File (SAF) data (2017).
     No improvement in congestive heart failure (CHF) rates 
after STEMI treated pPCI; the applicant referenced Szummer et al.'s 
\80\ work which indicated 1 year post primary PCI CHF rates of 10 
percent as well as a statistical analysis of CHF readmission outcomes 
that showed heart failure rates for this patient population have 
remained stable at 9 to 10 percent from 2012 to 2017.
---------------------------------------------------------------------------

    \80\ Szummer K, Wallentin L, Lindhagen L, et al. Improved 
outcomes in patients with ST-elevation myocardial infarction during 
the last 20 years are related to implementation of evidence-based 
treatments: experiences from the SWEDEHEART registry 1995-2014. Eur 
Heart J 2017;38:3056-65.
---------------------------------------------------------------------------

     A decrease in 30-day STEMI re-hospitalizations due to the 
evolution of PCI therapy; the applicant cited the work of Kim et 
al.,\81\ noting the readmission rates trended slightly downward from 
approximately 12 percent in 2010 to 10 percent in 2014. According to 
the applicant, these data

[[Page 58641]]

illustrate that PCI treats macrovascular aspects of STEMI events, but 
does not address the underlying infarct damage, which is highly 
correlated with worse long-term outcomes.
---------------------------------------------------------------------------

    \81\ Kim LK, Yeo I, Cheung, JW, et al. Thirty-Day Readmission 
Rates, Timing, Causes, and Costs after ST-Segment Myocardial 
Infarction in the United States: A National Readmission Database 
Analysis 2010-2014. J Am Heart Assoc 2018;7(18):1-34.
---------------------------------------------------------------------------

    The applicant reiterated statements from its prior application 
that, in order to reduce outcomes like mortality and heart failure in 
the STEMI population, therapies must be available above and beyond PCI 
to reduce the size of the infarct that results from a STEMI event. Per 
the applicant, the benefits shown in the AMIHOT I 6-hour sub-study, 
AMIHOT II and IC-HOT studies show statistically significant and 
clinically meaningful improvements in infarct size, left ventricular 
size and function, and long term outcomes that support the claim that 
SSO2 offers a substantial clinical improvement over PCI by 
filling an important gap in therapy with PCI, and specifically the need 
to reduce infarct size beyond simply opening occluded large vessels 
alone.
    With regard to CMS's second concern that the current data does not 
adequately support a sufficient association between the outcome 
measures of heart failure, rehospitalization, and mortality with the 
use of SSO2 Therapy, the applicant restated our concern as 
``the importance of the reduction of infarct size as an outcome for 
patients with anterior STEMI.'' The applicant provided multiple animal 
and human studies to illustrate how TherOx SSO2 potentially 
impacts outcome measures of heart failure, rehospitalization and 
mortality. Regarding animal studies, the applicant cited the porcine 
and canine study by Spears et al. and summarized above to illustrate 
how aqueous oxygen hyperoxemic perfusion attenuates microvascular 
ischemia.82 83 Regarding human studies, the applicant cited 
a 2004 review by Gibbons et al. to support its assertion that the best 
physical measure of the consequences of AMI in post-intervention 
patients is the quantification of the extent of necrosis or infarction 
in the muscle. In this 2004 review article, Gibbons et al. sought to 
summarize published evidence for quantification of infarct size using 
data from studies that assessed biomarkers, cardiac SPECT sestamibi and 
magnetic resonance imaging.\84\ Regarding the use of cardiac SPECT 
sestamibi imaging, Gibbons et al. found five separate lines of clinical 
evidence that validated the use of SPECT sestamibi imaging for 
determining infarct size.\85\ The applicant also referenced the CORE 
trial that it submitted with its original application and which we 
summarize above. Per the applicant, a substudy of CORE trial data by 
Burns et al. demonstrated that an absolute infarct size reduction of 3 
percent was associated with a mortality benefit.\86\ Specifically, the 
trial showed that six-month mortality was significantly related to 
infarct size. Per the applicant, among the 753 patients who underwent 
ejection fraction measurements, the odds ratio for infarct size for 
six-month mortality was 1.033--that is, for each 1 percent increase in 
infarct size, mortality in the next 6 months was 1.033 times more 
likely. A 5 percent increase in infarct size would therefore mean that 
6-month mortality was 1.176 times more likely. A patient with an 
infarct size that was greater by 5 percent of the left ventricle would 
therefore have a 17.6 percent greater chance of dying within the next 6 
months.\87\
---------------------------------------------------------------------------

    \82\ Spears JR, Henney C, Prcevski P, et al. Aqueous Oxygen 
Hyperbaric Reperfusion in a Porcine Model of Myocardial Infarction. 
J Invasive Cardiol 2002; 14(4):160-6.
    \83\ Spears JR, Prcevski P, Xu R, et al. Aqueous Oxygen 
Attenuation of Reperfusion Microvascular Ischemia in a Canine Model 
of Myocardial Infarction. ASAIO J 2003; 49(6):716-20.
    \84\ Gibbons RJ, Valeti US, Araoz PA, et al. The quantification 
of infarct size. J Am Coll Cardiol 2004; 44:1533-42.
    \85\ Id.
    \86\ Burns RJ, Gibbons RJ, Yi Q, et al. The relationships of 
left ventricular ejection fraction, end-systolic volume index and 
infarct size to six-month mortality after hospital discharge 
following myocardial infarction treated by thrombolysis. J Am Coll 
Cardiol 2002; 39:30-6.
    \87\ Id.
---------------------------------------------------------------------------

    The applicant further noted the CORE trial and associated studies 
were conducted when thrombolytic therapy was the standard of care for 
coronary artery reperfusion. The transition to PCI led directly to a 
measured absolute infarct size reduction of 5.1 percent in STEMI 
patients treated with PCI as compared to thrombolytic therapy, which 
correlated to a significant decrease in cardiovascular events. The 
applicant asserted that the infarct size reduction demonstrated with 
PCI compared to thrombolytic therapy helped establish PCI as the 
preferred standard of care, and that the results demonstrating the 
importance of infarct size reduction hold true in randomized PCI trials 
of STEMI patients, with infarct size evaluated by either Tc-99 
sestabmibi SPECT imaging or cardiac MRI. The applicant referred to the 
substudy of CORE trial data by Burns et al., which found that, among 
the three clinical prognostic outcomes studied, ejection fraction (EF) 
was superior to infarct size (IS) and end-systolic volume index (ESVI) 
in predicting 6-month mortality.\88\ The authors also noted that all 
three radionuclide measures were significantly associated with each 
other, and that the strongest correlation was between ESVI and EF. The 
study noted that infarct size was significantly correlated with both EF 
and ESVI despite being determined from a different radionuclide 
measurement, and that infarct location was not found to be 
significant.\89\
---------------------------------------------------------------------------

    \88\ Id.
    \89\ Id.
---------------------------------------------------------------------------

    The applicant also provided a study by Stone et al.\90\ to address 
our concern that the current data does not adequately support a 
sufficient association between the outcome measures of heart failure, 
rehospitalization, and mortality with the use of SSO2 
Therapy. The applicant provided Stone et al.'s recent analysis of 10 
pooled randomized trials involving 2,632 subjects, including some 
subjects from the AMIHOT II trial. Stone et al. set out to determine 
the strength of the relationship between infarct size assessed within 1 
month after pPCI in STEMI and subsequent all-cause mortality, 
reinfarction and hospitalization for heart failure.\91\ Infarct size 
was assessed using cardiac SPECT sestamibi or cardiac magnetic 
resonance and clinical follow-up data greater than or equal to 6 
months. The authors found infarct size reduction measured by either 
imaging method within 1 month correlated strongly with reduced 
mortality and heart failure hospitalization at 1 year. The applicant 
asserted that the results demonstrated that every 5 percent absolute 
increase in left ventricular infarct size was associated with a 19 
percent increase in 1-year mortality, correlating well with the 17.6 
percent estimate established from earlier data and underscoring the 
important, independent relationship between infarct size and mortality 
regardless of the treatment modality. The applicant asserted that the 
published analysis also demonstrated that infarct size measured within 
1 month after pPCI for STEMI using either imaging method is a powerful 
independent predictor of hospitalization for heart failure at 1 year. 
The applicant reiterated that overall, a 5 percent absolute infarct 
size increase was associated with a 20 percent increase in either death 
or heart failure at 1 year. The applicant explained that because 
infarct size is the quantification of the extent of scarring of the 
left ventricle post-AMI, it is a direct measure of the health of the 
myocardium and indirectly of the heart's structure and function. A

[[Page 58642]]

large infarct means the muscle cannot contract normally, leading to 
left ventricular enlargement, reduced ejection fraction, clinical heart 
failure, and death. Per the applicant, the Kaplan-Meier curves for the 
rates of heart failure at 12 months as a function of infarct size also 
show that a 5 percent increase in left ventricle infarct size 
corresponded to a 50-100 percent increase in the risk of heart failure 
at 12 months for the most severe infarcts. The applicant concluded that 
reducing infarct size 5 or more percentage points provides a clear and 
dramatic clinical benefit for patients as demonstrated by a wealth of 
trial data. Significantly, the applicant noted that even as treatment 
of the primary occlusion improved, the relationship between infarct 
size and mortality and heart failure persisted and remained present 
throughout the study data.
---------------------------------------------------------------------------

    \90\ Stone GW, Selker, HP, Thiele H, et al. Relationship between 
infarct size and outcomes following primary PCI. JACC 
2016;67(14):1674-83.
    \91\ Id.
---------------------------------------------------------------------------

    Finally, with regard to CMS's third concern that SSO2 
may not provide long-term clinical benefits in patients with AMI, the 
applicant again referred to the 1-year outcomes data collected from 
patients in the IC-HOT trial and which were compared to a control 
population from the INFUSE AMI study after propensity-matching. The 
applicant asserted that STEMI patients treated with SSO2 
Therapy showed statistically significant and clinically meaningful 
improvements in several critically important outcomes for patients with 
anterior STEMI at 1 year, such as--
     Death;
     New onset of heart failure and readmission for heart 
failure;
     Composite rate of death and new onset of heart failure;
     Composite rate of death, new onset of heart failure or 
readmission for heart failure, or clinically-driven target vessel 
revascularization;
     Composite of death, reinfarction/spontaneous MI, 
clinically driven target vessel revascularization or new onset heart 
failure or readmission for heart failure.
    The applicant concluded that, taken together, there is abundant 
evidence to support the claim that SSO2 Therapy represents a 
substantial clinical improvement over PCI alone in the management of 
patients with anterior STEMI. Per the applicant, there remains a strong 
unmet need for new therapies like SSO2 in addition to PCI in 
the management of patients with anterior STEMI to reduce the risk and 
severity of heart failure and death. The applicant maintained that the 
timely delivery of supersaturated oxygen therapy improves microvascular 
and tissue level flow, reduces infarct size, facilitates recovery of 
left ventricular function and preserves left ventricular stability, and 
improves patient outcomes, most notably lowering mortality and heart 
failure rates at 1 year post-procedure.
    We thank the applicant for the additional information to address 
the concerns discussed in the FY 2020 IPPS/LTCH PPS final rule. We 
appreciate how this information, and specifically the seven studies 
referenced in response to the applicant's restatement of our first 
concern, illustrates a potential unmet medical need. However, we stated 
in the proposed rule that we are concerned that the AMIHOT I and AMIHOT 
II data may not adequately demonstrate the relevant outcomes in the 
control (standard of care PCI) because the standard of care has evolved 
since the two trials were performed. Additionally, we stated that we 
are concerned that the results presented in these seven studies may be 
based on patients with all types of STEMI and are not specific to the 
FDA-approved indicated use of SSO2 Therapy for the treatment 
of anterior STEMI. We stated that ultimately, we remain concerned that 
the current data does not support a sufficient association between the 
outcome measures of heart failure, rehospitalization, and mortality 
with the use of SSO2 Therapy specifically to determine that 
the technology represents a substantial clinical improvement over 
existing available options. Therefore, we invited public comment on 
whether SSO2 Therapy meets the substantial clinical 
improvement criterion.
    We invited public comments on whether the SSO2 Therapy 
meets the substantial clinical improvement criterion.
    Comment: The applicant submitted comments regarding the concerns 
raised by CMS in the proposed rule about whether SSO2 
Therapy meets the substantial clinical improvement criterion. The 
commenter first recapped the clinical studies used to support 
SSO2 Therapy's Premarket Approval, which were the AMIHOT I 
and II and IC-HOT clinical trials.
    As discussed in the FY 2020 IPPS/LTCH PPS final rule and the FY 
2021 IPPS/LTCH PPS proposed rule, the AMIHOT I was a prospective, 
randomized study that enrolled both inferior and anterior STEMI 
patients assigned to either PCI with stenting alone (control group) or 
with SSO2 administered post-PCI (treatment group). The 
AMIHOT I trial showed a therapeutic benefit in the pre-specified 
anterior STEMI subgroup by reducing infarct size (the primary 
endpoint). However, as the AMIHOT I was not designed to test 
statistical superiority in the subgroup with anterior STEMI, for which 
SSO2 Therapy is indicated, the manufacturer undertook a 
second prospective, randomized controlled trial for this population, 
the AMIHOT II study.
    The AMIHOT II trial only enrolled anterior STEMI patients 
randomized to either PCI with stenting alone (control) or with 
SSO2 administered post-PCI (treatment). At the FDA's 
recommendation, the AMIHOT II utilized a pre-specified Bayesian 
statistical model for the primary endpoint analysis, which pooled 
anterior STEMI patients from the AMIHOT I and AMIHOT II patients. The 
results of AMIHOT II demonstrated superiority in the anterior STEMI 
population for the primary endpoint of reducing infarct size, or heart 
muscle damage, which the commenter asserted is a well-recognized 
predictor of heart failure and mortality.\92\
---------------------------------------------------------------------------

    \92\ Stone GW, Selker, HP, Thiele H, et al. Relationship between 
infarct size and outcomes following primary PCI. J Am Coll Cardiol 
2016;67(14):1674-83.
---------------------------------------------------------------------------

    Finally, the manufacturer undertook a third study, IC-HOT.\93\ The 
purpose of IC-HOT was to confirm the safety and efficacy results of 
SSO2 Therapy after technical modifications to device design. 
Per the applicant, the IC-HOT study enrolled a treatment-only cohort, 
met its primary endpoint, and confirmed the earlier AMIHOT findings for 
infarct size reduction and mortality. The commenter noted that the 
results are consistent across all key studies and demonstrate that 
SSO2 Therapy significantly reduces infarct size, or heart 
muscle damage.
---------------------------------------------------------------------------

    \93\ David SW et al. Evaluation of intracoronary hyperoxemic 
oxygen therapy in acute anterior myocardial infarction: The IC-HOT 
study. Catheter Cardiovasc Interv, 2019:93(5);882-90.
---------------------------------------------------------------------------

    Next, the applicant presented two new studies that had not been 
available at the time its FY 2021 new technology add-on payment 
application was submitted. The first (which the applicant referred to 
as the Chen paper) was an analysis of mortality and heart failure rates 
found in IC-HOT patients as compared to a historical propensity-matched 
population of anterior STEMI patients from the 2012 INFUSE-AMI trial. 
The applicant referenced this analysis in its FY 2021 new technology 
add-on payment application and has since had it peer-reviewed and 
accepted for publication. The analysis presented one-year follow-up 
data showing mortality and heart failure rates between the two groups. 
This new data showed treatment with SSO2 Therapy was 
associated with a lower 1-year rate of

[[Page 58643]]

the composite endpoint of all-cause death or new-onset heart failure or 
hospitalization for heart failure (0.0% vs. 12.3%, p=0.001), with 
reductions in the individual 1-year outcomes of death (0% vs. 7.6%, 
p=0.01) and new-onset heart failure or hospitalization for heart 
failure (0.0% vs. 7.4%, p =0.001). However, we note that the applicant 
did not observe a statistically significant result in the outcome 
measurements of reinfarction and target vessel revascularization.
    The applicant also commissioned the Medicare Mortality Analysis, 
which matched the IC-HOT patients with a population of anterior STEMI 
patients from 2018 Medicare inpatient data. The populations were 
matched for multiple covariates, using propensity scores and regression 
analysis. The applicant applied the same inclusion and exclusion 
criteria as the IC-HOT study, resulting in an eligible comparison group 
of 2,587 cases. The applicant then developed one-year follow-up data 
showing mortality rates between the two groups. Per the applicant, the 
IC-HOT treatment group had no mortality over the 30-day and 1-year 
follow-up periods, in contrast to the matched Medicare comparison 
group, which had a 30-day mortality of 5 percent and a 1-year mortality 
of 7.3 percent. The applicant stated that the differences in mortality 
between the IC-HOT sample and the matched Medicare sample were 
statistically significant at a 5 percent significance level. The 
applicant further developed data showing differences in the rate of re-
hospitalization for chronic heart failure. The applicant found that the 
mortality rate in the IC-HOT sample was 1 percent over the 30-day and 
1-year follow-up periods, but that the difference between the two 
populations was not statistically significant.
    The applicant also presented a Medicare Longitudinal Analysis of 
heart failure outcomes in anterior STEMI patients treated with PCI. The 
applicant obtained Medicare inpatient claims data from 2005-2008 (when 
the AMIHOT trials were conducted) and from 2016-2018 (during enrollment 
of the IC-HOT trial). Because the 2005-2007 Medicare Inpatient Limited 
Datasets only report the quarter of discharge from the hospital, the 
applicant examined outcomes by quarters and divided their sample into 
two cohorts based on year of discharge from the hospital. The early 
cohort included cases discharged in 2005 and 2007, and the later cohort 
included cases discharged in 2016, 2017, and 2018. The applicant found 
that, among Medicare beneficiaries diagnosed with STEMI who are treated 
with PCI with stenting, 4-quarter mortality rates following 
hospitalization was 8.9 percent in the 2005/2007 cohort and 10.3 
percent in the 2016/2017/2018 cohort. While the difference in these 
mortality rates between the early and later cohorts was statistically 
insignificant, the 8-quarter mortality rate increased from 11.4 percent 
in 2005 to 14.5 percent in 2016/2017, yielding a statistically 
significant difference of 3.1 percentage points. Per the applicant, 
controlling for differences in clinical characteristics between the 
early and later cohorts using Elixhauser comorbidities yielded a 4 
quarter mortality rate that increased by 2.3 percentage points, and an 
8-quarter mortality rate that increased by 4.2 percentage points 
between early and later cohorts. Per the applicant, risk-adjusted 4-
quarter rehospitalization rates for chronic heart failure decreased by 
6.9 percentage points between the 2005/2007 cohort and the 2016/2017/
2018 cohort. The applicant found no statistically significant change in 
8-quarter rehospitalization rate for chronic heart failure between the 
two cohorts. Per the applicant, these results demonstrate that 
mortality and heart failure outcomes in anterior STEMI patients treated 
with PCI have not improved since 2005 between the matched population of 
the earlier cohort and the later cohort.
    The applicant then addressed CMS' concerns (85 FR 32613) 
individually. With respect to the concern that the AMIHOT I and AMIHOT 
II data may not adequately demonstrate the relevant outcomes in the 
control group because the standard of care has evolved since the two 
trials were performed, the applicant responded that refinements to the 
standard of care have not improved mortality or heart failure since the 
studies were conducted. According to the applicant, the changes to the 
standard of care since AMIHOT I and AMIHOT II were conducted have been 
modest rather than transformative, and largely comprised of (1) earlier 
PCI intervention through reduced door-to-balloon times, (2) new 
adjunctive pharmacological alternatives, and (3) incremental 
improvements in stent design and delivery tools and techniques. The 
applicant reiterated that these changes have led to a reduction in 
rehospitalization and revascularization, but no improvement in 
mortality or heart failure rates.
    The applicant further noted that, with respect to earlier PCI 
intervention, it is important to recognize that door-to-balloon times 
in the AMIHOT control groups were already at the optimized levels seen 
in clinical practice today, as evidenced by the requirement in the 
AMIHOT trials to perform successful PCI within 6 hours of symptom 
onset, and the adherence to prompt door-to-balloon times in the PCI 
centers that participated in the study.\94\ Accordingly, the applicant 
asserted that the AMIHOT control group accurately reflects the current 
standard of care in this manner. The applicant asserted that other 
refinements have resulted in better PCI results, but have not improved 
mortality or heart failure rates. For example, the migration from bare 
metal stents to drug-eluting stents reduced target vessel 
revascularization rate by 46% but did not reduce cardiac death.\95\ The 
applicant referenced the Medicare Longitudinal Analysis, which saw an 
increase in the one-year mortality rate from 7.8% in 2005 to 10.8% in 
2018. The applicant noted that, in the same analysis, the trend in two-
year mortality rate also increased from 11.4% in 2005 to 15.3% in 2017. 
Similarly, two-year heart failure rate increased from 7.8% in 2005 to 
10.6% in 2018.
---------------------------------------------------------------------------

    \94\ Median D2B = 75 min for Controls and 77 min for 
SSO2 subjects in the AMIHOT II trial.
    \95\ Kalesan et. al. Comparison of drug-eluting stents with bare 
metal stents in patients with ST-segment elevation myocardial 
infarction. Euro Heart J 2012;33:977-87.
---------------------------------------------------------------------------

    The applicant concluded that both the clinical literature and 
Medicare's own anterior STEMI patient data demonstrate refinements to 
the PCI standard of care have not resulted in improved heart failure or 
mortality for anterior STEMI patients since the conduct of the AMIHOT 
trials, and that the AMIHOT I and II control group continues to be 
relevant. The applicant reiterated that, without a therapy to address 
microvascular injury in the heart muscle following an anterior STEMI, 
outcomes that are strongly correlated to microvascular injury are 
unlikely to improve. The applicant stated that in contrast to PCI 
refinements, SSO2 Therapy is specifically designed to 
address microvascular injury and improves anterior STEMI outcomes 
related to the development of heart failure and heart failure 
mortality.
    With respect to the concern that the results presented in the seven 
studies submitted with the applicant's FY 2021 application were based 
on patients with all types of STEMI and are not specific to the FDA-
approved indicated use of SSO2 Therapy for the treatment of 
anterior STEMI, the applicant responded that the studies presented are 
relevant even though they were not specific to the FDA approved 
indication. The applicant stated that the AMIHOT II and IC-HOT studies 
targeted the anterior STEMI population

[[Page 58644]]

after the pre-defined anterior STEMI subgroup in AMIHOT I saw the 
greatest benefit from SSO2 Therapy. To further confirm these 
results, the applicant referenced the Medicare Mortality Analysis, 
which included only anterior STEMI patients. The new analysis showed 
that the IC-HOT treatment group had no mortality over 30-day and 1-year 
follow-up periods. In contrast, the propensity-matched population from 
2018 Medicare inpatient data had a 30-day mortality of 5 percent, and 
1-year mortality of 7.3 percent. The differences in mortality between 
the IC-HOT sample and the matched Medicare sample were statistically 
significant at a 5 percent significance level, while the differences in 
re-hospitalization rate for CHF between the IC-HOT sample and the 
matched Medicare sample were statistically insignificant.
    The applicant noted that its FY 2021 application included a wide 
array of data demonstrating the absence of progress in mortality or 
heart failure outcomes in all types of STEMI patients, since large, 
longitudinal STEMI studies reported by infarct location are limited. As 
seen in AMIHOT I and the Medicare Mortality Analysis, clinical outcomes 
are worse in anterior STEMI patients and this population drives overall 
STEMI mortality and heart failure rates. The applicant again referenced 
the Medicare Longitudinal Analysis, which is derived from CMS data and 
specific to the anterior STEMI and matched population to support their 
assertion that there is a lack of progress in improving mortality and 
heart failure outcomes in anterior STEMI patients between 2005 and 
2018. The applicant explained that anterior STEMI carries a higher 
heart failure and mortality risk and thus any data presented that is 
not specific to the anterior STEMI population would tend to cause a 
bias towards underestimating adverse outcomes with anterior STEMI and 
therefore underestimate the clinical benefit from SSO2 
Therapy by comparison.\96\ The applicant maintained that all clinical 
data reported showing a benefit of SSO2 Therapy are among 
patients with anterior STEMI, so this bias can only exist for 
comparison data. The applicant stated as such, comparisons of 
SSO2 Therapy data in patients with anterior STEMI to data 
among patients with STEMI overall would tend to understate the benefits 
of SSO2 Therapy.
---------------------------------------------------------------------------

    \96\ Entezarjou et al. Culprit vessel: Impact on short-term and 
long-term prognosis in patients with ST-elevation myocardial 
infarction. Open Heart 2018;5:e000852. doi:10.1136/openhrt-2018-
000852.
---------------------------------------------------------------------------

    With respect to CMS' third concern that the current data does not 
support a sufficient association between the outcome measures of heart 
failure, rehospitalization, and mortality with the use of 
SSO2 Therapy specifically to determine that the technology 
represents a substantial clinical improvement over existing available 
options, the applicant submitted new supporting analyses while 
disagreeing with CMS' assessment. The applicant submitted the newly 
published Chen Paper which compares the outcomes of the most recent 
trial data from IC-HOT to an appropriate comparator population of 
subjects receiving the standard of care. As noted above, results 
demonstrated clinically and statistically lower one-year rates of 
mortality and heart failure in anterior STEMI patients treated with 
SSO2 Therapy as compared to a propensity matched population 
treated with only PCI. Per the applicant, the Medicare Mortality 
Analysis replicated these findings and demonstrated a clinically and 
statistically significant one-year mortality reduction in anterior 
STEMI patients treated with SSO2 Therapy as compared to 
matched control patients treated with only PCI.
    Finally, the applicant also compared outcomes of this same matched 
IC-HOT population to outcomes from the PCI standard of care control 
group from the CONDI-2/ERIC PPCI study, which to the commenter's 
knowledge is the most recently reported study with a large PCI control 
group.\97\ Per the applicant, this trial included 974 anterior STEMI 
control patients with outcomes very similar to those presented from the 
matched INFUSE-AMI population. The applicant stated that the one-year 
mortality and heart failure rates for the anterior STEMI patients 
analyzed were 5.2% and 11.6%, respectively. The applicant noted that 
these outcomes are consistent with the matched control populations 
above and substantially worse than the IC-HOT SSO2-treated 
group.
---------------------------------------------------------------------------

    \97\ Hausenloy DJ et al. Effect of remote ischaemic conditioning 
on clinical outcomes in patients with acute myocardial infarction 
(CONDI-2/ERIC-PPCI): a single-blind randomized controlled trial. 
Lancet 2019; 394: 1415-24.
---------------------------------------------------------------------------

    The applicant reiterated that, as seen in the AMIHOT I, AMIHOT II, 
and IC-HOT trials, SSO2 Therapy reduces infarct size. The 
applicant asserted that preserving heart tissue and reducing infarct 
size in patients who have had an anterior STEMI leads to heart function 
improvement, and patients experience fewer heart failure episodes, 
fewer heart failure symptoms, and lower incidence of death. The 
applicant maintained that this is a substantial clinical improvement 
beyond standard anterior STEMI care, not only because infarct size is 
itself clinically important, but also because, per the applicant, 
research has shown that use of SSO2 Therapy reduces rates of 
death and heart failure in the intended use population. The applicant 
asserted that, consistently, across multiple control groups, large and 
small, randomized and matched, SSO2 Therapy outperformed PCI 
alone in the critical outcomes of mortality and heart failure. The 
applicant further asserted that these results support the benefit of 
employing a treatment strategy of effective PCI first, then healing the 
injured myocardium with SSO2 Therapy administration.
    In conclusion, the commenter stated that the data presented in the 
FY2021 new technology add-on payment application supplemented by the 
data presented in its comment letter show that SSO2 Therapy 
meets the substantial clinical improvement criterion in addition to 
meeting the newness and cost criteria and merits approval for new 
technology add-on payments for FY 2021. The commenter stated that 
denial of new technology add-on payments would limit use of this 
beneficial technology in many hospitals, and disproportionately hinder 
improvements in anterior STEMI outcomes in economically disadvantaged 
communities, including rural areas, and prolong treatment for critical 
care.
    We also received comments from several other commenters asserting 
that SSO2 Therapy filled an unmet medical need while also 
being superior to the current standard of care, PCI with stenting. 
These commenters stated that there have been no significant 
advancements in anterior STEMI treatment that have impacted infarct 
size or heart failure since the AMIHOT I and AMIHOT II trials were 
conducted. According to these commenters, other drugs and therapies 
have not been able to reduce infarct size and had limited impact on 
reducing death and heart failure hospitalization rates. Additionally, 
several commenters reviewed the clinical data from the AMIHOT I, AMIHOT 
II, and IC-HOT trials for reductions in infarct size and improved 
ejection fraction and other indications of improved patient outcomes, 
which they believe correlate to reduced heart failure and improved 
mortality beyond the benefit of PCI and stenting alone.
    Several commenters cited their personal experience treating 
patients with SSO2 Therapy and noted the positive results in 
these patients,

[[Page 58645]]

including signs of clinical recovery such as restored normal heart 
functions and improved ejection fraction that they believe would not 
have occurred under PCI with stenting alone. One such commenter claimed 
to have treated three patients who all showed normal heart functions 
within one month of being treated with SSO2 Therapy. 
Overall, these commenters expressed their support of the applicant's 
claim that SSO2 Therapy has a measurable improved impact on 
patient outcomes and quality of life measurements.
    Response: We appreciate the commenters' input, including the 
additional information and analysis submitted by the applicant to 
address CMS' concerns. With respect to the original studies, we note 
that the AMIHOT I was a Phase II study designed to test efficacy. We 
also note that, while AMIHOT I and AMIHOT II were randomized, they were 
designed to show that SSO2 Therapy reduces infarct size but 
were not designed to demonstrate improved outcomes among anterior STEMI 
patients.
    The IC-HOT study was a single-arm study that recruited a treatment-
only group to confirm an objective safety performance goal, and was not 
statistically powered to look at any efficacy endpoint. The applicant 
compared one-year clinical outcomes to a propensity-matched control 
group of similar patients with anterior STEMI enrolled in the INFUSE-
AMI trial. We recognize that the results show all-cause mortality, 
driven by cardiovascular mortality, and new-onset heart failure or 
heart failure hospitalization, were each individually lower in patients 
treated with SSO2 Therapy. However, there may be variability 
from the types of patients enrolled in a single-arm registry such as 
IC-HOT and those in a comparator control group drawn from the 
randomized INFUSE-AMI trial. We note that the IC-HOT trial included 
more patients in Killip Class I (individuals with no clinical signs of 
heart failure), with 95.2 percent of patients compared to 85.5 percent 
of patients enrolled in INFUSE-AMI. We also note that IC-HOT had fewer 
patients in Killip Class II (individuals with rales or crackles in the 
lungs, an S3, and elevated jugular venous pressure), with 
3.6 percent of patients compared to 13.2 percent in INFUSE-AMI.
    As stated by the applicant and summarized above, the Chen paper was 
an analysis of mortality and heart failure rates found in IC-HOT 
patients as compared to a propensity-matched population enrolled in the 
INFUSE-AMI trial. Chen et al. noted the following study limitations: 
(1) The population represents a selected cohort of patients and, 
therefore, its findings may not apply to all patients with STEMI, such 
as those with cardiogenic shock, nonanterior MI, and others who did not 
undergo pPCI with stenting within six hours of symptom onset; (2) 
because patients from the comparator control group were drawn from the 
randomized INFUSE-AMI trial, there may be variability from the types of 
patients enrolled in a single-arm registry such as IC-HOT; and (3) they 
could not rule out the possibility that its analysis was confounded by 
other unmeasured factors that are correlated with SSO2 
Therapy treatment. Chen et al. concluded that based on the overall 
review of the data and study limitations that its results should be 
considered only hypothesis-generating. Finally, Chen et al. noted that 
the study results were an analysis from a modest-sized propensity-
matched cohort and recommended appropriately powered randomized 
controlled trials to demonstrate the effect of SSO2 Therapy 
treatment on outcomes in patients with anterior STEMI after successful 
PCI.
    We also reviewed two additional studies the applicant submitted, 
the Medicare Mortality Analysis and the Medicare Longitudinal Analysis. 
Per the applicant, these studies show that there is an unmet medical 
need in the population of anterior STEMI patients, as well as the 
superiority of SSO2 Therapy over PCI with stenting alone in 
mortality and heart failure outcomes among anterior STEMI patients. 
However, these analyses used results from the IC-HOT study, a study 
designed to look at safety only, to reach an efficacy endpoint. 
Similarly, though they state that the design of the Medicare Mortality 
Analysis used a propensity-matched population of anterior STEMI 
patients from Medicare inpatient data, and the Medicare Longitudinal 
Analysis also used matching to ensure appropriate comparison 
populations, it is unclear if baseline morbidity and other confounding 
factors were matched between arms.
    We also note that the FDA ordered a post-approval study to confirm 
the safety and effectiveness of SSO2 Therapy. The FDA 
specified that the new enrollment study should be a prospective global, 
multicenter, randomized (1:1), confirmatory study with patients 
randomized to either standard therapy or post-procedure infusion of 
SSO2 Therapy for a duration of 60 minutes and followed for 
12 months. The FDA also specified that the primary effectiveness 
endpoint of infarct size would be evaluated with a superiority test, 
and that the powered primary safety composite endpoint, which includes 
death, stent thrombosis, major bleeding, reinfarction, new onset severe 
heart failure and possibly other adverse events, would be developed 
with an appropriate non-inferiority margin. We note that this study has 
not begun enrollment nor been completed.
    In summary, while the applicant has submitted additional data to 
respond to our concerns, we do not believe that this data provides 
sufficient evidence that use of SSO2 Therapy specifically 
results in improved mortality and heart failure outcomes among anterior 
STEMI patients. While there is room for outcomes improvement in 
mortality and heart failure rates post-PCI and stenting, we believe 
additional data is needed to demonstrate the effects of SSO2 
Therapy in improving these outcomes as compared to currently available 
therapies.
    After consideration of all the information from the applicant, as 
well as the comments we received, we are unable to determine that 
SSO2 Therapy represents a substantial clinical improvement 
over existing technologies, and we are not approving new technology 
add-on payments for SSO2 Therapy for FY 2021.
e. Eluvia\TM\ Drug-Eluting Vascular Stent System (Eluvia)
    Boston Scientific submitted an application for new technology add-
on payments for the EluviaTM Drug-Eluting Vascular Stent 
System for FY 2021. EluviaTM, a drug-eluting stent for the 
treatment of lesions in the femoropopliteal arteries, received FDA 
premarket approval (PMA) September 18, 2018. The applicant asserted 
that EluviaTM was first commercially available on the market 
on October 4, 2018 and the first procedure with EluviaTM 
following FDA approval in the U.S. occurred on October 5, 2018. We note 
that the applicant submitted an application for new technology add-on 
payments for FY 2020. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42231), we stated that we remain concerned that we do not have enough 
information to determine that the EluviaTM device represents 
a substantial clinical improvement over existing technologies. 
Therefore, we did not approve the EluviaTM device for FY 
2020 new technology add-on payments. We refer the reader to the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42220 through 42231) for a complete 
discussion regarding the EluviaTM device's FY 2020 new 
technology application.

[[Page 58646]]

    According to the applicant, the EluviaTM system is a 
sustained release drug-eluting stent indicated for the treatment of 
lesions in the femoropopliteal arteries and is designed to restore 
blood flow in the peripheral arteries above the knee--specifically the 
superficial femoral artery (SFA) and proximal popliteal artery (PPA). 
The applicant asserted that this device/drug combination product for 
endovascular treatment of peripheral artery disease (PAD) utilizes a 
polymer that carries and protects the drug before and during the 
procedure and ensures that the drug is released into the tissue in a 
controlled, sustained manner to prevent the restenosis of the vessel. 
The applicant further asserted that EluviaTM system's stent 
platform is purpose-built to address the mechanical challenges of the 
SFA with an optimal amount of strength, flexibility and fracture 
resistance. According to the applicant, EluviaTM's polymer-
based drug delivery system is uniquely designed to sustain the release 
of paclitaxel beyond 1 year to match the restenotic process in the SFA. 
The EluviaTM system is indicated for improving luminal 
diameter in the treatment of symptomatic de-novo or restenotic lesions 
in the native SFA and/or PPA with reference vessel diameters (RVD) 
ranging from 4.0 to 6.0 mm and total lesion lengths up to 190 mm, 
according to the applicant.
    The applicant asserted that the EluviaTM system is 
comprised of the implantable endoprosthesis and the stent delivery 
system. The stent is a laser cut self-expanding stent composed of a 
nickel titanium alloy (nitinol). On both the proximal and distal ends 
of the stent, radiopaque markers made of tantalum increase visibility 
of the stent to aid in placement. The triaxial designed delivery system 
consists of an outer shaft to stabilize the stent delivery system, a 
middle shaft to protect and constrain the stent, and an inner shaft to 
provide a guidewire lumen. The delivery system is compatible with 0.035 
in (0.89 mm) guidewires. The EluviaTM stent is available in 
a variety of diameters and lengths. The delivery system is offered in 
two working lengths including 75 and 130 cm.
    Peripheral artery disease (PAD) is a circulatory problem in which 
narrowed arteries reduce blood flow to the limbs, usually in the legs. 
Symptoms of PAD may include lower extremity pain due to varying degrees 
of ischemia and claudication, which is characterized by pain induced by 
exercise and relieved with rest. Risk factors for PAD include age >=70 
years; age 50 to 69 years with a history of smoking or diabetes; age 40 
to 49 with diabetes and at least one other risk factor for 
atherosclerosis; leg symptoms suggestive of claudication with exertion, 
or ischemic pain at rest; abnormal lower extremity pulse examination; 
known atherosclerosis at other sites (for example, coronary, carotid, 
renal artery disease); smoking; hypertension, hyperlipidemia, and 
homocysteinemia.\98\ PAD is primarily caused by atherosclerosis--the 
buildup of fatty plaque in the arteries. PAD can occur in any blood 
vessel, but it is more common in the legs than the arms. Approximately 
8.5 million people in the United States have PAD, including 12-20% of 
individuals older than age 60.\99\
---------------------------------------------------------------------------

    \98\ Neschis, David G. & MD, Golden, M. (2018). Clinical 
features and diagnosis of lower extremity peripheral artery disease. 
Retrieved October 29, 2018, from https://www.uptodate.com/contents/clinical-features-and-diagnosis-of-lower-extremity-peripheral-artery-disease.
    \99\ Centers for Disease Control and Prevention. (2018). 
Peripheral Arterial Disease (PAD) Fact Sheet. Retrieved from https://www.cdc.gov/DHDSP/data_statistics/fact_sheets/fs_PAD.htm.
---------------------------------------------------------------------------

    A diagnosis of PAD is established with the measurement of an ankle-
brachial index (ABI) <=0.9. The ABI is a comparison of the resting 
systolic blood pressure at the ankle to the higher systolic brachial 
pressure. Duplex ultrasonography is commonly used in conjunction with 
the ABI to identify the location and severity of arterial 
obstruction.\100\
---------------------------------------------------------------------------

    \100\ Berger, J. & Davies, M. (2018). Overview of lower 
extremity peripheral artery disease. Retrieved October 29, 2018 from 
https://www.uptodate.com/contents/overview-of-lower-extremity-peripheral-artery-disease.
---------------------------------------------------------------------------

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

[[Page 58647]]

entire period most commonly associated with restenosis. According to 
the applicant, the sustained release of the anti-restenotic drug is 
intentionally designed to elute over a 12-15-month period delivering 
the drug when restenosis is most likely to occur, which the applicant 
stated is a significantly longer period than the two-month duration of 
drug eluted from drug-coated balloons and the paclitaxel-coated Zilver 
PTX drug eluting stent.
    The EluviaTM stent system was granted approval for the 
following ICD-10-PCS procedure codes effective October 1, 2019:
[GRAPHIC] [TIFF OMITTED] TR18SE20.153

    As discussed previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would therefore not be considered 
``new'' for purposes of new technology add-on payments. We note that in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42227), we stated that 
after consideration of the applicant's comments, we believe that the 
EluviaTM device uses a unique mechanism of action to achieve 
a therapeutic outcome when compared to existing technologies such as 
the paclitaxel-coated stent. Therefore, we stated that the 
EluviaTM device meets the newness criterion. We refer the 
reader to the FY 2020 final rule for the complete discussion of how the 
EluviaTM device meets the newness criterion. The applicant 
noted in its FY 2021 application that for FY 2020, CMS concluded that 
the EluviaTM device met the newness criterion. The applicant 
stated that it believes there is no basis for CMS to reach a contrary 
conclusion with regard to whether the EluviaTM system meets 
the newness criterion for FY 2021. The applicant also reiterated that 
the EluviaTM device uses a unique mechanism of action 
because it utilizes a sustained-release of a low-dose of

[[Page 58648]]

paclitaxel. In the proposed rule, we invited public comments on whether 
the EluviaTM device is substantially similar to an existing 
technology and whether it meets the newness criterion for purposes of 
its application for new technology add-on payments for FY 2021.
    Comment: A commenter stated that total paclitaxel dose, not just 
dose density should be considered when comparing the 
EluviaTM device to the Zilver[supreg] PTX for newness. The 
commenter noted the applicant's comparison of the dose density of 
paclitaxel for the polymer matrix vs the paclitaxel coated stent which 
as described by the applicant is 0.167ug/mm2 vs 3ug/mm2 respectively. 
The commenter stated that on the surface this statement may be 
technically accurate. However, according to the commenter, the 
EluviaTM drug-eluting stent (DES) is coated on all surfaces 
with a permanent, non-degradable, polymer matrix containing paclitaxel. 
In comparison, the Zilver PTX DES is coated only on the abluminal 
(outer) surface of the stent that is in contact with the vessel wall 
after implantation. As a result, according to the commenter, when 
comparing the paclitaxel dose of the devices, the total dose should 
also be considered, not just the dose density. The commenter further 
stated that whereas the dose density suggests a ~18x decrease in the 
amount of paclitaxel used, the actual paclitaxel dose is only decreased 
<3x, and reporting only the dose density could lead the reader into 
underestimating the amount of paclitaxel contained on the Eluvia DES.
    The commenter also noted that the applicant stated that 
``Paclitaxel is released directly to the target lesion with the polymer 
matrix stent and that paclitaxel release is non-specific to the target 
lesion with paclitaxel-coated stents.'' According to the commenter, the 
clinical, scientific, or logical basis for this statement is unclear. 
The commenter further stated that the EluviaTM DES is coated 
circumferentially with a paclitaxel-containing polymer matrix. The 
commenter stated that as a result of this historic coating technology 
that has been used on coronary stents initially approved by the FDA 
more than 15 years ago, the Eluvia stent releases paclitaxel 
circumferentially and nonspecific to the target lesion, which is only 
in contact with the abluminal surface of the stent. In contrast, as 
described above, the commenter stated that the Zilver PTX DES is only 
coated on the abluminal surface of the stent that is in contact with 
the treated vessel wall. Therefore, according to the commenter, the 
Zilver PTX releases paclitaxel directly to the target lesion in 
contrast with the nonspecific release of Eluvia.
    The commenter further stated that avoiding the use of a polymer, if 
possible, is a preferred stent design. Additionally, the commenter 
noted that the applicant reiterates that the EluviaTM device 
uses a unique mechanism of action because it utilizes a sustained 
release of a low-dose of paclitaxel. However, according to the 
commenter, this mechanism of action is neither new nor unique and has 
been used on coronary stents since approval of the first device in 
2004. The commenter stated that newer technologies have advanced to use 
biodegradable polymer coatings or, like the Zilver PTX DES, eliminated 
the risk of a polymer coating altogether. According to the commenter, 
the ability to provide similar clinical outcomes without the need for a 
permanent, and potentially thrombogenic, polymer would seem to be the 
preferred technology. The commenter stated that research published in 
2013 by authors from Boston Scientific, manufacturer of the 
EluviaTM DES, have reported that the polymer of vinylidene 
fluoride-hexafluoropropylene (PVDF-HFP) polymer used on the 
EluviaTM DES results in increased thrombogenicity compared 
with a bare metal stent: ``PVDF-HFP-coated struts exposed to blood flow 
offer a more thrombogenic surface compared with a bare luminal 
platinum-chromium (PtCr) stent, resulting in more initial thrombus and 
subsequently more neointima from thrombus organization.'' \101\ The 
commenter concluded by supporting the benefits of short-term and 
polymer-free drug delivery like that offered by the Zilver PTX DES: 
``our data suggest that short-term drug elution while polymer 
absorption occurs is biologically preferable to maintaining a 
continuous and permanent polymeric surface once drug elution has 
occurred. This approach offers the benefits of minimizing polymeric 
load, while avoiding chronic inflammatory reactions but maintaining the 
beneficial anti-proliferative effect.'' \102\ The commenter stated that 
based on this published research by the manufacturer of the 
EluviaTM DES, it is surprising that the EluviaTM 
technology would be considered to meet newness standards as compared to 
the polymer-free Zilver PTX DES.
---------------------------------------------------------------------------

    \101\ Eppihimer MJ, et al. Impact of Stent Surface on 
Thrombogenicity and Vascular Healing--A Comparative Analysis of 
Metallic and Polymeric Surfaces. Circ Cardiovasc Interv. 
2013;6(4):370-377, p. 376.
    \102\ Eppihimer MJ, et al. Impact of Stent Surface on 
Thrombogenicity and Vascular Healing--A Comparative Analysis of 
Metallic and Polymeric Surfaces. Circ Cardiovasc Interv. 
2013;6(4):370-377, p. 377.
---------------------------------------------------------------------------

    The applicant commented that the EluviaTM system 
satisfies the newness criterion because it is recently FDA-approved and 
is not substantially similar to existing devices due to its new and 
unique polymer carrier-enabled mechanism of action. The applicant 
asserted that EluviaTM is the first and only sustained-
release drug-eluting stent for the treatment of lesions in the 
superficial femoral artery (SFA) and proximal popliteal artery (PPA). 
The applicant reiterated that EluviaTM is significantly 
different from existing drug-coated stent technology, which lacks a 
mechanism for sustained and controlled release of paclitaxel. According 
to the applicant, the sustained-release mechanism the 
EluviaTM system offers enables the use of significantly less 
paclitaxel compared to current stent technology to inhibit restenosis. 
The applicant also commented that in addition, Eluvia's stent platform 
is purpose-built to address the mechanical challenges of the SFA, 
balancing strength, flexibility and fracture resistance.
    The applicant also noted CMS's concerns regarding newness expressed 
in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42228) and provided the 
following reiteration of their FY2020 comments which compared the 
EluviaTM to the Zilver[supreg] PTX (Zilver[supreg] drug-
eluting peripheral stent). The applicant commented that the 
EluviaTM device's mechanism of action is different from that 
of Zilver[supreg] PTX because the EluviaTM device's polymer 
matrix layer allows for targeted, localized, sustained, low-dose 
amorphous paclitaxel delivery with minimal systemic distribution or 
particulate loss. The applicant provided a comparison of the polymer 
matrix stent vs the paclitaxel-coated stent. According to the 
applicant, the polymer matrix stent is encased in a polymer matrix, the 
paclitaxel-coated stent is not. The dose density of paclitaxel for the 
polymer matrix vs the paclitaxel coated stent is 0.167ug/mm2 vs 3ug/
mm2. Paclitaxel is delivered to the lesion via a diffusion gradient 
with the polymer matrix stent whereas the paclitaxel-coated stent has 
no diffusion gradient. Paclitaxel is released directly to the target 
lesion with the polymer matrix stent. Paclitaxel release is non-
specific to the target lesion with paclitaxel-coated stent. Paclitaxel 
is released over approximately 12-15

[[Page 58649]]

months with the polymer matrix stent. Paclitaxel release is complete at 
two months with paclitaxel coated stents.
    The applicant also commented that CMS determined that Eluvia 
satisfied the newness and cost criteria in the FY2020 Final Rule and 
committed to ``monitor new information and recommendations as they 
become available.''
    Response: We appreciate the comments received regarding the 
comparison of the polymer matrix Eluvia\TM\ vs the paclitaxel-coated 
Zilver PTX with regard to the mechanism of action and newness. After 
consideration of the information provided by both the applicant and the 
commenter as to whether the Eluvia\TM\ should be considered new for 
purposes of new technology add on payments, we agree with the applicant 
that Eluvia\TM\ uses a unique mechanism of action because the sustained 
release of paclitaxel combats restenosis for 12-15 months as compared 
to other drug-coated balloons or drug-coated stents that deliver drug 
to the artery for about two months. Accordingly, after consideration of 
the comments, we believe that the EluviaTM device uses a 
unique mechanism of action to achieve a therapeutic outcome when 
compared to existing technologies such as the paclitaxel-coated stent 
and therefore meets the newness criterion. As previously stated, the 
EluviaTM device received FDA approval under a PMA on 
September 18, 2018. The device was first available on the U.S. market 
on October 4, 2018. We consider the beginning of the newness period to 
commence when Eluvia was first available on the U.S. market on October 
4, 2018.
    With regard to the cost criterion, the applicant conducted two 
analyses based on 100 percent of identified claims and 76 percent of 
identified claims. To identify potential cases where 
EluviaTM could be utilized, the applicant searched the FY 
2018 MedPAR file for ICD-10-PCS codes from the Peripheral Drug Eluting 
Stent and Peripheral Bare Metal Stent categories. For the analysis 
using 100 percent of cases, the applicant identified a total of 11,051 
cases spanning 150 MS-DRGs. The applicant then removed charges for the 
technology being replaced. The applicant stated that because it was 
unable to determine a more specific percentage reduction, it chose the 
most conservative approach for calculation purposes and removed 100% of 
charges associated with service category Medical/Surgical Supply Charge 
Amount, which included revenue center 027x. The applicant then 
standardized the charges and applied an inflation factor of 11.1%, 
which is the same inflation factor used by CMS to update the outlier 
threshold in the FY 2020 IPPS/LTCH PPS final rule, to update the 
charges from FY 2018 to FY 2020 (84 FR 42629). The applicant added 
charges for the new technology by multiplying the cost of the 
technology by the national CCR for implantable devices (0.299) from the 
FY 2020 IPPS final rule. Under the analysis based on 100% of identified 
claims, the applicant determined an average case-weighted threshold 
amount of $100,851 and a final average inflated standardized charge per 
case of $157,343.
    Under the analysis based on 76 percent of identified claims, the 
applicant used the same methodology, which identified 8,335 cases 
across 8 MS-DRGs. The applicant determined the average case-weighted 
threshold amount of $98,196 and a final inflated average standardized 
charge per case of $147,343. Because the final inflated average 
standardized charge per case exceeded the case-weighted threshold 
amount under both analyses, the applicant asserted that the technology 
meets the cost criterion. In the proposed rule, we invited public 
comments on whether EluviaTM meets the cost criterion.
    Comment: The applicant commented that the cost analysis, as 
summarized in the proposed rule, demonstrates that EluviaTM 
meets the new technology add-on payment cost criterion. The applicant 
further commented that it analyzed the cost criterion associated with 
Eluvia in various scenarios utilizing different assumptions and that in 
each of these analyses, the cost criterion was achieved. The applicant 
noted that CMS did not express any concerns regarding any of the 
analyses provided and as such, the applicant maintained that 
EluviaTM meets the cost criterion.
    Response: We appreciate the applicant's comments concerning the 
cost criterion. Based on the cost analysis as summarized previously and 
after consideration of the public comments we received, we agree that 
the EluviaTM device meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that EluviaTM represents a substantial 
clinical improvement over existing technologies because it achieves 
superior primary patency; reduces the rate of subsequent therapeutic 
interventions; decreases the number of future hospitalizations or 
physician visits; reduces hospital readmission rates; reduces the rate 
of device related complications; and achieves similar functional 
outcomes and EQ-5D index values while associated with half the rate of 
TLRs.
    As stated above, Boston Scientific submitted an application for new 
technology add-on payments for the EluviaTM device for FY 
2020 that was not approved. In the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42231), we noted the FDA's preliminary review of data that 
identified a potentially concerning signal of increased long-term 
mortality in study subjects treated with paclitaxel-coated products 
compared to patients treated with uncoated devices, and stated that we 
remained concerned that we did not have enough information to determine 
that the EluviaTM device represents a substantial clinical 
improvement over existing technologies. The applicant resubmitted its 
application for new technology add-on payments for FY 2021 with updated 
two-year primary patency results to demonstrate that the 
EluviaTM device represents a substantial clinical 
improvement over existing technologies. Below we summarize the studies 
the applicant submitted with both its FY 2020 and FY 2021 applications, 
followed by the new information the applicant submitted with its FY 
2021 application to support that the technology represents a 
substantial clinical improvement.
    The applicant submitted the results of the MAJESTIC study, a 
single-arm first-in-human study of EluviaTM. The MAJESTIC 
\103\ study is a prospective, multicenter single-arm, open label study. 
Per the applicant, the MAJESTIC study demonstrated long-term treatment 
durability among patients whose femoropopliteal arteries were treated 
with the EluviaTM stent. The MAJESTIC study enrolled 57 
patients with symptomatic lower limb ischemia and lesions in the 
superficial femoral artery or proximal popliteal artery. Efficacy 
measures at 2 years included primary patency, defined as duplex 
ultrasound peak systolic velocity ratio of <2.5 and the absence of 
target lesion revascularization (TLR) or bypass. Safety monitoring 
through 3 years included adverse events and TLR. The 24-month clinic 
visit was completed by 53 patients; 52 had Doppler ultrasound evaluable 
by the core laboratory, and 48 patients had radiographs taken for stent 
fracture analysis. The 3-year follow-up was completed by 54 patients. 
At 2 years, 90.6% (48/53) of patients had improved by one or more 
Rutherford categories as compared with the pre-

[[Page 58650]]

procedure level without the need for TLR (when those with TLR were 
included, 96.2% sustained improvement); only one patient exhibited a 
worsening in level, 66.0% (35/53) of patients exhibited no symptoms 
(category 0) and 24.5% (13/53) had mild claudication (category 1) at 
the 24-month visit. Mean ABI improved from 0.73  0.22 at 
baseline to 1.02  0.20 at 12 months and 0.93  
0.26 at 24 months. At 24 months, 79.2% (38/48) of patients had an ABI 
increase of at least 0.1 compared with baseline or had reached an ABI 
of at least 0.9. According to the applicant, the primary patency rate 
at 12 months was 96.4%. With regard to the EluviaTM stent 
achieving superior primary patency, the applicant submitted the results 
of the IMPERIAL \104\ trial in which the EluviaTM stent is 
compared, head-to-head, to the Zilver[supreg] PTX[supreg] drug-eluting 
stent. The IMPERIAL study is a global, multi-center, randomized 
controlled trial consisting of 465 subjects. Eligible patients were 
aged 18 years or older and had symptomatic lower-limb ischemia, defined 
as Rutherford category 2, 3, or 4 and stenotic, restenotic (treated 
with a drug-coated balloon >12 months before the study or standard 
percutaneous transluminal angioplasty only), or occlusive lesions in 
the native superficial femoral artery or proximal popliteal artery, 
with at least one infrapopliteal vessel patent to the ankle or foot. 
Patients had to have stenosis of 70% or more (via angiographic 
assessment), vessel diameter between 4 mm and 6 mm, and total lesion 
length between 30 mm and 140 mm.
---------------------------------------------------------------------------

    \103\ M[uuml]ller-H[uuml]lsbeck S et al. Long-Term Results from 
the MAJESTIC Trial of the Eluvia Paclitaxel-Eluting Stent for 
Femoropopliteal Treatment: 3-Year Follow-up. Cardiovasc Intervent 
Radiol. 2017 Dec; 40(12):1832-1838.
    \104\ Gray WA et al. A polymer-coated, paclitaxel-eluting stent 
(Eluvia) versus a polymer-free, paclitaxel-coated stent (Zilver PTX) 
for endovascular femoropopliteal intervention (IMPERIAL): A 
randomised, non-inferiority trial. Lancet. 2018 Sep 24.
---------------------------------------------------------------------------

    Subjects who had previously stented target lesion/vessels treated 
with drug-coated balloon <12 months prior to randomization/enrollment 
and subjects who had undergone prior surgery of the SFA/PPA in the 
target limb to treat atherosclerotic disease were excluded from the 
study. Two concurrent single-group (EluviaTM only) sub 
studies were done: a non-blinded, non-randomized pharmacokinetic sub 
study and a non-blinded, non-randomized study of patients with long 
lesions (>140 mm). The IMPERIAL study is a prospective, multicenter, 
single-blinded randomized, controlled (RCT) non-inferiority trial. 
Patients were randomized (2:1) to implantation of either a paclitaxel-
eluting polymer stent (EluviaTM) or a paclitaxel-coated 
stent (Zilver[supreg] PTX[supreg]) after the treating physician had 
successfully crossed the target lesion with a guide wire. The primary 
endpoints of the study are Major Adverse Events defined as all causes 
of death through 1 month, Target Limb Major Amputation through 12 
months and/or TLR through 12 months, and primary vessel patency at 12 
months post-procedure. Secondary endpoints included the Rutherford 
categorization, Walking Impairment Questionnaire, and EQ-5D assessments 
at 1 month and 6 months post-procedure. Patient demographic and 
characteristics were balanced between EluviaTM stent and 
Zilver[supreg] PTX[supreg] stent groups.
    The applicant noted that lesion characteristics for the 
EluviaTM stent vs Zilver[supreg] PTX[supreg] stent arms were 
comparable. Clinical follow-up visits related to the study were 
scheduled for 1 month, 6 months, and 12 months after the procedure, 
with follow-up planned to continue through 5 years, including clinical 
visits at 24 months and 5 years and clinical or telephone follow-up at 
3 and 4 years.
    The applicant asserted that in the IMPERIAL study, the 
EluviaTM stent demonstrated superior primary patency over 
the Zilver[supreg] PTX[supreg] stent, with 86.8% vs. 77.5% respectively 
(p=0.0144). The non-inferiority primary efficacy endpoint was also met. 
The applicant asserted that the SFA presents unique challenges with 
respect to maintaining long-term patency. There are distinct 
pathological differences between the SFA and coronary arteries. The SFA 
tends to have higher levels of calcification and chronic total 
occlusions when compared to coronary arteries. Following an 
intervention within the SFA, the SFA produces a healing response which 
often results in restenosis or re-narrowing of the arterial lumen. This 
cascade of events leading to restenosis starts with inflammation, 
followed by smooth muscle cell proliferation and matrix formation.\105\ 
Because of the unique mechanical forces in the SFA, this restenotic 
process of the SFA can continue well beyond 300 days from the initial 
intervention. Primary patency at 12 months, by Kaplan-Meier estimate, 
was significantly greater for EluviaTM than for 
Zilver[supreg] PTX[supreg], with 88.5% and 79.5% respectively 
(p=0.0119). According to the applicant, these results are consistent 
with the 96.4% primary patency rate at 12 months in the MAJESTIC study, 
the single-arm first-in-human study of EluviaTM.
---------------------------------------------------------------------------

    \105\ Forrester JS, Fishbein M, Helfant R, Fagin J. A paradigm 
for restenosis based on cell biology: Clues for the development of 
new preventive therapies. J Am Coll Cardiol. 1991 Mar 1;17(3):758-
69.
---------------------------------------------------------------------------

    The IMPERIAL study included two concurrent single-group 
(EluviaTM only) sub studies: a non-blinded, non-randomized 
pharmacokinetic sub study and a non-blinded, non-randomized study of 
patients with long lesions (>140 mm). For the pharmacokinetic sub 
study, patients had venous blood drawn before stent implantation, at 
intervals ranging from 10 minutes to 24 hours post implantation, and 
then at either 48 hours or 72 hours post implantation. The 
pharmacokinetics sub study confirmed that plasma paclitaxel 
concentrations after EluviaTM implantation were well below 
thresholds associated with toxic effects in studies in patients with 
cancer (0[middot]05 [mu]M or ~43 ng/mL).
    The IMPERIAL sub study long lesion subgroup consisted of 50 
patients with average lesion length of 162.8 mm that were each treated 
with two EluviaTM stents. Twelve-month outcomes for the long 
lesion subgroup are 87% primary patency and 6.5% TLR. In a subgroup 
analysis of patients 65 years and older (Medicare population), the 
primary patency rate in the EluviaTM stent group is 92.6%, 
compared to 75.0% for the Zilver[supreg] PTX[supreg] stent group 
(p=0.0386).
    With regard to reducing the rate of subsequent therapeutic 
interventions, secondary outcomes in the IMPERIAL study included repeat 
re-intervention on the same lesion, TLR. The rate of subsequent 
interventions, or TLRs, in the EluviaTM stent group was 4.5% 
compared to 9.0% in the Zilver[supreg] PTX[supreg] stent group. The 
applicant asserted that TLR rate in the EluviaTM group 
represents a substantial reduction in re-intervention on the target 
lesion compared to that of the Zilver[supreg] PTX[supreg] stent group.
    With regard to decreasing the number of future hospitalizations or 
physician visits, the applicant asserted that the substantial reduction 
in the lesion revascularization rate led to a reduced need to provide 
additional intensive care, distinguishing the EluviaTM group 
from the Zilver[supreg] PTX[supreg] group. In the IMPERIAL study, 
EluviaTM-treated patients required fewer days of re-
hospitalization. There were 13.9 post procedure in-hospital days in the 
EluviaTM group for all adverse events compared to 17.7 post 
procedure in-hospital days in the Zilver[supreg] PTX[supreg] group. 
There were 2.8 post procedure in-hospital days in the 
EluviaTM group for TLR/Total Vessel Revascularization (TVR) 
compared to 7.1 post procedure in-hospital days in the Zilver[supreg] 
PTX[supreg] group. And lastly, there were 2.7 post-procedure in-
hospital days from the

[[Page 58651]]

EluviaTM group for procedure/device related adverse events 
compared to 4.5 post procedure in-hospital days for the Zilver[supreg] 
PTX[supreg] group.
    With regard to reducing hospital readmission rates, the applicant 
asserted that patients treated in the EluviaTM group 
experienced reduced rates of hospital readmission following the index 
procedure compared to those in the Zilver[supreg] PTX[supreg] group. 
Hospital readmission rates at 12 months were 3.9% for the 
EluviaTM group compared to 7.1% for the Zilver[supreg] 
PTX[supreg] group. Similar results were noted at 1 and 6 months; 1.0% 
vs 2.6% and 2.4% vs 3.8% respectively.
    With regard to reducing the rate of device related complications, 
the applicant asserted that while the rates of adverse events were 
similar in total between treatment arms in the IMPERIAL study, there 
were measurable differences in device-related complications. Device-
related adverse-events were reported in 8% of patients in the 
EluviaTM group compared to 14% of patients in the 
Zilver[supreg] PTX[supreg] group.
    Lastly, with regard to achieving similar functional outcomes and 
EQ-5D index values, while associated with half the rate of TLRs, the 
applicant asserted that narrowed or blocked arteries within the SFA can 
limit the supply of oxygen-rich blood throughout the lower extremities, 
causing pain or discomfort when walking. The applicant further asserted 
that performing physical activities is often challenging because of 
decreased blood supply to the legs, typically causing symptoms to 
become more challenging overtime unless treated. The applicant asserted 
that while functional outcomes appear similar between the 
EluviaTM and Zilver[supreg] PTX[supreg] groups at 12 months, 
these improvements for the Zilver[supreg] PTX[supreg] group are 
associated with twice as many TLRs to achieve similar EQ-5D index 
values.\106\ At 12 months, of the patients with complete Rutherford 
assessment data, 241 (86 percent) of 281 patients in the 
EluviaTM group and 120 (85 percent) of 142 patients in the 
Zilver[supreg] PTX[supreg] group had symptoms reported as Rutherford 
Category 0 or 1 (none to mild claudication). The mean ankle-brachial 
index was 1[middot]0 (SD 0[middot]2) in both groups at 12 months 
(baseline mean ankle-brachial index 0[middot]7 [SD 0[middot]2] for 
EluviaTM; 0[middot]8 [0[middot]2] for Zilver[supreg] 
PTX[supreg]), with sustained hemodynamic improvement for approximately 
80 percent of the patients in both groups. Walking function improved 
significantly from baseline to 12 months in both groups, as measured 
with the Walking Impairment Questionnaire and the 6-minute walk test. 
In both groups, the majority of patients had sustained improvement in 
the mobility dimension of the EQ-5D and roughly half had sustained 
improvement in the pain or discomfort dimension. No significant 
between-group differences were observed in the Walking Impairment 
Questionnaire, 6-minute walk test, or EQ-5D. Secondary endpoint results 
for the EluviaTM stent and Zilver[supreg] PTX[supreg] stent 
groups are as follows:
---------------------------------------------------------------------------

    \106\ Gray WA, Keirse K, Soga Y, et al. A polymer-coated, 
paclitaxel-eluting stent (Eluvia) versus a polymer-free, paclitaxel-
coated stent (Zilver PTX) for endovascular femoropopliteal 
intervention (IMPERIAL): A randomized, non-inferiority trial. Lancet 
2018; published online Sept 22. http://dx.doi.org/10.1016/S0140-6736(18)32262-1.
---------------------------------------------------------------------------

     Hemodynamic improvement in walking--80.8 percent versus 
78.7 percent;
     Walking impairment questionnaire scores (change from 
baseline)--40.8 (36.5) versus 35.8 (39.5);
     Distance (change from baseline)--33.2 (38.3) versus 29.5 
(38.2);
     Speed (change from baseline)--18.3 (29.5) versus 18.1 
(28.7);
     Stair climbing (change from baseline)--19.4 (36.7) versus 
21.1 (34.6); and
     6-Minute walk test distance (m) (change from baseline)--
44.5 (119.5) versus 51.8 (130.5).
    As summarized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42230), in our discussion of the comments received regarding 
substantial clinical improvement with respect to the new technology 
add-on payment application for EluviaTM for FY 2020, we 
received a comment expressing safety concerns with paclitaxel-coated 
devices used to treat PAD. The commenter stated they were aware of an 
FDA alert concerning paclitaxel-coated devices. The commenter stated 
the applicant and other manufacturers of devices using paclitaxel 
should consider an alternative to paclitaxel.
    We stated in response that we were aware of FDA's March 15, 2019 
letter to healthcare providers regarding the ``Treatment of Peripheral 
Arterial Disease with Paclitaxel-Coated Balloons and Paclitaxel-Eluting 
Stents Potentially Associated with Increased Mortality''. We noted that 
in March 2019, FDA conducted a preliminary analysis of long-term 
follow-up data (up to 5 years in some studies) of the pivotal premarket 
randomized trials for paclitaxel-coated products indicated for PAD. We 
stated that while the analyses are ongoing, according to FDA, the 
preliminary review of the data had identified a potentially concerning 
signal of increased long-term mortality in study subjects treated with 
paclitaxel-coated products compared to patients treated with uncoated 
devices.\107\ Of the three trials with 5-year follow-up data, each 
showed higher mortality in subjects treated with paclitaxel-coated 
products than subjects treated with uncoated devices. In total, among 
the 975 subjects in these 3 trials, there was an approximately 50 
percent increased risk of mortality in subjects treated with 
paclitaxel-coated devices versus those treated with control devices 
(20.1 percent versus 13.4 percent crude risk of death at 5 years).
---------------------------------------------------------------------------

    \107\ https://www.fda.gov/medical-devices/letters-health-care-providers/update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel-eluting.
---------------------------------------------------------------------------

    We also noted that FDA stated that the data should be interpreted 
with caution for several reasons. First, there is large variability in 
the risk estimate of mortality due to the limited amount of long-term 
data. Second, the studies were not originally designed to be pooled, 
introducing greater uncertainty in the results. Third, the specific 
cause and mechanism of the increased mortality is unknown.
    We further stated that based on the preliminary review of available 
data, FDA made the following recommendations regarding the use of 
paclitaxel-coated balloons and paclitaxel-eluting stents: That health 
care providers consider the following until further information is 
available; continue diligent monitoring of patients who have been 
treated with paclitaxel-coated balloons and paclitaxel-eluting stents; 
when making treatment recommendations and as part of the informed 
consent process, consider that there may be an increased rate of long-
term mortality in patients treated with paclitaxel-coated balloons and 
paclitaxel-eluting stents; discuss the risks and benefits of all 
available PAD treatment options with your patients; for most patients, 
alternative treatment options to paclitaxel-coated balloons and 
paclitaxel-eluting stents should generally be used until additional 
analysis of the safety signal has been performed; for some individual 
patients at particularly high risk for restenosis, clinicians may 
determine that the benefits of using a paclitaxel-coated product may 
outweigh the risks; ensure patients receive optimal medical therapy for 
PAD and other cardiovascular risk factors as well as guidance on 
healthy lifestyles including weight control, smoking cessation, and 
exercise.
    We also noted that FDA further stated that paclitaxel-coated 
balloons and stents are known to improve blood flow

[[Page 58652]]

to the legs and decrease the likelihood of repeat procedures to reopen 
blocked blood vessels. However, because of this concerning safety 
signal, FDA stated that it believes alternative treatment options 
should generally be used for most patients while FDA continues to 
further evaluate the increased long-term mortality signal and its 
impact on the overall benefit-risk profile of these devices. FDA stated 
it intends to conduct additional analyses to determine whether the 
benefits continue to outweigh the risks for approved paclitaxel-coated 
balloons and paclitaxel-eluting stents when used in accordance with 
their indications for use. FDA stated it will also evaluate whether 
these analyses impact the safety of patients treated with these devices 
for other indications, such as treatment of arteriovenous access 
stenosis or critical limb ischemia.
    Furthermore, we stated that because of concerns regarding this 
issue, FDA convened an Advisory Committee meeting of the Circulatory 
System Devices Panel on June 19 and 20, 2019 to: Facilitate a public, 
transparent, and unbiased discussion on the presence and magnitude of a 
long-term mortality signal; discuss plausible reasons, including any 
potential biological mechanisms, for a long-term mortality signal; re-
examine the benefit-risk profile of this group of devices; consider 
modifications to ongoing and future U.S. clinical trials evaluating 
devices containing paclitaxel, including added surveillance, updated 
informed consent, and enhanced adjudication for drug-related adverse 
events and deaths; and guide other regulatory actions, as needed. The 
June 19 and 20, 2019 Advisory Committee meeting of the Circulatory 
System Devices Panel concluded that analyses of available data from 
FDA-approved devices show an increase in late mortality (between 2 and 
5 years) associated with paclitaxel-coated devices intended to treat 
femoropopliteal disease.\108\ However, causality for the late mortality 
rate increase could not be determined. Additional data may be needed to 
further assess the magnitude of the late mortality signal, determine 
any potential causes, identify patient sub-groups that may be at 
greater risk, and to update benefit-risk considerations of this device 
class.\109\
---------------------------------------------------------------------------

    \108\ https://www.fda.gov/advisory-committees/advisory-committee-calendar/june-19-20-2019-circulatory-system-devices-panel-medical-devices-advisory-committee-meeting#event-materials.
    \109\ https://www.fda.gov/advisory-committees/advisory-committee-calendar/june-19-20-2019-circulatory-system-devices-panel-medical-devices-advisory-committee-meeting#event-materials.
---------------------------------------------------------------------------

    We stated that FDA continues to recommend that health care 
providers report any adverse events or suspected adverse events 
experienced with the use of paclitaxel-coated balloons and paclitaxel-
eluting stents. FDA stated that it will keep the public informed as any 
new information or recommendations become available.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42231), after 
consideration of the public comments we received and the latest 
available information from the FDA advisory panel, we noted the FDA 
panel's preliminary review of the data had identified a potentially 
concerning signal of increased long-term mortality in study subjects 
treated with paclitaxel-coated products compared to patients treated 
with uncoated devices. We stated that additionally, since FDA has 
stated that it believes alternative treatment options should generally 
be used for most patients while it continues to further evaluate the 
increased long-term mortality signal and its impact on the overall 
benefit-risk profile of these devices, we remained concerned that we 
did not have enough information to determine that the 
EluviaTM device represents a substantial clinical 
improvement over existing technologies. Therefore, we stated that we 
were not approving the EluviaTM device for FY 2020 new 
technology add-on payments. We also stated that we would monitor any 
new information or recommendations as they become available.
    Since the FY 2020 IPPS/LTCH PPS final rule, the FDA issued an 
August 7, 2019 update: ``Treatment of Peripheral Arterial Disease with 
Paclitaxel-Coated Balloons and Paclitaxel-Eluting Stents Potentially 
Associated with Increased Mortality''.\110\ In its update, the FDA 
included recommendations to healthcare providers for assessing and 
treating patients with PAD using paclitaxel-coated devices. Based on 
the FDA's review of available data and the Advisory Panel conclusions, 
the FDA recommends that healthcare providers consider the following:
---------------------------------------------------------------------------

    \110\ https://www.fda.gov/medical-devices/letters-health-care-providers/august-7-2019-update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel.
---------------------------------------------------------------------------

     Continue diligent monitoring of patients who have been 
treated with paclitaxel-coated balloons and paclitaxel-eluting stents.
     When making treatment recommendations, and as part of the 
informed consent process, consider that there may be an increased rate 
of long-term mortality in patients treated with paclitaxel-coated 
balloons and paclitaxel-eluting stents.
     Discuss the risks and benefits of all available PAD 
treatment options with your patients. For many patients, alternative 
treatment options to paclitaxel-coated balloons and paclitaxel-eluting 
stents provide a more favorable benefit-risk profile based on currently 
available information.
     For individual patients judged to be at particularly high 
risk for restenosis and repeat femoropopliteal interventions, 
clinicians may determine that the benefits of using a paclitaxel-coated 
device outweigh the risk of late mortality.
     In discussing treatment options, physicians should explore 
their patients' expectations, concerns and treatment preferences.
     Ensure patients receive optimal medical therapy for PAD 
and other cardiovascular risk factors as well as guidance on healthy 
lifestyles including weight control, smoking cessation, and exercise.
     Report any adverse events or suspected adverse events 
experienced with the use of paclitaxel-coated balloons and paclitaxel-
eluting stents.
    In addition, the August 7, 2019 update noted the following. Based 
on the conclusions of its analysis and recommendations of the advisory 
panel, FDA stated that it is taking additional steps to address this 
signal, including working with manufacturers on updates to device 
labeling and clinical trial informed consent documents to incorporate 
information about the late mortality signal. FDA also stated that it is 
continuing to actively work with the manufacturers and investigators on 
additional clinical evidence development for assessment of the long-
term safety of paclitaxel-coated devices. FDA noted that paclitaxel-
coated balloons and stents improve blood flow to the legs and decrease 
the likelihood of repeat procedures to reopen blocked blood vessels 
compared to uncoated devices. The update stated that the panel 
concluded that the benefits of paclitaxel-coated devices (for example, 
reduced reinterventions) should be considered in individual patients 
along with potential risks (for example, late mortality).
    The applicant stated in its FY 2021 application that while CMS 
denied the application for new technology add-on payments for 
EluviaTM for FY 2020 because of its concerns about 
paclitaxel, the available evidence and policymaking from the FDA would 
suggest that this device is safe, effective and a substantial clinical 
improvement. To address the substantial clinical

[[Page 58653]]

improvement concerns stated in the FY 2020 final rule, the applicant 
stated that EluviaTM is not associated with increased all-
cause mortality and that two-year all-cause mortality data are 
consistent with FDA-published rates for uncoated angioplasty devices. 
The applicant further asserted that most recent publications on 
peripheral paclitaxel-coated devices do not replicate the strong 
mortality signal identified in the meta-analysis. The applicant stated 
that it submitted information on EluviaTM to the FDA for the 
June 19-20 Circulatory System Devices Panel of the Medical Devices 
Advisory Committee meeting. The applicant further asserted that the FDA 
continues to find that paclitaxel devices are effective, specifically 
that ``Paclitaxel-coated balloons and stents improve blood flow to the 
legs and decrease the likelihood of repeat procedures to reopen blocked 
blood vessels compared to uncoated devices''.\111\ The applicant stated 
that the FDA, following months of investigation, multiple letters to 
health care providers and an advisory panel meeting, has not changed 
the marketed status of peripheral paclitaxel devices. Therefore, the 
applicant respectfully requested that CMS consider that 
EluviaTM satisfies the substantial clinical improvement 
criterion in light of this information. The applicant referred to the 
FDA's meta-analysis of long-term follow-up data from the pivotal 
premarket randomized trials for paclitaxel-coated devices used to treat 
PAD. The FDA's meta-analysis of these trials \112\ identified a late 
mortality signal in study subjects treated with paclitaxel-coated 
devices compared to patients treated with uncoated devices. 
Specifically, in three randomized trials which enrolled a total of 
1,090 patients, the crude mortality rate at 5 years was 19.8% (range 
15.9%-23.4%) in patients treated with paclitaxel-coated devices 
compared to 12.7% (range 11.2%-14.0%) in subjects treated with uncoated 
devices. The relative risk for increased mortality at 5 years was 1.57 
(95% confidence interval 1.16-2.13), which corresponds to a 57% 
relative increase in mortality in patients treated with paclitaxel-
coated devices.
---------------------------------------------------------------------------

    \111\ FDA Letter to Health Care Providers, August 7, 2019. Last 
accessed at https://www.fda.gov/medical-devices/letters-health-care-providers/august-7-2019-update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel on September 10, 
2019.
    \112\ https://www.fda.gov/medical-devices/letters-health-care-providers/update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel-eluting.
---------------------------------------------------------------------------

    In its application for FY 2021, the applicant stated that they 
respectfully disagree with CMS's conclusion that EluviaTM 
did not satisfy the substantial clinical improvement criterion as the 
IMPERIAL randomized controlled trial demonstrates superiority over the 
closest comparative device. In its application for FY 2021, in response 
to these concerns related to peripheral paclitaxel devices, the 
applicant referred to the updated bulletin FDA issued in August 2019 to 
provide the latest information on its analysis of long-term follow-up 
data from premarket trials and to provide summary information from its 
June 2019 advisory panel meeting. Specifically, the applicant noted 
that FDA stated that paclitaxel-coated balloons and stents improve 
blood flow to the legs and decrease the likelihood of repeat procedures 
to reopen blocked blood vessels compared to uncoated devices. The June 
2019 advisory panel concluded that the benefits of paclitaxel-coated 
devices (for example, reduced reinterventions) should be considered in 
individual patients along with potential risks (for example, late 
mortality).
    The applicant also noted that it has worked closely with FDA to 
address questions about the late mortality signal associated with some 
peripheral paclitaxel-coated devices, as identified in the meta-
analysis. The applicant noted that EluviaTM was not included 
in the meta-analysis.
    Additionally, the applicant stated that it has demonstrated (a) the 
absence of a mortality signal with EluviaTM and (b) the 
absence of a mortality signal with sustained-release drug eluting 
paclitaxel stent technology in the large long-term data for the TAXUS 
coronary stent.\113\
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    \113\ Stone GW, Ellis SG, Colombo A, et al. Long-term safety and 
efficacy of paclitaxel-eluting stents final 5-year analysis from the 
TAXUS Clinical Trial Program. JACC Cardiovasc Interv. 2011;4(5):530-
542.
---------------------------------------------------------------------------

    With regard to the absence of a mortality signal with 
EluviaTM, the applicant further stated that 
EluviaTM is not associated with increased all-cause 
mortality. The applicant explained that EluviaTM shows no 
mortality signal at 2 years in over 300 patients. Additionally, the 
applicant noted that its parent company Boston Scientific has extensive 
experience with sustained-release paclitaxel-eluting stent technology 
and noted that TAXUS has over 10 years of clinical data, with long-term 
mortality in clinical trials following approximately 2,800 patients, 
without an observed mortality signal.
    As it relates to EluviaTM, the applicant stated that 
findings of the FDA analysis should be interpreted with caution for 
several reasons. First, EluviaTM was not included in the FDA 
meta-analysis. Second, the applicant stated the analysis failed to find 
any plausible mechanism that could explain the observed mortality 
signal. Third, the applicant asserted that the analysis contained 
structural flaws that may have contributed to its findings, including 
small sample size, presence of ascertainment bias and lack of patient 
level data.
    The applicant added that additional analyses have been conducted 
since the publication of the meta-analysis. In a Medicare claims 
analysis of over 150,000 patients who underwent femoropopliteal artery 
revascularization, the applicant noted that no mortality signal was 
seen in the group treated with paclitaxel-coated devices.\114\ 
According to the applicant, this finding was echoed by other studies.
---------------------------------------------------------------------------

    \114\ Secemsky EA at al. Drug-Eluting Stent Implantation and 
Long-Term Survival Following Peripheral Artery Revascularization. J 
Am Coll Cardiol. 2019 May 28;73(20):2636-2638.
---------------------------------------------------------------------------

    Finally, the applicant stated that it believes the FDA recognized 
the value of allowing physicians to treat their PAD patients with 
paclitaxel devices in its letter published on August 7, 2019, 
acknowledging the signal in the meta-analysis and recognizing the 
benefits that paclitaxel devices offer for these patients.
    In summary, the applicant stated that EluviaTM should be 
approved for new technology add-on payments based on the following:
     Updated August 2019 FDA letter to providers issued after 
the FY 2020 IPPS/LTCH PPS final rule, maintaining peripheral paclitaxel 
devices on the market;
     Multiple recently published studies\115\ \116\ 
demonstrating the absence of increased mortality associated with 
peripheral paclitaxel devices;
---------------------------------------------------------------------------

    \115\ 18Spreen MI, Martens JM, Knippenberg B, et al. Long-Term 
Follow-up of the PADI Trial: Percutaneous Transluminal Angioplasty 
Versus Drug-Eluting Stents for Infrapopliteal Lesions in Critical 
Limb Ischemia. J Am Heart Assoc. 2017;6(4).
    \116\ UPDATE: Treatment of Peripheral Arterial Disease with 
Paclitaxel-Coated Balloons and Paclitaxel-Eluting Stents Potentially 
Associated with Increased Mortality--Letter to Health Care 
Providers. 2019; Last accessed at https://www.fda.gov/MedicalDevices/Safety/LetterstoHealthCareProviders/ucm633614.htm on 
October 9, 2019.
---------------------------------------------------------------------------

     An analysis of over 150,000 Medicare beneficiaries, 
designed with FDA input, demonstrating no difference in mortality 
between patients treated with peripheral paclitaxel devices

[[Page 58654]]

compared to those treated without paclitaxel devices;
     Confounding factors in the 2018 JAHA Katsanos et al. meta-
analysis (meta-analysis)\117\ and ascertainment bias, as highlighted at 
the 2019 Vascular Leaders Forum,\118\ and no plausible mechanism has 
been identified for increased mortality;
---------------------------------------------------------------------------

    \117\ https://www.ahajournals.org/doi/full/10.1161/JAHA.118.011245.
    \118\ Varcoe R. Unintended Consequences of Various trial 
Designs, Potential Effect on Mortality and Other Outcomes. Vascular 
Leaders Forum, March 2019.
---------------------------------------------------------------------------

     The rate of mortality for patients treated with 
EluviaTM at 2 years is consistent with the rate of non-
paclitaxel-based peripheral devices.\119\
---------------------------------------------------------------------------

    \119\ Pooled all-cause mortality rate includes IMPERIAL and 
MAJESTIC Trials. 2-year all-cause mortality rate for IMPERIAL 
(includes IMPERIAL RCT, Long Lesion, and PK sub-studies) is 7.0%. 
MAJESTIC follow-up is final at 3 years. IMPERIAL follow-up is 
complete through 2 years and ongoing through 5 years. As-treated 
ELUVIA patients. FDA PTA reference based on FDA Executive Summary. 
Two-year mortality rate within the PTA arm of ILLUMENATE was 7.4% 
and within the PTA arm of IN.PACT SFA was 1.0%.
---------------------------------------------------------------------------

    Although the EluviaTM system was not included in the 
meta-analysis, in the proposed rule we stated that we were concerned 
with the conclusion of the meta-analysis results. Specifically, we 
stated that we were concerned with the conclusion that there is an 
increased risk of death following application of 
paclitaxel[hyphen]coated balloons and stents in the femoropopliteal 
artery of the lower limb and how it impacts substantial clinical 
improvement for the EluviaTM system.
    We also noted the FDA's statement in the August 2019 letter that 
because of the demonstrated short-term benefits of the devices, the 
limitations of the available data, and uncertainty regarding the long-
term benefit-risk profile of paclitaxel-coated devices, the FDA 
believes clinical studies of these devices may continue and should 
collect long-term safety (including mortality) and effectiveness data. 
Per the FDA, these studies require appropriate informed consent and 
close safety monitoring to protect enrolled patients.
    Comment: A commenter stated that the design of the MAJESTIC 
clinical study is inadequate to support a claim of substantial clinical 
improvement due to its small size, strict inclusion/exclusion criteria, 
and lack of a comparator group. According to the commenter, the 
MAJESTIC study is inadequate to demonstrate substantial clinical 
improvement and that use of this single arm study to support 
substantial clinical improvement should be considered with care due to 
the small (n=57) and highly selected patient population (for example, 
lesion length limited to a maximum of 11 cm). The commenter stated that 
although the applicant reports a very high primary patency rate of 
96.4% at 12 months, this rate drops substantially to 77.9% at just 25 
months, suggesting the potential of a late catch-up phenomenon as 
previously observed with other polymer-coated peripheral DES.\120\ 
\121\ The commenter also noted that the TLR rate appears to double each 
year (that is quadruple from year 1 to year 3), increasing from 3.6% at 
1 year to 7.2% at 2 years to 14.7% at 3 years.\122\
---------------------------------------------------------------------------

    \120\ Duda SH, et al. Drug-eluting and Bare Nitinol Stents for 
the Treatment of Atherosclerotic Lesions in the Superficial Femoral 
Artery: Long-Term Results From the SIROCCO Trial. J Endovasc Ther. 
2006;13(6):701-710.
    \121\ Lammer J, et al. First Clinical Trial of Nitinol Self-
Expanding Everolimus-Eluting Stent Implantation for Peripheral 
Arterial Occlusive Disease. J Vasc Surg. 2011;54(2):394-401.
    \122\ M[uuml]ller-H[uuml]lsbeck S, et al. Long-Term Results from 
the MAJESTIC Trial of the Eluvia Paclitaxel-Eluting Stent for 
Femoropopliteal Treatment: 3-Year Follow-up. Cardiovasc Intervent 
Radiol. 2017;40(12):1832-1838.
---------------------------------------------------------------------------

    The commenter also stated that there are errors in the published 1-
year IMPERIAL study primary patency results, which is the primary 
endpoint of the study which require a correction of the 1-year 
publication and results. The commenter stated that although the errors 
have been identified, to their knowledge no correction to the paper has 
yet been published. As such, according to the commenter, the ability to 
understand the outcomes of this study, particularly patency, which is 
the primary endpoint of the study, is hindered.
    The commenter also stated that patency results are inconsistently 
presented. The primary endpoint of 12-month patency was reported after 
the required sample size of 409 patients completed 12-month follow-up 
or had an endpoint event; these results indicate primary patency of 
86.8% (231/266) for Eluvia vs. 81.5% (106/130) for Zilver PTX. However, 
a post-hoc analysis reports a larger difference of 86.8% (243/280) for 
Eluvia vs. 77.5% (110/142) for Zilver PTX. This represents an 
additional 14 Eluvia patients and 12 Zilver PTX patients compared to 
the primary analysis. While the results for the Eluvia patients are 
consistent between the primary and post-hoc analyses (86.8% [231/266] 
vs. 85.7% [12/14]), the results for the final 12 Zilver PTX patients 
added to the post-hoc analysis appear to be outliers who had 
significantly worse outcomes than the primary patient cohort (patency 
77.5% [110/142] in primary cohort vs. 33.3% [4/12] in post-hoc cohort, 
p=0.002); according to the commenter, this raises questions about the 
pooling of data between the primary cohort and the post-hoc cohort that 
is used in the post-hoc analysis and reporting.
    The commenter further stated that claims of ``superior primary 
patency'' and ``highest reported'' two-year primary patency are 
misleading. From the most recently presented two-year results (with 
data correction), there is no significant difference in patency between 
Eluvia and Zilver PTX at two years (83.0% vs. 77.1%, p=0.10, not 
significant). Based on these results, a claim of superior primary 
patency cannot be maintained, according to the commenter. The commenter 
also expressed concerns regarding the claim of ``highest reported'' 
two-year patency. The commenter stated that by its very nature, this 
claim can only be made by comparing results across numerous distinct 
clinical trials, each enrolling patients and analyzing outcomes based 
on study-specific criteria and variable definitions. For example, the 
commenter noted that the Zilver PTX randomized trial included the 
enrollment of patients with critical limb ischemia, a group with known 
poor outcomes that were excluded from the IMPERIAL trial. The Zilver 
PTX trial also had a more stringent definition for patency, requiring 
the peak systolic velocity ratio (PSVR) to be <2.0 for a lesion to be 
considered patent.\123\ In comparison, in the IMPERIAL trial, the 
requirement for patency was a more lenient criterion of PSVR <=2.4. The 
commenter stated that more concerning is that the definition of patency 
at two years in the IMPERIAL trial has been redefined to eliminate any 
patency failures that may have occurred prior to 730 days and is now 
defined as ``clinically-driven TLR up to 730 days and duplex ultrasound 
data at 24 months.'' This change in the definition can be observed by 
comparing the one-year Kaplan-Meier curves to the two-year curves and 
noting that patency at 24 months is actually increased compared with 
what was previously reported at 13 months; that is, patency failures 
occurring on imaging, but not resulting in a re-intervention have been 
eliminated prior to 730 days.\124\ The

[[Page 58655]]

commenter stated that this modified definition is inconsistent with 
other studies, further highlighting the inability to appropriately 
compare data across studies.
---------------------------------------------------------------------------

    \123\ Dake MD, et al. Durable Clinical Effectiveness With 
Paclitaxel-Eluting Stents in the Femoropopliteal Artery 5-Year 
Results of the Zilver PTX Randomized Trial. Circulation. 
2016;133(15):1472-1483.
    \124\ Gray WA. 2-year Outcomes from the IMPERIAL Randomized Head 
to Head Study of Eluvia DES and Zilver PTX. Oral presentation at: 
The Leipzig Interventional Course (LINC) Annual Meeting; January 
2020; Leipzig, Germany.
---------------------------------------------------------------------------

    The commenter also stated that the secondary randomization (that 
is, the provisional DES arm) of the Zilver PTX RCT was specifically 
excluded from this comparison. These Zilver PTX patients actually had a 
higher two-year primary patency rate of 83.4% compared with 83.0% for 
Eluvia. According to the commenter, this blanket claim of superiority 
appears to be in stark contrast to traditionally accepted criteria 
established by FDA to allow such superiority claims. The commenter 
further stated that the FDA has not indicated that Eluvia provides a 
substantial clinical improvement.
    We also received a comment stating that section Sec.  412.87(b) 
describes the eligibility criteria associated with the substantial 
clinical improvement criterion, specifically that it ``improves 
clinical outcomes relative to services or technologies previously 
available...'' The commenter stated that CMS' conclusions that there is 
insufficient evidence to determine substantial clinical improvement 
included in both the FY 2020 and 2021 rules does not articulate why the 
clinical trial information provided by the applicant is not sufficient. 
Instead, CMS relies on the potential signal described in the meta-
analysis and the FDA review of the data on paclitaxel-coated devices.
    The commenter further stated that despite the various deliberations 
by the FDA, it has not limited the use of paclitaxel devices and more 
importantly, CMS has not limited coverage of paclitaxel devices. Per 
the language in Sec.  412.87(b), the substantial clinical improvement 
criterion is to be evaluated ``relative to services or technologies 
previously available.'' The commenter stated that it appears the 
applicant has provided a comparison of the Eluvia device to existing, 
comparable devices for the treatment of peripheral arterial disease. 
The commenter contended this is the data that should be utilized to 
determine if the technology represents a SCI.
    The commenter also asserted that if the FDA had removed existing 
paclitaxel devices from the market, or CMS had issued non-coverage for 
paclitaxel devices at the national or local level based on the FDA 
analyses, they would concur that there would be insufficient data to 
determine SCI. The commenter stated that since the FDA has not 
materially changed the label for paclitaxel devices nor has CMS issued 
non-coverage policies for any paclitaxel devices, existing paclitaxel 
devices represent an appropriate comparison when evaluating substantial 
clinical improvement in the new technology add-on payment application 
as they represent a medically reasonable medical option for Medicare 
patients.
    The commenter contended that the EluviaTM device meets 
the substantial clinical improvement criterion as it showed superiority 
over the only other paclitaxel peripheral stent in a head-to-head 
randomized controlled trial, and that the results have been sustained 
based on longest follow up clinical data published to date for the 
EluviaTM device.
    The applicant commented that the IMPERIAL trial was designed as a 
non-inferiority study, as are many head-to-head trials of medical 
devices. Boston Scientific defined a pre-specified, post-hoc 
superiority analysis before evaluation of the clinical trial results; 
therefore, the non-inferiority and subsequent superiority testing 
methodology and results were not subjected to bias. The superiority 
testing was performed after the 12-month follow-up window for all 
enrolled subjects had closed.
    According to the applicant, from a statistical perspective, the 
pre-specified success criteria for superiority used the same logic as 
the pre-specified success criteria for non-inferiority: ``ELUVIA will 
be concluded to be superior to Zilver PTX for device effectiveness if 
the one-sided lower 95% confidence bound on the difference between 
treatment groups in 12-month primary patency is greater than zero.'' 
The commenter stated that a more stringent one-sided lower 97.5% 
confidence bound (shown as two-sided 95% confidence interval) on the 
difference between treatment groups was observed to be greater than 
zero and the corresponding p-value was 0.0144.
    In addition to the internal analysis performed by Boston 
Scientific, these data were published in The Lancet following its peer-
review process. As stated in The Lancet, ``The superiority analysis of 
primary patency in the full-analysis cohort was a pre-specified post-
hoc analysis'' and ``In this head-to-head randomized trial, the primary 
non-inferiority endpoints for efficacy and safety at 12 months were 
met, and post-hoc analysis of the 12-month patency rate showed 
superiority for Eluvia over Zilver PTX.'' \125\ According to the 
applicant, these claims are non-misleading and supported by valid 
scientific evidence.
---------------------------------------------------------------------------

    \125\ Gray WA, Keirse K, Soga Y, et al. A polymer-coated, 
paclitaxel-eluting stent (Eluvia) versus a polymer-free, paclitaxel-
coated stent (Zilver PTX) for endovascular femoropopliteal 
intervention (IMPERIAL): a randomised, non-inferiority trial. The 
Lancet. 2018;392(10157):1541-1551.
---------------------------------------------------------------------------

    The applicant also provided a comment in response to CMS' request 
for comments on the implications of the recent meta-analysis addressing 
paclitaxel-coated balloons and stents. The applicant maintained that 
EluviaTM is different from the devices evaluated in the 
meta-analysis. The applicant stated that as CMS noted, 
EluviaTM was not addressed in the meta-analysis. Further, 
the applicant maintained that EluviaTM delivers paclitaxel 
in much lower doses than the products discussed in the meta-analysis 
and is the only peripheral device to deliver paclitaxel through a 
sustained-release mechanism of action where delivery of paclitaxel is 
controlled and focused on the target lesion. Thus, according to the 
applicant, the suggestion in the meta-analysis of a late-term mortality 
risk associated with paclitaxel coated devices is not directly 
applicable to the EluviaTM device. Boston Scientific 
submitted information (available at https://www.fda.gov/media/127704/download) to the FDA on paclitaxel relative to EluviaTM in 
advance of FDA's June 19-20 Circulatory System Devices Panel of the 
Medical Devices Advisory Committee Meeting.
    Consequently, the applicant does not believe that the findings of 
limited generalizability suggested in the meta-analysis should inhibit 
CMS from determining that EluviaTM satisfies the substantial 
clinical improvement criterion.
    The applicant further commented that given the differences between 
EluviaTM and other peripheral paclitaxel coated devices, it 
would be more appropriate to examine safety considerations for 
EluviaTM relative to products with similar mechanisms of 
action and dose levels, such as the Taxus coronary stent indicated in 
the treatment of lesions in native coronary arteries. Boston Scientific 
asserted that it has more experience with sustained-release drug-
eluting stents than any other manufacturer. According to the applicant, 
Boston Scientific developed coronary sustained-release drug-eluting 
stent technology, first with its Taxus coronary drug-eluting stent. 
According to the applicant, the EluviaTM and Taxus stents 
are similar in design intent and mechanism of action. We note that the 
Taxus stent involves the treatment of a different patient population. 
According to the applicant, with the same drug and comparable low-dose 
controlled drug elution profiles achieved via a polymer matrix, the 
EluviaTM peripheral stent bears greater similarity to the 
Taxus

[[Page 58656]]

coronary stent than to any peripheral paclitaxel-coated balloon or non-
polymeric paclitaxel-coated stent with respect to design features and 
drug release kinetics. The applicant asserted that given the similarity 
in disease presentation for coronary and peripheral atherosclerotic 
lesions and the same anti-proliferative impact of paclitaxel on the 
lesions regardless of vessel bed, signals for any potential long-term 
systemic effects of targeted paclitaxel eluted from a stent polymer 
matrix would be apparent in patients treated with Taxus. Therefore, the 
applicant asserted that data on the controlled, localized and low dose 
paclitaxel elution by Taxus in the coronary or infrapopliteal 
vasculature can be used to gauge potential systemic effects of 
paclitaxel eluted from EluviaTM. According to the applicant, 
Taxus stent use has been extensively studied with more than 14 years of 
commercial experience and clinical trial data out to 10 years in 
patients with coronary\126\ \127\ \128\ \129\ implants and 5 years for 
those with infrapopliteal implants.
---------------------------------------------------------------------------

    \126\ Yamaji K, Raber L, Zanchin T, et al. Ten-year clinical 
outcomes of first-generation drug-eluting stents: the Sirolimus-
Eluting vs. Paclitaxel-Eluting Stents for Coronary Revascularization 
(SIRTAX) VERY LATE trial. Eur Heart J. 2016;37(45):3386-3395.
    \127\ Ormiston JA, Charles O, Mann T, et al. Final 5-year 
results of the TAXUS ATLAS, TAXUS ATLAS Small Vessel, and TAXUS 
ATLAS Long Lesion clinical trials of the TAXUS Liberte paclitaxel-
eluting stent in de-novo coronary artery lesions. Coron Artery Dis. 
2013;24(1):61-68.
    \128\ Kereiakes DJ, Cannon LA, Dauber I, et al. Long-term 
follow-up of the platinum chromium TAXUS Element (ION) stent: The 
PERSEUS Workhorse and Small Vessel trial five-year results. Catheter 
Cardiovasc Interv. 2015;86(6):994-1001.
    \129\ Stone GW, Ellis SG, Colombo A, et al. Long-term safety and 
efficacy of paclitaxel-eluting stents final 5-year analysis from the 
TAXUS Clinical Trial Program. JACC Cardiovasc Interv. 2011;4(5):530-
542.
---------------------------------------------------------------------------

    The applicant commented that in the Taxus stent family series of 
coronary studies, paclitaxel-based treatment showed consistent benefits 
compared to bare metal stenting and did not differentially affect long-
term all-cause mortality as compared to bare stent treatment. Stone et 
al. report 5-year patient-level pooled results from nearly 2800 
patients in randomized studies showing that all-cause mortality for 
patients treated with Taxus was similar to that of patients treated 
with the bare metal platform (9.8% vs 9.1%, p=0.53). The event rate 
analysis of mortality through 5 years for patients treated with Taxus 
(n=1400) compared to patients treated with the bare metal platform 
(n=1397) log-rank p=0.5283.
    These analyses represent approximately triple the sample size of 
the studies with >2 year data included in the Katsanos meta-analysis 
and in FDA's analysis of 5-year data from paclitaxel-coated devices. In 
addition, long-term data from more than 4000 patients who received 
coronary Taxus in randomized and nonrandomized studies show mortality 
rates consistent with those expected for this patient population.\130\ 
\131\
---------------------------------------------------------------------------

    \130\ Shishehbor MH, Goel SS, Kapadia SR, et al. Long-term 
impact of drug-eluting stents versus baremetal stents on all-cause 
mortality. J Am Coll Cardiol. 2008;52(13):1041-1048.
    \131\ Bravata DM, Gienger AL, McDonald KM, et al. Systematic 
review: the comparative effectiveness of percutaneous coronary 
interventions and coronary artery bypass graft surgery. Ann Intern 
Med. 2007;147(10):703-716.
---------------------------------------------------------------------------

    The applicant also commented that it remains questionable and 
unproven that the root cause of the observed higher mortality in 
certain retrospective meta-analyses has a direct relationship to the 
presence of paclitaxel in the evaluated devices. In the March 15 Letter 
to Health Care Providers,\132\ the FDA observed, ``These data should be 
interpreted with caution for several reasons. First, there is large 
variability in the risk estimate of mortality due to the limited amount 
of long-term data. Second, these studies were not originally designed 
to be pooled, introducing greater uncertainty in the results. Third, 
the specific cause and mechanism of the increased mortality is 
unknown.''
---------------------------------------------------------------------------

    \132\ UPDATE: Treatment of Peripheral Arterial Disease with 
Paclitaxel-Coated Balloons and Paclitaxel-Eluting Stents Potentially 
Associated with Increased Mortality--Letter to Health Care 
Providers. 2019; https://www.fda.gov/MedicalDevices/Safety/LetterstoHealthCareProviders/ucm633614.htm. Accessed April 15, 2019, 
2019.
---------------------------------------------------------------------------

    The applicant commented that notably, the number of studies, 
patients, and devices contributing to the mortality calculations 
significantly decreased with the longer follow-up time frames. In 
addition, the applicant asserted that understanding possible effects of 
paclitaxel exposure is not possible without complete analysis of 
uniformly re-adjudicated patient level data, particularly with 
treatment arm crossover and previous interventions or subsequent re-
interventions with paclitaxel-coated devices, which occurred in the 
analyzed studies.
    The applicant commented that explanations unrelated to drug 
exposure may account for the signal observed in the meta-analysis by 
Katsanos et al.\133\ These include preferential follow-up for control-
arm patients (that is, more physician visits, closer monitoring, 
enhanced comorbidity management), which may improve survival in these 
arms. Not adjusting for between-arm imbalance of predisposing 
conditions or comorbidities associated with increased mortality risk in 
the cohort-level analysis could also contribute to a false signal.
---------------------------------------------------------------------------

    \133\ Katsanos K, Spiliopoulos S, Kitrou P, Krokidis M, 
Karnabatidis D. Risk of Death Following Application of Paclitaxel-
Coated Balloons and Stents in the Femoropopliteal Artery of the Leg: 
A Systematic Review and Meta-Analysis of Randomized Controlled 
Trials. J Am Heart Assoc. 2018;7(24): e011245.
---------------------------------------------------------------------------

    The applicant further commented that currently, no plausible 
mechanistic link between paclitaxel and death has been postulated or 
established. To the contrary, the applicant stated that systemic 
paclitaxel infusions are known to improve survival among cancer 
patients.\134\ \135\ The periodically-repeated systemic doses of 
paclitaxel for chemotherapy are multiple orders of magnitude greater 
than the doses following treatment with either paclitaxel-coated 
devices\136\ \137\ \138\ \139\ or EluviaTM. The applicant 
stated that it is extremely unlikely that localized micro-doses 
associated with peripheral device use would have a negative effect on 
long-term survival.
---------------------------------------------------------------------------

    \134\ Ferguson T, Wilcken N, Vagg R, Ghersi D, Nowak AK. Taxanes 
for adjuvant treatment of early breast cancer. Cochrane Database 
Syst Rev. 2007(4):CD004421.
    \135\ Ghersi D, Willson ML, Chan MM, Simes J, Donoghue E, 
Wilcken N. Taxane-containing regimens for metastatic breast cancer. 
Cochrane Database Syst Rev. 2015(6):CD003366.
    \136\ BD announces new 300-mm length for Lutonix 018 DCB. 
Endovascular Today. March 2, 2020.
    \137\ Speck U, Cremers B, Kelsch B, et al. Do pharmacokinetics 
explain persistent restenosis inhibition by a single dose of 
paclitaxel? Circ Cardiovasc Interv. 2012;5(3):392-400.
    \138\ Yazdani SK, Pacheco E, Nakano M, et al. Vascular, 
downstream, and pharmacokinetic responses to treatment with a low 
dose drug-coated balloon in a swine femoral artery model. Catheter 
Cardiovasc
    Interv. 2014;83(1):132-140.
    \139\ Scheinert D, Duda S, Zeller T, et al. The LEVANT I 
(Lutonix paclitaxel-coated balloon for the prevention of 
femoropopliteal restenosis) trial for femoropopliteal 
revascularization: first-in-human randomized trial of low-dose drug-
coated balloon versus uncoated balloon angioplasty. JACC Cardiovasc 
Interv. 2014;7(1):10-19.
---------------------------------------------------------------------------

    The applicant commented that as no local vascular-based causes of 
mortality have been identified, any paclitaxel effect on mortality 
would occur via a systemic or non-vascular mechanism and would be 
apparent following paclitaxel exposure regardless of the administration 
route or implant location. The applicant asserted that no such effect 
on mortality was seen among thousands of patients who received a TAXUS 
paclitaxel-eluting coronary stent with a design very similar to that of 
EluviaTM, and no systemic effect should be expected with 
peripheral application.

[[Page 58657]]

    Response: We appreciate the comments received from the applicant 
and other commenters.
    CMS has always considered all evidence in its decision whether a 
technology represents a substantial clinical improvement over existing 
technologies. We refer the commenter to the regulations at Sec.  412.87 
which states a new medical service or technology represents an advance 
that substantially improves, relative to technologies previously 
available, the diagnosis or treatment of Medicare beneficiaries. Some 
highlights of what we consider includes the following but not limited 
to are:
     The totality of the circumstances when making a 
determination that a new medical service or technology represents an 
advance that substantially improves, relative to services or 
technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries.
     The totality of the information otherwise demonstrates 
that the new medical service or technology substantially improves, 
relative to technologies previously available, the diagnosis or 
treatment of Medicare beneficiaries.
     Evidence from published or unpublished information sources 
from within the United States or elsewhere such as clinical trials, 
peer reviewed journal articles, study results, meta-analyses, consensus 
statements and white papers may be sufficient to establish that a new 
medical service or technology represents an advance that substantially 
improves, relative to services or technologies previously available, 
the diagnosis or treatment of Medicare beneficiaries. Information 
sources we consider are listed including ``other appropriate 
information sources may be considered''.
    We believe the IMPERIAL and MAJESTIC trials show a number of 
improved outcomes such as primary patency rates and decreased need for 
subsequent interventions. As stated above, the applicant provided the 
following two-year results from the IMPERIAL global randomized 
controlled clinical trial, comparing EluviaTM to 
Zilver[supreg] PTX[supreg]:
     EluviaTM maintains higher primary patency than 
Zilver[supreg] PTX[supreg] at 2 years, 83.0% compared to 77.1%. The 
applicant contended that guidelines recognize the importance of primary 
patency in assessing the efficacy of peripheral endovascular 
therapies.\140\
---------------------------------------------------------------------------

    \140\ Writing Committee Members, Gerhard-Herman MD, Gornik HL et 
al. 2016 AHA/ACC Guideline on the Management of Patients with Lower 
Extremity Peripheral Artery Disease: Executive Summary. Vasc Med. 
2017 Jun; 22(3):NP1-NP43.
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     EluviaTM's tw2-year primary patency is the 
highest reported in a superficial femoral artery US pivotal trial for a 
drug-eluting stent or drug-coated balloon.\141\ Per the applicant, the 
2-year primary patency results are consistent with the 2-year TLR 
results released earlier in 2019.\142\ According to the applicant, 
EluviaTM sustained a statistically significant reduction in 
TLR at 2 years compared to Zilver PTX, 12.9% vs. 20.5% (p=0.0472).\143\
---------------------------------------------------------------------------

    \141\ Highest two-year primary patency based on 24-month Kaplan-
Meier estimates reported for IMPERIAL, IN.PACT SFA, ILLUMENATE, 
LEVANT II and Primary Randomization for Zilver PTX RCT.
    \142\ BSC Data on File. As-treated ELUVIA and PTxControl data 
from IMPERIAL RCT.FDA PTA reference based on FDA Executive Summary 
(median of PTA arms).Abbreviations: DES, drug-eluting stent; TLR, 
target lesion revascularization; PTx, paclitaxel.
    \143\ Boston Scientific Presentation to the Circulatory System 
Devices Panel of the Medical Devices Advisory Committee Meeting, 
June 19, 2019.
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     In a subgroup analysis of patients 65 years and older 
(Medicare population), the primary patency rate in the 
EluviaTM stent group is 92.6%, compared to 75.0% for the 
Zilver[supreg] PTX[supreg] stent group (p=0.0386).
    Additionally, after the FY 2020 IPPS/LTCH final rule last year, as 
noted above, in its August 7, 2019 update, the FDA stated that 
``Paclitaxel-coated balloons and stents improve blood flow to the legs 
and decrease the likelihood of repeat procedures to reopen blocked 
blood vessels compared to uncoated devices. The Panel concluded that 
the benefits of paclitaxel-coated devices (for example, reduced 
reinterventions) should be considered in individual patients along with 
potential risks (for example, late mortality).'' \144\ Furthermore, per 
the FDA August 2019 update, ``for individual patients judged to be at 
particularly high risk for restenosis and repeat femoropopliteal 
interventions, clinicians may determine that the benefits of using a 
paclitaxel-coated device outweigh the risk of late mortality.'' \145\ 
We expect that clinicians will discuss the risks and benefits of all 
available PAD treatment options with patients and that they will 
continue to diligently monitor patients who have been treated with 
paclitaxel-coated balloons and paclitaxel-eluting stents. We will 
continue to monitor the data and any further information provided by 
the FDA regarding the EluviaTM system. Therefore, based on 
the above, we believe the EluviaTM system represents a 
substantial clinical improvement over existing technologies.
---------------------------------------------------------------------------

    \144\ https://www.fda.gov/medical-devices/letters-health-care-providers/august-7-2019-update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel.
    \145\ https://www.fda.gov/medical-devices/letters-health-care-providers/august-7-2019-update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel.
---------------------------------------------------------------------------

    After consideration of the public comments we received and for the 
reasons discussed, including the IMPERIAL and MAJESTIC trials which 
show a number of improved outcomes and the FDA August 7, 2019 update 
which concluded that the benefits of paclitaxel-coated devices (for 
example, reduced reinterventions) should be considered in individual 
patients along with potential risks (for example, late mortality) as 
well as for individual patients judged to be at particularly high risk 
for restenosis and repeat femoropopliteal interventions, clinicians may 
determine that the benefits of using a paclitaxel-coated device 
outweigh the risk of late mortality, we believe EluviaTM 
represents a substantial clinical improvement over existing 
technologies. Therefore, we have determined that the 
EluviaTM system meets all of the criteria for approval of 
new technology add-on payments for FY 2021. Cases involving 
EluviaTM that are eligible for new technology add-on 
payments will be identified by the following ICD-10-PCS procedure 
codes:

[[Page 58658]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.154

    According to the applicant, the cost per case for the 
EluviaTM device is $5,610. Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 65 percent of the 
costs of the new medical service or technology, or 65 percent of the 
amount by which the costs of the case exceed the MS-DRG payment. As a 
result, the maximum new technology add-on payment for a case involving 
the use of the EluviaTM device is $3,646.50 for FY 2021.
f. GammaTile
    GT Medical Technologies, Inc. submitted an application for new 
technology add-on payments for FY 2021 for the GammaTile\TM\. We note 
that Isoray Medical, Inc. and GammaTile, LLC previously submitted an 
application for new technology add-on payments for GammaTile\TM\ for FY 
2018, which was withdrawn, and also for FY 2019; however, the 
technology did not receive FDA marketing authorization by July 1, 2018 
and, therefore, was not eligible for consideration for new technology 
add-on payments for FY 2019. GT Medical Technologies, Inc. submitted an 
application for FY 2020, which was not approved as CMS was unable to 
make a determination that GammaTileTM technology represents 
a substantial clinical improvement over existing therapies.
    The GammaTile\TM\ is a brachytherapy device for use in the 
treatment of patients who have been diagnosed with recurrent 
intracranial neoplasms, which uses cesium-131 radioactive sources 
embedded in a collagen matrix. GammaTile\TM\ is designed to provide 
adjuvant radiation therapy to eliminate remaining tumor cells in 
patients who required surgical resection of recurrent brain tumors. 
According to the applicant, the GammaTile\TM\ constitutes a new form of 
internal radiation, with collagen tile structural offsets acting as an 
internal compensator for the delivery of cesium-131 brachytherapy 
sources embedded within the product. The applicant stated that the 
technology has been manufactured for use in the setting of a craniotomy 
resection site where there is a high chance of local

[[Page 58659]]

recurrence of a Central Nervous System (CNS) or dual-based tumor. The 
applicant asserted that the use of the GammaTile\TM\ technology 
provides a new, unique modality for treating patients who require 
radiation therapy to augment surgical resection of malignancies of the 
brain. By offsetting the radiation sources with a 3mm gap of a collagen 
matrix, the applicant asserted that the use of the GammaTile\TM\ 
technology resolves issues with ``hot'' and ``cold'' spots associated 
with brachytherapy, improves safety, and potentially offers a treatment 
option for patients with limited or no other available options. The 
GammaTile\TM\ is biocompatible and bioabsorbable, and is left in the 
body permanently without need for future surgical removal. The 
applicant asserted that the commercial manufacturing of the product 
will significantly improve on the process of constructing customized 
implants with greater speed, efficiency, and accuracy than is currently 
available, and requires less surgical expertise in placement of the 
radioactive sources, allowing a greater number of surgeons to utilize 
brachytherapy techniques in a wider variety of hospital settings.
    The GammaTile\TM\ technology received FDA Section 510(k) clearance 
as a medical device on July 6, 2018. According to the applicant, due to 
finalization of design and manufacturing activities, the technology was 
not commercially available until January of 2019. Subsequently, the FDA 
cleared GammaTile\TM\ as a Class II medical device under the corporate 
name of GT Medical Technologies, Inc. on March 13, 2019. The cleared 
indications for use state that GammaTile\TM\ is intended to deliver 
radiation therapy (brachytherapy) in patients who have been diagnosed 
with recurrent intercranial neoplasms. The applicant submitted a 
request for approval for a unique ICD-10-PCS code for the use of the 
GammaTile\TM\ technology, which was approved effective October 1, 2017 
(FY 2018). The ICD-10-PCS procedure code used to identify procedures 
involving the use of the GammaTile\TM\ technology is 00H004Z (Insertion 
of radioactive element, cesium-131 collagen implant into brain, open 
approach).
    As discussed previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would therefore not be considered 
``new'' for purposes of new technology add-on payments. We note that in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42261), we stated that 
after consideration of comments, we believe that the 
GammaTileTM mechanism of action is different from current 
forms of radiation therapy and brachytherapy as it is the first FDA 
cleared device to use a manufactured collagen matrix which offsets 
radiation sources for use for the treatment of recurrent intracranial 
neoplasms. Therefore, we stated that the GammaTileTM is not 
substantially similar to existing brachytherapy technology and meets 
the newness criterion. We refer the reader to the FY 2020 final rule 
for the complete discussion of how the GammaTileTM meets the 
newness criterion. We invited public comments on whether the 
GammaTileTM is substantially similar to an existing 
technology and whether it meets the newness criterion for purposes of 
its application for new technology add-on payments for FY 2021, but did 
not receive any additional comments. We continue to believe that the 
GammaTileTM is not substantially similar to existing 
brachytherapy technology and meets the newness criterion for purposes 
of its application for new technology add-on payments for FY 2021.
    With regard to the cost criterion, the applicant conducted the 
following analysis. The applicant worked with the Barrow Neurological 
Institute at St. Joseph's Hospital and Medical Center (St. Joseph's) to 
obtain actual claims from mid-2015 through mid-2016 for craniotomies 
that did not involve placement of the GammaTile\TM\ technology. The 
cases were assigned to MS-DRGs 025, 026, and 027 (Craniotomy and 
Endovascular Intracranial Procedures with MCC, with CC, and without CC/
MCC, respectively). For the 460 claims, the average case-weighted 
unstandardized charge per case was $143,831. The applicant standardized 
the charges for each case and inflated each case's charges by applying 
the outlier charge inflation factor of 1.054 included in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42629) by the age of each case (that 
is, the factor was applied to 2015 claims 4 times and 2016 claims 3 
times). The applicant then calculated an estimate for ancillary charges 
associated with placement of the GammaTile\TM\ device, as well as 
standardized charges for the GammaTile\TM\ device itself. The applicant 
determined it meets the cost criterion because the final inflated 
average caseweighted standardized charge per case (including the 
charges associated with the GammaTile\TM\ device) of $270,445 exceeds 
the average case-weighted threshold amount of $151,193 for MS-DRG 023 
(Craniotomy with Major Device Implant or Acute Complex CNS PDX with MCC 
or Chemotherapy Implant or Epilepsy with Neurostimulator), the MS-DRG 
that would be assigned for cases involving the GammaTile\TM\ device.
    The applicant stated that its analysis does not include a reduction 
in costs due to reduced operating room times. According to the 
applicant, the cost analysis reflects the time associated with a 
craniotomy and device placement. The applicant does not anticipate any 
reduction in operating room time relative to prior operative methods. 
We invited public comments on whether the GammaTile\TM\ technology 
meets the cost criterion. We did not receive any additional comments. 
Based on the analysis above, we believe that GammaTile\TM\ meets the 
cost criterion.
    With regard to substantial clinical improvement, the applicant 
stated that the GammaTile\TM\ technology offers a treatment option for 
a patient population unresponsive to, or ineligible for, currently 
available treatments for recurrent CNS malignancies and significantly 
improves clinical outcomes when compared to currently available 
treatment options. The applicant explained that therapeutic options for 
patients who have been diagnosed with large or recurrent brain 
metastases are limited (for example, stereotactic radiotherapy, 
additional EBRT, or systemic immunochemotherapy). However, according to 
the applicant, the GammaTile\TM\ technology provides a treatment option 
for patients who have been diagnosed with radiosensitive recurrent 
brain tumors that are not eligible for treatment with any other 
currently available treatment options. Specifically, the applicant 
stated that the GammaTile\TM\ device may provide the only radiation 
treatment option for patients who have been diagnosed with tumors 
located close to sensitive vital brain sites (for example, brain stem) 
and patients who have been diagnosed with recurrent brain tumors who 
may not be eligible for additional treatment involving the use of 
external beam radiation therapy. There is a lifetime limit for the 
amount of radiation therapy a specific area of the body can receive. 
Patients whose previous treatment includes external beam radiation 
therapy may be precluded from receiving high doses of radiation 
associated with subsequent external beam radiation therapy, and the 
GammaTile\TM\ technology can also be used to treat tumors that are too 
large for treatment with external beam radiation therapy. According to 
the applicant,

[[Page 58660]]

patients who have been diagnosed with these large tumors are not 
eligible for treatment with external beam radiation therapy because the 
radiation dose to healthy brain tissue would be too high.
    The applicant summarized how the GammaTile\TM\ technology improves 
clinical outcomes compared to existing treatment options, including 
external beam radiation therapy and other forms of brain brachytherapy 
as: (1) Providing a treatment option for patients with no other 
available treatment options; (2) reducing the rate of mortality 
compared to alternative treatment options; (3) reducing the rate of 
radiation necrosis; (4) reducing the need for re-operation; (5) 
reducing the need for additional hospital visits and procedures; and 
(6) providing more rapid beneficial resolution of the disease process 
treatment.
    The applicant cited several sources of data to support these 
assertions. The applicant referenced a paper by Brachman, Dardis et 
al., which was published in the Journal of Neurosurgery on December 21, 
2018.\146\ This study, a follow-up on the progress of 20 patients with 
recurrent previously irradiated meningiomas, is a feasibility or 
superior progression-free survival study comparing the patient's own 
historical control rate against subsequent treatment with 
GammaTile\TM\.
---------------------------------------------------------------------------

    \146\ Brachman, D., et al., ``Resection and permanent 
intracranial brachytherpay using modular, biocompatible cesium-131 
implants: Results in 20 recurrent previously irradiated 
meningiomas,'' J Neurosurgery, December 21, 2018.
---------------------------------------------------------------------------

    An additional source of clinical data is from Gamma Tech's internal 
review of data from two centers treating brain tumors with 
GammaTile\TM\; the two centers are the Barrow Neurological Institute 
(BNI) at St. Joseph's Hospital and St. Joseph's Medical Center, 
Phoenix, AZ, and this internal review is referred to here as the 
``BNI'' study.\147\ The BNI study summarized Gamma Tech's experience 
with the GammaTile\TM\ technology. The applicant also included a 
reference to its updated study, described on ClinicalTrials.gov under 
NCT03088579, which includes 79 recurrent, previously irradiated 
intracranial neoplasms.
---------------------------------------------------------------------------

    \147\ Brachman, D., et al., ``Surgery and Permanent 
Intraoperative Brachytherapy Improves Time to Progress of Recurrent 
Intracranial Neoplasms,'' Society for Neuro-Oncology Conference on 
Meningioma, June 2016.
---------------------------------------------------------------------------

    Another source of data that the applicant cited to support its 
assertions regarding substantial clinical improvement is an abstract by 
Pinnaduwage, D., et al. Also submitted in the application were 
abstracts from 2014 through 2018 in which updates from the progression-
free survival study and the BNI study were presented at specialty 
society clinical conferences. The following summarizes the findings 
cited by the applicant to support its assertions regarding substantial 
clinical improvement.
    Regarding the assertion of local control, the 2018 article which 
was published in the Journal of Neurosurgery found that, with a median 
followup of 15.4 months (range 0.03-47.5 months), there were 2 reported 
cases of recurrence out of 20 meningiomas, with median treatment site 
progression time after surgery and brachytherapy with the GammaTile\TM\ 
precursor and prototype devices not yet being reached, compared to 18.3 
months in prior instances. Median overall survival after resection and 
brachytherapy was 26 months, with 9 patient deaths. In a presentation 
at the Society for Neuro-Oncology in November 2014,\148\ the outcomes 
of 20 patients who were diagnosed with 27 tumors covering a variety of 
histological types treated with the GammaTile\TM\ prototype were 
presented. The applicant noted the following with regard to the 
patients: (1) All tumors were intracranial, supratentorial masses and 
included low and high-grade meningiomas, metastases from various 
primary cancers, high-grade gliomas, and others; (2) all treated masses 
were recurrent following treatment with surgery and/or radiation and 
the group averaged two prior craniotomies and two prior courses of 
external beam radiation treatment; and (3) following surgical excision, 
the prototype GammaTile\TM\ were placed in the resection cavity to 
deliver a dose of 60 Gray to a depth of 5 mm of tissue; and (4) all 
patients had previously experienced regrowth of their tumors at the 
site of treatment and the local control rate of patients entering the 
study was 0 percent.
---------------------------------------------------------------------------

    \148\ Dardis, C., ``Surgery and Permanent Intraoperative 
Brachytherapy Improves Times to Progression of Recurrent 
Intracranial Neoplasms,'' Society for Neuro-Oncology, November 2014.
---------------------------------------------------------------------------

    With regard to outcomes, the applicant stated that, after their 
initial treatment, patients had a median progression-free survival time 
of 5.8 months; post treatment with the prototype GammaTile\TM\, at the 
time of this analysis, only 1 patient had progressed at the treatment 
site, for a local control rate of 96 percent; and median progression-
free survival time, a measure of how long a patient lives without 
recurrence of the treated tumor, had not been reached (as this value 
can only be calculated when more than 50 percent of treated patients 
have failed the prescribed treatment).
    The applicant stated that it received two peer-reviewed awards for 
comprehensive clinical trial reporting on the treatment of 79 recurrent 
brain tumors treated with GammaTile. The applicant provided a recent 
summary presentation titled: ``Surgically Targeted Radiation Therapy: A 
Prospective Trial in 79 Recurrent, Previously Irradiated Intracranial 
Neoplasms'' at The American Brachytherapy Society.\149\ The clinical 
endpoints included time to tumor progression and survival, which the 
applicant stated provided objective, clinically important measures. The 
median local control after GammaTile therapy versus prior treatment was 
12.0 versus 9.5 months for high-grade glioma patients (p=0.13) and 48.8 
months versus 23.3 months for meningioma patients (p=0.01). For the 
metastasis patients, the median local control had not been reached 
versus 5.1 months with prior treatment (p=0.02). The median overall 
survival was 12.0 months for high grade glioma patients, 12.0 months 
for brain metastasis patients, and 49.2 months for the meningioma 
patients. According to the applicant, these data demonstrate dramatic, 
clinically meaningful difference in Kaplan-Meier curves comparing time 
to local recurrence at same site in the same patients. The applicant 
stated that GammaTileTM is significantly outperforming the 
initial therapies attempted in this patient population.
---------------------------------------------------------------------------

    \149\ Brachman D, Youssef E, Dardis C, et al.: Surgically 
Targeted Radiation Therapy: Safety Profile of Collagen Tile 
Brachytherapy in 79 Recurrent, Previously Irradiated Intracranial 
Neoplasms on a Prospective Clinical Trial. Brachytherapy 18 (2019) 
S35-36.
---------------------------------------------------------------------------

    The applicant also cited the findings from Brachman, et al. to 
support local control of recurrent brain tumors. At the Society for 
Neuro-Oncology Conference on Meningioma in June 2016,\150\ a second set 
of outcomes on the prototype GammaTile\TM\ was presented. This study 
enrolled 16 patients with 20 recurrent Grade II or III meningiomas, who 
had undergone prior surgical excision and external beam radiation 
therapy. These patients underwent surgical excision of the tumor, 
followed by adjuvant radiation therapy with the prototype 
GammaTile\TM\. The applicant noted the following outcomes: (1) Of the 
20 treated tumors, 19 showed no evidence of radiographic progression at

[[Page 58661]]

last follow-up, yielding a local control rate of 95 percent; 2 of the 
20 patients exhibited radiation necrosis (1 symptomatic, 1 
asymptomatic); and (2) the median time to failure from the prior 
treatment with external beam radiation therapy was 10.3 months and 
after treatment with the prototype GammaTile\TM\ only 1 patient failed 
at 18.2 months. Therefore, according to the applicant, the median 
treatment site progression-free survival time after the prototype 
GammaTile\TM\ treatment had not yet been reached (average follow-up of 
16.7 months, range 1 to 37 months).
---------------------------------------------------------------------------

    \150\ Brachman, D., et al., ``Surgery and Permanent 
Intraoperative Brachytherapy Improves Time to Progress of Recurrent 
Intracranial Neoplasms,'' Society for Neuro-Oncology Conference on 
Meningioma, June 2016.
---------------------------------------------------------------------------

    A third prospective study was accepted for presentation at the 
November 2016 Society for Neuro-Oncology annual meeting.\151\ In this 
study, 13 patients who were diagnosed with recurrent high-grade gliomas 
(9 with glioblastoma and 4 with Grade III astrocytoma) were treated in 
an identical manner to the cases previously described. Previously, all 
patients had failed the international standard treatment for high-grade 
glioma, a combination of surgery, radiation therapy, and chemotherapy 
referred to as the ``Stupp regimen.'' For the prior therapy, the median 
time to failure was 9.2 months (range 1 to 40 months). After therapy 
with a prototype GammaTile\TM\, the applicant noted the following: (1) 
The median time to same site local failure had not been reached and 1 
failure was seen at 18 months (local control 92 percent); and (2) with 
a median follow-up time of 8.1 months (range 1 to 23 months) 1 
symptomatic patient (8 percent) and 2 asymptomatic patients (15 
percent) had radiation-related MRI changes. However, no patients 
required re-operation for radiation necrosis or wound breakdown. Dr. 
Youssef was accepted to present at the 2017 Society for Neuro-Oncology 
annual meeting, where he provided an update of 58 tumors treated with 
the GammaTile\TM\ technology. At a median whole group follow-up of 10.8 
months, 12 patients (20 percent) had a local recurrence at an average 
of 11.33 months after implant. 6- and 18-month recurrence-free survival 
was 90 percent and 65 percent, respectively. Five patients had 
complications, at a rate that was equal to or lower than rates 
previously published for patients without access to the GammaTile\TM\ 
technology.
---------------------------------------------------------------------------

    \151\ Youssef, E., ``C-131 Implants for Salvage Therapy of 
Recurrent High Grade Gliomas,'' Society for Neuro-Oncology Annual 
Meeting, November 2016.
---------------------------------------------------------------------------

    In support of its assertion of a reduction in radiation necrosis, 
the applicant also included discussion of a presentation by D.S. 
Pinnaduwage, Ph.D., at the August 2017 annual meeting of the American 
Association of Physicists in Medicine. Dr. Pinnaduwage compared the 
brain radiation dose of the GammaTile\TM\ technology with other 
radioactive seed sources. Iodine-125 and palladium-103 were substituted 
in place of the cesium-131 seeds. The study reported findings that 
other radioactive sources reported higher rates of radiation necrosis 
and that ``hot spots'' increased with larger tumor size, further 
limiting the use of these isotopes. The study concluded that the larger 
high-dose volume with palladium-103 and iodine-125 potentially 
increases the risk for radiation necrosis, and the inhomogeneity 
becomes more pronounced with increasing target volume. The applicant 
also cited a presentation by Dr. Pinnaduwage at the August 2018 annual 
meeting of the American Association of Physicists in Medicine, in which 
research findings demonstrated that seed migration in collagen tile 
implantations was relatively small for all tested isotopes, with 
Cesium-13 showing the least amount of seed migration.
    The applicant asserted that, when considered in total, the data 
reported in these presentations and studies and the intermittent data 
presented in their abstracts support the conclusion that a significant 
therapeutic effect results from the addition of GammaTile\TM\ radiation 
therapy to the site of surgical removal. According to the applicant, 
the fact that these patients had failed prior best available treatments 
(aggressive surgical and adjuvant radiation management) presents the 
unusual scenario of a salvage therapy outperforming the current 
standard of care. The applicant noted that follow-up data continues to 
accrue on these patients.
    Regarding the assertion that GammaTile\TM\ reduces mortality, the 
applicant stated that the use of the GammaTile\TM\ technology reduces 
rates of mortality compared to alternative treatment options. The 
applicant explained that studies on the GammaTile\TM\ technology have 
shown improved local control of tumor recurrence. According to the 
applicant, the results of these studies showed local control rates of 
92 percent to 96 percent for tumor sites that had local control rates 
of 0 percent from previous treatment. The applicant noted that these 
studies also have not reached median progression-free survival time 
with follow-up times ranging from 1 to 37 months. Previous treatment at 
these same sites resulted in median progression-free survival times of 
5.8 to 10.3 months.
    The applicant further stated that the use of the GammaTile\TM\ 
technology reduces rates of radiation necrosis compared to alternative 
treatment options. The applicant explained that the rate of symptomatic 
radiation necrosis in the GammaTile\TM\ clinical studies of 5 to 8 
percent is substantially lower than the 26 percent to 57 percent rate 
of symptomatic radiation necrosis requiring re-operation historically 
associated with brain brachytherapy, and lower than the rates reported 
for initial treatment of similar tumors with modern external beam and 
stereotactic radiation techniques. The applicant indicated that this is 
consistent with the customized and ideal distribution of radiation 
therapy provided by the GammaTile\TM\ technology.
    The applicant also asserted that the use of the GammaTile\TM\ 
technology reduces the need for re-operation compared to alternative 
treatment options. The applicant explained that patients receiving a 
craniotomy, followed by external beam radiation therapy or 
brachytherapy, could require re-operation in the following three 
scenarios:
     Tumor recurrence at the excision site could require 
additional surgical removal;
     Symptomatic radiation necrosis could require excision of 
the affected tissue; and
     Certain forms of brain brachytherapy require the removal 
of brachytherapy sources after a given period of time.
    However, according to the applicant, because of the high local 
control rates, low rates of symptomatic radiation necrosis, and short 
half-life of cesium-131, the GammaTile\TM\ technology will reduce the 
need for re-operation compared to external beam radiation therapy and 
other forms of brain brachytherapy.
    Additionally, the applicant stated that the use of the 
GammaTile\TM\ technology reduces the need for additional hospital 
visits and procedures compared to alternative treatment options. The 
applicant noted that the GammaTile\TM\ technology is placed during 
surgery, and does not require any additional visits or procedures. The 
applicant contrasted this improvement with external beam radiation 
therapy, which is often delivered in multiple fractions that must be 
administered over multiple days. The applicant provided an example 
where whole brain radiotherapy (WBRT) is delivered over 2 to 3 weeks, 
while the placement of the GammaTile\TM\ technology occurs during

[[Page 58662]]

the craniotomy and does not add any time to a patient's recovery.
    Based on consideration of all of the previously presented data, the 
applicant believed that the use of the GammaTile\TM\ technology 
represents a substantial clinical improvement over existing 
technologies. We noted in the proposed rule that the clinical data 
submitted as of that time in connection with its application for new 
technology add-on payments for FY 2021 is essentially identical to what 
was submitted in connection with its application for new technology 
add-on payments for FY 2020. As we indicated in previous rulemaking (84 
FR 42260 through 42265), the findings presented appear to be derived 
from relatively small case-studies and not data from clinical trials 
conducted under an FDA-approved investigational device exemption 
application. We noted that the study performed on 74 patients with 79 
tumors was a single-arm and single-institution study, where each 
patient functioned as their own control and the study goal was to 
compare the time to local recurrence after GammaTileTM 
treatment to the time of local recurrence after initial treatment of 
intracranial tumors. That is, the control arm were patients treated for 
initial intracranial brain tumors, and the treatment arm or the 
GammaTileTM treatment arm were the same control patients now 
experiencing local recurrent intracranial brain tumors in the same site 
with the same brain tumor type. In this clinical trial, the applicant 
compared the time from initial treatment to first local recurrence 
(control arm) vs. time from GammaTileTM treatment of first 
local recurrence to second local recurrence of the same brain tumor 
site and tumor type. There was a statistically significant difference 
between the control arm treatment and GammaTileTM treatment 
for patients with recurrent meningioma and brain metastases and no 
statistically significant difference between the control arm treatment 
and GammaTileTM treatment for patients with recurrent high-
grade glioma.
    We stated in the proposed rule that we continue to have concerns 
that, while the applicant described increases in median time to disease 
recurrence for certain intra-cranial tumors (in a small number of 
patients with different histologies) in support of clinical 
improvement, the lack of analysis, meta-analysis, or statistical tests 
indicates that the clinical efficacy and safety data for seeded 
brachytherapy is limited. While we acknowledged the difficulty in 
establishing randomized control groups in studies involving recurrent 
brain tumors, we stated that we are concerned that GammaTile\TM\ 
technology does not represent a substantial clinical improvement over 
existing therapies and requires additional clinical data to demonstrate 
substantial clinical improvement. We noted that the applicant has 
stated its intention to provide additional clinical data and 
information in connection with its application for new technology add-
on payments for FY 2021, potentially including an update on patient 
outcomes from the completed clinical trial (ClinicalTrials.gov, 
NCT03088579), additional clinical data from early adopting locations, 
and additional meta-analysis to address the concerns previously raised 
by CMS.
    We invited public comments on whether the GammaTile TM 
technology meets the substantial clinical improvement criterion.
    Comment: The applicant submitted a comment providing additional 
clinical data and information to support a determination of substantial 
clinical improvement, including updated clinical data from the pivotal 
clinical trial on GammaTile TM, additional clinical data 
from early adopting clinical locations, and results from a systematic 
literature review, meta-analyses, and analyses of historic controls. 
The applicant submitted new data and analyses as evidence to support 
GammaTile TM's substantial clinical improvement for the 
treatment of three types of brain tumors: Recurrent high-grade gliomas; 
recurrent meningiomas; and recurrent metastatic brain tumors. According 
to the applicant, the single arm pivotal clinical trial on GammaTile 
TM limited enrollment to patients who were unable to receive 
other forms of radiation therapy.
    The applicant included new data to show substantial clinical 
improvement using GammaTile TM for recurrent high-grade 
gliomas. They reported updated data from the pivotal trial 
demonstrating a median overall survival (OS) of 16.7 months and a 
median progression free survival (PFS) of 12.9 months for 40 patients 
with high-grade gliomas receiving GammaTile TM plus 
bevacizumab, with a mean follow-up time of 10.7 months. The applicant 
also reported results from a meta-analysis comparing median overall 
survival for recurrent high-grade gliomas with a range of comparators, 
and noted the median OS using GammaTile TM plus bevacizumab, 
external beam radiotherapy plus bevacizumab, bevacizumab, resection, 
Optune[supreg], and best supportive care were 16.7 months, 10.1 months, 
9.7 months, 7.3 months, 6.6 months, and 4.8 months, respectively. The 
applicant stated there was a statistically significant difference for 
GammaTile TM plus bevacizumab versus surgical resection 
alone (p<0.001), as well as for GammaTile TM plus 
bevacizumab versus best supportive care (p<0.001). The applicant noted 
there was insufficient publicly available information to perform 
statistical comparisons of GammaTile TM plus bevacizumab 
versus either external beam radiotherapy plus bevacizumab or 
bevacizumab alone.\152\ The applicant also conducted a systematic 
literature review and selected a total of 16 articles with 695 patients 
for analysis. According to the applicant, the literature review and 
meta-analysis included a total of nine articles involving the treatment 
of recurrent high-grade gliomas in 522 patients. Of these nine studies, 
three utilized interstitial high-dose rate brachytherapy (HDR), one 
utilized interstitial low-dose rate brachytherapy (LDR), one utilized 
intracavitary HDR, and four utilized intracavitary LDR techniques. The 
applicant stated it could not perform statistical analyses on these 
outcomes due to the small number of studies and inconsistent reporting 
of OS and PFS. According to the applicant, the pooled meta-analysis for 
high-grade gliomas showed the mean rate of radiation necrosis requiring 
surgical intervention using traditional brachytherapy was 3.0 percent 
(standard error [SE]=1.0 percent),\153\ whereas in the pivotal trial 
involving GammaTile TM, 0 percent of patients treated with 
GammaTile TM for recurrent glioblastoma reported radiation 
necrosis requiring surgical intervention.\154\
---------------------------------------------------------------------------

    \152\ Brachman D, Nakaji P, Smith K, et al. Resection and 
Surgically Targeted Radiation Therapy for Treatment of Recurrent 
GBM. (submitted to the 2021 American Association of Neurological 
Surgeons (AANS) Annual Scientific Meeting).
    \153\ Choi M, Zabramski, JM. Re-irradiation Using Brachytherapy 
for Recurrent Intracranial Tumors: A Systematic Review and Meta-
analysis of the Literature. (submitted to Cureus).
    \154\ Brachman D, Nakaji P, Smith K, et al. Resection and 
Surgically Targeted Radiation Therapy for Treatment of Recurrent 
GBM. (submitted to the 2021 American Association of Neurological 
Surgeons (AANS) Annual Scientific Meeting).
---------------------------------------------------------------------------

    The applicant cited two abstracts submitted to the 2020 annual 
Congress of Neurological Surgeons and 2020 annual meeting of the 
Society for Neuro-Oncology to report updated data on GammaTile 
TM treatment for recurrent meningiomas. According to the 
applicant, the updated data from the single arm pivotal clinical trial 
on GammaTile TM with a median follow-up of 25 months 
demonstrated a 6-month

[[Page 58663]]

PFS rate of 100 percent for the 28 patients with 35 recurrent, 
previously-irradiated meningioma tumors treated with surgical resection 
plus GammaTile TM treatment. Additionally, the applicant 
asserted that the 3-year PFS rate matches the 2-year PFS rate (72 
percent and 72 percent, respectively) for the patients included in the 
trial. The applicant noted that median time to progression had not been 
reached (95 percent CI > 35.6 months).\155\ The applicant also noted 
that individuals with recurrent meningioma tumors treated with 
chemotherapeutic agents without radiation have a 6-month PFS rate of 26 
percent,\156\ and those who received stereotactic radiosurgery have 3-
year PFS of 55%.\157\ The applicant stated GammaTile TM 
treatment provides a substantial clinical improvement for recurrent 
meningioma tumors over existing treatment options considering the 
differences between reported 6-month, 2-year, and 3-year PFS rates.
---------------------------------------------------------------------------

    \155\ Rogers L, Nakaji P, Youssef E, et al. Resection and 
Surgically Targeted Radiation Therapy for Initial or Salvage 
Treatment of Aggressive Meningioma: Results from a Prospective 
Trial. (submitted to the 2020 Congress of Neurological Surgeons 
(CNS) Annual Meeting); Rogers L, Nakaji P, Youssef E, et al. A 
Prospective Trial of Resection and Surgically Targeted Radiation 
Therapy for Initial or Salvage Treatment of Aggressive Meningioma. 
(submitted to the 2020 Society for Neuro-Oncology (SNO) Annual 
Meeting).
    \156\ Kaley T, Barani I, Chamberlain M, et al. Historical 
Benchmarks for Medical Therapy Trials in Surgery- and Radiation-
Refractory Meningioma: A RANO Review. Neuro Oncol. 2014;16:829-40.
    \157\ Kim M, Lee DH, Kim Rn HJ, et al. Analysis of the results 
of recurrent intracranial meningiomas treated with re-radiosurgery. 
Clin Neurol Neurosurg. 2017;153:93-101.
---------------------------------------------------------------------------

    The applicant noted that in the update of the GammaTile 
TM pivotal trial which included 29 recurrent meningiomas, 
there were statistically significant improvements in treatment site 
local control achieved with resection plus GammaTile TM 
versus the prior most recent treatments in the same patients. The 
applicant stated local control at 24 months was 51.7 percent with prior 
treatment versus 89.7 percent with GammaTile TM (hazard 
ratio [HR]=0.2 [p=0.0008]).\158\ The applicant noted that the pivotal 
trial showed significant improvement in prognosis for patients with 
recurrent meningiomas. According to the applicant, the Cox's regression 
comparing the time-to-progression of the prior therapy to that of the 
GammaTile TM therapy produced a log-rank test with a p-value 
of 0.0008. The applicant stated that the median time to progression was 
18.3 months in the prior period, but with a median study follow-up time 
of 15.4 months and only 2 failures, the median time to progression in 
the GammaTile TM period had not been reached, nor was it 
close.\159\ According to the applicant, it performed a pooled meta-
analysis of 16 articles with 695 patients, and included four articles 
involved in the treatment of recurrent meningioma tumors in 87 
patients. The applicant stated that results from the meta-analysis 
showed a mean rate of radiation necrosis of 17.3 percent (SE=5.0 
percent) and a mean rate of radiation necrosis requiring surgical 
intervention of 11.9 percent (SE=5.3 percent),\160\ whereas in the 
pivotal trial involving treatment of recurrent meningioma using 
GammaTile TM, 6% of patients had radiation necrosis and 0 
percent of patients had radiation necrosis requiring surgical 
intervention.\161\
---------------------------------------------------------------------------

    \158\ Rogers L, Nakaji P, Youssef E, et al. Resection and 
Surgically Targeted Radiation Therapy for Initial or Salvage 
Treatment of Aggressive Meningioma: Results from a Prospective 
Trial. (submitted to the 2020 Congress of Neurological Surgeons 
(CNS) Annual Meeting); Rogers L, Nakaji P, Youssef E, et al. A 
Prospective Trial of Resection and Surgically Targeted Radiation 
Therapy for Initial or Salvage Treatment of Aggressive Meningioma. 
(submitted to the 2020 Society for Neuro-Oncology (SNO) Annual 
Meeting).
    \159\ Rogers L, Nakaji P, Youssef E, et al. Resection and 
Surgically Targeted Radiation Therapy for Initial or Salvage 
Treatment of Aggressive Meningioma: Results from a Prospective 
Trial. (submitted to the 2020 Congress of Neurological Surgeons 
(CNS) Annual Meeting); Rogers L, Nakaji P, Youssef E, et al. A 
Prospective Trial of Resection and Surgically Targeted Radiation 
Therapy for Initial or Salvage Treatment of Aggressive Meningioma. 
(submitted to the 2020 Society for Neuro-Oncology (SNO) Annual 
Meeting).
    \160\ Choi M, Zabramski, JM. Re-irradiation Using Brachytherapy 
for Recurrent Intracranial Tumors: A Systematic Review and Meta-
analysis of the Literature. (submitted to Cureus).
    \161\ Rogers L, Nakaji P, Youssef E, et al. Resection and 
Surgically Targeted Radiation Therapy for Initial or Salvage 
Treatment of Aggressive Meningioma: Results from a Prospective 
Trial. (submitted to the 2020 Congress of Neurological Surgeons 
(CNS) Annual Meeting); Rogers L, Nakaji P, Youssef E, et al. A 
Prospective Trial of Resection and Surgically Targeted Radiation 
Therapy for Initial or Salvage Treatment of Aggressive Meningioma. 
(submitted to the 2020 Society for Neuro-Oncology (SNO) Annual 
Meeting).
---------------------------------------------------------------------------

    The applicant cited two abstracts submitted to the 2020 annual 
meeting of the Society for Neuro-Oncology Metastases and 2020 annual 
Congress of Neurological Surgeons as well as an unpublished manuscript 
submitted to World Neurosurgery to report updated data on GammaTile 
TM treatment for recurrent brain metastases. The applicant 
reported updated data from the single arm pivotal clinical trial on 
GammaTile TM for 12 previously-irradiated brain metastases 
treated with surgery and re-irradiation via permanently implanted 
GammaTile TM brachytherapy. The applicant reported that, 
with a median follow-up of 9.5 months, the median time to progression 
after the prior standard of care treatments was 4.8 months (95 percent 
CI; 1.9-22.0 months) and has not yet been reached after GammaTile 
TM therapy (95 percent CI gives a lower limit of at least 
10.9 months). The applicant stated that when looking at all patients by 
tumor size, Kaplan-Meier estimated local control at 1 year for all 
tumors, tumors <2.5 cm, and >2.5 cm was 83 percent, 100 percent, and 75 
percent, respectively. The applicant stated that with site-level 
frailty term, the HR=0.052 (p=0.0073; 95 percent CI = 0.006-0.452). 
Following a systematic review of the clinical literature, the applicant 
cited an MD Anderson Cancer Center postoperative resection cavity 
study, which evaluated 64 patients with completed resected brain 
metastases who were randomized to stereotactic radiosurgery (SRS) 
versus observation, at median follow-up of 11.1 months. According to 
the applicant, in the SRS arm, 1-year local control for all metastases, 
small metastases (<2.5cm), and large metastases (>2.5cm) were 72 
percent, 91 percent, and 40-46 percent, respectively.\162\ The 
applicant asserted that compared to the MD Anderson Cancer Center 
study, which was a primary cited example in guidance from the RANO 
Brain Metastases Working Group, GammaTile TM treatment 
offers a clear and substantial clinical improvement.
---------------------------------------------------------------------------

    \162\ Mahajan A, Ahmed S, McAleer MF, et al. Post-Operative 
Stereotactic Radiosurgery versus Observation for Completely Resected 
Brain Metastases: A Single-Centre, Randomised, Controlled, Phase 3 
Trial. Lancet Oncol. 2017;18:1040-1048; Alexander BM, Brown PD, 
Ahluwalia MS, et al. Clinical Trial Design for Local Therapies for 
Brain Metastases: A Guideline by the Response Assessment in Neuro-
Oncology Brain Metastases Working Group. Lancet Oncol. 2018;19:e33-
e42.
---------------------------------------------------------------------------

    According to the applicant, it performed a pooled meta-analysis of 
16 articles with 695 patients, and included three articles involved in 
the treatment of recurrent brain metastases in 86 patients. The 
applicant stated it could not perform statistical analyses on these 
outcomes due to the small number of studies and inconsistent reporting 
of PFS and OS. The applicant stated that results from the meta-analysis 
showed mean rates of symptomatic radiation necrosis and radiation 
necrosis requiring surgical intervention of 22.4 percent (SE=7.0 
percent) and 10.0 percent (SE=7.3 percent), respectively,\163\ whereas 
in the pivotal trial involving GammaTile TM, 8 percent and 0 
percent of patients treated with

[[Page 58664]]

GammaTile TM for recurrent brain metastases reported 
symptomatic radiation necrosis and radiation necrosis requiring 
surgical intervention, respectively.\164\
---------------------------------------------------------------------------

    \163\ Choi M, Zabramski, JM. Re-irradiation Using Brachytherapy 
for Recurrent Intracranial Tumors: A Systematic Review and Meta-
analysis of the Literature. (submitted to Cureus).
    \164\ Brachman D, Nakaji P, Smith K, et al. A Prospective Trial 
of Resection Plus Surgically Targeted Radiation Therapy for Brain 
Metastasis. (accepted to 2020 Society for Neuro-Oncology (SNO) 
Metastasis Annual Meeting; Nakaji P, Youssef E, Smith K, et al. A 
Prospective Trial of Resection Plus Surgically Targeted Radiation 
Therapy for Brain Metastasis. (submitted to the 2020 Congress of 
Neurological Surgeons (CNS) Annual Meeting); Nakaji P, Smith K, 
Youssef E, et al. A Prospective Trial of Resection Plus Surgically 
Targeted Radiation Therapy for Brain Metastasis. (submitted to World 
Neurosurgery).
---------------------------------------------------------------------------

    The applicant noted that in the update of the GammaTile 
TM pivotal trial which included 12 recurrent brain 
metastases, there were statistically significant improvements in 
treatment site local control achieved with resection plus GammaTile 
TM versus the prior most recent treatments in the same 
patients. The applicant stated local control at 6 months was 41.7 
percent with prior treatment versus 100 percent with resection plus 
GammaTile TM; at 12 months, local control was 33.3 percent 
with prior treatment versus 83.3 percent with resection plus GammaTile 
TM (HR=0.052 [p = 0.0073]).\165\ The applicant noted that 
the pivotal trial showed significant improvement in prognosis for 
patients with recurrent brain metastases. According to the applicant, 
the Cox's regression comparing the time-to-progression of the prior 
therapy to that of the GammaTile TM therapy produced a log-
rank test with a p-value of 0.0073. The applicant stated that the 
median time to progression was 4.8 months in the prior period, but with 
a median study follow-up time of 9.5 months and only 1 failure, the 
median time to progression in the GammaTile TM period had 
not been reached, nor was it close.\166\
---------------------------------------------------------------------------

    \165\ Brachman D, Nakaji P, Smith K, et al. A Prospective Trial 
of Resection Plus Surgically Targeted Radiation Therapy for Brain 
Metastasis. (accepted to 2020 Society for Neuro-Oncology (SNO) 
Metastasis Annual Meeting; Nakaji P, Youssef E, Smith K, et al. A 
Prospective Trial of Resection Plus Surgically Targeted Radiation 
Therapy for Brain Metastasis. (submitted to the 2020 Congress of 
Neurological Surgeons (CNS) Annual Meeting); Nakaji P, Smith K, 
Youssef E, et al. A Prospective Trial of Resection Plus Surgically 
Targeted Radiation Therapy for Brain Metastasis. (submitted to World 
Neurosurgery).
    \166\ Brachman D, Nakaji P, Smith K, et al. A Prospective Trial 
of Resection Plus Surgically Targeted Radiation Therapy for Brain 
Metastasis. (accepted to 2020 Society for Neuro-Oncology (SNO) 
Metastasis Annual Meeting; Nakaji P, Youssef E, Smith K, et al. A 
Prospective Trial of Resection Plus Surgically Targeted Radiation 
Therapy for Brain Metastasis. (submitted to the 2020 Congress of 
Neurological Surgeons (CNS) Annual Meeting); Nakaji P, Smith K, 
Youssef E, et al. A Prospective Trial of Resection Plus Surgically 
Targeted Radiation Therapy for Brain Metastasis. (submitted to World 
Neurosurgery).
---------------------------------------------------------------------------

    The applicant stated that it conducted a survey of 27 early 
adopters at 14 institutions who were involved in 51 commercial cases 
involving use of the GammaTile TM device for treatment of 
recurrent brain tumors. The applicant asserted that the survey reported 
an overall adverse event/complication rate occurring during the 30 days 
following surgery of 3.8 percent, below the expected complication rate 
ranging from 9-40 percent that has been reported for intracranial 
neoplasm surgery.\167\
---------------------------------------------------------------------------

    \167\ Brachman DG, Youssef E, Dardis CJ, et al. Resection and 
Permanent Intracranial Brachytherapy Using Modular, Biocompatible 
Cesium-131 Implants: Results in 20 Recurrent, Previously Irradiated 
Meningiomas. J Neurosurg. 2018;131:1819-1828; Ferreira C, Parham A, 
Chen C, et al. First Experience with GammaTile Permanent Implants 
for Recurrent Brain Tumors. Neuro-Oncology. 2019;i:216; Wong JM, 
Panchmatia JR, Ziewacz JE, et al. Patterns in Neurosurgical Adverse 
Events: Intracranial Neoplasm Surgery. Neurosurg Focus. 2012;33:E16; 
Brachman D, Youssef E, Dardis C, et al. Surgically Targeted 
Radiation Therapy: Safety Profile of Collagen Tile Brachytherapy in 
79 Recurrent, Previously Irradiated Intracranial Neoplasms on a 
Prospective Clinical Trial. Brachytherapy, An International 
Multidisciplinary Journal. 2019;18:S35-S36.
---------------------------------------------------------------------------

    The applicant also claimed that GammaTile TM therapy 
provides a substantial clinical improvement because use of GammaTile 
TM therapy leads to a substantially decreased number of 
future visits to radiation oncology centers and to more rapid 
resolution of adjuvant radiation therapy treatment. According to the 
applicant, as the only truly available adjuvant radiation therapy for 
recurrent brain tumors that can be administered at the time of surgical 
excision, GammaTile TM provides individuals access to 
adjuvant radiation therapy who otherwise are unable or unlikely to 
return for multiple follow-up visits for other forms of radiation 
therapy. According to the applicant, this substantial clinical 
improvement is critically important for many Medicare beneficiaries who 
live in distant rural areas and individuals in low-income households 
who are unlikely to return for follow-up due to socio-economic factors, 
and for individuals who are fearful or at high-risk if exposed to 
COVID-19 while traveling on public transportation, staying in hotels, 
or otherwise participating in follow-up radiation therapy visits.
    The applicant further stated that CMS data demonstrates the unique 
ICD-10-PCS code for GammaTileTM that maps to MS-DRG 023 
results in significantly more reimbursement for large, urban academic 
institutions as compared to smaller, community-based non-academic 
hospitals. The applicant asserted that approving new technology add-on 
payments for GammaTileTM will enable adoption in community 
and non-urban hospitals, improving both access to care and outcomes for 
patients by leveling the playing field for all institutions.
    Other commenters expressed their support for GammaTileTM 
meeting the substantial clinical improvement criterion. Several 
commenters noted that GammaTileTM provides a safe and 
effective treatment option for a patient population that is in great 
need of new treatment options, especially given that individuals with 
recurrent brain cancer often are poor candidates for other forms of 
repeat same-site irradiation. Several commenters stated there was a 
growing body of evidence confirming that GammaTileTM therapy 
is well tolerated and improves local tumor control and survival.
    Some commenters stated their direct experience with 
GammaTileTM therapy has been positive, and that they have 
seen lower complication rates than would otherwise be expected in these 
complex patients who are at higher risk for complications due to their 
prior treatments. A commenter referenced studies demonstrating the 
clinical outcomes involving the recurrent tumor (treated with 
GammaTileTM) exceeded the outcomes achieved during the prior 
attempt to treat the tumor in the same patient. The commenter noted the 
superior outcomes with GammaTileTM occurred despite the fact 
that recurrent tumors are known to be more aggressive and faster 
moving, and also despite the fact that the patients were older at the 
time of recurrence.
    Some commenters suggested that GammaTileTM therapy 
reduces the physical and financial burden of treatment for brain tumor 
patients by reducing the number of physician visits required for 
radiation therapy. Some commenters also noted that the ``one-and-done'' 
aspect of GammaTileTM therapy reduces caregiver burden and 
provides a radiation treatment option that minimizes the need for 
exposure to other individuals during travel and participation in 
follow-up visits, which is especially important during the ongoing 
COVID-19 public health emergency. Several commenters asserted that 
GammaTileTM therapy ensures 100 percent patient compliance 
since it is implanted at the time of surgery. A commenter noted their 
support for patient access to GammaTileTM because of the 
large proportion of their cancer center patients who travel well over 
an hour from their home to receive post-

[[Page 58665]]

resection radiation treatments, and having to travel that far has a 
negative impact on patient compliance.
    Response: We thank the commenters for their comments, including the 
updated data and additional analyses provided by the applicant to 
address the concerns discussed in the proposed rule.
    After further review, including review of the additional clinical 
data and information submitted by the applicant, CMS continues to have 
concerns with respect to whether GammaTileTM meets the 
substantial clinical improvement criterion for approval for new 
technology add-on payments. While the updated pivotal trial data 
provided by the applicant in its comment compared the treatment of the 
recurrent tumor with GammaTileTM to the prior most recent 
treatments in the same patients for all three tumor types, we have 
concerns that a primary tumor and tumor recurrence may not be 
comparable diseases and therefore question whether the pivotal trial 
data is appropriate for the purposes of evaluating substantial clinical 
improvement. Furthermore, the applicant provided data from abstracts 
and an unpublished manuscript submitted for publication to report 
updated data on the GammaTileTM pivotal trial for recurrent 
meningiomas and recurrent brain metastases, but did not provide 
statistical data or meta-analyses that demonstrate significant efficacy 
of GammaTileTM when compared to conventional radiation 
therapy. The applicant also performed a meta-analysis for each of the 3 
cancer sub-types, which showed the only improvement in overall survival 
for patients treated with GammaTileTM was for those with 
high-grade gliomas when treated in combination with bevacizumab when 
compared to surgery alone, but not other modalities. The meta-analyses 
looking at recurrent meningiomas and recurrent brain metastases did not 
show statistically significant improvements in clinical outcomes. 
Furthermore, the authors of the systematic literature review and meta-
analyses noted the limitations of the study, including the small number 
of studies available on same site reirradiation using brachytherapy for 
recurrent brain tumors. Moreover, the vast majority of studies included 
in the literature review and meta-analyses included no randomization 
and no control group in their study designs. While the applicant 
provided summary results for the meta-analyses showing outcomes for 
GammaTileTM when compared to existing treatments (as well as 
the studies used), we have concerns that we are unable to determine 
superiority for GammaTileTM without any data analysis and 
methods for these meta-analyses.
    After review of all data received to date, we continue to have the 
same concerns as noted in the FY 2020 final rule and the FY 2021 
proposed rule, discussed previously. Therefore, based on the 
information stated above, we are unable to make a determination that 
GammaTileTM technology represents a substantial clinical 
improvement over existing therapies, and we are not approving new 
technology add-on payments for the GammaTileTM for FY 2021.
g. Hemospray[supreg] Endoscopic Hemostat
    Cook Medical submitted an application for new technology add-on 
payments for the Hemospray [supreg] Endoscopic Hemostat (Hemospray) for 
FY 2021. According to the applicant, Hemospray is indicated by the FDA 
for hemostasis of nonvariceal gastrointestinal bleeding. Using an 
endoscope to access the gastrointestinal tract, the Hemospray delivery 
system is passed through the accessory channel of the endoscope and 
positioned just above the bleeding site without making contact with the 
GI tract wall. The Hemospray powder, bentonite, is propelled through 
the application catheter, either a 7 or 10 French polyethylene 
catheter, by release of CO2 from the cartridge located in 
the device handle and sprayed onto the bleeding site. According to the 
applicant, bentonite can rapidly absorb 5 to 10 times its weight in 
water and swell up to 15 times its dry volume, becoming cohesive to 
itself and adhesive to tissue forming a physical barrier to aqueous 
fluid (for example, blood). Hemospray powder is not absorbed by the 
body and does not require removal as it passes through the GI tract 
within 72 hours. Hemospray is single-use and disposable.
    According to the applicant, current standard of care hemostatic 
modalities used for the management of nonvariceal gastrointestinal 
bleeding have a failure rate of 8 to 15 percent and a rebleeding rate 
of 10 to 25 percent, or worse, depending on patient etiology and 
morbidity.\168\ The applicant asserted that the risk of morbidity, 
mortality, and rebleeding can be predicted using validated scoring 
methods such as the Rockall Score (RS).\169\ Cancerous lesions, which 
are more frequently identified as a result of advances in locating and 
determining the cause of bleeding,\170\ have lower rates of hemostasis 
(as low as 40 percent), with higher recurrent bleeding rates (over 50 
percent within 1 month), with high 3 month mortality.\171\ \172\ 
Continued bleeding that is not controlled by conventional techniques, 
or recurrent bleeding from the same lesion, may be treated by repeated 
attempts at endoscopic hemostasis, interventional radiology hemostasis 
(IRH) with guided transarterial embolization (TAE), or surgery.\173\ 
According to the applicant, a recent systematic review found minimally 
invasive rescue options like TAE had re-bleeding rates that were higher 
than those from surgery with no significant difference in 
mortality.\174\ According to the applicant, patients who are not 
surgical candidates have very few options for ``rescue'' when 
conventional hemostasis techniques fail.
---------------------------------------------------------------------------

    \168\ Lau J, Barkun A, Fan D, Kuipers E, Yang Y, Chan F. 
Challenges in the management of acute peptic ulcer bleeding. Lancet 
2013; 381: 2033-43.
    \169\ Mokhtare M, Bozorgi V, Agah S et al. Comparison of 
Glasgow-Blatchford score and full Rockall score systems to predict 
clinical outcomes in patients with upper gastrointestinal bleeding. 
Clin. Exp. Gastroenterol. 2016; 9: 337-43.
    \170\ Heller SJ, Tokar JL, Nguyen MT, et al. Management of 
bleeding GI tumors. Gastrointest Endosc 2010;72:817-24.
    \171\ Kim YI, Choi IJ, Cho SJ, et al. Outcome of endoscopic 
therapy for cancer bleeding in patients with unresectable gastric 
cancer. J Gastroenterol Hepatol 2013;28:1489-95.
    \172\ Roberts SE, Button LA, Williams JG. Prognosis following 
upper gastrointestinal bleeding. PLoS One 2012;7:e49507.
    \173\ Lau JY, Sung JJ, Lam YH, et al. Endoscopic retreatment 
compared with surgery in patients with recurrent bleeding after 
initial endoscopic control of bleeding ulcers. N Engl J Med 1999; 
340: 751-756.
    \174\ Beggs AD, Dilworth MP, Powell SL, et al. A systematic 
review of transarterial embolization versus emergency surgery in 
treatment of major nonvariceal upper gastrointestinal bleeding. Clin 
Exp Gastroenterol 2014; 7: 93-104.
---------------------------------------------------------------------------

    The applicant asserted that, in addition to increased morbidity and 
mortality, the financial impact of failure to achieve hemostasis is 
considerable. Based on a retrospective claims analysis by the applicant 
of the 2012 MedPAR file and the Provider of Services file, 13,501 cases 
were identified which showed all-cause mortality for patients requiring 
more than 1 endoscopy (6%), IRH (9%), or surgery (14%) was 
significantly higher than for patients requiring only 1 endoscopy 
(3%).\175\ The median hospital costs for these patients were 
considerable, with costs for patients requiring over 1 endoscopy of 
$20,055, for patients requiring IRH of $34,730, and for patients 
requiring surgery of $47,589. According to the applicant, Hemospray is 
an alternative to IRH and surgery and the applicant

[[Page 58666]]

asserts it would avoid the costs associated with these procedures.
---------------------------------------------------------------------------

    \175\ Roy A, Kim M, Hawes R, Varadarajulu S. The clinical and 
cost implications of failed endoscopic hemostasis in gastroduodenal 
ulcer bleeding. UEG Journal 2017; 5(3): 359-364.
---------------------------------------------------------------------------

    With respect to the newness criterion, the applicant for Hemospray 
was granted a FDA de novo classification request on May 7, 2018. The 
applicant stated revisions to the instructions for use were required by 
the FDA and therefore the device was not commercially available until 
July 1, 2018. The FDA has classified Hemospray as a Class II device for 
intraluminal gastrointestinal use. The applicant submitted a request 
for approval for a unique ICD-10-PCS code for the administration of 
Hemospray beginning in FY 2021 and was granted approval for the 
following procedure codes: XW0G886 (Introduction of mineral-based 
topical hemostatic agent into upper GI, via natural or artificial 
opening endoscopic, new technology group 6) and XW0H886 (Introduction 
of mineral-based topical hemostatic agent into lower GI, via natural or 
artificial opening endoscopic, new technology group 6).
    According to information submitted by the applicant, Cook Medical 
recalled Hemospray [supreg] Endoscopic Hemostat due to complaints 
received that the handle and/or activation knob on the device in some 
cases has cracked or broken when the device is activated and in some 
cases has caused the carbon dioxide cartridge to exit the handle. The 
applicant stated that Cook Medical received 1 report of a superficial 
laceration to the user's hand that required basic first aid; however, 
there have been no reports of laceration, infection, or permanent 
impairment of a body structure to users or to patients due to the 
carbon dioxide cartridge exiting the handle. The applicant stated that 
Cook Medical initiated an investigation to determine the appropriate 
corrective action(s) to prevent recurrence of this issue. According to 
the applicant, although the recall did restrict availability of the 
device, they wished to continue their application for new technology 
add-on payment as they believe the use of Hemospray significantly 
improves clinical outcomes for certain patient populations compared to 
currently available treatments.
    As discussed earlier, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would not be considered ``new'' 
for purposes of new technology add-on payments. The applicant 
identified three treatment options currently available for the 
treatment of bleeding of the gastrointestinal system, which were 
thermal modalities, injection needles, and mechanical modalities. The 
applicant stated that thermal modalities are those endoscopic methods 
that treat gastrointestinal hemorrhage by means of bipolar 
electrocautery, hemostatic graspers, and argon plasma coagulation. 
These devices generate heat resulting in edema, coagulation of tissue 
protein, and contraction of vessels and indirect activation of the 
coagulation cascade. The applicant stated that injection needles treat 
gastrointestinal hemorrhage through the injection of various materials 
including epinephrine, saline, histoacryl, ethanolamine, and ethanol. 
This method achieves hemostasis by both mechanical tamponade and 
cytochemical mechanisms.\176\ The applicant stated that mechanical 
modalities including hemostatic endoclips, detachable loop ligators and 
multi-band ligators control gastrointestinal hemorrhage by applying 
mechanical pressure to the bleeding site. The applicant claimed these 
treatment options (thermal modalities, injection needles, and 
mechanical modalities) are insufficient in achieving hemostasis as 
evidenced by rates of failed hemostasis of 8 to 15 percent.\177\ The 
applicant stated that all the current treatments result in injury to 
the tissue, which in some cases can result in a worsening of the 
severity of the bleeding or perforation. Furthermore, it stated that 
with the exception of argon plasma coagulation, the current hemostatic 
modalities require precise targeting of the source of the bleed, which 
may limit their utility when diffuse or non-precise bleeding occurs. 
According to the applicant, the primary benefit of all endoscopic 
hemostasis procedures, including Hemospray, is the achievement of 
hemostasis without conversion to interventional radiology or surgery, 
both of which carry higher risk of mortality and morbidity.\178\
---------------------------------------------------------------------------

    \176\ ASGE, The role of endoscopy in the management of acute 
non-variceal upper GI bleeding, Gastrointestinal Endoscopy. 2012; 
75(6): 1132-1138.
    \177\ Lau J, Barkun A, Fan D, Kuipers E, Yang Y, Chan F. 
Challenges in the management of acute peptic ulcer bleeding. Lancet 
2013; 381: 2033-43.
    \178\ Beggs AD, Dilworth MP, Powell SL, et al. A systematic 
review of transarterial embolization versus emergency surgery in 
treatment of major nonvariceal upper gastrointestinal bleeding. Clin 
Exp Gastroenterol 2014; 7: 93-104.
---------------------------------------------------------------------------

    With regard to the first criterion, whether a product uses the same 
or similar mechanism of action to achieve a therapeutic outcome, the 
application asserted that Hemospray is a novel device in which the 
mechanism of action differs from alternative treatments by creating a 
diffuse mechanical barrier over the site of bleeding with a non-
thermal, non-traumatic, noncontact modality.
    With respect to the second criterion, whether a product is assigned 
to the same or different MS-DRG, the applicant did not specifically 
comment. The applicant stated that cases involving the use of Hemospray 
would span a wide variety of MS-DRGs, but that the technology would 
most likely be used for cases in MS-DRGs 377, 378, and 379 (G.I. 
Hemorrhage with MCC, with CC, and without CC/MCC, respectively). We 
believe that cases involving the use of the technology would be 
assigned to the same MS-DRG as cases involving the current standard of 
care treatments.
    With respect to the third criterion, whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, we noted that the 
applicant also did not comment specifically on this criterion. However, 
we noted that we believed that this technology would be used to treat 
the same or similar type of disease and the same or similar patient 
population as the current standard of care treatments.
    Based on the applicant's statements as summarized previously, the 
applicant believed that Hemospray was not substantially similar to 
other currently available therapies and/or technologies and met the 
``newness'' criterion. However, we stated in the proposed rule that we 
were concerned that the mechanism of action of Hemospray may be similar 
to existing endoscopic hemostatic treatments. Specifically, we noted 
that as described in literature provided by the applicant, technologies 
such as Ankaferd Bloodstopper and EndoClot Polysaccharide Hemostatic 
System appeared to utilize a similar mechanism of action as Hemospray 
to achieve hemostasis.\179\ Based on the literature provided by the 
applicant, EndoClot, a device developed in California, USA, ``. . . 
consists of absorbable modified polymer . . . [which is] biocompatible, 
non-pyogenic, and starch-derived compound that rapidly absorbs water 
from serum and concentrates platelets, red blood cells, and coagulation 
proteins at the bleeding site to accelerate the clotting cascade.'' 
\180\ EndoClot received 510(k) premarket notification January 18, 2017 
and is indicated by the FDA to assist the delivery of a powdered 
hemostatic agent to the treatment site in endoscopic

[[Page 58667]]

surgeries. Therefore, we were concerned with the similarity of this 
mechanism of action. Moreover, as previously noted, the applicant 
asserted generally it did not meet the substantial similarity criteria, 
but did not specifically address the second and third substantial 
similarity criteria. We believed that cases involving the use of the 
Hemospray would be assigned to the same MS-DRG as cases involving the 
current standard of-care treatments and that the technology would be 
used to treat the same or similar type of disease and the same or 
similar patient population as the current standard-of-care treatments. 
We invited public comments on whether Hemospray is substantially 
similar to other currently available therapies and/or technologies and 
whether this technology meets the newness criterion.
---------------------------------------------------------------------------

    \179\ Barkun, A., Moosavi, S., & Martel, M. (2013). Topical 
hemostatic agents: A systematic review with particular emphasis on 
endoscopic application in GI bleeding. Gastrointestinal Endoscopy, 
77(5), 692-700.
    \180\ Ibid.
---------------------------------------------------------------------------

    Comment: The applicant reasserted that Hemospray meets the newness 
criterion because of the FDA de Novo classification, which according to 
the applicant confirms there is no comparable predicate hemostasis 
device cleared for use in the United States. The applicant stated that 
both the Ankaferd Blood Stopper (ABS) and EndoClot systems are not 
cleared for use in the United States with the latter only having 
clearance for the delivery system and for a product intended for 
submucosal injection.
    In regard to the first substantial similarity criterion, the 
applicant stated that Hemospray has a different mechanism of action as 
compared to ABS and the EndoClot systems which are, according to the 
applicant, comprised of biologically active materials or absorbable 
polysaccharides. The applicant stated that ABS uses an active process 
related to proteins, via the formation of an encapsulated protein 
network that provides focal points for vital erythrocyte aggregation, 
that is substantially different from Hemospray. The applicant then 
stated with regard to EndoClot that the product produces a gelled 
matrix that adheres to and seals bleeding tissue; according to the 
applicant EndoClot substantially differs from Hemospray in its 
composition and properties that permit dissolution and degradation. 
Furthermore, the applicant stated that labeling in markets where 
EndoClot is commercially available limits its use to non-bleeding 
wounds within the GI tract, while Hemospray is indicated for active 
bleeding.
    With regard to the second substantial similarity criterion, the 
applicant maintained that currently all control of GI bleeding no 
matter the treatment is typically grouped to MS-DRGs 377, 378, and 379.
    With regard to the third substantial similarity criterion, the 
applicant stated that Hemospray will treat the same or similar type of 
disease and a similar patient population. They added that the unique 
features of the product differ substantially from other treatments and 
therefore, Hemospray meets the newness criterion.
    Response: After consideration of the public comments we received 
and information submitted by the applicant in its application, we 
believe that while potential cases representing patients who may be 
eligible for treatment involving Hemospray would be assigned to the 
same MS-DRGs as cases representing patients who receive SOC treatment 
for a diagnosis of nonvariceal gastrointestinal bleeding, and that 
Hemospray is used to treat the same or similar type of disease (a 
diagnosis of nonvariceal gastrointestinal bleeding) and a similar 
patient population as currently available treatment options, we agree 
with the applicant that Hemospray does not use the same or similar 
mechanism of action as other technologies used for the treatment of 
nonvariceal gastrointestinal bleeding. We believe that Hemospray's 
mechanism of action, which creates a diffuse mechanical barrier over 
the site of bleeding with a non-thermal, non-traumatic, non-contact 
modality, is unique and distinct from other forms of treatment 
available in the U.S. for nonvariceal gastrointestinal bleeding and, 
therefore, we believe that Hemospray meets the newness criterion. We 
consider the beginning of the newness period to commence on the first 
date Hemospray was commercially available, July 1, 2018.
    With regard to the cost criterion, the applicant provided the 
following analysis to demonstrate the technology meets the cost 
criterion. The applicant asserted patients who would use Hemospray are 
identified by using a combination of one ICD-10-PCS procedure code and 
one ICD-10-CM diagnosis code. The applicant provided a list of 39 ICD-
10-PCS procedure codes that included 21 Non O.R. digestive system 
procedures and 18 Extensive O.R. digestive system procedures. The 
applicant provided a list of 32 ICD-10-CM diagnosis codes that included 
29 principal diagnoses in MS-DRGs 377, 378, and 379 (G.I. Hemorrhage 
with MCC, with CC, and without CC/MCC, respectively) and 3 principal 
diagnoses in MDC 06 (Diseases and Disorders of the Digestive System) 
across 10 MS-DRG classifications. The applicant extracted claims from 
the FY 2018 MedPAR final rule dataset based on the presence of one 
procedure and one diagnosis code in the list provided. The applicant 
stated MS-DRGs 377, 378, and 379 made up 3 of the top 4 MS-DRGs by 
volume and about 64 percent of cases were grouped to these 3 MS-DRGs. 
The applicant stated consequently they limited their analysis to the 
cases assigned to MS-DRGs 377, 378, and 379 and those claims that would 
be used for IPPS rate setting. The applicant identified a total of 
40,012 cases.
    The applicant first calculated a case weighted threshold of $46,568 
based upon the dollar threshold for each MS-DRG grouping and the 
proportion of cases in each MS-DRG. The applicant then calculated the 
average charge per case. The applicant stated Hemospray may not replace 
other therapies occurring during an inpatient stay and therefore chose 
to not remove charges for the prior technology or technology being 
replaced. Next the applicant calculated the average standardized charge 
per case using the FY 2018 IPPS Final Rule Impact file. The 2-year 
inflation factor of 11.1% (1.11100) was obtained from the FY 2020 IPPS/
LTCH PPS final rule and applied to the average standardized charge per 
case. To determine the charges for Hemospray, the applicant used the 
inverse of the FY 2020 IPPS/LTCH PPS final rule supplies and equipment 
national average CCR of 0.299, based on an assumption that hospitals 
would use the inverse of the national average CCR for supplies and 
equipment to mark-up charges, and therefore assumed an average charge 
for Hemospray of $8,361.20. The applicant calculated the final inflated 
average case-weighted standardized charge per case by adding the 
charges for the new technology to the inflated average standardized 
charge per case. The applicant determined a final inflated average 
case-weighted standardized charge per case of $60,193, which exceeds 
the average case-weighted threshold amount of $46,568. We invited 
public comments on whether Hemospray meets the cost criterion.
    Comment: The applicant maintained that Hemospray meets the cost 
criterion as the inflated average case-weighted standardized charge per 
case of $60,193 exceeds the average case-weighted threshold amount of 
$46,568. The applicant stated that they did not remove the costs for 
other devices because some physicians may choose to use Hemospray in 
conjunction with endoscopic clips or thermal coagulation.
    Response: We appreciate the applicant's comment in response to the

[[Page 58668]]

proposed rule. Based on the cost analysis as described previously and 
after consideration of public comments we received, we believe 
Hemospray meets the cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that Hemospray represents a substantial clinical 
improvement over existing technologies. According to the applicant, 
Hemospray is a topically applied mineral powder that offers a novel 
primary treatment option for endoscopic bleeding management, serves as 
an option for patients who fail conventional endoscopic treatments, and 
serves as an alternative to interventional radiology hemostasis (IRH) 
and surgery. Broadly, the applicant outlined two treatment areas in 
which it asserted Hemospray would provide a substantial clinical 
improvement: (1) As a primary treatment or a rescue treatment after the 
failure of a conventional method, and (2) for the treatment of 
malignant lesions.
    The applicant provided eight articles specifically for the purpose 
of addressing the substantial clinical improvement criterion. Three 
articles are systematic reviews, three are prospective studies, and two 
are retrospective studies.
    The first article provided by the applicant was a prospective 
single armed multicenter phase two safety and efficacy study performed 
in France.\181\ From March 2013 to January 2015, 64 endoscopists in 20 
centers enrolled 202 patients in the study in which Hemospray was used 
as either a first line treatment (46.5%) or as salvage therapy (53.5%) 
following the unsuccessful treatment with another method. The 
indication for Hemospray as a first-line therapy or salvage therapy was 
at the discretion of the endoscopist. Of the 202 patients the mean age 
was 68.9, 69.3 percent were male, and all patients were classified into 
four primary etiologic groups: Ulcers (37.1%), malignant lesions 
(30.2%), post-endoscopic bleeding (17.3%), and other (15.3%). Patients 
were further classified by the American Society of Anesthesiologist 
(ASA) physical status scores with 4.5 percent as a normal healthy 
patient, 24.3 percent as a patient with mild systemic disease, 46 
percent as a patient with severe systemic disease, 22.8 percent as a 
patient with severe systemic disease that is a constant threat to life, 
and 2.5 percent as a moribund patient who is not expected to survive 
without an operation.182 183 Immediate hemostasis was 
achieved in 96.5 percent across all patients; among treatment subtypes 
immediate hemostasis was achieved in 96.8 percent of first-line treated 
patients and 96.3 percent of salvage therapy patients. At day 30 the 
overall rebleeding was 33.5 percent of 185 patients with cumulative 
incidences of 41.4 percent for ulcers, 37.7 percent for malignant 
lesions, 17.6 percent for post-endoscopic bleedings, and 25 percent for 
others. When Hemospray was used as a first-line treatment, rebleeding 
at day 30 occurred in 26.5 percent (22/83) of overall lesions, 30.8 
percent of ulcers, 33.3 percent of malignant lesions, 13.6 percent of 
post-endoscopic bleedings, and 22.2 percent of other. When Hemospray 
was used as a salvage therapy, rebleeding at day 30 occurred in 39.2 
percent (40/102) of overall lesions, 43.9 percent of ulcers, 50.0 
percent of malignant lesions, 25.0 percent of post-endoscopic 
bleedings, and 26.3 percent for others. According to the article, the 
favorable hemostatic results seen from Hemospray are due to its 
threefold mechanism of action: Formation of a mechanical barrier; 
concentration of clotting factors at the bleeding site; and enhancement 
of clot formation.\184\ No severe adverse events were noted; however, 
the authors note the potential for pain exists due to the use of carbon 
dioxide. Lastly, the authors stated that while Hemospray was found to 
reduce the need for radiological embolization and surgery as salvage 
therapies, it was not found to be better than other hemostatic methods 
in terms of preventing rebleeding of ulcers.
---------------------------------------------------------------------------

    \181\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic 
powder for upper gastrointestinal bleeding: A multicenter study (the 
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
    \182\ Ibid.
    \183\ ASA House of Delegates/Executive Committee. (2014, October 
15). ASA Physical Status Classification System. Retrieved from 
American Society of Anesthesiologists: https://www.asahq.org/standards-and-guidelines/asa-physical-status-classification-system.
    \184\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic 
powder for upper gastrointestinal bleeding: A multicenter study (the 
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
---------------------------------------------------------------------------

    A second article provided by the applicant contained a systematic 
review of published Hemospray case data summarizing 17 human and 2 
animal studies.\185\ The authors do not provide the total number of 
articles reviewed but do provide search terms and engines used to 
conduct the review. The studies included in this review included 6 case 
reports and 13 case series taking place in North America, Europe, Hong 
Kong, and Egypt up until August 2014. A total of 234 cases were 
identified of which 28.2 percent involved gastric bleeding, 6.4 percent 
esophageal bleeding, 26.5 percent duodenal bleeding, 3.85 percent 
bleeding of the gastroesophageal junction, and 11 percent bleeding of 
the lower gastrointestinal tract. (We note it is unclear what form of 
bleeding the remaining 24.1 percent of cases addressed.) The mean size 
of the bleeding source was 37.4 mm ranging from 8 mm to 350 mm. 
Hemospray was used as a primary and sole treatment in 83 percent of 
cases while 17 percent of cases used Hemospray as a follow-up 
treatment. Hemospray achieved hemostasis in 88.5 percent of all 
reviewed cases. Within the 72 hour post-treatment period, rebleeding 
occurred in 16.2 percent of patients and 27.3 percent of animal models. 
The authors acknowledge the potential for rare adverse events such as 
embolism, intestinal obstruction, and allergic reaction, but state no 
procedure related adverse events were associated with Hemospray-.\186\
---------------------------------------------------------------------------

    \185\ Changela K, Papafragkakis H, Ofori E, et al. Hemostatic 
powder spray: a new method for managing gastrointestinal bleeding. 
Ther Adv Gastroenterol 2015; 8(3): 125-135.
    \186\ Ibid.
---------------------------------------------------------------------------

    The applicant provided a third article consisting of an abstract 
from another systematic review article.\187\ The abstract purports to 
cover a review of prospective, retrospective, and randomized control 
trials evaluating Hemospray as a rescue therapy. Eighty-five articles 
were initially identified and 23 were selected for review. Of those, 5 
studies were selected which met the inclusion criteria of the analysis. 
The median age of patients was 69, 68 percent were male. The abstract 
concludes that when used as a rescue therapy after the failure of 
conventional endoscopic modalities, in nonvariceal gastrointestinal 
bleeding, Hemospray seems to have significantly higher rates of 
immediate hemostasis.
---------------------------------------------------------------------------

    \187\ Moole, V., Chatterjee, T., Saca, D., Uppu, A., Poosala, 
A., & Duvvuri, A. A Systematic review and meta-analysis: analyzing 
the efficacy of hemostatic nanopowder (TC-325) as rescue therapy in 
patients with nonvariceal upper gastrointestinal bleeding. 
Gastroenterology 2019; 156(6), S-741.
---------------------------------------------------------------------------

    A fourth article provided by the applicant described a single-arm 
retrospective analytical study of 261 enrolled patients conducted at 21 
hospitals in Spain.\188\ The mean age was 67 years old, 69 percent of 
patients were male, and the overall technical success, defined as 
correct assembly and delivery of Hemospray to a bleeding lesion, was 
97.7 percent (95.1%-

[[Page 58669]]

99.2%). The most common causes of bleeding in patients were peptic 
ulcer (28%), malignancy (18.4%), therapeutic endoscopy-related (17.6%), 
and surgical anastomosis (8.8%). Overall, 93.5 percent (89.5%-96%) of 
procedures achieved hemostasis. Recurrent bleeding, defined as (1) a 
new episode of bleeding symptoms, (2) a decrease in hemoglobin of >2 g/
dL within 48 hours of an index endoscopy or > 3g/dL in 24 hours, or 3) 
direct visualization of active bleeding at the previously treated 
lesion on repeat endoscopy, had a cumulative incidence at 3 and 30 days 
of 16.1 percent (11.9%-21%) and 22.9 percent (17.8%-28.3%) 
respectively. The overall risk of Hemospray failure at 3 and 30 days 
was 21.1 percent (16.4%-26.2%) and 27.4 percent (22.1%-32.9%) 
respectively with no statistically significant differences (p = 0.07) 
between causes at 30 days (for example peptic ulcer, malignancy, 
anastomosis, therapeutic endoscopy-related, and other causes). With the 
use of multivariate analysis, spurting bleeding vs. nonspurting 
bleeding (subdistribution hazard ratio [sHR] 1.97 (1.24-3.13)), 
hypotension vs. normotensive (sHR 2.14 (1.22-3.75)), and the use of 
vasoactive drugs (sHR 1.80 (1.10-2.95)) were independently associated 
with Hemospray failure. The overall 30-day survival was 81.9 percent 
(76.5%-86.1%) with 46 patients dying during follow-up and 22 
experiencing bleeding related deaths; 20 patients (7.6%) with 
intraprocedural hemostasis died before day 30. The authors indicated 
the majority of Hemospray failures occurred within the first 3 days and 
the rate of immediate hemostasis was similar to literature reports of 
intraprocedural success rates of over 90 percent. The authors stated 
that the hemostatic powder of Hemospray is eliminated from the GI tract 
as early as 24 hours after use, which could explain the wide ranging 
recurrent bleeding percentage. The authors reported that importantly, 
adverse events are rare, but cases of abdominal distension, visceral 
perforation, transient biliary obstruction, and splenic infarct have 
been reported; one patient involved in this study experienced an 
esophageal perforation without a definitive causal relationship.
---------------------------------------------------------------------------

    \188\ Rodriguez de Santiago E, Burgos-Santamaria D, Perez-Carazo 
L, et al. Hemostatic spray TC-325 for GI bleeding in a nationwide 
study: survival analysis and predictors of failure via competing 
risks analysis. Gastrointest Endosc 2019; 90(4), 581-590.
---------------------------------------------------------------------------

    A fifth article provided by the applicant described a single-arm 
multicenter prospective registry involving 314 patients in Europe which 
collected data on days 0, 1, 3, 7, 14, and 30 after endotherapy with 
Hemospray.\189\ The outcomes of interest in this study were immediate 
endoscopic hemostasis (observed cessation of bleeding within 5 minutes 
post Hemospray application) with secondary outcomes of rebleeding 
immediately following treatment and during follow-up, 7 and 30 day all-
cause mortality, and adverse events. The sample was 74 percent male 
with a median age of 71 with the most common pathologies of peptic 
ulcer (53%), malignancy (16%), post-endoscopic bleeding (16%), bleeding 
from severe inflammation (11%), esophageal variceal bleeding (2.5%), 
and cases with no obvious cause (1.6%). The median baseline Blatchford 
score (BS) and RS were 11 and 7 respectively. The BS ranges from 0 to 
23 with higher scores indicating increasing risk for required 
endoscopic intervention and is based upon the blood urea nitrogen, 
hemoglobin, systolic blood pressure, pulse, presence of melena, 
syncope, hepatic disease, and/or cardiac failure.\190\ The RS ranges 
from 0 to 11 with higher scores indicating worse potential outcomes and 
is based upon age, presence of shock, comorbidity, diagnosis, and 
endoscopic stigmata of recent hemorrhage.\191\ Immediate hemostasis was 
achieved in 89.5 percent of patients following the use of Hemospray; 
only the BS was found to have a positive correlation with treatment 
failure in multivariate analysis (OR 1.21 (1.10-1.34)). Rebleeding 
occurred in 10.3 percent of patients who achieved immediate hemostasis 
again with only the BS having a positive correlation with rebleeding 
(OR: 1.13 (1.03-1.25)). At 30 days the all-cause mortality was 20.1 
percent with 78 percent of these patients having achieved immediate 
endoscopic hemostasis and a cause of death resulting from the 
progression of other comorbidities. A subgroup analysis of treatment 
type (monotherapy, combination therapy, and rescue therapy groups) was 
performed showing no statistically significant difference in immediate 
hemostasis across groups (92.4 percent, 88.7 percent, and 85.5 percent 
respectively). Higher all-cause mortality rates at 30 days were highest 
in the monotherapy group (25.4%, p=0.04) as compared to all other 
groups. According to the authors, in comparison to major recent 
studies, they were able to show lower rebleeding rates overall and in 
all subgroups despite the high-risk population.\192\ The authors 
further note limitations in that the inclusion of patients was 
nonconsecutive and at the discretion of the endoscopist, at the time of 
the endoscopy, which allows for the potential introduction of selection 
bias which may have affected these study results.
---------------------------------------------------------------------------

    \189\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.
    \190\ Saltzman, J. (2019, October). Approach to acute upper 
gastrointestinal bleeding in adults. (M. Feldman, Editor) Retrieved 
from UpToDate: https://www.uptodate.com/contents/approach-to-acute-upper-gastrointestinal-bleeding-in-adults
    \191\ Ibid.
    \192\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.
---------------------------------------------------------------------------

    The fifth article also described the utility of Hemospray in the 
treatment of malignant lesions. According to the applicant, malignant 
lesions pose a significant clinical challenge as successful hemostasis 
rates are as low as 40 percent with high recurrent bleeding over 50 
percent within 1 month following standard treatments.\193\ \194\ The 
applicant added that bleeding from tumors is often diffuse and consists 
of friable mucosa decreasing the utility of traditional treatments (for 
example, ligation, cautery). From the fifth article, the applicant 
noted that 50 patients were treated for malignant bleeding with overall 
immediate hemostasis in 94 percent of patients.\195\ Of the 50 
patients, 33 were treated with Hemospray alone, 11 were treated with 
Hemospray as the final treatment, and 4 were treated with Hemospray as 
rescue therapy of which 100 percent, 84.6 percent and 75 percent 
experienced immediate hemostasis respectively.\196\ Similarly, from the 
first discussed article, the applicant noted that among malignant 
bleeding patients, 95.1 percent achieved immediate hemostasis with 
lower rebleeding rates at 8 days when Hemospray was used as a primary 
treatment as compared to when used as a rescue therapy (17.1 percent 
vs. 46.7 percent respectively).\197\ The applicant concluded that 
Hemospray may provide an advantage as a primary treatment to patients 
with malignant bleeding.
---------------------------------------------------------------------------

    \193\ Kim YI, Choi IJ, Cho SJ, et al. Outcome of endoscopic 
therapy for cancer bleeding in patients with unresectable gastric 
cancer. J Gastroenterol Hepatol 2013;28:1489-95.
    \194\ Roberts SE, Button LA, Williams JG. Prognosis following 
upper gastrointestinal bleeding. PLoS One 2012;7:e49507.
    \195\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.
    \196\ Ibid.
    \197\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic 
powder for upper gastrointestinal bleeding: a multicenter study (the 
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
---------------------------------------------------------------------------

    A sixth article provided by the applicant consisted of a systematic

[[Page 58670]]

review from January 1950 to August 2014 concerning all available 
powdered topical hemostatic agents.\198\ Of an initial 3,799 articles, 
105 were initially reviewed and after excluding nonendoscopic data, 
review articles, in vitro studies, and animal models 61 articles were 
ultimately included in the study. Three primary hemostatic agents were 
identified in this review, the Ankaferd Blood Stopper (ABS), Hemospray, 
and EndoClot. The applicant noted the authors of this article 
identified 131 high risk patients treated with Hemospray, of which 28 
had tumor bleeding. According to the applicant, all 28 patients 
achieved immediate hemostasis with 25 percent experiencing rebleeding 
at 7-day follow-up. The overall immediate hemostasis in this particular 
study was 91.6 percent and 7-day rebleeding was 25.8 percent among 
high-risk rebleeding patients.\199\
---------------------------------------------------------------------------

    \198\ Chen Y-I, Barkun A. Hemostatic powders in gastrointestinal 
bleeding, a systematic review. Gastrointest Endoscopy Clin N Am 
2015; 25: 535-552.
    \199\ Ibid.
---------------------------------------------------------------------------

    The applicant provided a seventh article which consisted of a 
journal pre-proof article detailing a 1:1 randomized control trial of 
20 patients treated with Hemospray versus the standard of care (for 
example, thermal and injection therapies) in the treatment of malignant 
gastrointestinal bleeding.\200\ The goals of this pilot study were to 
determine the feasibility of a definitive trial. The primary outcome of 
the study was immediate hemostasis (absence of bleeding after 3 
minutes) with secondary outcomes of recurrent bleeding at days 1, 3, 
30, 90, and 180 and adverse events at days 1, 30, and 180. The mean age 
of patients was 67.2, 75 percent were male, and on average patients 
presented with 2.9  1.7 comorbidities. All patients had 
active bleeding at endoscopy and the majority of patients had an ASA 
score of 2 (45%) or 3 (40%). Immediate hemostasis was achieved in 90 
percent of Hemospray patients and 40 percent of standard of care 
patients (5 injection alone, 3 thermal, 1 injection with clips, and 1 
unknown). Of those patients in the control group, 83.3 percent crossed 
over to the Hemospray treatment. One patient died while being treated 
with Hemospray from exsanguination; post-mortem examination 
demonstrated that bleeding was caused by rupture of a malignant 
inferior mesenteric artery aneurysm. Overall, 86.7 percent of patients 
treated with Hemospray initially or as crossover treatment achieved 
hemostasis. Recurrent bleeding was lower in the Hemospray group (20%) 
as compared to the control group (60%) at 180 days. Forty percent of 
the treated group received blood transfusions as compared to 70 percent 
of the control group. The overall length of stay was 14.6 days among 
treated patients as compared to 9.4 in the control group. Mortality at 
180 days was 80 percent in both the treated and control groups. The 
authors noted the potential for operator bias in the use of Hemospray 
prior to switching to another method when persistent bleeding exists. 
Lastly, the authors noted that while they did not occur during this 
study, there are concerns around the risks of perforation, obstruction, 
and systemic embolization with the use of Hemospray.
---------------------------------------------------------------------------

    \200\ Chen Y-I, Wyse J, Lu Y, Martel M, Barkun AN, TC-325 
hemostatic powder versus current standard of care in managing 
malignant GI bleeding: A pilot randomized clinical trial. 
Gastrointestinal Endoscopy (2019), doi: https://doi.org/10.1016/j.gie.2019.08.005.
---------------------------------------------------------------------------

    An eighth article provided by the applicant described a single-arm 
multicenter retrospective study from 2011 to 2016 involving 88 patients 
who bled as a result of either a primary GI tumor or metastases to the 
GI tract.\201\ In this study the authors define immediate hemostasis as 
no further bleeding at least one minute after treatment with Hemospray 
and recurrent bleeding was suspected if one of seven criteria were met: 
(1) Hematemesis or bloody nasogastric tube >6 hours after endoscopy; 
(2) melena after normalization of stool color; (3) hematochezia after 
normalization of stool color or melena; (4) development of tachycardia 
or hypotension after >1 hour of vital sign stability without other 
cause; (5) decrease in hemoglobin level greater than or equal to 3 
hours apart; (6) tachycardia or hypotension that does not resolve 
within 8 hours after index endoscopy; or (7) persistent decreasing 
hemoglobin of >3 g/dL in 24 hours associated with melena or 
hematochezia). The sample for this study consisted of 88 patients (with 
a mean age of 65 years old and 70.5 percent male) of which 33.3 percent 
possessed no co morbid illness, and 25 percent were on current 
antiplatelet/anticoagulant medication. The mean BS was 8.7 plus or 
minus 3.7 with a range from 0 to 18. Overall, 72.7 percent of patients 
had a stage 4 adenocarcinoma, squamous cell carcinoma, or lymphoma. 
Immediate hemostasis was achieved in 97.7 percent of patients. 
Recurrent bleeding occurred among 13 of 86 (15%) and 1 of 53 (1.9%) at 
3 and 30 days, respectively. A total of 25 patients (28.4%) died during 
the 30-day follow up period. Overall, 27.3 percent of patients re-bled 
within 30 days after treatment of which half were within 3 days. Using 
multivariate analysis, the authors found that patients with good 
performance status, no end-stage cancer, or receiving any combination 
of definitive hemostasis treatment modalities had significantly greater 
survival. The authors acknowledged the recurrent bleeding rate post 
Hemospray treatment at 30 days of 38 percent is comparable with that 
seen in sole conventional hemostatic techniques (40-50%) and state this 
implies that the long-term effect of Hemospray does not differ from 
conventional techniques and remains unsatisfactory for upper GI tumor-
related bleeding. However, they state that Hemospray is more 
predictably effective in providing initial hemostasis for tumor-related 
GI bleeding than conventional methods as SOC methods provide variable 
immediate hemostasis rates of 31 to 93 percent while Hemospray had a 
97.7% success rate in this study. They further conclude that though 
Hemospray may provide only a temporary hemostatic effect in this group 
of patients, its strong efficacy in the short-term allows patients to 
subsequently receive definitive hemostatic treatment that may translate 
into higher 6-month survival rates.
---------------------------------------------------------------------------

    \201\ Pittayanon R, Rerknimitr R, Barkun A. Prognostic factors 
affecting outcomes in patients with malignana GI bleeding treated 
with a novel endoscopically delivered hemostatic powder. 
Gastrointest Endosc 2018; 87:991-1002.
---------------------------------------------------------------------------

    Ultimately, the applicant concluded nonvariceal gastrointestinal 
bleeding is associated with significant morbidity and mortality in 
older patients with multiple co-morbid conditions. Inability to achieve 
hemostasis and early rebleeding are associated with increased cost and 
greater resource utilization. According to the applicant, patients with 
bleeding from malignant lesions have few options that can provide 
immediate hemostasis without further disrupting fragile mucosal tissue 
and worsening the active bleed. The applicant asserted Hemospray is an 
effective agent that provides immediate hemostasis in patients with GI 
bleeding as part of multimodality treatment, as well as when used to 
rescue patients who have failed more conventional endoscopic 
modalities. Furthermore, the applicant stated that in patients with 
malignant bleeding in the GI tract, Hemospray provides a high rate of 
immediate hemostasis and fewer recurrent bleeding episodes, which in 
combination with definitive cancer treatment may lead to improvements 
in long term survival. Lastly, the applicant asserted Hemospray is an 
important

[[Page 58671]]

new technology that permits immediate and long-term hemostasis in GI 
bleeding cases where standard of care treatment with clip ligation or 
cautery are not effective.
    We noted in the proposed rule that the majority of studies provided 
lack a comparator when assessing the effectiveness of Hemospray. Three 
of the articles provided were systematic reviews of the literature. We 
noted that while we found these articles helpful in establishing a 
background for the use of Hemospray, we were concerned that they may 
not provide strong evidence of substantial clinical improvement. Four 
studies appeared to be single-armed studies assessing the efficacy of 
Hemospray in the patient setting. We stated that in all of these 
articles, comparisons were made between Hemospray and standard of care 
treatments; however, without the ability to control for factors such as 
study design, patient characteristics, etc., it was difficult to 
determine if any differences seen result from Hemospray or confounding 
variables. Furthermore, within the retrospective and prospective 
studies lacking a control subset, some level of selection bias appeared 
to potentially be introduced in that providers may be allowed to select 
the manner and order in which patients are treated, thereby potentially 
influencing outcomes seen in these studies.
    Additionally, one randomized control trial provided by the 
applicant appeared to be in the process of peer-review and was not yet 
published. Furthermore, we noted that this article was written as a 
feasibility study for a potentially larger randomized control trial and 
contains a sample of only 20 patients. This small sample size left us 
concerned that the results are not representative of any larger 
population. Lastly, as described, we were concerned the control group 
can receive one of multiple treatments which lack a clear designation 
methodology beyond physician choice. For instance, 50 percent of the 
control patients received injection therapy alone, which according to 
the literature provided by the applicant was not an acceptable 
treatment for endoscopic bleeding. Accordingly, it was not clear 
whether performance seen in the treated group as compared to the 
control group is due to Hemospray itself or due to confounding factors.
    Third, we were concerned with the samples chosen in many of the 
studies presented. Firstly, we noted that the Medicare population is a 
diverse group of men and women. Many of the samples provided by the 
applicant were overwhelmingly male. Secondly, many of the studies 
provided were performed in European and other settings outside of the 
United States. We were therefore concerned that the samples chosen 
within the literature provided may not represent the Medicare 
population.
    Lastly, we were concerned about the potential for adverse events 
resulting from Hemospray. It was unclear from the literature provided 
by the applicant what the likelihood of these events were and whether 
or not an evaluation for the safety of Hemospray was performed. About 
one-third of the articles submitted specifically addressed adverse 
events with Hemospray. However, the evaluation of adverse events was 
limited and most of the patients in the studies died of disease 
progression. A few of the provided articles stated the potential for 
severe adverse reactions (for example, abdominal distension, visceral 
perforation, biliary obstruction, splenic infarct). Specifically, one 
article \202\ recorded adverse events related to Hemospray, including 
abdominal distention and esophageal perforation. We invited public 
comments on whether Hemospray meets the substantial clinical 
improvement criterion.
---------------------------------------------------------------------------

    \202\ Rodriguez de Santiago E, Burgos-Santamaria D, Perez-Carazo 
L, et al. Hemostatic spray TC-325 for GI bleeding in a nationwide 
study: Survival analysis and predictors of failure via competing 
risks analysis. Gastrointest Endosc 2019; 90(4), 581-590.
---------------------------------------------------------------------------

    Comment: According to the applicant, a recently published study 
randomized Hemospray against dual therapy as first treatment and 
demonstrated Hemospray is a viable alternative to dual therapy.\203\ 
This multicenter non-inferiority randomized controlled trial assigned 
patients with active non-variceal upper GI bleeding to receive either 
Hemospray or standard dual modality treatment. A total of 224 patients 
were randomized. With intention-to-treat analysis, the re-bleeding free 
probability over 30 days was 89.8% in the TC-325 group and 81.1% in the 
standard treatment group (difference in proportions, 95% CI; 8.7%, -
1.3%, 18,7%). There were fewer failures in the control of bleeding 
during index endoscopy with the use of Hemospray (3 vs. 11, OR, 95% CI, 
3.88, 1.05-14.32), although 30-day re-bleeding and mortality was not 
different between groups.
---------------------------------------------------------------------------

    \203\ AB14 GASTROINTESTINAL ENDOSCOPY Volume 91, No. 6S: 2020. 
#98 by Lau et al.
---------------------------------------------------------------------------

    The applicant agreed with CMS that the use of single arm and 
retrospective studies potentially suffer from selection bias. The 
applicant asserted that while this bias is inevitable, the 
retrospective studies specifically exclude those cases successfully 
treated with conventional dual therapy. According to the applicant, 
this therefore ensured the bias was toward the patients with the 
highest risk of treatment failure, morbidity, and mortality, and 
representing the most challenging hemostasis cases. The applicant 
stated that in both the Rodriguez de Santiago et al. and Alzoubaidi et 
al. articles, there was an overall treatment success with no rebleeding 
in 70% of cases where Hemospray was used after all other conventional 
treatments failed.
    In response to CMS' concerns about the randomized control trial 
(RCT), the applicant stated that the study evaluated patients with 
bleeding from malignant lesions and has now been published. According 
to the applicant, the comparator treatment used in this study, 
injection only, is consistent with the 2016 guidelines of the European 
Society of Gastrointestinal Endoscopy for the treatment of bleeding 
from upper GI malignancies which recommends, ``endoscopic monotherapy 
with epinephrine injection . . . or saline injection . . .''.\204\ The 
applicant stated that while the study was a small sample size pilot 
study, the results are representative of the general population with 
malignant GI bleeding. Further, the applicant stated that in the study 
by Alzoubaidi et al. 50 patients with symptomatic bleeding secondary to 
malignancy were treated. Hemospray monotherapy was the most common mode 
of treatment (33/50 = 66 percent) with a hemostasis rate of 100 
percent. In the remaining patients, Hemospray was used in combination 
with conventional methods or as a rescue, with a lower aggregate rate 
of immediate hemostasis.
---------------------------------------------------------------------------

    \204\ Gralnek IM, Dumonceau J-M, Kuipers EJ. Diagnosis and 
management of nonvariceal upper gastrointestinal hemorrhage: 
European Society of Gastrointestinal Endoscopy (ESGE) Guideline. 
Endoscopy 2015; 47: 1-46
---------------------------------------------------------------------------

    In response to CMS' concerns about the study samples presented, the 
applicant acknowledged that the majority of data came from outside of 
the United States due to commercial availability. The applicant stated 
that the FDA considered the outside of the United States data to be 
representative of the US population when granting a de novo 
classification request for the product. In response to CMS' concern 
that the provided literature showed a predominance of males, the 
applicant stated that the 2016 Healthcare Cost and Utilization Project 
(HCUP) showed that 60% of patients that underwent endoscopic control of 
bleeding were male. Lastly, the applicant stated that

[[Page 58672]]

from the three studies 205 206 207 representing 777 
patients, the median or average age ranged from 67-71 which they 
believed to be representative of the Medicare population.
---------------------------------------------------------------------------

    \205\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.
    \206\ Rodriguez de Santiago E, Burgos-Santamaria D, Perez-Carazo 
L, et al. Hemostatic spray TC-325 for GI bleeding in a nationwide 
study: Survival analysis and predictors of failure via competing 
risks analysis. Gastrointest Endosc 2019; 90(4), 581- 590.
    \207\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic 
powder for upper gastrointestinal bleeding: A multicenter study (the 
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
---------------------------------------------------------------------------

    In response to CMS' concerns about potential adverse events, the 
applicant stated that the FDA determined the product is safe and 
effective for its intended use and has an acceptable risk/benefit ratio 
when it granted de Novo classification request and authorization to 
market in the United States. According to the applicant, any procedure 
is associated with risks. The applicant stated that they understand the 
potential risks associated with Hemospray and that they clearly labeled 
their product with such information. The applicant also conducts 
physician training to ensure physicians understand the risks and select 
patients who they believe would benefit most from Hemospray. In 
addition, the applicant conveyed that they diligently monitor reported 
complaints or complications related to a device once it is in the real 
world. According to the applicant, the same will be done with Hemospray 
and if the risk ratio increases to an unacceptable level; the applicant 
will take appropriate steps to correct it. According to the applicant, 
these are the standard processes with any device and the applicant does 
not see a reason to divert from these processes for Hemospray.
    The applicant acknowledged that it had initiated a voluntary recall 
of Hemospray due to complaints received that the handle and/or 
activation knob on the device in some cases had cracked or broken when 
the device was activated and in some cases had caused the carbon 
dioxide cartridge to exit the handle. According to the applicant, as of 
June 10, 2020, the FDA cleared Hemospray to return to the market 
(K200972) after the applicant sufficiently addressed the issue that led 
to the cartridge exiting the handle. As such, Hemospray will return to 
the US market in July 2020.
    One commenter stated that they frequently use Hemospray and believe 
it is irreplaceable in the role of controlling tumor bleeding. The 
commenter added that Hemospray has a critical role in rescue bleeding 
in cases that preclude contact hemostatic methods due to the risk of 
perforation. They stated that Hemospray's ability to buy time to 
resuscitate during challenging bleeding cases is the most understated 
benefit of the device. Lastly, the commenter stated that there are 
currently no hemostatic powder alternatives on the market in the United 
States.
    Response: We appreciate the commenters' input in response to the 
concerns discussed in the proposed rule regarding the substantial 
clinical improvement criterion. We agree with the applicant that the 
control therapy in the RCT, injection only as compared to dual therapy, 
was appropriate based on the 2016 guidelines of the European Society of 
Gastrointestinal Endoscopy for the treatment of bleeding from upper GI 
malignancies. In the commenter's response to CMS regarding potential 
selection bias in single arm and retrospective studies, the applicant 
stated that based on the study design, any potential bias introduced 
was toward the patients with the highest risk of negative outcomes. We 
appreciate the applicant's response to our concerns and agree that this 
potential bias is no longer a concern. Regarding the applicant's 
comment on study samples, we agree with the applicant that these 
samples are adequately representative of the Medicare population. We 
also appreciate the comment response to the potential for adverse 
events. We will continue to monitor available data for Hemospray in 
regard to any potential risk of adverse events. Finally, we appreciate 
the applicant's update on the status of their voluntary recall of the 
Hemospray system.
    While we acknowledge the limitations of some of the data, we 
believe that Hemospray represents a substantial clinical improvement 
for the treatment of gastrointestinal bleeding for the following 
reasons. We believe that given the results from the RCT trials and the 
single-armed studies Hemospray provides a treatment benefit 
particularly for those with bleeding from GI malignancies. We also see 
the clinical importance of Hemospray as an alternative to invasive 
treatments traditionally used as salvage therapy. Lastly, we note that 
Hemospray provides treatment for bleeding without requiring tissue 
trauma or precise targeting.
    After consideration of the public comments we received and the 
information included in the applicant's new technology add-on payment 
application, we have determined that Hemospray meets the criteria for 
approval of the new technology add-on payment. Therefore, we are 
approving new technology add-on payments for this technology for FY 
2021. Cases involving the use of Hemospray that are eligible for new 
technology add-on payments will be identified by procedure codes 
XW0G886 (Introduction of mineral-based topical hemostatic agent into 
upper GI, via natural or artificial opening endoscopic, new technology 
group 6) and XW0H886 (Introduction of mineral-based topical hemostatic 
agent into lower GI, via natural or artificial opening endoscopic, new 
technology group 6).
    In its application, the applicant estimated that the cost of 
Hemospray is $2,500.00 per patient. Under Sec.  412.88(a)(2), we limit 
new technology add-on payments to the lesser of 65 percent of the 
average cost of the technology, or 65 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, the maximum new 
technology add-on payment for a case involving the use of Hemospray is 
$1,625.00 for FY 2021.
h. IMFINZI[supreg] (durvalumab) and TECENTRIQ[supreg] (atezolizumab)
    Two manufacturers, AstraZeneca PLC and Genentech, Inc., submitted 
separate applications for new technology add-on payments for FY 2021 
for IMFINZI[supreg] (durvalumab) and TECENTRIQ[supreg] (atezolizumab), 
respectively. Both of these technologies are programmed death-ligand 1 
(PD-L1) blocking antibodies used for the treatment of patients with 
extensive-stage small cell lung cancer (ES-SCLC).\208\ In the proposed 
rule, we discussed these applications as two separate technologies. 
After further consideration and as discussed below, we believe 
IMFINZI[supreg] and TECENTRIQ[supreg] are substantially similar to each 
other and that it is appropriate to evaluate both technologies as one 
application for new technology add-on payments under the IPPS. We refer 
the reader below for a complete discussion regarding our analysis of 
the substantial similarity of IMFINZI[supreg] and TECENTRIQ[supreg].
---------------------------------------------------------------------------

    \208\ TECENTRIQ (atezolizumab) [prescribing information]. San 
Francisco, CA: Genentech, Inc., 2019.
---------------------------------------------------------------------------

    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32631) we noted, 
and as summarized in the following table, the FDA initially approved 
IMFINZI[supreg] on May 1, 2017 for the indicated treatment of patients 
with locally advanced or metastatic urothelial carcinoma who have 
disease

[[Page 58673]]

progression during or following platinum-containing chemotherapy or who 
have disease progression within 12 months of neoadjuvant or adjuvant 
treatment with platinum containing chemotherapy. The FDA subsequently 
approved IMFINZI[supreg] on February 16, 2018 for a second indication, 
treatment of patients with unresectable, Stage III non-small cell lung 
cancer (NSCLC) whose disease has not progressed following concurrent 
platinum-based chemotherapy and radiation therapy. IMFINZI[supreg] in 
combination with etoposide and either carboplatin or cisplatin was 
approved by the FDA as first-line treatment of patients with extensive-
stage small cell lung cancer (ES-SCLC) on March 27, 2020, the 
indication for which the applicant is seeking new technology add-on 
payments.\209\With regard to TECENTRIQ[supreg], and as summarized in 
the following table, the applicant stated TECENTRIQ[supreg] was 
initially approved by FDA on May 18, 2016, for treatment of patients 
with locally advanced or metastatic urothelial carcinoma,\210\ and 
subsequently for patients with metastatic non-small cell lung cancer 
who have disease progression during or following platinum-containing 
chemotherapy on October 18, 2016; \211\ for the first-line treatment of 
patients with metastatic non-squamous NSCLC with no EGFR or ALK genomic 
tumor aberrations on December 6, 2018; \212\ and for metastatic triple 
negative breast cancer on March 8, 2019.\213\ TECENTRIQ[supreg] 
received FDA approval on March 18, 2019 in combination with carboplatin 
and etoposide for the first-line treatment of adult patients with ES-
SCLC, the indication for which the applicant is seeking new technology 
add-on payments. The applicant stated that TECENTRIQ[supreg] is the 
first cancer immunotherapy to be approved in the first-line treatment 
of ES-SCLC.\214\ The applicant stated that the National Comprehensive 
Cancer Network (NCCN) recommends TECENTRIQ[supreg] + carboplatin + 
etoposide as the only category 1 preferred initial treatment for 
patients with ES-SCLC.\215\
---------------------------------------------------------------------------

    \209\ https://www.fda.gov/drugs/resources-information-approved-drugs/fda-approves-durvalumab-extensive-stage-small-cell-lung-cancer.
    \210\ U.S. Department of Health and Human Services. BLA 
Accelerated Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2016/761034Orig1s000ltr.pdf. Accessed 
August 9, 2019.
    \211\ U.S. Department of Health and Human Services. BLA 
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2016/761041Orig1s000ltr.pdf. Accessed August 9, 2019.
    \212\ U.S. Department of Health and Human Services. Supplement 
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2018/761034Orig1s009ltr_REPLACEMENT.pdf. Accessed August 9, 2019.
    \213\ U.S. Department of Health and Human Services. Accelerated 
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2019/761034Orig1s018ltr.pdf. Accessed August 9, 2019.
    \214\ U.S. Department of Health and Human Services. Supplemental 
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2019/761034Orig1s019ltr.pdf. Accessed August 9, 2019.
    \215\ National Comprehensive Cancer Network. NCCN Clinical 
Practice Guidelines in Oncology. Small Cell Lung Cancer Version 
2.2019. https://www.nccn.org/professionals/physician_gls/pdf/sclc.pdf. Accessed August 16, 2019.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 58674]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.155

BILLING CODE 4120-01-C
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32663), we noted 
that the applicant for TECENTRIQ[supreg] submitted a request for a 
unique ICD-

[[Page 58675]]

10-PCS code for TECENTRIQ[supreg] beginning in FY 2021. The following 
ICD-10-PCS codes, effective October 1, 2020, were approved for 
procedures involving the administration of TECENTRIQ[supreg]: XW033D6 
(Introduction of atezolizumab antineoplastic into peripheral vein, 
percutaneous approach, new technology group 6) and XW043D6 
(Introduction of atezolizumab antineoplastic into central vein, 
percutaneous approach, new technology group 6). In the FY 2021 IPPS/
LTCH PPS proposed rule (85 FR 32632), we noted that the applicant for 
IMFINZI[supreg] submitted a request for a unique ICD-10-PCS code for 
IMFINZI[supreg] beginning in FY 2021. The following ICD-10-PCS codes, 
effective October 1, 2020, were approved for procedures involving the 
administration of IMFINZI[supreg]: XW03336 (Introduction of durvalumab 
antineoplastic into peripheral vein, percutaneous approach, new 
technology group 6) and XW04336 (Introduction of durvalumab 
antineoplastic into central vein, percutaneous approach, new technology 
group 6).
    According to the applicant for TECENTRIQ[supreg], lung cancer is 
the second most commonly diagnosed cancer and the leading cause of 
cancer-related death among men and women in the United States.\216\ 
SCLC is a high-grade neuroendocrine tumor comprising small cells with 
minimal cytoplasm, poorly defined cell borders, and either no nucleoli 
or unremarkable nucleoli.217 218 The most aggressive of all 
lung cancers, it accounts for about 10-15 percent of lung cancer 
cases.\219\ Key characteristics of SCLC include its rapid doubling time 
and the early development of widespread metastases.220 221 
About 72 percent of SCLC cases are diagnosed at the extensive stage, 
which is associated with a 5-year survival rate of 2.9 
percent.222 223 According to the applicant for 
IMFINZI[supreg], 75 percent of patients are diagnosed in the late/
metastatic stage described as ES-SCLC and are considered incurable, 
with a median overall survival of 9-11 months with standard of care 
(SOC).224 225 The median overall survival for ES-SCLC has 
remained the same for the past 20 years with essentially no 
improvements or new therapies.\226\
---------------------------------------------------------------------------

    \216\ American Cancer Society. Lung Cancer Prevention and Early 
Detection. American Cancer Society. https://www.cancer.org/cancer/lung-cancer/prevention-and-early-detection.html. Accessed October 3, 
2019.
    \217\ Meerbeeck, J.P.V., Fennell, D.A., Ruysscher, D.K.D, 
``Small-cell Lung Cancer,'' The Lancet, 2011, 378(9804), pp.1741-
1755, doi:10.1016/s0140-6736(11):60165-7.
    \218\ Kalemkerian, G., ``Small Cell Lung Cancer,'' Seminars in 
Respiratory and Critical Care Medicine, 2016, 37(05) pp.783-796, 
doi:10.1055/s-0036-1592116.
    \219\ WebMD, LLC. Types of Lung Cancer. https://www.webmd.com/lung-cancer/lung-cancer-types#1. Accessed August 15, 2019.
    \220\ Harris, K., Khachaturova, I., Azab, B., et al., ``Small 
Cell Lung Cancer Doubling Time and its Effect on Clinical 
Presentation: a Concise Review,'' Sage Journals, 2012, 6, pp.199-
203, doi:10.4137/CMO.S9633.
    \221\ Pietanza, M.C., Averett, L., Minna, J., Rudin, C.M., 
``Small Cell Lung Cancer: Will Recent Progress Lead to Improved 
Outcomes?,'' Clinical Cancer Research, 2015, (21), pp. 2244-2255, 
doi: 10.1158/1078-0432.CCR-14-2958.
    \222\ American Lung Association. Trends in Lung Cancer Morbidity 
and Mortality. https://www.lung.org/assets/documents/research/lc-trend-report.pdf. Accessed August 15, 2019.
    \223\ Noone, A.M., Howlader, N., Krapcho, M., et al., SEER 
Cancer Statistics Review, 1975-2015, based on November 2017 SEER 
data submission, posted to the SEER website, April 2018. Bethesda, 
MD: National Cancer Institute. 2018; https://seer.cancer.gov/csr/1975_2015/results_merged/sect_15_lung_bronchus.pdf. Accessed 
September 23, 2019.
    \224\ Sabari, J.K., Lok, B.H., Laird, J.H., et al., 
``Unravelling the biology of SCLC: Implications for therapy,'' 
Nature Reviews Clinical Oncology, 2017, 14(9), pp. 549-561.
    \225\ Farago, A..F., Keane F.K., ``Current standards for 
clinical management of small cell lung cancer,'' Translational Lung 
Cancer Research, 2018, 7, pp. 69-79.
    \226\ Ibid.
---------------------------------------------------------------------------

    According to the applicant for TECENTRIQ[supreg], the current SOC 
treatment for ES-SCLC is a combination of etoposide, which is FDA-
approved in SCLC only in combination with cisplatin, and carboplatin, 
which is used in preference to cisplatin for toxicity reasons, despite 
being off-label.\227\ Although ES-SCLC is highly sensitive to platinum/
etoposide in the first-line setting with response rates of 50-60 
percent, the majority of patients will relapse within the first year of 
treatment, with a median progression-free survival (PFS) of 4-6 
months.\228\ The applicant for IMFINZI[supreg] also asserted that 
overall, responses to SOC are short-lived and long-term outcomes remain 
poor.\229\
---------------------------------------------------------------------------

    \227\ UpToDate, Inc. ES-Small Cell Lung Cancer: Initial 
Management. https://www.uptodate.com/contents/extensive-stage-small-cell-lung-cancer-initial-management. Accessed July 26, 2019.
    \228\ Hurwitz, J.L., McCoy, F., Scullin, P., et al., ``New 
advances in the second-line treatment of small cell lung cancer,'' 
Oncologist, 2009, 14(10), pp. 986-994.
    \229\ Haque, N., Raza, A., McGoey, R., et al., ``Small cell lung 
cancer: time to diagnosis and treatment,'' Southern Medical Journal, 
2012, 105(8), pp. 418-423.
---------------------------------------------------------------------------

    The applicant for IMFINZI[supreg] further stated that diagnosis 
often occurs at later stages and SCLC patients may be sicker at the 
time of diagnosis, presenting with comorbidities.230 231 For 
these reasons, the applicant asserted that a significant number of 
patients present and are diagnosed in the hospital inpatient setting. 
According to the applicant, ES-SCLC is very responsive to chemotherapy 
treatment, with response rates to platinum/etoposide ranging from 44 
percent to 78 percent,\232\ and given the severity of symptoms, it is 
recommended to initiate treatment within two weeks of diagnosis.\233\ 
According to the applicant, many patients have a clinical response and 
improvement of symptoms with the initiation of platinum/etoposide, 
confirming the clinical observation that many SCLCs are highly 
sensitive to platinum/etoposide in the first-line setting.\234\ 
According to the applicant for TECENTRIQ[supreg], despite SOC 
chemotherapy regimens using etoposide and carboplatin, the majority of 
patients with ES-SCLC will experience recurrence within 1 year. Median 
progression-free survival (PFS) and overall survival (OS) rates are 2 
months and 10 months, respectively, after initial 
chemotherapy.235 236 237
---------------------------------------------------------------------------

    \230\ Bennett, B.M., Wells, J.R., Panter, C., et al., ``The 
humanistic burden of small cell lung cancer (SCLC): A systematic 
review of health-related quality of life (HRQoL) literature,'' 
Frontiers in Pharmacology, 2017, 8, p. 339.
    \231\ Aarts, M.J., Aerts, J.G., van den Borne, B.E., et al., 
``Comorbidity in patients with small-cell lung cancer: Trends and 
prognostic impact,'' Clinical Lung Cancer, 2015, 16(4), pp. 282-291.
    \232\ Farago, A.F., Keane, F.K, ``Current standards for clinical 
management of small cell lung cancer,'' Translational Lung Cancer 
Research, 2018, 7, pp. 69-79.
    \233\ Haque, N., Raza, A., McGoey, R., et al., ``Small cell lung 
cancer: Time to diagnosis and treatment,'' Southern Medical Journal, 
2012, 105(8), pp. 418-423.
    \234\ Ibid.
    \235\ Kalemkerian, G., ``Small Cell Lung Cancer,'' Seminars in 
Respiratory and Critical Care Medicine, 2016, 37(05):783-796. 
doi:10.1055/s-0036-1592116.
    \236\ Gadgeel, S.M., Pennell, N.A., Fidler, M.J., et al., 
``Phase II Study of Maintenance Pembrolizumab in Patients with ES-
Small Cell Lung Cancer (SCLC),'' Journal of Thoracic Oncology, 2018, 
13(9), pp. 1393-1399. doi:10.1016/j.jtho.2018.05.002.
    \237\ Rossi, A., ``Relapsed Small-Cell Lung Cancer: Platinum Re-
Challenge Or Not,'' Journal of Thoracic Disease, 2016, 8(9), pp. 
2360-2364, doi:10.21037/jtd.2016.09.28.
---------------------------------------------------------------------------

    According to the applicant for TECENTRIQ[supreg], progress in the 
treatment of ES-SCLC has been limited. Over the past 40 years, the 2-
year OS has increased from 3.4 percent to 5.6 percent, and the median 
OS has remained at about 10 months since the 
1980s.238 239 240 One paper submitted by

[[Page 58676]]

the applicant noted that more than 40 phase III trials evaluating other 
regimens in SCLC have failed since 1970.\241\
---------------------------------------------------------------------------

    \238\ Kalemkerian, G., ``Small Cell Lung Cancer,'' Seminars in 
Respiratory and Critical Care Medicine, 2016, 37(05), pp. 783-796, 
doi:10.1055/s-0036-1592116.
    \239\ Evans, W.K., Shepherd, F.A., Feld, R., Osoba, D., Dang, 
P., Deboer, G., ``VP-16 and Cisplatin as First-Line Therapy for 
Small-Cell Lung Cancer,'' Journal of Clinical Oncology, 1985, 3(11), 
pp. 1471-1477, doi:10.1200/jco.1985.3.11.1471.
    \240\ Boni, C., Cocconi, G., Bisagni, G., Ceci, G., Peracchia, 
G., Cisplatin and Etoposide (VP-16) as a Single Regimen for Small 
Cell Lung Cancer. A phase II trial,'' Cancer, 1989, 63(4), pp. 638-
642, doi:10.1002/1097-0142(19890215)63:4<638:aid-
cncr2820630406>3.0.co;2-8.
    \241\ Byers, L.A., Rudin, C.M., ``Small Cell Lung Cancer: Where 
Do We Go from Here?,'' Cancer, 2014, 121(5), pp. 664-672, 
doi:10.1002/cncr.29098.
---------------------------------------------------------------------------

    As stated earlier and for the reasons discussed further later in 
this section, we believe that IMFINZI[supreg] and TECENTRIQ[supreg] are 
substantially similar to each other such that it is appropriate to 
analyze these two applications as one technology for purposes of new 
technology add-on payments, in accordance with our policy. Below we 
discuss the information provided by the applicants, as summarized in 
the proposed rule, regarding whether IMFINZI[supreg] and 
TECENTRIQ[supreg] are substantially similar to existing technologies 
prior to their approval by the FDA and their release onto the U.S. 
market. As discussed earlier, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would not be considered ``new'' 
for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, the 
applicant for TECENTRIQ[supreg] asserted that the mechanism of action 
of ES-SCLC is not the same as or similar to an existing technology. The 
applicant described TECENTRIQ[supreg] as a programmed PD-L1 blocking 
antibody, and as the first and only blocking antibody to target the PD-
L1/PD-1 pathway that is FDA-approved for the treatment of ES-SCLC. The 
applicant explained that PD-L1 is a protein expressed on the surface of 
cancer cells, which allows them to inactivate the T-cells of the 
patient's immune system which would normally attack the cancer cells. 
The applicant asserted that TECENTRIQ[supreg] blocks the PD-L1 protein, 
rendering the cancer cells susceptible to attack.\242\ The applicant 
indicated that the current standard of care drugs etoposide, 
carboplatin, and cisplatin impart their cytotoxic effects by 
interfering with the processes of DNA replication.243 244 
Therefore, the applicant stated the mechanism of action of 
TECENTRIQ[supreg] is unique and distinct from other available forms of 
treatment for ES-SCLC.
---------------------------------------------------------------------------

    \242\ Chen, D.S., Irving, B.A., Hodi, F.S., ``Molecular 
Pathways: Next-Generation Immunotherapy--Inhibiting Programmed 
Death-Ligand 1 and Programmed Death-1,'' Clinical Cancer Research, 
2012, 18(24), pp. 6580-6587. doi:10.1158/1078-0432.ccr-12-1362.
    \243\ ETOPOPHOS (etoposide phosphate) [prescribing information]. 
Deerfield, IL: Baxter Healthcare, Co., 2017.
    \244\ Sousa, G.F.D., Wlodarczyk SR, Monteiro G., ``Carboplatin: 
Molecular Mechanisms of Action Associated with Chemoresistance,'' 
Brazilian Journal of Pharmaceutical Sciences, 2014, 4(50), pp. 693-
701, doi:10.1590/S1984-82502014000400004.
---------------------------------------------------------------------------

    The applicant for IMFINZI[supreg] asserted that IMFINZI[supreg] 
offers a novel mechanism of action for the treatment of ES-SCLC 
compared to the SOC chemotherapy. The applicant for IMFINZI[supreg] 
stated that first line SOC treatment of ES-SCLC is standard 
chemotherapy, including a platinum agent (typically carboplatin or 
cisplatin) plus etoposide.\245\ The mechanism of action of platinum 
chemotherapy agents (including cisplatin and carboplatin) is based on 
the agent's ability to crosslink with the purine bases on the DNA; 
crosslinking interferes with DNA repair mechanisms, causes DNA damage, 
and subsequently induces apoptosis in cancer cells.246 247
---------------------------------------------------------------------------

    \245\ Farago, A.F., Keane, F.K., ``Current standards for 
clinical management of small cell lung cancer,'' Translational Lung 
Cancer Research, 2018, 7, pp. 69-79.
    \246\ Dasari, S., Tchounwou, P.B., ``Cisplatin in cancer 
therapy: Molecular mechanisms of action,'' European Journal of 
Pharmacology, 2014, 740, pp. 364-378.
    \247\ Thirumaran R, Prendergast GC, Gilman PB, ``Cytotoxic 
chemotherapy in clinical treatment of cancer,'' In: Prendergast, 
G.C., Jaffee, E.M., editors, Cancer Immunotherapy: Immune 
Suppression and Tumor Growth, USA: Elsevier Inc, 2007, pp. 101-116, 
http://dx.doi.org/10.1016/B978-012372551-6/50071-7.
---------------------------------------------------------------------------

    The applicant for IMFINZI[supreg] asserted that etoposide phosphate 
is a plant alkaloid prodrug that is converted to its active moiety, 
etoposide, by dephosphorylation. Further, the applicant explained 
etoposide causes the induction of DNA strand breaks by an interaction 
with DNA-topoisomerase II or the formation of free radicals, leading to 
cell cycle arrest, primarily at the G2 stage of the cell cycle, and 
cell death.248 249
---------------------------------------------------------------------------

    \248\ Ibid.
    \249\ Etopophos[supreg] (etoposide phosphate) [Prescribing 
Information]. Princeton, NJ; Bristol-Myers Squibb, 2019.
---------------------------------------------------------------------------

    The applicant stated IMFINZI[supreg] is a selective, high-affinity, 
human IgG1[kappa] monoclonal antibody that blocks PD-L1 binding to 
programmed cell death-1 and CD80 without antibody-dependent cell-
mediated cytotoxicity.\250\ The applicant asserted that 
IMFINZI[supreg], in combination with chemotherapy, demonstrated a 
statistically and clinically significant improvement in overall 
survival in a randomized Phase III study (CASPIAN), which is discussed 
later in this section.\251\
---------------------------------------------------------------------------

    \250\ Pas-Ares, L., Jiang, H., Huang, Y., et al., A Phase III 
Randomized Study of First-Line DurvalumabTremelumimab+Platinum-based Chemotherapy (EP) vs. EP Alone in 
Extensive-Stage Disease Small Cell Lung Cancer (ED-SCLC):CASPIAN 
[Poster]. Presented at: the ASCO annual meeting, Chicago, IL June 2-
6, 2017.
    \251\ Paz-Ares, L., Chen, Y., Reinmuth, N., et al., Overall 
Survival with Durvalumab Plus Platinum-Etoposide in First-Line 
Extensive-Stage SCLC: Results from the CASPIAN Study [presentation], 
Presented at: World Conference on Lung Cancer, Barcelona, Spain, 
September 7-10, 2019.
---------------------------------------------------------------------------

    With regard to the second criterion, whether IMFINZI[supreg] and 
TECENTRIQ[supreg] will be assigned to the same or a different MS-DRG, 
the applicant for TECENTRIQ[supreg] referenced the FY 2016 IPPS/LTCH 
PPS Final Rule (80 FR 49445) to support that this criterion is not met 
in cases where the subject technology is treating a disease for which 
the current SOC involves non-FDA-approved therapies that are also 
associated with different MS-DRGs. As previously noted, the applicant 
stated that the current SOC treatment for ES-SCLC is a combination of 
etoposide, which is FDA-approved in SCLC only in combination with 
cisplatin, and carboplatin, which is used in preference to cisplatin 
for toxicity reasons, despite being off-label. The applicant for 
TECENTRIQ[supreg] also pointed out that irinotecan, a topoisomerase 
inhibitor indicated in colon and rectal cancers, is sometimes used in 
place of etoposide.
    The applicant for TECENTRIQ[supreg] also stated that the MS-DRG 
payment system cannot differentiate between patients with NSCLC and ES-
SCLC and noted that MS-DRGs 180 (Respiratory Neoplasms with MCC) and 
181 (Respiratory Neoplasms with CC) are applicable to both diseases. 
The applicant for TECENTRIQ[supreg] also noted that category C34 
(Malignant neoplasm of bronchus and lung) of the ICD-10-CM diagnosis 
coding classification system can be used to identify NSCLC and SCLC 
cases but does not differentiate between them. As a result, the 
applicant for TECENTRIQ[supreg] suggested both TECENTRIQ[supreg] and an 
existing technology (such as one used to treat NSCLC) may be assigned 
to either of these MS DRGs, even though, as previously noted, the NSCLC 
and SCLC patient populations are different.
    The applicant for IMFINZI[supreg] asserted that extensive stage 
small cell lung cancer patients are identified under category C34 
(Malignant neoplasm of bronchus and lung) of the ICD-10-CM coding 
classification system. According to the applicant for IMFINZI[supreg], 
category C34 is all encompassing and does not distinguish between the 
lung cancer subtypes. The applicant also stated that both non-small 
cell lung cancer patients as well as earlier stages of small cell lung 
cancer (that is, limited stage) are captured under category C34, all of

[[Page 58677]]

which have differing epidemiological considerations and treatment 
interventions. The applicant for IMFINZI[supreg] concluded that 
patients diagnosed with ES-SCLC, identified using category C34, map to 
MS-DRGs 180, 181, and 182 (Respiratory Neoplasms with MCC, with CC, and 
without CC/MCC, respectively). The applicant for IMFINZI[supreg] stated 
that the existing ICD-10-PCS coding system does not allow for 
visibility into the different MS-DRGs that ES-SCLC patients map to 
versus NSCLC patients, making it difficult to show that ES-SCLC 
patients receiving IMFINZI[supreg] would map to a unique MS-DRG from 
NSCLC cases, where IMFINZI[supreg] and other immuno-oncology therapies 
are already being used.
    To further identify the patient population of interest, the 
applicant for IMFINZI[supreg] searched charge level data from the 
Premier Hospital Database to determine which MS-DRGs these cases are 
mapping to, beyond relying on the broad lung cancer category C34. The 
applicant asserted that the Premier Hospital database is a large U.S. 
hospital-based, all payer database that contains discharge information 
from geographically diverse non-governmental, community, and teaching 
hospitals and health systems across both rural and urban areas. The 
applicant for IMFINZI[supreg] stated that this database contains data 
from standard hospital discharge files providing access to all 
procedures, diagnoses, drugs, and devices received for each patient 
regardless of the insurance or disease state. The applicant for 
IMFINZI[supreg] used charge level hospital data from the Premier 
Hospital Database to identify cases that used category C34 as well as 
carboplatin or cisplatin plus etoposide, the chemotherapy doublet 
specifically used for ES-SCLC patients. The applicant also looked for 
the use of prophylactic cranial irradiation (PCI), a type of radiation 
therapy used for ES-SCLC patients to address the frequent occurrence of 
multiple brain metastases associated with SCLC. Based on this 
assessment of hospital charge-level data, the applicant for 
IMFINZI[supreg] stated that over 60 percent of ES-SCLC patients map to 
MS-DRGs 180 (Respiratory Neoplasms with MCC), 181 (Respiratory 
Neoplasms with CC), and 164 (Major Chest Procedures with CC). We agreed 
with the applicant that patients receiving IMFINZI[supreg] would map to 
the same DRGs as patients receiving standard therapy for ES-SCLC.
    With regard to the third criterion, whether IMFINZI[supreg] and 
TECENTRIQ[supreg] will be used to treat the same or similar disease in 
the same or similar patient population when compared to existing 
therapies, the applicant for IMFINZI[supreg] stated that 
IMFINZI[supreg], in combination with standard chemotherapy, represents 
a new treatment option for patients with extensive stage small cell 
lung cancer, demonstrating statistically and clinically significant 
improved overall survival as compared to standard chemotherapy (Hazard 
ratio [HR] 0.73; 95 percent CI 0.59-0.91; p=0.0047).\252\ The applicant 
for IMFINZI[supreg] asserted that IMFINZI[supreg] in combination with 
chemotherapy represents a new treatment option for ES-SCLC patients. 
The applicant for TECENTRIQ[supreg] stated the use of TECENTRIQ[supreg] 
in ES-SCLC does not involve the treatment of the same or a similar type 
of disease and the same or similar patient population when compared to 
an existing technology.
---------------------------------------------------------------------------

    \252\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab 
plus platinum-etoposide versus platinum-etoposide in first-line 
treatment of extensive-stage small-cell lung cancer (CASPIAN): a 
randomized, controlled, open-label, phase 3 trial [article and 
supplementary appendix],'' Lancet, 2019.
---------------------------------------------------------------------------

    We invited public comments on whether IMFINZI[supreg] or 
TECENTRIQ[supreg] is substantially similar to an existing technology 
and whether they meet the newness criterion.
    In the proposed rule we stated that both IMFINZI[supreg] and 
TECENTRIQ[supreg] seem to be intended for similar patient populations 
and would involve the treatment of the same conditions: Patients with 
locally advanced or metastatic urothelial carcinoma and patients with 
SCLC. We stated that we were interested in information on how these two 
technologies may differ from each other with respect to the substantial 
similarity criteria and newness criterion, to inform our analysis of 
whether IMFINZI[supreg] and TECENTRIQ[supreg] are substantially similar 
to each other and therefore should be considered as a single 
application for purposes of new technology add-on payments.
    Comment: The applicants for TECENTRIQ[supreg] and IMFINZI[supreg] 
each provided comments regarding whether TECENTRIQ[supreg] and 
IMFINZI[supreg] were substantially similar to the other, or to any 
existing technology.
    The applicant for TECENTRIQ[supreg] (Genentech) commented that 
TECENTRIQ[supreg] is a humanized programmed death-ligand 1 (PD-L1) 
blocking antibody (which binds to PD-L1 and blocks its interactions 
with both PD-1 and B7.1 receptors) with multiple oncology indications, 
including one in combination with carboplatin and etoposide for the 
first-line treatment of adult patients with ES-SCLC.\253\ According to 
the commenter, TECENTRIQ[supreg] has a total of nine indications--two 
in urothelial carcinoma, four in NSCLC, one in triple-negative breast 
cancer, one in ES-SCLC, and one in hepatocellular carcinoma.\254\ The 
commenter stated that, in addition, TECENTRIQ[supreg] was the first 
cancer immunotherapy to be approved for the first line treatment of ES-
SCLC, on March 18, 2019; \255\ and the first drug to improve median OS 
in ES-SCLC which has remained at ~10 months or less since the 
1980s.256 257 The commenter explained that over 40 Phase III 
trials evaluating 60+ other regimens have been attempted since 1970, 
none of which led to additional FDA approvals in first-line ES-
SCLC.\258\ Furthermore, the applicant stated that the use of 
TECENTRIQ[supreg] to treat ES-SCLC also amounts to a paradigm shift 
that was validated by the subsequent approval of IMFINZI[supreg] for an 
almost identical indication. According to the applicant, the 
combination of TECENTRIQ[supreg] with carboplatin and etoposide is also 
the first FDA approval for the first-line treatment of ES-SCLC since 
the approval of carboplatin and etoposide alone in 1999 and prior to 
that, the most recent approval was that of cisplatin and etoposide, in 
1985.\259\ The applicant asserted that, whereas TECENTRIQ[supreg] in 
combination with carboplatin and etoposide is associated with a 
statistically significant increase in overall survival and progression-
free survival compared to placebo plus carboplatin and etoposide, this 
was not the case for the combination of KEYTRUDA (pembrolizumab), 
another

[[Page 58678]]

well-known PD-1 blocking antibody, with either carboplatin or 
cisplatin, and etoposide.\260\ According to the applicant, since March 
2019, TECENTRIQ[supreg] in combination with carboplatin and etoposide 
has become the standard of care for first-line ES-SCLC, with over 60% 
of newly diagnosed patients receiving the regimen according to the 
applicant.\261\
---------------------------------------------------------------------------

    \253\ TECENTRIQ (atezolizumab) [prescribing information]. San 
Francisco, CA: Genentech, Inc.; 2020.
    \254\ TECENTRIQ (atezolizumab) [prescribing information]. San 
Francisco, CA: Genentech, Inc.; 2020.
    \255\ U.S. Department of Health and Human Services. Supplemental 
Approval.
    https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2019/761034Orig1s019ltr.pdf. Accessed June 11, 2020.
    \256\ Evans WK, Shepherd FA, Feld R, Osoba D, Dang P, Deboer G. 
VP-16 and cisplatin as first-line therapy for smallcell lung cancer. 
Journal of Clinical Oncology. 1985;3(11):1471-1477. doi:10.1200/
jco.1985.3.11.1471
    \257\ Boni C, Cocconi G, Bisagni G, Ceci G, Peracchia G. 
Cisplatin and etoposide (VP-16) as a single regimen for small cell 
lung cancer. A phase II trial. Cancer. 1989;63(4):638-642. 
doi:10.1002/1097-0142(19890215)63:4<638::aidcncr2820630406>3.0.co;2-
8.
    \258\ Byers LA, Rudin CM. Small cell lung cancer: Where do we go 
from here? Cancer. 2014;121(5):664-672. doi:10.1002/cncr.29098.
    \259\ Sabari JK, Lok BH, Laird JH, Poirier JT, Rudin CM. 
Unravelling the biology of SCLC: Implications for therapy. Nat Rev 
Clin Oncol. 2017;14(9):549-561. doi:10.1038/nrclinonc.2017.71.
    \260\ Rudin CM, Awad MM, Navarro A, et al. Pembrolizumab or 
Placebo Plus Etoposide and Platinum as First-Line Therapy for 
Extensive-Stage Small-Cell Lung Cancer: Randomized, Double-Blind, 
Phase III KEYNOTE-604 Study [published online ahead of print, 2020 
May 29]. J Clin Oncol. 2020;JCO2000793. doi:10.1200/JCO.20.00793.
    \261\ FlatIron EMR Data, April 2020.
---------------------------------------------------------------------------

    The applicant for TECENTRIQ[supreg] stated that IMFINZI[supreg] is 
a human PD-L1 blocking antibody \262\ (that blocks the interaction of 
PD-L1 with both PD-1 and CD80 receptors).\263\ According to the 
applicant for TECENTRIQ[supreg], IMFINZI[supreg] has indications in 
urothelial carcinoma, NSCLC, and, most recently, ES-SCLC.\264\ The 
applicant explained that IMFINZI[supreg] was the second cancer 
immunotherapy to be approved for the first-line treatment of ES-SCLC, a 
little over a year after TECENTRIQ[supreg] and after the deadline for 
the submission of the FY 2021 new technology add-on payment 
application, on March 27, 2020.\265\ The commenter stated that although 
there are slight molecular differences between TECENTRIQ[supreg] and 
IMFINZI[supreg], they both fall into the same class of PD-L1 blocking 
antibodies. The applicant noted that if CMS believes that 
TECENTRIQ[supreg] and IMFINZI[supreg] are similar, then they presume 
CMS will consider them as a single application for purposes of new 
technology add-on payments in a way that was analogous to what was done 
for KYMRIAH and YESCARTA in FY 2019 in which both were approved for new 
technology add-on payments.
---------------------------------------------------------------------------

    \262\ IMFINZI (durvalumab) [prescribing information]. 
Wilmington, DE: AstraZeneca Co.; 2020.
    \263\ Harding FA, Stickler MM, Razo J, DuBridge RB. The 
immunogenicity of humanized and fully human antibodies: Residual 
immunogenicity resides in the CDR regions. MAbs. 2010;2(3):256-265. 
doi:10.4161/mabs.2.3.11641.
    \264\ IMFINZI (durvalumab) [prescribing information]. 
Wilmington, DE: AstraZeneca Co.; 2020.
    \265\ U.S. Department of Health and Human Services. Supplemental 
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2020/761069Orig1s018ltr.pdf. Accessed June 21, 2020.
---------------------------------------------------------------------------

    The applicant for IMFINZI[supreg] (AstraZeneca) commented that the 
addition of IMFINZI[supreg] to the standard of care--etoposide and 
platinum-based chemotherapy (either carboplatin or cisplatin)--offers a 
novel mechanism of action for the first-line treatment of ES-SCLC. 
Therefore, the applicant stated that IMFINZI[supreg] is not 
substantially similar to the standard of care because it does not have 
the same or similar mechanism of action. The applicant for 
IMFINZI[supreg] stated that it offers a new, unique treatment option 
for the specific patient population facing this much more aggressive 
form of lung cancer, small cell cancer.
    The applicant for IMFINZI[supreg] asserted that IMFINZI[supreg] and 
TECENTRIQ[supreg] are unique molecular entities, with unique active 
ingredients and should be considered separately for new technology add-
on payments. According to the commenter, IMFINZI[supreg] is a 
selective, high-affinity, human IgG1 monoclonal antibody.\266\ The 
commenter explained that in comparison, TECENTRIQ[supreg] is a 
humanized monoclonal antibody.267 268 According to the 
commenter, theoretically, human antibodies, which have no non-human 
genetic material as humanized antibodies do, should have less 
immunogenicity and therefore induce less development of anti-drug 
antibodies (ADA).\269\ Also according to the commenter, in the CASPIAN 
study, of those who received IMFINZI[supreg], none of the 201 patients 
tested positive for treatment-emergent ADA.\270\ The commenter 
indicated, comparatively, 18.6% of patients were reported to have 
treatment-emergent ADA in the TECENTRIQ[supreg] IMPower 133 study.\271\ 
The applicant for IMFINZI[supreg] stated that the two new drugs 
IMFINZI[supreg] and TECENTRIQ[supreg] were evaluated in distinct and 
differently structured clinical trials. The commenter explained that 
the CASPIAN trial with IMFINZI[supreg] was studied in combination with 
etoposide and either carboplatin or cisplatin \272\ whereas the 
TECENTRIQ[supreg] study omitted cisplatin as an option.\273\ The 
applicant also noted that the inclusion of patients with asymptomatic 
brain metastases is another aspect of the CASPIAN trial that 
differentiated the expected IMFINZI[supreg] patient population 
according to the applicant.\274\
---------------------------------------------------------------------------

    \266\ IMFINZI[supreg] (durvalumab) [prescribing information]. 
Wilmington, DE. AstraZeneca, Inc.
    \267\ National Cancer Institute Dictionary of Cancer Terms 
https://www.cancer.gov/publications/dictionaries/cancer-terms/def. 
Accessed June 2020.
    \268\ Enrico D et al. Antidrug Antibodies Against Immune 
Checkpoint Blockers: Impairment of Drug Efficacy or Indication of 
Immune Activation? American Association for Cancer Research Journal. 
2020. Volume 26 (4) 787-792. https://clincancerres.aacrjournals.org/content/26/4/787. Accessed June 16, 2020.
    \269\ Enrico D et al. Antidrug Antibodies Against Immune 
Checkpoint Blockers: Impairment of Drug Efficacy or Indication of 
Immune Activation? American Association for Cancer Research Journal. 
2020. Volume 26 (4) 787-792. https://clincancerres.aacrjournals.org/content/26/4/787. Accessed June 16, 2020.
    \270\ IMFINZI[supreg] (durvalumab) [prescribing information]. 
Wilmington, DE. AstraZeneca, Inc.
    \271\ TECENTRIQ EMA Assessment report, July 25, 2019. https://www.ema.europa.eu/en/documents/variation-report/tecentriq-h-c-004143-ii-0018-epar-assessment-report-variation_en.pdf; accessed 
June 2020.
    \272\ Paz-Ares L, et al. Durvalumab  tremelimumab + 
platinum-etoposide in first-line extensive-stage SCLC: Updated 
results from the phase 3 CASPIAN study. 2020 ASCO Annual meeting, 
abstract 9002.
    \273\ TECENTRIQ[supreg] (atezolizumab) [prescribing 
information]. South San Francisco, CA. Genentech, Inc.
    \274\ National Comprehensive Cancer Network, Inc. NCCN Clinical 
Practice Guidelines in Oncology (NCCN Guidelines) for Small Cell 
Lung Cancer version 3.2020. Available at: https://www.nccn.org/professionals/physician_gls/pdf/sclc.pdf. Accessed May 2020.
---------------------------------------------------------------------------

    The applicant further stated that IMFINZI[supreg]'s unique ICD-10 
procedure code which has an October 1, 2020 effective date, is distinct 
from that of TECENTRIQ[supreg], to enable data to be collected specific 
to each technology for specific uses and patient populations, 
supporting a conclusion that the technologies should be considered 
separately for new technology add-on payments. Therefore, the 
manufacturer for IMFINZI[supreg] requested that CMS discretely grant 
new technology add-on payments for IMFINZI[supreg], stating that 
current evidence does not support consideration of new technology add-
on payments for IMFINZI[supreg] jointly with another applicant.
    Response: We thank the applicants for their comments. After 
consideration of the public comments we received, although we recognize 
that there may be slight molecular differences, we believe 
IMFINZI[supreg] and TECENTRIQ[supreg] both fall into the same class of 
PD-L1 blocking antibodies. Also, we are not convinced that these 
differences result in the use of a different mechanism of action and, 
therefore, we believe that the two technologies' mechanisms of action 
are the same. Furthermore, we believe that IMFINZI[supreg] and 
TECENTRIQ[supreg] are substantially similar to one another because the 
technologies are intended to treat the same or similar disease in the 
same or similar patient population--patients with ES-SCLC, and are 
purposed to achieve the same therapeutic outcome using the same or 
similar mechanism of action using PD-L1 blocking antibodies.
    We also believe IMFINZI[supreg] and TECENTRIQ[supreg] are not 
substantially similar to any other existing technologies because, as 
both applicants asserted in their FY 2021 new technology add-on payment 
applications and in their comments the technologies do not use the same 
or similar mechanism of action to achieve a therapeutic outcome as any 
other

[[Page 58679]]

existing drug or therapy assigned to the same or different MS-DRG. 
Based on the information described in this section, we believe 
IMFINZI[supreg] and TECENTRIQ[supreg] meet the newness criterion.
    We also note that proposals to create, delete, or revise codes 
under the ICD-10-PCS structure are referred to the ICD-10 Coordination 
and Maintenance Committee. The decisions of this committee are 
independent from any decision for new technology add on payments. 
Therefore, we do not agree with the commenter that the fact that 
IMFINZI[supreg] and TECENTRIQ[supreg] have separate codes supports a 
conclusion that the technologies should be considered separately for 
new technology add-on payments.
    Based on the above, we are making one determination regarding 
approval for new technology add-on payments that will apply to both 
applications, and in accordance with our policy, we use the earliest 
market availability date submitted as the beginning of the newness 
period for both IMFINZI[supreg] and TECENTRIQ[supreg].
    We believe our current policy for evaluating new technology payment 
applications for two technologies that are substantially similar to 
each other is consistent with the authority and criteria in section 
1886(d)(5)(K) of the Act. We note that CMS is authorized by the Act to 
develop criteria for the purposes of evaluating new technology add-on 
payment applications. For the purposes of new technology add-on 
payments, when technologies are substantially similar to each other, we 
believe it is appropriate to evaluate both technologies as one 
application for new technology add-on payments under the IPPS, for the 
reasons we discussed above and consistent with our evaluation of 
substantially similar technologies in prior rulemaking (82 FR 38120).
    With respect to the newness criterion, as previously stated, 
IMFINZI[supreg] received FDA approval on March 27, 2020 and 
TECENTRIQ[supreg] received FDA approval on March 18, 2019. In 
accordance with our policy, because these technologies are 
substantially similar to each other, we use the earliest market 
availability date submitted as the beginning of the newness period for 
both technologies. Therefore, based on our policy, with regard to both 
technologies, if the technologies are approved for new technology add-
on payments, we believe that the beginning of the newness period would 
be March 18, 2019.
    The applicants submitted separate cost and clinical data, and in 
the proposed rule, we reviewed and discussed each set of data 
separately. However, as stated above, for this final rule, we will make 
one determination regarding new technology add-on payments that will 
apply to both applications. We believe that this is consistent with our 
policy statements in the past regarding substantial similarity. 
Specifically, we have noted that approval of new technology add-on 
payments would extend to all technologies that are substantially 
similar (66 FR 46915), and we believe that continuing our current 
practice of extending new technology add-on payments without a further 
application from the manufacturer of the competing product, or a 
specific finding on cost and clinical improvement if we make a finding 
of substantial similarity among two products is the better policy 
because we avoid--
     Creating manufacturer-specific codes for substantially 
similar products;
     Requiring different manufacturers of substantially similar 
products to submit separate new technology add-on payment applications;
     Having to compare the merits of competing technologies on 
the basis of substantial clinical improvement; and
     Bestowing an advantage to the first applicant representing 
a particular new technology to receive approval (70 FR 47351).
    If substantially similar technologies are submitted for review in 
different (and subsequent) years, rather than the same year, we 
evaluate and make a determination on the first application and apply 
that same determination to the second application. However, because the 
technologies have been submitted for review in the same year, and 
because we believe they are substantially similar to each other, we 
consider both sets of cost data and clinical data in making a 
determination, and we do not believe that it is possible to choose one 
set of data over another set of data in an objective manner.
    As we discussed in the proposed rule and as stated above, each 
applicant submitted separate analyses regarding the cost criterion for 
each of their products, and both applicants maintained that their 
product meets the cost criterion. We summarize each analysis below.
    With respect to the cost criterion, the applicant for 
IMFINZI[supreg] conducted the following analysis to demonstrate that 
IMFINZI[supreg] meets the cost criterion. To identify cases that may be 
eligible for the use of IMFINZI[supreg], the applicant searched the FY 
2018 MedPAR LDS file for claims reporting an ICD-10-CM code of category 
C34 in combination with Z51.11 (Encounter for antineoplastic 
chemotherapy) or Z51.12 (Encounter for antineoplastic immunotherapy). 
The applicant also included any cases within MS-DRGs 180, 181, 182 with 
an ICD-10-CM diagnosis code from category C34 as the applicant 
suggested hospitals may not always capture the encounter for 
chemotherapy. Based on the FY 2018 MedPAR LDS file, the applicant 
identified a total of 24,193 cases. Of the MS-DRGs with more than 11 
cases, the applicant found 23,933 cases which were mapped to 12 unique 
MS-DRGs. The applicant excluded MS-DRGs with case volume less than 11 
total cases.
    Using these 23,933 cases, the applicant for IMFINZI[supreg] then 
calculated the unstandardized average charges per case for each MS-DRG. 
The applicant determined that it did not need to remove any charges as 
IMFINZI[supreg] is not expected to offset historical charges already 
included within the MS-DRGs. The applicant asserted that ES-SCLC 
patients will receive their initial dose of IMFINZI[supreg] in the 
inpatient setting. The applicant for IMFINZI[supreg] then standardized 
the charges and inflated the charges by 1.11100 or 11.10 percent, the 
same inflation factor used by CMS to update the outlier threshold in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629). The applicant then 
added the charges for IMFINZI[supreg] by converting the costs to a 
charge by dividing the cost by the national average cost-to-charge 
ratio of 0.189 for drugs from the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42179).
    Based on the FY 2020 IPPS/LTCH PPS final rule correction notice 
data file thresholds, the average case-weighted threshold amount for 
IMFINZI[supreg] was $53,209. In the applicant's analysis, the final 
inflated average case-weighted standardized charge per case was 
$111,093. Because the final inflated average case-weighted standardized 
charge per case exceeds the average case-weighted threshold amount, the 
applicant for IMFINZI[supreg] maintained that the technology meets the 
cost criterion.
    To identify cases that may be eligible for TECENTRIQ[supreg], the 
applicant searched the FY 2018 MedPAR LDS file for claims reporting an 
ICD-10-CM code from category C34 and considered only cases where the 
diagnosis codes were in the primary or admitting position to 
differentiate ES-SCLC from limited-stage SCLC. Cases classified with 
one or more of 48 surgical lung procedure codes were not considered to 
differentiate ES-SCLC from NSCLC. This resulted in 33,404 cases, which 
the applicant for TECENTRIQ[supreg] indicated constitute what it 
defines as an ES-

[[Page 58680]]

SCLC case through the reconciliation of clinical presentation, 
applicable ICD-10-CM and ICD-10-PCS codes, and MedPAR data fields, 
which mapped to 264 MS-DRGs.
    Using these 33,404 cases, the applicant for TECENTRIQ[supreg] then 
calculated the unstandardized average charges per case for each MS-DRG. 
The applicant determined that it did not need to remove any charges 
because TECENTRIQ[supreg] is administered as a combination therapy with 
carboplatin and etoposide to treat ES-SCLC.
    The applicant for TECENTRIQ[supreg] then standardized the charges 
and inflated the charges by 1.11100 or 11.10 percent, the same 
inflation factor used by CMS to update the outlier threshold in the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42629). The applicant then added 
the estimated cost of an ES-SCLC TECENTRIQ[supreg] administration to 
the MedPAR cases. The applicant then added the charges for 
TECENTRIQ[supreg] by converting the costs to a charge by dividing the 
cost by what the applicant described as a conservative cost-to-charge 
ratio of 0.5.
    Based on the FY 2020 IPPS/LTCH PPS final rule correction notice 
data file thresholds, the average case-weighted threshold amount for 
TECENTRIQ[supreg] was $65,738. In the applicant's analysis, the final 
inflated average case-weighted standardized charge per case for 
TECENTRIQ[supreg] was $88,561. Because the final inflated average case-
weighted standardized charge per case exceeds the average case-weighted 
threshold amount, the applicant maintained that the technology meets 
the cost criterion.
    The applicant for TECENTRIQ[supreg] also provided a sensitivity 
analysis using this same methodology but considered only the MS-DRGs 
representing 1 percent of case volume, producing a list of 10 MS-DRGs 
that cumulatively represent 88.31 percent of case volume, or 29,500 
cases. Based on the FY 2020 IPPS/LTCH PPS final rule correction notice 
data file thresholds, the average case weighted threshold amount was 
$56,987. In the applicant's analysis, the final inflated average case-
weighted standardized charge per case for TECENTRIQ[supreg] was 
$88,404. Because the final inflated average case-weighted standardized 
charge per case exceeds the average case-weighted threshold amount, the 
applicant maintained that the technology meets the cost criterion.
    The ICD-10-CM diagnosis codes and MS-DRGs in the cost analysis for 
IMFINZI[supreg] differ from those used in the cost analysis for 
TECENTRIQ[supreg]. Specifically, as noted previously, the applicant for 
TECENTRIQ[supreg] searched for claims with ICD-10-CM diagnosis codes 
from category C34 while the applicant for IMFINZI[supreg] searched for 
ICD-10-CM diagnosis codes from category C34 in combination with Z51.11 
or Z51.12. As noted in the proposed rule, we were concerned as to why 
the diagnosis codes would differ between the cost analysis for 
IMFINZI[supreg] and for TECENTRIQ[supreg] as one analysis may lend more 
accuracy to the calculation depending on which is more reflective of 
the applicable patient population.
    We invited public comment on whether IMFINZI[supreg] or 
TECENTRIQ[supreg] meet the cost criterion.
    Comment: Genentech, the applicant for TECENTRIQ[supreg], commented 
that while the cost analysis approaches taken for TECENTRIQ[supreg] and 
IMFINZI[supreg] are different, both independently concluded that the 
cost criterion was met. Regarding the contrast in selection of 
diagnostic codes, Genentech considered AstraZeneca's decision to 
include patient cases of the ICD-10-CM category C34 in combination with 
the ICD-10-CM codes Z51.11 (Encounter for antineoplastic chemotherapy) 
or Z51.12 (Encounter for antineoplastic immunotherapy) \275\ to be 
reasonable. However, the real-world scenario where the patient is 
diagnosed with ES-SCLC in the inpatient setting and then treated there 
due to their immediate need for treatment may not result in Z51.11 and/
or Z51.12 appearing in the corresponding claim, because the inpatient 
stay was not solely or primarily for the administration of 
chemotherapy. Regarding the contrasting cost-to-charge ratios, 
Genentech stated that the one used by Genentech (0.5) is more 
conservative than that used by AstraZeneca (0.189), but both can be 
justified.
---------------------------------------------------------------------------

    \275\ 85 FR 32,633.
---------------------------------------------------------------------------

    1. Genentech (CCR of 0.5): This was noted by CMS in the FY 2016 
IPPS Final Rule, with reference to the successful application for NTAP 
of BLINCYTO.\276\
---------------------------------------------------------------------------

    \276\ 80 FR 49,446.
---------------------------------------------------------------------------

    2. AstraZeneca (CCR of 0.189): This figure was calculated by CMS, 
specifically for drugs, from FY 2017 cost report data.\277\
---------------------------------------------------------------------------

    \277\ 84 FR 42,179.
---------------------------------------------------------------------------

    The applicant for IMFINZI[supreg] also commented that both 
applicants utilized the ``C34 Malignant neoplasm of bronchus and lung'' 
ICD-10-CM code series (85 FR 32633).
    Although the same primary diagnosis code was used, each applicant 
further refined the patient population using different subsequent 
methods. The applicant for IMFINZI[supreg] stated that the case-
weighted threshold amount published in the proposed rule, using their 
methodology, is $65,738. Although this threshold presented in the 
proposed rule and the inflated case-weighted standardized charges from 
analyses AstraZeneca performed were calculated using different 
methodologies, the applicant stated that comparing them suggests that 
IMFINZI[supreg] would meet the cost criterion if this analysis was 
performed with IMFINZI[supreg] charges.
    Response: We thank the applicants for their comments. We agree that 
both IMFINZI[supreg] and TECENTRIQ[supreg] meet the cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant for IMFINZI[supreg] asserted that IMFINZI[supreg] represents 
a substantial clinical improvement over existing technologies because 
it offers a treatment option for a patient population unresponsive to 
currently available treatments. The applicant for IMFINZI[supreg] also 
stated that it represents a substantial clinical improvement because 
the technology reduces mortality, decreases disease progression, and 
improves quality of life.
    The CASPIAN clinical trial for IMFINZI[supreg] was a randomized, 
open-label, phase 3 trial at 209 sites across 23 countries. Eligible 
patients were adults with untreated ES-SCLC, with World Health 
Organization (WHO) performance status 0 or 1 and measurable disease as 
per Response Evaluation Criteria in Solid Tumors (RECIST). Patients 
were randomly assigned (in a 1:1:1 ratio) to durvalumab plus platinum-
etoposide; durvalumab plus tremelimumab plus platinum-etoposide; or 
platinum-etoposide alone. All drugs were administered intravenously. 
Platinum-etoposide consisted of etoposide 80-100 mg/m2 on days 1-3 of 
each cycle with investigator's choice of either carboplatin area under 
the curve 5-6 mg/mL per min or cisplatin 75-80 mg/m2 (administered on 
day 1 of each cycle). Patients received up to four cycles of platinum-
etoposide plus durvalumab 1500 mg with or without tremelimumab 75 mg 
every 3 weeks followed by maintenance durvalumab 1500 mg every 4 weeks 
in the immunotherapy groups and up to 6 cycles of platinum-etoposide 
every 3 weeks plus prophylactic cranial irradiation (investigator's 
discretion) in the platinum-etoposide group. The primary endpoint was 
overall survival in the intention-to-treat population. The applicant 
for IMFINZI[supreg] stated that the median OS was 13.0 months (95 
percent CI, 11.5-14.8) for patients treated with IMFINZI[supreg] plus 
chemotherapy vs. 10.3 months (95 percent CI, 9.3-11.2) for

[[Page 58681]]

SOC chemotherapy. The results also showed a sustained OS benefit with 
34 percent survival at 18 months following treatment with 
IMFINZI[supreg] plus chemotherapy vs. 25 percent following SOC 
chemotherapy. No data was provided on patients treated with durvalumab 
plus tremelimumab plus platinum-etoposide in the interim analysis 
submitted in the application.\278\
---------------------------------------------------------------------------

    \278\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab 
plus platinum-etoposide versus platinum-etoposide in first-line 
treatment of extensive-stage small-cell lung cancer (CASPIAN): A 
randomized, controlled, open-label, phase 3 trial,'' Lancet, 2019, 
https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)32222-6/fulltext. Accessed October 7, 2019.
---------------------------------------------------------------------------

    The applicant for IMFINZI[supreg] further stated that other key 
secondary endpoints demonstrated consistent and durable improvement for 
IMFINZI[supreg] plus chemotherapy, including a higher progression-free 
survival (PFS) rate at 12 months (17.5 percent vs. 4.7 percent), a 10 
percent increase in confirmed objective response rate (ORR) (67.9 
percent vs. 57.6 percent), and improved duration of response at 12 
months (22.7 percent vs. 6.3 percent). The median progression-free 
Survival was 5.1 months with IMFINZI[supreg] versus 5.4 months for the 
control arm, which was not significantly different.
    The applicant for IMFINZI[supreg] stated that in combination with 
etoposide and platinum-based chemotherapy, IMFINZI[supreg] provided a 
significant improvement in survival and notable changes in patient 
reported outcomes. According to the applicant, patients receiving 
IMFINZI[supreg] plus etoposide and platinum-based chemotherapy 
experienced reduced symptom burden over 12 months for pre-specified 
symptoms of fatigue, appetite loss, cough, dyspnea, and chest pain 
(based on adjusted mean change from baseline, MMRM). The applicant 
stated a large difference over 12 months was observed for appetite loss 
in favor of IMFINZI[supreg] plus etoposide and platinum-based 
chemotherapy compared to standard of care etoposide and platinum-based 
chemotherapy. The applicant further stated that patients receiving 
IMFINZI[supreg] plus etoposide and platinum-based chemotherapy also 
experienced longer time to deterioration in a broad range of patient-
reported symptoms (dyspnea, appetite loss, chest pain, arm/shoulder 
pain, other pain, insomnia, constipation, diarrhea), functioning 
(physical, cognitive, role, emotional, social), and Health Related 
Quality of Life (HRQoL) indicators, compared to cisplatin 
(EP).279 280 281 282
---------------------------------------------------------------------------

    \279\ AstraZeneca Press Release, September 9, 2019, Available 
at: https://www.astrazeneca-us.com/content/az-us/media/press-releases/2019/imfinzi-is-first-immunotherapy-to-show-both-significant-survival-benefit-and-improved-durable-responses-in-extensive-stage-small-cell-lung-cancer-09092019.html.
    \280\ Paz-Ares, L., Chen, Y., Reinmuth, N., et al., Overall 
Survival with Durvalumab Plus Platinum-Etoposide in First-Line 
Extensive-Stage SCLC: Results from the CASPIAN Study [presentation], 
Presented at: World Conference on Lung Cancer, Barcelona, Spain, 
September 7-10, 2019.
    \281\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab 
plus platinum-etoposide versus platinum-etoposide in first-line 
treatment of extensive-stage small-cell lung cancer (CASPIAN): A 
randomized, controlled, open-label, phase 3 trial,'' Lancet. 2019, 
https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)32222-6/fulltext. Accessed October 7, 2019.
    \282\ Paz-Ares, L., Goldman, J.W., Garassino, M.C., et al., PD-
L1 expression, patterns of progression and patient-reported outcomes 
(PROs) with durvalumab plus platinum-etoposide in ES-SCLC: Results 
from CASPIAN [presentation], Presented at European Society for 
Medical Oncology; Barcelona, Spain, September 27-October 1, 2019.
---------------------------------------------------------------------------

    As stated previously, the applicant asserted that IMFINZI[supreg] 
represents a substantial clinical improvement over existing 
technologies because it offers a treatment option for a patient 
population unresponsive to currently available treatments. The 
applicant explained that the CASPIAN study demonstrated the following 
endpoints: Patient population baseline characteristics, treatment 
exposure, overall survival (including pre-specified subgroups), 
progression-free survival, sites of progression, objective response 
rate, duration of response, and detailed safety analysis. All results 
provided comparison of the active IMFINZI[supreg] plus SOC chemotherapy 
arm to the SOC chemotherapy alone arm.\283\
---------------------------------------------------------------------------

    \283\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab 
plus platinum-etoposide versus platinum-etoposide in first-line 
treatment of extensive-stage small-cell lung cancer (CASPIAN): A 
randomized, controlled, open-label, phase 3 trial [article and 
supplementary appendix],'' Lancet, 2019.
---------------------------------------------------------------------------

    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32634), we had 
concerns that the CASPIAN study is ongoing, and the information is 
preliminary. Specifically, the three arms in the study had not yet been 
analyzed at time of application. Additionally, while the data show a 
median survival benefit of about 3 months with treatment with 
IMFINZI[supreg], we stated that we did not see any data that 
demonstrates significant improvement in median progression-free 
survival. Also, while we recognized that the trials are ongoing and 
that the analysis of the three study arms is not complete, we stated 
that we were interested in any updates and additional information 
concerning adverse events to help us better understand the safety 
profile of IMFINZI[supreg].
    The applicant for TECENTRIQ[supreg] asserted that TECENTRIQ[supreg] 
plus standard of care represents a substantial clinical improvement 
over existing technologies because it offers a treatment option for a 
patient population unresponsive to, or ineligible for currently 
available treatments. The applicant also maintained that 
TECENTRIQ[supreg] represents a substantial clinical improvement because 
the technology demonstrates statistically significant improvement in 
overall survival, statistically significant improvement in progression-
free survival, as well as improved HRQoL (Health-related quality of 
life, which is an individual's or a group's perceived physical and 
mental health over time) \284\ and reduced symptomatology.
---------------------------------------------------------------------------

    \284\ https://www.cdc.gov/hrqol/index.htm. Accessed December 27, 
2019.
---------------------------------------------------------------------------

    According to the applicant, the use of TECENTRIQ[supreg] in cases 
of ES-SCLC was evaluated in IMpower133, a phase III (efficacy) and 
phase I (safety), double-blind, placebo-controlled, randomized, 
multicenter study designed to compare the efficacy and safety of 
TECENTRIQ[supreg] vs. placebo in combination with carboplatin and 
etoposide in patients with ES-SCLC who did not receive prior systemic 
therapy.\285\ Over 40 percent of the population of the IMpower133 
clinical trial were of Medicare age.\286\
---------------------------------------------------------------------------

    \285\ Horn, .L, Mansfield, A.S., Szcz[eogon]sna, A., et al., 
``First-Line Atezolizumab plus Chemotherapy in Extensive Stage 
Small-Cell Lung Cancer,'' New England Journal of Medicine, 2018, 
379(23), pp. 2220-2229, doi:10.1056/nejmoa1809064.
    \286\ Ibid.
---------------------------------------------------------------------------

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

[[Page 58682]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.156

    At the time of data cutoff (April 24, 2018), the median follow-up 
was 13.9 months. The applicant stated that patients treated with 
TECENTRIQ[supreg] + carboplatin + etoposide experienced a significantly 
longer OS and PFS compared with patients treated with placebo + 
carboplatin + etoposide in the ITT population. The 1-year OS with 
TECENTRIQ[supreg] + carboplatin + etoposide, compared with the placebo 
+ carboplatin + etoposide rate, was approximately 13 percent higher; 
the 1-year PFS was approximately 7 percent higher, as shown in the 
following table that summarizes Landmark Overall Survival and 
Progression-free Survival Rates (Data Cutoff: April 24, 2018).
[GRAPHIC] [TIFF OMITTED] TR18SE20.157

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

[[Page 58683]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.158

    More patients in the TECENTRIQ[supreg] group than in the placebo 
group experienced immune-related AEs, with rash and hypothyroidism 
being the most common. The following table summarizes immune-related 
AEs occurring in >=5 patients in any treatment arm (data cutoff: April 
24, 2018) (safety population).
[GRAPHIC] [TIFF OMITTED] TR18SE20.159

    The median treatment duration of TECENTRIQ[supreg] was 4.7 months 
(range: 0-1), and the median number of TECENTRIQ[supreg] doses 
administered was 7 (range: 1-30). The median dose intensity, total 
cumulative dose, and median number of chemotherapy doses (four doses of 
carboplatin, 12 doses of etoposide) were similar in the two treatment 
groups.
    The addition of TECENTRIQ[supreg] to carboplatin + etoposide 
demonstrated a statistically significant improvement in OS and PFS 
compared with placebo + carboplatin + etoposide for the first-line 
treatment of ES-SCLC. Overall, the safety profiles of TECENTRIQ[supreg] 
+ carboplatin + etoposide and placebo + carboplatin + etoposide were 
comparable to the safety profiles of each individual agent; no new 
safety signals were identified with the combinations.
    The applicant asserted that TECENTRIQ[supreg] plus standard of care 
therapy represents a substantial clinical improvement over existing 
technologies because it offers a treatment option for a patient 
population unresponsive to or ineligible for currently available 
treatments. The applicant also asserted that TECENTRIQ[supreg] 
represents a significant clinical improvement over existing 
technologies because the technology produces a statistically 
significant improvement in overall survival, a statistically 
significant improvement in progression-free survival, as well as 
improved HRQoL and reduced symptomatology.
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32667), we stated 
we were concerned that the survival benefit of the addition of 
TECENTRIQ[supreg] was a median duration of only 2 months over standard 
therapy and the improvement on the median progression-free survival was 
less than one month. We were also concerned that the short survival and 
progression-free survival may not be clinically significant. 
Additionally, we were concerned that the participants did not have a 
clinically significant improvement in their quality of life given the 
number of AEs in the TECENTRIQ[supreg] treatment arm combined with the 
number of treatments given in that arm.
    We invited public comments on whether IMFINZI[supreg] or 
TECENTRIQ[supreg] meet the substantial clinical improvement criterion.
    Comment: Multiple commenters, including the applicant for 
TECENTRIQ[supreg], remarked that outcomes in ES-SCLC have been poor for 
decades and that the current standard therapy of platinum + etoposide 
chemotherapy was introduced in the 1970's. The commenters referenced 
multiple unsuccessful studies in the intervening decades and that 
TECENTRIQ[supreg] was the first advance to change that standard of 
care. The commenters cited the results from IMpower133, a randomized,

[[Page 58684]]

placebo-controlled, phase III trial, which showed that the addition of 
atezolizumab to standard chemotherapy significantly improved survival 
(Horn et al, N Engl J Med 2018).\287\ The commenters also cited that 
adding atezolizumab to standard chemotherapy did not significantly 
worsen toxicity and also improved symptom control (Mansfield et al, Ann 
Oncol 2019).\288\
---------------------------------------------------------------------------

    \287\ Horn L et al. New England Journal of Medicine. 
2018;379(23):2220-2229. doi:10.1056/nejmoa1809064.
    \288\ Califano R et al. Annals of Oncology. 2018;29(suppl_10).
---------------------------------------------------------------------------

    Multiple commenters, including the applicant for TECENTRIQ[supreg], 
remarked that SCLC is the most aggressive type of lung cancer, 
accounting for 10-15% of lung cancer cases.\289\ The commenters 
explained that the majority of these (72%) are diagnosed at the 
extensive stage,\290\ which is associated with a 5-year survival rate 
of only 2.9%.\291\ According to the commenters, ES-SCLC necessitates 
immediate treatment, and TECENTRIQ[supreg] is FDA-approved to be 
administered to Medicare beneficiaries on the very first day of 
treatment.\292\ The commenters stated that ideally, this would be with 
the current best therapy, atezolizumab plus chemotherapy, but without 
the new technology add-on payment, the commenters stated that some 
patients will be treated with inferior therapy. The applicant stated 
that delaying immunotherapy is suboptimal--as a phase III study 
exploring immunotherapy after chemotherapy (CheckMate 451) did not 
improve survival (Owonikoko, ELCC 2019).
---------------------------------------------------------------------------

    \289\ WebMD, LLC. Types of Lung Cancer. https://www.webmd.com/lung-cancer/Jung-cancer-types# I. Accessed September 19, 2019.
    \290\ American Lung Association. Trends in Lung Cancer Morbidity 
and Mortality. https://www.lung.org/assets/documents/researcb/lc-trend-report.pdf. Published November 2014. Accessed September 19, 
2019.
    \291\ Noone AM, Howlader N, K.rapcho M, et al. SEER Cancer 
Statistics Review, 1975-2015, based on November 2017 SEER data 
submission, posted to the SEER website, April 2018. Bethesda, MD: 
National Cancer Institute. 2018; https://seer.cancer.gov/csr/1975_2015/. Accessed Sept 19, 2019.
    \292\ TENCENTRIQ (atezolizumab) [prescribing information]. San 
Francisco, CA: Genentech, Inc.; 2019.
---------------------------------------------------------------------------

    The applicant for IMFINZI[supreg] commented that the final analysis 
of the CASPIAN trial was presented on May 29, 2020 at the 2020 ASCO 
Annual Meeting.\293\ According to the commenter, the final evidence 
supporting this indication demonstrated clinical and meaningful 
improvement in PFS and OS in the completed and final first experimental 
arm of the CASPIAN trial. According to the applicant, results from the 
CASPIAN trial continued to demonstrate improvement in OS vs EP, with a 
HR of 0.75 (95% CI 0.62-0.91; nominal p=0.0032); median OS 12.9 vs 10.5 
mo, respectively. 22.2% of pts were alive at 2 y with durvalumab + 
cisplatin or carboplatin vs 14.4% of pts with cisplatin or carboplatin. 
The study concluded that the addition of durvalumab to cisplatin or 
carboplatin continued to demonstrate improvement in OS compared with a 
robust control arm, further supporting this regimen as a new standard 
of care for 1L ES-SCLC offering the flexibility of platinum choice.
---------------------------------------------------------------------------

    \293\ Paz-Ares L, et al. Durvalumab  tremelimumab + 
platinum-etoposide in first-line extensive-stage SCLC: Updated 
results from the phase 3 CASPIAN study. 2020 ASCO Annual meeting, 
abstract 9002.
---------------------------------------------------------------------------

    Response: We appreciate the commenters' input and the applicants' 
submission of additional information to address the concerns presented 
in the proposed rule.
    After consideration of the public comments we received, we agree 
that both IMFINZI[supreg] and TECENTRIQ[supreg] represent a substantial 
clinical improvement over existing technologies because the 
technologies significantly improve clinical outcomes. These two 
treatments are the first to show improved overall survival in the 
treatment of ES-SCLC, an aggressive and deadly disease, in more than 20 
years. In summary, we have determined that IMFINZI[supreg] and 
TECENTRIQ[supreg] meet all of the criteria for approval of new 
technology add-on payments. Therefore, we are approving new technology 
add-on payments for IMFINZI[supreg] and TECENTRIQ[supreg] for FY 2021. 
As previously stated, cases involving IMFINZI[supreg] that are eligible 
for new technology add-on payments will be identified by ICD-10-PCS 
procedure codes XW03336 (Introduction of durvalumab antineoplastic into 
peripheral vein, percutaneous approach, new technology group 6) or 
XW04336 (Introduction of durvalumab antineoplastic into central vein, 
percutaneous approach, new technology group 6). Cases involving 
TECENTRIQ[supreg] that are eligible for new technology add-on payments 
will be identified by ICD-10-PCS procedure codes XW033D6 (Introduction 
of atezolizumab antineoplastic into peripheral vein, percutaneous 
approach, new technology group 6) or XW043D6 (Introduction of 
atezolizumab antineoplastic into central vein, percutaneous approach, 
new technology group 6), respectively.
    Each of the applicants submitted cost information for its 
application. The manufacturer of IMFINZI[supreg] stated that the cost 
of its technology is $10,833. The applicant projected that 6,073 cases 
will involve the use of IMFINZI[supreg] in FY 2021. The manufacturer of 
TECENTRIQ[supreg] stated that the cost of its technology is $9,013.75. 
The applicant projected that 806 cases will involve the use of 
TECENTRIQ[supreg] in FY 2021. Because the technologies are 
substantially similar to each other, we believe using a single cost for 
purposes of determining the new technology add-on payment amount is 
appropriate for IMFINZI[supreg] and TECENTRIQ[supreg] even though each 
applicant has its own set of codes. We also believe using a single cost 
provides predictability regarding the add on payment when using 
IMFINZI[supreg] or TECENTRIQ[supreg] for the treatment of patients with 
ES-SCLC. As such, we believe that the use of a weighted average of the 
cost of IMFINZI[supreg] and TECENTRIQ[supreg] based on the projected 
number of cases involving each technology to determine the maximum new 
technology add-on payment would be most appropriate. To compute the 
weighted cost average, we summed the total number of projected cases 
for each of the applicants, which equaled 6,879 cases (6,073 plus 806). 
We then divided the number of projected cases for each of the 
applicants by the total number of cases, which resulted in the 
following case-weighted percentages: 86 Percent for IMFINZI[supreg] and 
14 percent for TECENTRIQ[supreg]. We then multiplied the cost per case 
for the manufacturer specific drug by the case-weighted percentage 
(0.86 * $10,833 = $9,316.38 for IMFINZI[supreg] and 0.14 * $9,013.75 = 
$1,261.93 for TECENTRIQ[supreg]). This resulted in a case-weighted 
average cost of $10,578.53 for the technology. Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
65 percent of the average cost of the device or 65 percent of the costs 
in excess of the MS-DRG payment for the case. As a result, the maximum 
new technology add-on payment for a case involving IMFINZI[supreg] or 
TECENTRIQ[supreg] is $6,875.90 for FY 2021.
i. Soliris
    Alexion, Inc, submitted an application for new technology add-on 
payments for Soliris[supreg] (eculizumab) for FY 2021. Soliris[supreg] 
is approved for the treatment of neuromyelitis optica spectrum disorder 
(NMOSD) in adult patients who are anti-aquaporin-4 (AQP4) antibody 
positive.
    According to the applicant, NMOSD is a rare and severe condition 
that attacks the central nervous system without warning. The applicant 
explained that NMOSD attacks, also referred to as relapses, can cause 
progressive and irreversible damage to

[[Page 58685]]

the brain, optic nerve and spinal cord, which may lead to long-term 
disability, and in some instances, the damage may result in death. 
According to the applicant, the serious nature of an NMOSD relapse 
frequently requires inpatient hospitalization and treatment should be 
initiated as quickly as possible.
    According to the applicant, in patients with AQP4 antibody-positive 
NMOSD, the body's own immune system can turn against itself to produce 
auto-antibodies against AQP4, a protein on certain cells in the eyes, 
brain and spinal cord that are critical for the survival of nerve 
cells. The applicant explained that the binding of these anti-AQP4 
auto-antibodies activates the complement cascade, another part of the 
immune system.
    According to the applicant, complement activation by anti-AQP4 
auto-antibodies is one of the primary causes of NMOSD. The applicant 
explained that formation of membrane attack complex (MAC) is the end 
product of the activated complement system which is directly 
responsible for the damage to astrocytes leading to astrocytopathy 
(astrocyte death) and ensuing neurologic damage associated with NMOSD 
and relapses. According to the applicant, the primary goal of NMOSD 
treatment is to prevent these relapses, which over time lead to 
irreversible neurologic damage.
    According to the applicant, Soliris[supreg] is a first-in-class 
complement inhibitor that works by selectively inhibiting the 
complement system, a central part of the immune system involved in 
inflammatory processes, pathogen elimination, activation of the 
adaptive immune response, and maintenance of homeostasis. The applicant 
explained that the complement system distinguishes between healthy host 
cells, cell debris, apoptotic cells, and external pathogens. The 
applicant further explained that the complement system triggers a 
modulated immune response, and functions through a combination of 
effector proteins, receptors, and regulators. The applicant asserted 
that when the complement system detects a threat, an initial protease 
is activated. This protease (either alone or in a complex) then cleaves 
its target, which in turn becomes active and starts to cleave the next 
target in the chain, and so on, leading to a cascade.
    Per the applicant, initial activation of the complement system 
occurs via three different pathways, which all ultimately lead to the 
formation of the membrane attack complex (MAC) and release of the 
anaphylatoxins: (1) The classical pathway is activated by antibody-
antigen complexes; (2) The alternative pathway is activated at a 
constant low level via ``tick-over'' (spontaneous hydrolysis) of 
Complement component 3 (C3), a protein of the immune system; (3) The 
lectin pathway is activated by carbohydrates frequently found on the 
surface of microbes. According to the applicant, all pathways of 
complement activation result in the formation of C3 convertase 
(``proximal complement''), and converge at the cleavage of C5 leading 
to the generation of C5a and C5b by the C5 convertase enzyme complexes 
(``Terminal complement''). The applicant explained that C3 is the most 
abundant complement protein in plasma, occurring at a concentration of 
1.2 mg/mL and C3 cleavage products bridge the innate and the adaptive 
immune systems. The applicant also explained that C3a acts as an 
anaphylatoxin and is a mediator of inflammatory processes and C3b 
opsonizes the surface of recognized pathogens and facilitates 
phagocytosis and binds C3 convertase to form C5 convertase. The 
applicant also explained that C5 convertase cleaves C5 into C5a and 
C5b; C5a is chemotactic agent and anaphylatoxin, causing leukocyte 
activation, endothelial cell activation, and proinflammatory and 
prothrombotic effects.
    According to the applicant, imbalance between complement activation 
and regulation leads to host tissue damage, and congenital deficiencies 
in the complement system can lead to an increased susceptibility to 
infection. The applicant explained that the complement system is also 
associated with the pathogenesis of non-infectious diseases such as 
chronic inflammation, autoimmune diseases, thrombotic microangiopathy, 
transplant rejection reactions, ischemic, neurodegenerative age-
associated diseases, and cancer. According to the applicant, the 
complement system is also recognized as important in the antibody-
mediated autoimmune disease AQP4 antibody-positive NMOSD. The applicant 
stated that Soliris[supreg] is the first and only FDA approved 
treatment for adult patients with NMOSD who are AQP4 antibody-positive 
that is proven to reduce the risk of relapse.
    The incidence of NMOSD in the United States is 0.7/100,000 while 
the prevalence is 3.9/100,000 population.\294\ The median onset of 
NMOSD is 39 years of age and 83 percent of cases are 
female.295 296 NMOSD was commonly misdiagnosed as multiple 
sclerosis (MS) in the past.\297\ According to the applicant, at least 
two-thirds of NMOSD cases are associated with aquaporin-4 antibodies 
(AQP4-IgG) and complement-mediated damage to the central nervous 
system.
---------------------------------------------------------------------------

    \294\ Flanagan EP, et al., ``Epidemiology of aquaporin-4 
autoimmunity and neuromyelitis optica spectrum,'' Ann Neurol, 2016, 
vol. 79(5), pp. 775-783.
    \295\ Bukhari W, et al., ``Incidence and prevalence of NMOSD in 
Australia and New Zealand,'' J Neurol Neurosurg Psychiatry, 2017, 
vol. 88(8), pp. 632-638.
    \296\ Wingerchuk DM, et al., ``The spectrum of neuromyelitis 
optica,'' Lancet Neurol, 2007, vol. 6, pp. 805-815.
    \297\ Jarius S, et al., ``Contrasting disease patterns in 
seropositive and seronegative neuromyelitis optica: A multicentre 
study of 175 patients,'' J Neuroinflammation, 2012, vol. 9, pp. 14.
---------------------------------------------------------------------------

    According to the applicant, Soliris[supreg] is administered via an 
IV infusion by a healthcare professional. The applicant explained that 
for adult patients with neuromyelitis optica spectrum disorder, 
Soliris[supreg] therapy consists of 900 mg weekly for the first 4 
weeks, followed by 1200 mg for the fifth dose 1 week later, then 1200 
mg every 2 weeks thereafter. According to the applicant, 
Soliris[supreg] should be administered at the recommended dosage 
regimen time points, or within 2 days of these time points. The 
applicant also explained that for adult and pediatric patients with 
NMOSD, supplemental dosing of Soliris[supreg] is required in the 
setting of concomitant plasmapheresis or plasma exchange, or fresh 
frozen plasma infusion (PE/PI).
    The applicant explained that Soliris[supreg] has a boxed warning 
for risk of serious meningococcal infections. According to the 
applicant, life-threatening and fatal meningococcal infections have 
rarely occurred in patients treated with Soliris[supreg] and can be 
mitigated with proper vaccination. The applicant explained that by 
blocking the terminal complement system, Soliris[supreg] increases the 
risk of meningococcal and encapsulated bacterial infection. According 
to the applicant, all the patients in a pivotal trial received 
meningococcal vaccination, and no cases of meningococcal infection were 
reported. The applicant also noted that Soliris[supreg] is available 
only through a restricted program under a Risk Evaluation and 
Mitigation Strategy (REMS) and under the Soliris[supreg] REMS, 
prescribers must enroll in the program.
    With respect to the newness criterion, FDA approved Soliris[supreg] 
for the indication of treatment of NMOSD in adult patients who are AQP4 
antibody positive on June 27, 2019. Soliris[supreg] was first approved 
by FDA on March 19, 2007 for the treatment of patients with paroxysmal 
nocturnal hemoglobinuria (PNH) to reduce hemolysis, followed by

[[Page 58686]]

approvals for the treatment of patients with atypical hemolytic uremic 
syndrome (aHUS) to inhibit complement mediated thrombotic 
microangiopathy, and for an efficacy supplement to add the indication 
of treatment of generalized myasthenia gravis (gMG) in adult patients 
who are anti-acetylcholine receptor (AChR) antibody positive. The 
applicant has applied for new technology add-on payments for use of 
Soliris[supreg] only for the indication of treatment of NMOSD in adult 
patients who are AQP4 antibody positive. The applicant stated that FDA 
granted Soliris[supreg] Orphan Drug Designation for the treatment of 
neuromyelitis optica on June 24, 2014. Additionally, the applicant 
stated that Soliris[supreg] was filed as a supplemental biologics 
license application (sBLA; BLA125166/S-431) for the treatment of NMOSD 
in adult patients who are AQP4 antibody positive, which FDA assigned 
Priority Review status.
    According to the applicant, patients with NMOSD are currently 
identified by ICD-10-CM diagnosis code: G36.0 Neuromyelitis optica 
(Devic's syndrome). The applicant submitted a request for approval for 
a unique ICD-10-PCS procedure code for the administration of 
Soliris[supreg] beginning in FY 2021 and was granted approval for the 
following ICD-10-PCS procedure codes effective October 1, 2020: XW033C6 
(Introduction of eculizumab into peripheral vein, percutaneous 
approach, new technology group 6) and XW043C6 (Introduction of 
eculizumab into central vein, percutaneous approach, new technology 
group 6).
    As stated previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and, therefore, would not be 
considered ``new'' for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or similar mechanism of action to achieve a therapeutic outcome, 
according to the applicant, Soliris[supreg] is the only treatment for 
NMOSD that works by specifically inhibiting the complement cascade as 
described previously. According to the applicant, Soliris[supreg] is 
the only FDA approved treatment for NMOSD, although several off-label 
products are used to treat relapse prevention in NMOSD. As mentioned 
previously, the applicant explained that the formation of the membrane 
attack complex (MAC) is the end product of the activated complement 
system which is directly responsible for the damage to astrocytes 
leading to astrocytopathy (astrocyte death) and the ensuing neurologic 
damage associated with NMOSD and relapses.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant stated that cases 
involving the administration of Soliris[supreg] will likely be assigned 
to the same MS-DRGs as other therapies that are currently used but not 
indicated to treat NMOSD. These therapies that are used off-label 
include axiothiprine, rituximab, low-dose steroids (prednisone), 
mycophenolate mofetil, methotrexate, mitoxantrone, cyclophosphamide, 
tacrolimus, tocilizumab, cyclosporin A, and plasma exchange. As stated 
previously, the applicant asserted that Soliris[supreg] is the first 
approved treatment for NMOSD in adult patients who are AQP4 antibody 
positive.
    With respect to the third criterion, whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, the applicant 
maintained that although Soliris[supreg] will be treating the same 
disease and patient population as currently available therapies, it 
will improve the treatment of NMOSD as there were previously no FDA 
labeled treatments. As stated previously, the applicant asserted that 
Soliris[supreg] is the first approved treatment for NMOSD in adult 
patients who are AQP4 antibody positive.
    In summary, the applicant asserted that Soliris[supreg] meets the 
newness criterion because it is the only FDA approved treatment for 
NMOSD that works by specifically inhibiting the complement cascade. We 
invited public comments on whether Soliris[supreg] is substantially 
similar to other technologies and whether Soliris[supreg] meets the 
newness criterion.
    Comment: One commenter asserted that the mechanism of action for 
Soliris[supreg] does meet the newness criterion. A second commenter 
observed that Soliris[supreg] was the first FDA-approved complement 
inhibitor indicated for the treatment of adults with AQP4 antibody-
positive NMOSD, and that this is a novel therapy for NMOSD.
    Response: We thank the commenters for their input concerning the 
application of the newness criterion to Soliris[supreg].
    Based on these comments and on information submitted by the 
applicant as part of its FY 2021 new technology add-on payment 
application for Soliris[supreg], as discussed in the proposed rule (85 
FR 32653) and previously summarized, we believe that Soliris[supreg] 
has a unique mechanism of action in the treatment of patients with AQP4 
antibody-positive NMOSD. Therefore, we believe Soliris[supreg] is not 
substantially similar to existing treatment options and does meet the 
newness criterion. We consider the beginning of the newness period to 
commence when Soliris[supreg] was approved by FDA for the indication of 
treatment of NMOSD, on June 27, 2019.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that the technology meets the cost 
criterion. The applicant searched claims in the FY 2018 MedPAR final 
rule dataset reporting an ICD-10-CM diagnosis code of G36.0.
    This search identified 1,151 cases primarily spanning 14 MS-DRGs. 
According to the applicant, cases representing patients who may be 
eligible for treatment with Soliris[supreg] for NMOSD would most likely 
map to MS-DRGs 058, 059 and 060 (Multiple Sclerosis and Cerebellar 
Ataxia with MCC, with CC and without CC/MCC, respectively)--the family 
of MS-DRGs for multiple sclerosis & cerebellar ataxia. According to the 
applicant, these three MS-DRGs were three of the top four MS-DRGs by 
volume to which cases reporting a diagnosis code G36.0 were assigned, 
and together these MS-DRGs accounted for about 32 percent of the 1,151 
originally identified cases reporting a diagnosis code G36.0. 
Consequently, the applicant limited its analysis to the 376 cases that 
grouped to these three MS-DRGs (058, 059 and 060).
    The applicant performed its cost analysis based on the 376 claims 
assigned to MS-DRGs 058, 059 and 060. The applicant first removed 
charges for other technologies. According to the applicant, 
Soliris[supreg] would replace other drug therapies, such as 
azathioprine, methotrexate, and rituximab, among others. Because it is 
generally not possible to differentiate between different drugs on 
inpatient claims, the applicant removed all charges in the drug cost 
center. The applicant also removed all charges from the blood cost 
center, because Soliris[supreg] will replace plasma exchange 
procedures. Lastly, the applicant removed an additional $12,000 of cost 
for the plasma exchange procedural costs, based on an internal analysis 
of the average cost of plasma exchange. To convert these costs to 
charges, the applicant used the ``other services'' national average 
cost-to-charge ratio (0.346). According to the applicant, this was 
likely an overestimate of the charges that would be replaced by using 
Soliris[supreg].
    After removing charges for the prior technology to be replaced, the 
applicant standardized the charges. The applicant

[[Page 58687]]

then used the 2-year inflation factor of 11.1 percent, as published in 
the FY 2020 IPPS final rule (84 FR 42629), to inflate the charges from 
FY 2018 to FY 2020. To determine the charges for Soliris[supreg], the 
applicant assumed hospitals would use the inverse of the national 
average cost to charge ratio for pharmacy costs (0.189) from the FY 
2020 IPPS/LTCH PPS final rule to mark-up charges.
    Based on the aforementioned analysis, the applicant computed a 
final inflated average case-weighted standardized charge per case of 
$72,940, as compared to a calculated threshold value of $44,420. 
Because the final inflated average case-weighted standardized charge 
per case exceeded the average case-weighted threshold amount, the 
applicant asserted that the technology meets the cost criterion.
    We note that, in the proposed rule, we inadvertently omitted the 
charges for Soliris[supreg] in the applicant's cost analysis. After 
accounting for these charges, the applicant computed a final inflated 
average case-weighted standardized charge per case of $172,867, which 
exceeds the calculated threshold value of $44,420. However, as 
previously noted, the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount 
even without the addition of charges for Soliris[supreg]. We invited 
public comments on whether Soliris[supreg] meets the cost criterion.
    We did not receive any public comments on whether Soliris[supreg] 
meets the cost criterion. Based on the information submitted by the 
applicant as part of its FY 2021 new technology add-on payment 
application for Soliris[supreg], as discussed in the proposed rule (85 
FR 32652 through 32655) and previously summarized, the final inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount. Therefore, Soliris[supreg] meets the 
cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that Soliris[supreg] represents a substantial 
clinical improvement over existing technologies because it 
significantly improves clinical outcomes relative to services or 
technologies previously available, as demonstrated by the applicant's 
clinical data and patient outcomes, such as the prevention of relapses 
in patients with NMOSD.
    The applicant provided a randomized, controlled trial in support of 
its claims of reduction of first-adjudicated on-trial relapse with 
Soliris[supreg] (PREVENT).\298\ The PREVENT study enrolled 143 adults 
who were randomly assigned in a 2:1 ratio to receive intravenous 
eculizumab (at a dose of 900 mg weekly for the first four doses 
starting on day 1, followed by 1200 mg every 2 weeks starting at week 
4) or a matched placebo. The continued use of stable-dose 
immunosuppressive therapy was permitted. The primary endpoint studied 
was the first adjudicated relapse. Secondary outcomes included the 
adjudicated annualized relapse rate, quality-of-life measures, and the 
score on the Expanded Disability Status Scale (EDSS), which ranges from 
0 (no disability) to 10 (death). Adjudicated relapses occurred in 3 of 
96 patients (3 percent) in the Soliris[supreg] group and 20 of 47 (43 
percent) in the placebo group (hazard ratio, 0.06; 95 percent 
confidence interval [CI], 0.02 to 0.20; P<0.001). The adjudicated 
annualized relapse rate was 0.02 in the eculizumab group and 0.35 in 
the placebo group (rate ratio, 0.04; 95 percent CI, 0.01 to 0.15; 
P<0.001). The applicant also explained that 97.9 percent of patients on 
Soliris[supreg] remained NMOSD relapse free at 48 weeks, 96.4 percent 
at 96 weeks and 96.4 percent at 144 weeks. There was no significant 
between-group difference in measures of disability progression. The 
mean change in the EDSS score was -0.18 in the eculizumab group and 
0.12 in the placebo group (least-squares mean difference, -0.29; 95% 
CI, -0.59 to 0.01).
---------------------------------------------------------------------------

    \298\ Pittock, S.J., Berthele, A., Fujihara, K., Kim, H.J., 
Levy, M., Palace, J., Nakashima, I., Terzi, M., Totolyan, N., 
Viswanathan, S., Wang, K.C., Pace, A., Futita, K.P., Armstrong, R., 
Wingerchuk, D.M., ``Eculizumab in Aquaporin-4-Positive Neuromyelitis 
Optica Spectrum Disorder.'' N Engl J Med., 2019, vol 381(7), pp., 
614-625.
---------------------------------------------------------------------------

    The applicant also submitted a poster presentation of post hoc 
efficacy analyses in pre-specified subgroups from the PREVENT 
study.\299\ Pre-specified subgroup summaries for time to first 
adjudicated relapse were based on immunosuppressive therapies (IST) use 
(five subgroups for concomitant IST use; two subgroups according to 
whether or not rituximab was previously used), geographic region, age, 
sex, race and randomization stratum. Time to first adjudicated relapse 
was increased with eculizumab compared with placebo in all subgroups 
analyzed. Significant treatment effects were observed in all subgroups 
for IST use, region, age, sex and race, except for the smallest 
subgroups in which the differences were similar to the others but did 
not reach nominal significance owing to small sizes (patients using 
other ISTs, n = 7; Black/African American patients, n = 17, among whom 
none of the nine patients receiving eculizumab experienced a relapse), 
and in patients from the Americas owing to the performance of the 
placebo arm. In patients who had received rituximab more than 3 months 
before the study, the adjudicated relapse risk reduction was 90.7 
percent with eculizumab compared with placebo (p = 0.0055). The 
proportion of patients who were relapse-free at week 48 was 
consistently higher with eculizumab than with placebo in all pre-
specified IST subgroups.
---------------------------------------------------------------------------

    \299\ Pittock, S.J., Berthele, A., Fujihara, K., Kim, H.J., 
Levy, M., Palace, J., Nakashima, I., Terzi, M., Totolyan, N., 
Viswanathan, S., Wang, K.C., Pace, A., Futita, K.P., Yountz, M., 
Armstrong, R., Wingerchuk, D.M., ``Subgroup analyses from the phase 
3 PREVENT study in patients with aquaporin-4 antibody-positive 
neuromyelitis optica spectrum disorder,'' September 11-13, 2019, 
Poster presentation at ECTRIMS, Stockholm, Sweden.
---------------------------------------------------------------------------

    As stated previously, the applicant asserted that Soliris[supreg] 
represents a substantial clinical improvement over existing 
technologies because it reduces relapses in patients with NMOSD. The 
applicant explained that the PREVENT study demonstrated several 
endpoints. The applicant explained that Soliris[supreg] reduced first 
adjudicated on-trial relapse with eculizumab in comparison to placebo 
with a 94 percent relative risk reduction (Hazard Ratio, 0.006; 95% CI, 
0.02-0.20). The applicant also explained that 97.9 percent of 
Soliris[supreg] patients were relapse free at 48 weeks, compared to 
63.2 percent for the placebo group. The applicant further noted that in 
a subgroup of patients utilizing monotherapy (patients on eculizumab or 
placebo only, without concomitant immunosuppressant agents), 100 
percent of Soliris[supreg] patients were relapse free at 48 weeks 
compared to 60.6 percent for placebo. The applicant also explained that 
in the PREVENT subgroup analysis presented as a poster, the treatment 
effect was observed regardless of whether it was used as a monotherapy 
or with concomitant ISTs (corticosteroids alone, azathioprine, 
mycophenolate mofetil); previous IST use (including rituximab); 
geographical region; age; sex; and race.
    The applicant also explained that the Soliris[supreg] U.S. 
Prescribing Information contains the following information on resource 
utilization in the applicant's phase III trials (corticosteroid use, 
plasma exchange treatment, and hospitalizations): Compared to placebo-
treated patients, the PREVENT study showed that Soliris[supreg]-treated 
patients had reduced annualized rates of (1) hospitalizations (0.04 for 
Soliris[supreg] versus 0.31 for placebo), (2) of corticosteroid 
administration to treat acute relapses

[[Page 58688]]

(0.07 for Soliris[supreg] versus 0.42 for placebo), and (3) of plasma 
exchange treatments (0.02 for Soliris[supreg] versus 0.19 for placebo). 
The applicant explained that annualized rates were calculated by 
dividing the total number of on-trial relapses requiring acute 
treatment during the study period for all patients by the number of 
patient-years in the study period.
    After reviewing the information submitted by the applicant as part 
of its FY 2021 new technology add-on payment application for Soliris, 
we stated in the proposed rule that we are concerned that the applicant 
provided only one study in support of its assertions of substantial 
clinical improvement, which is the PREVENT trial, with additional 
supporting documents all based on the same trial. We noted that the 
study compared Soliris to placebo but that there was no comparison of 
Soliris to currently available treatments to gauge real world efficacy, 
nor was there information about how these current treatments work and 
why they are ineffective. Furthermore, in the PREVENT trial, the 
applicant did not provide the dosage amounts for the patients on 
continuing medication in addition to placebo or Soliris. We stated that 
it is not clear to us if the patients receiving Soliris had higher 
dosages of continuing medications than those in the placebo group. We 
stated that we would be interested in more information about the dosage 
amounts in the treatment and control groups in the PREVENT trial. We 
invited public comment on whether Soliris[supreg] technology meets the 
substantial clinical improvement criterion.
    Comment: The applicant submitted comments in response to CMS's 
concerns in the proposed rule regarding whether Soliris[supreg] meets 
the substantial clinical improvement criterion.
    With respect to the concern that the applicant provided only one 
study in support of its assertions of substantial clinical improvement, 
the PREVENT trial, the applicant responded that although evidence from 
two or more well-controlled studies is a common benchmark for 
demonstrating efficacy, regulatory agencies (including FDA) have 
acknowledged that a single adequate and well-controlled study can, in 
some circumstances, constitute sufficient basis for a demonstration of 
clinical efficacy. According to the applicant, reliance on single 
studies is typically limited to situations in which the trial has 
demonstrated a clinically meaningful effect on mortality or 
irreversible morbidity, and confirmation of the result with a second 
trial would be practically or ethically difficult to carry out. The 
applicant noted in this context that clinical trials for NMOSD in 
particular present challenges due to the rarity of the disease, ethical 
concerns regarding placebo-controlled designs, and a lack of validated 
outcome measures or biomarkers.
    According to the applicant, the PREVENT study was an adequately 
designed and well-controlled trial based on general FDA guidance on 
rare disease clinical trials and on specific recommendations made by 
the Center for Drug Evaluation and Research. The applicant reiterated 
that the PREVENT study was a large, multicenter study, involved a 
double-blind randomized design, and enrolled patients who demonstrated 
a large unmet medical need (>=2 relapses in previous 12 months, or >=3 
relapses in previous 24 months with a least one relapse in the previous 
12 months). The applicant also pointed out that many of these patients 
were on corticosteroids and immunosuppressive therapies (ISTs), which 
are used off-label in patients with NMOSD. Finally, the applicant 
repeated several of the core findings from the PREVENT trial, with 
regard to the comparative effectiveness of Soliris.
    With respect to the concern that the PREVENT trial compared Soliris 
to placebo, but that there was no comparison of Soliris to currently 
available treatments to gauge real world efficacy, the applicant 
responded that at the start of the PREVENT trial, there were no other 
FDA-approved therapies for managing NMOSD. The applicant further 
asserted that even today, the other off-label immunosuppressant 
therapies (ISTs) used in the treatment of NMOSD (including 
corticosteroids, mycophenolate mofetil, azathioprine, tacrolimus, and 
rituximab) are employed primarily based on empiric evidence, but there 
is no uniform consensus on appropriate standard of care. Given this, in 
order to evaluate the efficacy of Soliris in NMOSD, a randomized, 
placebo-controlled trial was necessary, according to the applicant.
    The applicant also noted that the PREVENT trial included 
comparisons involving several of the available IST treatments, when 
used with Soliris, to use of the same IST treatments with placebo. The 
PREVENT trial included an eculizumab arm and a placebo arm, and 
patients in both arms could continue to receive ISTs (including 
corticosteroids, azathioprine, and/or mycophenolate mofetil) at stable 
dosages throughout the study. According to the applicant, the PREVENT 
trial demonstrated statistically persuasive findings showing the 
effectiveness of Soliris in preventing NMOSD relapses, including among 
the subset of study patients who also received maintenance treatment 
with ISTs.
    With respect to the concern that the applicant did not provide 
information about how the alternative IST treatments for NMOSD work, 
and why these are ineffective, the applicant asserted that it cannot 
explain how these current, off-label treatments work, but the available 
data, which are primarily from case reports and small prospective or 
retrospective studies, suggest that these alternatives are not 
effective.
    According to the applicant, current treatment goals for NMOSD rely 
on long-term stabilization of disease course by preventing relapses and 
relapse-associated symptoms. The available efficacy and safety data for 
the use of non-FDA-approved therapies in patients with NMOSD is 
primarily from case reports and small prospective or retrospective 
studies. In addition, despite increasingly common use of rituximab off-
label as a preferred therapy in NMOSD, experience in patients with 
NMOSD is mostly derived from retrospective analyses. According to the 
applicant, approximately one-third of patients enrolled in PREVENT had 
previously received rituximab, but not within 3 months before enrolling 
in PREVENT.
    The applicant then asserted that available data show that current 
IST treatments are not effective in the long-term control of NMOSD. The 
applicant noted data from a study showing that the five-year prognosis 
of patients with AQP4-IgG seropositive NMOSD is:
     55% relapse within one year of onset;
     22% required canes, crutches, or braces to walk (95% CI 
15%-29%);
     8% restricted to bed, chair, or wheelchair (95% CI 3%-
13%);
     41% legally blind in one or both eyes (95% CI 33%-50%); 
and
     9% legally blind in both eyes (95% CI 4%-14%) \300\
---------------------------------------------------------------------------

    \300\ Jiao Y, et al. Neurology. 2013;81(14):1197-1204.
---------------------------------------------------------------------------

    The applicant concluded that in the PREVENT trial, the hazard ratio 
based on a stratified Cox proportional hazards model for relapse was 
0.06 (95% CI, 0.02 to 0.20) indicating that Soliris-treated patients 
experienced a 94% relative relapse risk reduction (p <0.0001) compared 
to patients on placebo. The time to the first adjudicated on-trial 
relapse was significantly longer in eculizumab-

[[Page 58689]]

treated patients compared to placebo-treated patients (p <0.0001).
    With regard to the concern that it was not clear if the patients in 
the PREVENT study who received Soliris had higher dosages of continuing 
IST medications than those in the placebo group, the applicant provided 
additional information on the dosage of those medications. The 
applicant acknowledged that the inclusion of patients receiving 
concomitant ISTs in PREVENT raised the possibility that the treatment 
effect ascribed to Soliris might have resulted from one of the other 
background therapies instead. However, the applicant asserted that 
several approaches were taken in PREVENT to mitigate the potentially 
confounding influence of concomitant ISTs. In particular, background 
IST dosages were not permitted to change during the trial, to ensure 
that increased IST dosages did not confound efficacy evaluations. Also, 
the total daily corticosteroid dose should not have exceeded 20 mg/day 
of prednisone or equivalent, to ensure that no significant imbalance 
between groups in regards to corticosteroid use could exist.
    The applicant also provided additional data showing that the 
average doses of concomitant ISTs (Azathioprine; Corticosteroids; 
Mycophenolate Mofetil) in patients randomized to the eculizumab and 
placebo groups in PREVENT were similar, thereby arguing against any 
imbalance between treatment groups that may have influenced the 
efficacy results.
    In addition, several other commenters wrote letters of support for 
the Soliris[supreg] new technology add-on payment application, in which 
they asserted that Soliris[supreg] had been shown effective in the 
PREVENT trial, and therefore that Soliris[supreg] meets the substantial 
clinical improvement criterion. A few of the commenters cited their own 
clinical experience in working with NMOSD patients, and either 
described the potential value of Soliris[supreg] based on their own 
experience, or based on the unique mechanism of action of 
Soliris[supreg].
    Response: We appreciate the commenters' input, including the 
additional information and analysis provided by the applicant in 
response to our concerns regarding substantial clinical improvement. 
After reviewing the information submitted by the applicant addressing 
our concerns raised in the proposed rule, we agree with the applicant 
that Soliris[supreg] represents a substantial clinical improvement over 
existing technologies because, based on the information provided by the 
applicant, the technology offers a treatment option for preventing 
relapses and improving long-term outcomes in the treatment of NMOSD, 
for which it is the first and only FDA approved treatment.
    After consideration of the public comments we received, we have 
determined that Soliris[supreg] meets all of the criteria for approval 
for new technology add-on payments. Therefore, we are approving new 
technology add-on payments for Soliris[supreg] for FY 2021. Cases 
involving the use of Soliris[supreg] that are eligible for new 
technology add-on payments will be identified by ICD-10-PCS procedure 
codes XW033C6 and XW043C6.
    In its application, the applicant stated that Soliris[supreg] is 
available in a 30ml package with a strength of 10mg/1ml. According to 
the applicant, the WAC per package of Soliris[supreg] is $6,523. The 
applicant stated that the typical patient will receive a 900mg dose 
each week the patient is in the hospital, which is equivalent to three 
packages for a cost of $19,569 per week. Based on the cases in the 
applicant's sample, the applicant calculated that the average cost per 
hospital visit per patient for Soliris[supreg] is $28,416.69, which is 
approximately 1.45 doses per hospital stay. However, according to FDA 
labeling, all packages of Soliris[supreg] are single-dose. Therefore, 
we have determined that cases involving Soliris[supreg] would incur an 
average cost of $32,615, which is the equivalent of 5 packages (900mg 
per dose x 1.45 doses per hospital stay = 1,305mg per hospital stay/
300mg per package = 4.35 vials). Under Sec.  412.88(a)(2), we limit new 
technology add-on payments to the lesser of 65 percent of the costs of 
the new medical service or technology, or 65 percent of the amount by 
which the costs of the case exceed the MS-DRG payment. As a result, the 
maximum new technology add-on payment for a case involving the use of 
Soliris[supreg] is $21,199.75 for FY 2021.
k. The SpineJack[supreg] System
    Stryker, Inc., submitted an application for new technology add-on 
payments for the SpineJack[supreg] Expansion Kit (hereinafter referred 
to as the SpineJack[supreg] system) for FY 2021. The applicant 
described the SpineJack[supreg] system as an implantable fracture 
reduction system, which is indicated for use in the reduction of 
painful osteoporotic vertebral compression fractures (VCFs) and is 
intended to be used in combination with Stryker VertaPlex and VertaPlex 
High Viscosity (HV) bone cement.
    The applicant explained that the SpineJack[supreg] system is 
designed to be implanted into a collapsed vertebral body (VB) via a 
percutaneous transpedicular approach under fluoroscopic guidance. 
According to the applicant, once in place, the intravertebral implants 
are expanded to mechanically restore VB height and maintain the 
restoration. The applicant explained that the implants remain within 
the VB and, together with the delivered bone cement, stabilize the 
restoration, provide pain relief and improve patient mobility. 
According to the applicant, the SpineJack[supreg] system further 
reduces the risk of future adjacent level fractures (ALFs).\301\
---------------------------------------------------------------------------

    \301\ Noriega, D., et al., ``A prospective, international, 
randomized, noninferiority study comparing an implantable titanium 
vertebral augmentation device versus balloon kyphoplasty in the 
reduction of vertebral compression fractures (SAKOS study),'' The 
Spine Journal, November 2019, vol 19(11), pp. 1782-1795.
---------------------------------------------------------------------------

    The applicant explained that the SpineJack[supreg] system is 
available in three sizes (4.2, 5.0 and 5.8 mm), and implant size 
selection is based upon the internal cortical diameter of the pedicle. 
According to the SpineJack[supreg] system Instructions for Use, the use 
of two implants is recommended to treat a fractured VB. According to 
the applicant, multiple VBs can also be treated in the same operative 
procedure as required.
    The applicant explained that using a bilateral transpedicular 
approach, the SpineJack[supreg] implants are inserted into the 
fractured VB. The applicant stated that the implants are then 
progressively expanded though actuation of an implant tube that pulls 
the two ends of the implant towards each other in situ to mechanically 
restore VB height. The applicant explained that the mechanical working 
system of the implant allows for a progressive and controlled reduction 
of the vertebral fracture.\302\ The applicant stated that when 
expanded, each SpineJack[supreg] system implant exerts a lifting 
pressure on the fracture through a mechanism that may be likened to the 
action of a scissor car jack, and that the longitudinal compression on 
the implant causes it to open in a craniocaudal direction. The 
applicant explained that the implant is locked into the desired 
expanded position as determined and controlled by the treating 
physician.\303\
---------------------------------------------------------------------------

    \302\ Vanni D., et al., ``Third-generation percutaneous 
vertebral augmentation systems,'' J. Spine Surg., 2016, vol. 2(1), 
pp. 13-20.
    \303\ Noriega D. et al., ``Clinical Performance and Safety of 
108 SpineJack Implantations: 1-Year Results of a Prospective 
Multicentre Single-Arm Registry Study,'' BioMed Res. Int., 2015, 
vol. 173872.
---------------------------------------------------------------------------

    The applicant further explained that once the desired expansion has 
been

[[Page 58690]]

obtained, polymethylmethacrylate (PMMA) bone cement is injected at low 
pressure into and around the implant to stabilize the restored 
vertebra, which leads the implant to become encapsulated with the 
delivered bone cement. According to the applicant, restoration of the 
anatomy and stabilization of the fracture results in pain relief as 
well as improved mobility for the patient.\304\
---------------------------------------------------------------------------

    \304\ Ibid.
---------------------------------------------------------------------------

    According to the applicant, osteoporosis is one of the most common 
bone diseases worldwide that disproportionately affects aging 
individuals. The applicant explained that in 2010, approximately 54 
million Americans aged 50 years or older had osteoporosis or low bone 
mass,\305\ which resulted in more than 2 million osteoporotic fragility 
fractures in that year alone.\306\ The applicant stated it has been 
estimated that more than 700,000 VCFs occur each year in the United 
States (U.S.),\307\ and of these VCFs, about 70,000 result in hospital 
admissions with an average length of stay of 8 days per patient.\308\ 
Furthermore, the applicant noted that in the first year after a painful 
vertebral fracture, patients have been found to require primary care 
services at a rate 14 times greater than the general population.\309\ 
The applicant explained that medical costs attributed to VCFs in the 
U.S. exceeded $1 billion in 2005 and are predicted to surpass $1.6 
billion by 2025.\310\
---------------------------------------------------------------------------

    \305\ National Osteoporosis Foundation. (2019). What is 
osteoporosis and what causes it? Available from: https://www.nof.org/patients/what-isosteoporosis/.
    \306\ King A and Fiorentino D. ``Medicare payment cuts for 
osteoporosis testing reduced use despite tests' benefit in reducing 
fractures.'' Health Affairs (Millwood), 2011, vol. 30(12), pp. 2362-
2370.
    \307\ Riggs B and Melton L. ``The worldwide problem of 
osteoporosis: Insights afforded by epidemiology.'' Bone, 1995, vol. 
17(Suppl 5), pp. 505-511.
    \308\ Siemionow K and Lieberman I. ``Vertebral augmentation in 
osteoporotic and osteolytic fractures: Current Opinion in Supportive 
and Palliative Care.'' 2009, vol. 3(3), pp. 219-225.
    \309\ Wong C and McGirt M. ``Vertebral compression fractures: A 
review of current management and multimodal therapy.'' Journal of 
Multidisciplinary Healthcare, 2013, vol 6, pp. 205- 214.
    \310\ Burge R et al. ``Incidence and economic burden of 
osteoporosis-related fractures in the United States: 2005-2025.'' 
Journal of Bone and Mineral Research. 2007, vol 22(3), pp. 465-475.
---------------------------------------------------------------------------

    The applicant explained that osteoporotic VCFs occur when the 
vertebral body (VB) of the spine collapses and can result in chronic 
disabling pain, excessive kyphosis, loss of functional capability, 
decreased physical activity and reduced quality of life. The applicant 
stated that as the spinal deformity progresses, it reduces the volume 
of the thoracic and abdominal cavities, which may lead to crowding of 
internal organs. The applicant noted that the crowding of internal 
organs may cause impaired pulmonary function, abdominal protuberance, 
early satiety and weight loss. The applicant indicated that other 
complications may include bloating, distention, constipation, bowel 
obstruction, and respiratory disturbances such as pneumonia, 
atelectasis, reduced forced vital capacity and reduced forced 
expiratory volume in 1 second.
    The applicant stated that if VB collapse is >50 percent of the 
initial height, segmental instability will ensue. As a result, the 
applicant explained that adjacent levels of the VB must support the 
additional load and this increased strain on the adjacent levels may 
lead to additional VCFs. Furthermore, the applicant summarized that 
VCFs also lead to significant increases in morbidity and mortality risk 
among elderly patients, as evidenced by a 2015 study by Edidin et al., 
in which researchers investigated the morbidity and mortality of 
patients with a newly diagnosed VCF (n=1,038,956) between 2005 to 2009 
in the U.S. Medicare population. For the osteoporotic VCF subgroup, the 
adjusted 4-year mortality was 70 percent higher in the conservatively 
managed group than in the balloon kyphoplasty procedures (BKP)-treated 
group, and 17 percent lower in the BKP group than in the vertebroplasty 
(VP) group. According to the applicant, when evaluating treatment 
options for osteoporotic VCFs, one of the main goals of treatment is to 
restore the load-bearing bone fracture to its normal height and 
stabilize the mechanics of the spine by transferring the adjacent level 
pressure loads across the entire fractured vertebra and in this way, 
the intraspinal disc pressure is restored and the risk of adjacent 
level fractures (ALFs) is reduced.
    The applicant explained that treatment of osteoporotic VCFs in 
older adults most often begins with conservative care, which includes 
bed rest, back bracing, physical therapy and/or analgesic medications 
for pain control. According to the applicant, for those patients that 
do not respond to conservative treatment and continue to have 
inadequate pain relief or pain that substantially impacts quality of 
life, vertebral augmentation (VA) procedures may be indicated. The 
applicant explained that VP and BKP are two minimally invasive 
percutaneous VA procedures that are most often used in the treatment of 
osteoporotic VCFs and another VA treatment option includes the use of a 
spiral coiled implant made from polyetheretherketone (PEEK), which is 
part of the Kiva[supreg] system.
    According to the applicant, among the treatment options available, 
BKP is the most commonly performed procedure and the current gold 
standard of care for VA treatment. The applicant stated that it is 
estimated that approximately 73 percent of all vertebral augmentation 
procedures performed in the United States between 2005 and 2010 were 
BKP.\311\ According to the applicant, the utilization of the 
Kiva[supreg] system is relatively low in the U.S. and volume 
information was not available in current market research data.\312\
---------------------------------------------------------------------------

    \311\ 0 Goz V et al. ``Vertebroplasty and kyphoplasty: National 
outcomes and trends in utilization from 2005 through 2010.'' The 
Spine Journal. 2015, vol. 15(5), pp. 959-965.
    \312\ Lin M. ``Minimally invasive vertebral compression fracture 
treatments. Medtech 360, Market Insights, Millennium Research Group. 
2019.
---------------------------------------------------------------------------

    The applicant stated that VA treatment with VP may alleviate pain, 
but it cannot restore VB height or correct spinal deformity. The 
applicant stated that BKP attempts to restore VB height, but the 
temporary correction obtained cannot be sustained over the long-term. 
The applicant stated that the Kiva[supreg] implant attempts to 
mechanically restore VB height, but it has not demonstrated superiority 
to BKP for this clinical outcome.\313\
---------------------------------------------------------------------------

    \313\ Ibid.
---------------------------------------------------------------------------

    With respect to the newness criterion, the SpineJack[supreg] 
Expansion Kit received FDA 510(k) clearance on August 30, 2018, based 
on a determination of substantial equivalence to a legally marketed 
predicate device. We note, except for this paragraph summarizing FDA 
clearance documentation and market availability, we refer to the 
SpineJack[supreg] Expansion Kit in this final rule as the 
SpineJack[supreg] system. The applicant explained that although the 
SpineJack[supreg] Expansion Kit received FDA 510(k) clearance on August 
30, 2018, due to the time required to prepare for supply and 
distribution channels, it was not available on the U.S. market until 
October 11, 2018. As we discussed previously, the SpineJack[supreg] 
Expansion Kit is indicated for use in the reduction of painful 
osteoporotic VCFs and is intended to be used in combination with 
Stryker VertaPlex and VertaPlex High Viscosity (HV) bone cements. In 
the FY 2021 IPPS/LTCH PPS proposed rule, we noted that the applicant 
submitted a request for approval for a unique ICD-10-PCS procedure code 
for the implantation of the SpineJack[supreg] Expansion Kit beginning 
in FY 2021. The applicant was granted approval for

[[Page 58691]]

the following procedure codes: XNU0356 (Supplement lumbar vertebra with 
mechanically expandable (paired) synthetic substitute, percutaneous 
approach, new technology group 6) and XNU4356 (Supplement thoracic 
vertebra with mechanically expandable (paired) synthetic substitute, 
percutaneous approach, new technology group 6).
    As discussed previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and therefore would not be considered 
``new'' for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or similar mechanism of action to achieve a therapeutic outcome, 
according to the applicant, there are several factors that highlight 
the different mechanism of action in treating osteoporotic VCFs with 
the SpineJack[supreg] system compared to other BKP implants to reduce 
the incidence of ALFs and improve midline VB height restoration. 
According to the applicant, these differences include implant 
construction, mechanism of action, bilateral implant load support and 
>500 Newtons (N) of lift pressure.
    The applicant described the SpineJack[supreg] system as including 
two cylindrical implants constructed from Titanium-6-Aluminum-4-
Vanadium (Ti6Al4V) with availability in three sizes 4.2 mm (12.5 mm 
expanded), 5.0 mm (17 mm expanded) and 5.8 mm (20 mm expanded).
    According to the applicant, the SpineJack[supreg] system implant 
exerts lifting pressure on the fracture through a mechanism that may be 
likened to the action of a scissor car jack. The applicant explained 
that following the insertion of the implant into the vertebral body 
(VB), it is progressively expanded though actuation of an implant tube 
that pulls the two ends of the implant towards each other and the 
longitudinal compression on the implant causes it to open in a 
craniocaudal direction. According to the applicant, the force generated 
by the bilateral the SpineJack[supreg] system implants varies according 
to implant size, ranging from 500-1,000 Newtons for fracture reduction 
and superior endplate lift. In addition, the applicant explained that 
the SpineJack[supreg] system implant provides symmetric, broad load 
support under the fractured endplate and spinal column which 
differentiates the mechanism of action from BKP.\314\
---------------------------------------------------------------------------

    \314\ Jacobson R et al. ``Re-expansion of osteoporotic 
compression fractures using bilateral SpineJack implants: Early 
clinical experience and biomechanical considerations.'' Cureus. 
2019, vol 11(4), e4572.
---------------------------------------------------------------------------

    The applicant stated that the SpineJack[supreg] system implant is 
uniquely constructed from a titanium alloy, which the applicant claims 
allows for plastic deformation when it encounters the hard cortical 
bone of the endplate yet still provides the lift force required to 
restore midline VB height in the fractured vertebra. The applicant 
stated that the SpineJack[supreg] system notably contains a self-
locking security mechanism that restricts further expansion of the 
device when extreme load forces are concentrated on the implant. As a 
result, the applicant asserted that this feature significantly reduces 
the risk of vertebral endplate breakage while it further allows 
functional recovery of the injured disc.\315\
---------------------------------------------------------------------------

    \315\ Vanni D et al. ``Third-generation percutaneous vertebral 
augmentation systems.'' Journal of Spine Surgery. 2016, vol 2(1), 
pp. 13-20.
---------------------------------------------------------------------------

    According to the applicant, the expansion of the SpineJack[supreg] 
system implants creates a preferential direction of flow for the bone 
cement; PMMA bone cement is deployed from the center of the implant 
into the VB. The applicant stated that when two implants are 
symmetrically positioned in the VB, this allows for a more homogenous 
spread of PMMA bone cement. The applicant asserted that the 
interdigitation of bone cement creates a broad supporting ring under 
the endplate, which is essential to confer stability to the VB.
    The applicant explained that the SpineJack[supreg] system implants 
provide symmetric, broad load support for osteoporotic vertebral 
collapse, which is based upon precise placement of bilateral ``struts'' 
that are encased in PMMA bone cement, whereas BKP and vertebroplasty 
(VP) do not provide structural support via an implanted device. The 
applicant explained that the inflatable balloon tamps utilized in BKP 
are not made from titanium and are not a permanent implant. According 
to the applicant, the balloon tamps are constructed from thermoplastic 
polyurethane, which have limited load bearing capacity. The applicant 
noted that although the balloon tamps are expanded within the VB to 
create a cavity for bone cement, they do not remain in place and are 
removed before the procedure is completed. The applicant explained that 
partial lift to the VB is obtained during inflation, resulting in 
kyphotic deformity correction and partial gains in anterior VB height 
restoration, but inflatable balloon tamps are deflated prior to removal 
so some of the VB height restoration obtained is lost upon removal of 
the bone tamps. According to the applicant, BKP utilizes the placement 
of PMMA bone cement to stabilize the fracture and does not include an 
implant that remains within the VB to maintain fracture reduction and 
midline VB height restoration.
    According to the applicant, the Kiva[supreg] system is constructed 
of a nitinol coil and PEEK-OPTIMA sheath, with sizes including a 4-loop 
implant (12 mm expanded) and a 5-loop implant (15 mm expanded), and 
unlike the SpineJack[supreg] system, is not made of titanium and does 
not include a locking scissor jack design. The applicant stated that 
the specific mechanism of action for the Kiva[supreg] system is 
different from the SpineJack[supreg] system. The applicant explained 
that during the procedure that involves implanting the Kiva[supreg] 
system, nitinol coils are inserted into the VB to form a cylindrical 
columnar cavity. The applicant stated that the PEEK-OPTIMA is then 
placed over the nitinol coil. The applicant explained that the nitinol 
coil is removed from the VB and the PEEK material is filled with PMMA 
bone cement. The applicant stated that the deployment of 5 coils 
equates to a maximum of height of 15 mm. The applicant stated that the 
lifting direction of the Kiva[supreg] system is caudate and 
unidirectional. According to the applicant, in the KAST (Kiva Safety 
and Effectiveness Trial) pivotal study, it was reported that 
osteoporotic VCF patients treated with the Kiva[supreg] system had an 
average of 2.6 coils deployed.\316\ Additionally, in a biomechanical 
comparison conducted for the Kiva[supreg] system and BKP using a 
loading cycle of 200-500 Newtons in osteoporotic human cadaver spine 
segments filled with bone cement, there were no statistically 
significant differences observed between the two procedures for VB 
height restoration, stiffness at high or low loads, or displacement 
under compression.\317\
---------------------------------------------------------------------------

    \316\ Tutton S et al. KAST Study: The Kiva system as a vertebral 
augmentation treatment--a safety and effectiveness trial: A 
randomized, noninferiority trial comparing the Kiva system with 
balloon kyphoplasty in treatment of osteoporotic vertebral 
compression fractures. Spine. 2015; 40(12):865-875.
    \317\ Wilson D et al. An ex vivo biomechanical comparison of a 
novel vertebral compression fracture treatment system to 
kyphoplasty. Clinical Biomechanics. 2012; 27(4):346-353.
---------------------------------------------------------------------------

    The applicant summarized the differences and similarities of the 
SpineJack[supreg] system, BKP, and PEEK coiled implant as follows: (1) 
With respect to construction, the SpineJack[supreg] system is made of 
Titanium-6-Aluminum-4-Vanadium compared to

[[Page 58692]]

thermoplastic polyurethanes for BKP and nitinol and PEEK for the PEEK 
coiled implant; (2) with respect to mechanism of action, the 
SpineJack[supreg] system uses a locking scissor jack encapsulated in 
PMMA bone cement compared to hydrodynamic cavity creation and PMMA 
cavity filler for BKP and coil cavity creation and PEEK implant filled 
with PMMA bone cement for the PEEK coiled implant; (3) with respect to 
plastic deformation, the SpineJack[supreg] system and BKP allow for 
plastic deformation while the PEEK coiled implant does not; (4) with 
respect to craniocaudal expansion, the SpineJack[supreg] system allows 
for craniocaudal expansion, whereas BKP and the PEEK coiled implant do 
not; (5) with respect to bilateral load support, the SpineJack[supreg] 
system provides bilateral load support whereas BKP and the PEEK coiled 
implant do not; and (6) with respect to lift pressure of >500 N, the 
SpineJack[supreg] system provides lift pressure of >500 N whereas BKP 
and the PEEK coiled implant do not. The applicant summarized that the 
SpineJack[supreg] system is uniquely constructed and utilizes a 
different mechanism of action than BKP, which is the gold standard of 
treatment for osteoporotic VCFs, and that the construction and 
mechanism of action of the SpineJack[supreg] system is further 
differentiated when compared with the PEEK coiled implant.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant did not specify 
whether it believed cases involving the SpineJack[supreg] system would 
be assigned to the same MS-DRG as existing technology. However, we note 
that the MS-DRGs the applicant included in its cost analysis were the 
same MS-DRGs to which cases involving BKP procedures are typically 
assigned.
    With respect to the third criterion, whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, the applicant did 
not specifically address whether the technology meets this criterion. 
However, the applicant generally summarized the disease state that the 
technology treats as osteoporotic VCFs, and described other treatment 
options for osteoporotic VCFs as including VP, BKP and the PEEK coiled 
implant.
    In summary, the applicant asserted that the SpineJack[supreg] 
system is not substantially similar to any existing technology because 
it utilizes a different mechanism of action, when compared to existing 
technologies, to achieve a therapeutic outcome.
    We invited public comments on whether the SpineJack[supreg] system 
is substantially similar to other currently available technologies and 
whether the SpineJack[supreg] system meets the newness criterion.
    Comment: Several commenters expressed their specific and general 
support for approval of the SpineJack[supreg] system for new technology 
add-on payment. Many of these commenters shared their academic 
knowledge of and first-hand clinical experience with vertebral 
augmentation procedures, including claims of familiarity and expertise 
with the use of the Kiva[supreg] system, BKP and the SpineJack[supreg] 
system. According to many of these commenters, the SpineJack[supreg] 
system provides a significant benefit beyond that which is achieved by 
other vertebral augmentation technology. Many commenters also indicated 
that the price compared to the reimbursement rate has been an 
impediment to use of the SpineJack[supreg] system in some cases. 
Finally, several of these commenters expressed their belief that the 
SpineJack[supreg] system may reduce costs to hospitals and the U.S. 
health system overall by preventing the onset of additional adjacent 
fractures in patients.
    Response: We thank the commenters for the analysis and feedback 
provided.
    Comment: The applicant submitted a comment restating information 
that was previously provided in their application for new technology 
add-on payment and described in the proposed rule and previously in 
this final rule. According to the applicant, the SpineJack[supreg] 
system meets the newness criterion, because it received FDA 510(k) 
clearance on August 30, 2018, and was commercially available in the 
United States on October 11, 2018. The applicant also explained that 
based on the information submitted in the application for new 
technology add-on payment, specifically regarding implant construction, 
mechanism of action, bilateral implant load support and lift pressure, 
the SpineJack[supreg] system has a unique mechanism of action to 
achieve a therapeutic outcome, compared to other VCF treatments.
    In response to CMS' concern that the applicant did not specify 
whether it believed cases involving the SpineJack[supreg] system would 
be assigned to the same MS-DRGs as existing technology, the applicant 
provided additional clarification, and acknowledged that the 
SpineJack[supreg] system would be assigned to the same MS-DRGs as 
existing technology for vertebral augmentation.
    In response to CMS' concern that the applicant did not specifically 
address whether the new use of the technology involves the treatment of 
the same or similar type of disease and the same or similar patient 
population, the applicant stated that the SpineJack[supreg] system is 
used in the reduction of osteoporotic VCFs, and does target the same or 
similar type of disease and the same or similar patient population as 
targeted by VP, BKP and other mechanical vertebral augmentation 
systems.
    Two commenters asserted that the applicant's description of the 
mechanism of action of the SpineJack[supreg] system relative to other 
implant devices (including BKP and the Kiva[supreg] system) contained 
important inaccuracies, including with regard to the claims that the 
SpineJack[supreg] system acts uniquely to achieve craniocaudal 
expansion, bilateral load support, and lift pressure >500 Newtons. The 
commenters stated that BKP does offer craniocaudal expansion while 
creating a void for safer cement fill. Furthermore, with respect to 
bilateral load support, according to the commenters, BKP has been 
offered since 1998 as a bilateral procedure option to maximize lift 
potential and reduce stress exerted on endplates. The commenters went 
on to explain that BKP provides bilateral symmetric load support to 
fractured endplates by providing a larger surface area when restoring 
height. Finally, the commenters asserted that several of the 
commenter's claims of superiority for the SpineJack[supreg] system were 
misleading, and furthermore that the newest generation of BKP implants 
is capable of inflating to 700 psi and generating a lift force of 1200 
Newtons.
    Another commenter made a different substantial similarity argument, 
with regard to the SpineJack[supreg] system and the Kiva[supreg] 
system. The commenter asserted that both the Kiva[supreg] system and 
SpineJack[supreg] systems use a similar mechanism of action (mechanical 
lift) to achieve a therapeutic outcome (reducing osteoporotic VCFs). 
The commenter noted that although the way the implant provides 
mechanical expansion within the vertebral body is different between the 
Kiva[supreg] and SpineJack[supreg] systems, both processes still 
qualify as mechanical expansion. The commenter described several other 
functional similarities in regard to the effect achieved by the 
Kiva[supreg] and SpineJack[supreg] systems, and further pointed out 
that the Kiva[supreg] system served as the predicate device for the 
SpineJack[supreg] system, with regard to the FDA 510(k) clearance 
process for the SpineJack[supreg] system. On this basis, the commenter 
asserted that the Kiva[supreg] and the SpineJack[supreg] system are 
substantially similar technologies.

[[Page 58693]]

    One commenter expressed their general belief that the 
SpineJack[supreg] system meets the new technology add-on payment 
newness criterion because it utilizes a distinct mechanism of action, 
especially in comparison to the mechanisms of action utilized by the 
Kiva[supreg] system and balloon kyphopasty.
    Response: We thank the commenters for their input and technical 
comments with regard to the SpineJack[supreg] system and the newness 
criterion. We note that some of these comments rest on conflicting 
factual assertions made by commenters and the applicant, which we are 
unable directly to resolve. After consideration of the comments 
received, however, we believe that the physical construction and 
mechanism of action by which the SpineJack[supreg] system implant 
exerts a lift force is mechanically different from either the 
Kiva[supreg] system (coil) implant, or from the inflation mechanism of 
a BKP implant. In our view, these differences support that the 
SpineJack[supreg] system does not use the same or similar mechanism of 
action to achieve a therapeutic outcome and therefore is not 
substantially similar to prior technology.
    After consideration of the public comments we received and 
information submitted by the applicant as part of its FY 2021 new 
technology add-on payment application for the SpineJack[supreg] system, 
as discussed in the proposed rule (85 FR 32656) and previously in this 
final rule, we believe that the SpineJack[supreg] system has a unique 
mechanism of action in the treatment of patients with osteoporotic 
VCFs. Therefore, we believe that the SpineJack[supreg] system is not 
substantially similar to existing treatment options and meets the 
newness criterion. We consider the beginning of the newness period to 
commence following the approval of the SpineJack[supreg] system by the 
FDA, on the date when it became commercially available on the U.S. 
market, which was October 11, 2018.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that the technology meets the cost 
criterion. The applicant searched the FY 2018 MedPAR file for inpatient 
hospital claims that reported the following ICD-10-PCS procedure codes: 
0PS43ZZ (Reposition thoracic vertebra, percutaneous approach) in 
combination with 0PU43JZ (Supplement thoracic vertebra with synthetic 
substitute, percutaneous approach) and 0QS03ZZ (Reposition lumbar 
vertebra, percutaneous approach) in combination with 0QU03JZ 
(Supplement lumbar vertebra with synthetic substitute, percutaneous 
approach). According to the applicant, the results included cases 
involving BKP procedures. This resulted in 15,352 cases spanning 
approximately 130 MS-DRGs, with approximately 77 percent of those cases 
(n=11,841) mapping to the following top 6 MS-DRGs:
[GRAPHIC] [TIFF OMITTED] TR18SE20.160

    The applicant performed two separate analyses with regard to the 
cost criterion, one based on 100 percent of the claims reporting the 
specified ICD-10-PCS procedure codes, and the second based on the 77 
percent of claims mapping to the top six MS-DRGs.
    The applicant used the following methodology for both analyses. The 
applicant first removed the charges for the prior technology being 
replaced by the SpineJack[supreg] system. The applicant explained that 
it estimated charges associated with the prior technology as 50 percent 
of the charges associated with the category Medical Surgical Supply 
Charge Amount (which included revenue centers 027x). The applicant 
stated that use of the SpineJack[supreg] system would replace some but 
not all of the device charges included in these claims, as some 
currently used medical and surgical supplies and devices would still be 
required for patients during their hospital stay, even after 
substituting the SpineJack[supreg] system for BKP and other surgical 
interventions. The applicant stated that it was unable to determine a 
more specific percentage for the appropriate amount of prior medical 
and surgical supply charges to remove from the relevant patient claims, 
but asserted that removing 50 percent of the charges was a conservative 
approach for calculation purposes. The applicant then standardized the 
charges and inflated the charges from FY 2018 to FY 2020. The applicant 
reported using an inflation factor of 11.1 percent, as published in the 
FY 2020 IPPS final rule (84 FR 42629).
    The applicant then calculated and added the charges for the 
SpineJack[supreg] system technology by taking the estimated per patient 
cost of the device, and converting it to a charge by dividing the costs 
by the national average CCR (cost-to-charge ratio) of 0.299 for 
implantable devices from the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42179).
    We stated in the proposed rule that in the analysis based on 100 
percent of claims, the applicant computed a final inflated average 
case-weighted standardized charge per case of $108,760, as compared to 
an average case-weighted threshold amount of $77,395. In the analysis 
based on 77 percent of claims from only the top six MS-DRGs, the 
applicant computed a final inflated average case-weighted standardized 
charge per case of $92,904, as compared to an average case-weighted 
threshold amount of $72,273.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount 
under both analyses described previously, the applicant asserted that 
the technology meets the cost criterion. We invited public comments on 
whether the SpineJack[supreg] system meets the cost criterion.
    Comment: The applicant offered a minor typographic correction in 
regard to the charge threshold analysis that was included in the 
proposed rule for the SpineJack[supreg] system. The applicant explained 
that in its new technology add-on payment application submission for 
the SpineJack[supreg] system, the inflated case-weighted standardized 
charge per case was reported as $108,670 for the analysis based on 100 
percent of claims. The applicant noted that a transposition error was 
made in the proposed rule,

[[Page 58694]]

such that this figure was incorrectly reported as $108,760. The 
applicant concluded that the difference between these figures is 
negligible and does not impact the result of the average case-weighted 
standardized charge per case exceeding the average case-weighted 
threshold amount. Therefore, the applicant maintained that the 
SpineJack[supreg] system does meet the cost criterion.
    Response: We thank the applicant for this correction and 
clarification with regard to the cost analysis for the 
SpineJack[supreg] system.
    Comment: We received comments that were not directly related to the 
cost analysis, including that the different mechanism of action, time, 
and expertise involved in the use of the SpineJack[supreg] system uses 
warrants a separate billable code.We also received comments questioning 
the costs associated with the SpineJack[supreg] system, including that 
the estimated $100,000 cost per case appears high compared to the 
approximately $3,500 cost of other treatment options like kyphoplasty.
    Response: We appreciate the commenters' feedback. We also note that 
proposals to create, delete, or revise codes under the ICD-10-PCS 
structure are referred to the ICD-10 Coordination and Maintenance 
Committee. The decisions of this committee are independent from any 
decision for new technology add on payments.
    After consideration of the public comments we received and based on 
the information included in the applicant's new technology add-on 
payment application, we believe that the SpineJack[supreg] system meets 
the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that the treatment of osteoporotic vertebral 
compression fracture (VCF) patients with the SpineJack[supreg] system 
represents a substantial clinical improvement over existing 
technologies because clinical research supports that it reduces future 
interventions, hospitalizations, and physician visits through a 
decrease in adjacent level fractures (ALFs), which the applicant 
asserted are clinically significant adverse events associated with 
osteoporotic VCF. The applicant also asserted that treatment with the 
SpineJack[supreg] system greatly reduces pain scores and pain 
medication use when compared to BKP, which the applicant stated is the 
current gold standard in vertebral augmentation (VA) treatment. The 
applicant submitted eight studies to support that its technology 
represents a substantial clinical improvement over existing 
technologies.
    The applicant explained that the SpineJack[supreg] system has been 
available for the treatment of patients with osteoporotic VCFs for over 
10 years in Europe. The applicant explained that, as a result, the 
SpineJack[supreg] system implant has been extensively studied, and 
claims from smaller studies are supported by the results from a recent, 
larger prospective, randomized study known as the SAKOS 
(SpineJack[supreg] versus Kyphoplasty in Osteoporotic Patients) study. 
The applicant cited the SAKOS study \318\ in support of multiple 
clinical improvement claims. The applicant explained that the SAKOS 
study was the pivotal trial conducted in support of the FDA 510(k) 
clearance for the SpineJack[supreg] system and that the intent of the 
study was to compare the safety and effectiveness of the 
SpineJack[supreg] system with the KyphX Xpander Inflatable Bone Tamp 
(BKP) for treatment of patients with painful osteoporotic VCFs in order 
to establish a non-inferiority finding for use of the SpineJack[supreg] 
system versus balloon kyphoplasty procedure (BKP).
---------------------------------------------------------------------------

    \318\ Noriega, D., et al., ``A prospective, international, 
randomized, noninferiority study comparing an implantable titanium 
vertebral augmentation device versus balloon kyphoplasty in the 
reduction of vertebral compression fractures (SAKOS study),'' The 
Spine Journal, 2019, vol. 19(11), pp. 1782-1795.
---------------------------------------------------------------------------

    The SAKOS study is a prospective, international, randomized, non-
inferiority study comparing a titanium implantable vertebral 
augmentation device (TIVAD), the SpineJack[supreg] system, versus BKP 
in the reduction of vertebral compression fractures with a 12-month 
follow-up. The primary endpoint was a 12-month responder rate based on 
a composite of three components: (1) Reduction in VCF fracture-related 
pain at 12 months from baseline by >20 mm as measured by a 100-mm 
Visual Analog Scale (VAS) measure, (2) maintenance or functional 
improvement of the Oswestry Disability Index (ODI) score at 12 months 
from baseline, and (3) absence of device-related adverse events or 
symptomatic cement extravasation requiring surgical reintervention or 
retreatment at the index level. If the primary composite endpoint was 
successful, a fourth component (absence of ALF) was added to the three 
primary components for further analysis. If the analysis of this 
additional composite endpoint was successful, then midline target 
height restoration at 6 and 12 months was assessed. According to the 
applicant, freedom from ALFs and midline VB height restoration were two 
additional superiority measures that were tested. According to the 
SAKOS study, secondary clinical outcomes included changes from baseline 
in back pain intensity, ODI score, EuroQol 5-domain (EQ-5D) index score 
(to evaluate quality of life), EQ-VAS score, ambulatory status, 
analgesic consumption, and length of hospital stay. Radiographic 
endpoints included restoration of vertebral body height (mm), and Cobb 
angle at each follow-up visit. Adverse events (AEs) were recorded 
throughout the study period. The applicant explained that researchers 
did not blind the treating physicians or patients, so each group was 
aware of the treatment allocation prior to the procedure; however, the 
three independent radiologists that performed the radiographic reviews 
were blinded to the personal data of the patients, study timepoints and 
results of the study.
    The SAKOS study recruited patients from 13 hospitals across 5 
European countries and randomized 152 patients with osteoporotic 
vertebral compression fractures (OVCFs) (1:1) to either the 
SpineJack[supreg] system or BKP procedures. Specifically, patients were 
considered eligible for inclusion if they met a number of criteria, 
including (1) at least 50 years of age, (2) had radiographic evidence 
of one or two painful VCF between T7 and L4, aged less than 3 month, 
due to osteoporosis, (3) fracture(s) that showed loss of height in the 
anterior, middle, or posterior third of the VB >=15% but <=40%, and (4) 
patient failed conservative medical therapy, defined as either having a 
VAS back pain score of >=50 mm at 6 weeks after initiation of fracture 
care or a VAS pain score of >=70% mm at 2 weeks after initiation of 
fracture care. Eleven of the originally recruited patients were 
subsequently excluded from surgery (9 randomized to the 
SpineJack[supreg] system and 2 to BKP). A total of 141 patients 
underwent surgery, and 126 patients completed the 12-month follow-up 
period (61 TIVAD and 65 BKP). The applicant contended that despite the 
SAKOS study being completed outside the U.S., results are applicable to 
the Medicare patient population, noting that 82 percent (116 of 141) of 
the patients in the SAKOS trial that received treatment (the 
SpineJack[supreg] system or BKP) were age 65 or older.
    The applicant explained further that the FDA evaluated the 
applicability of the SAKOS clinical data to the U.S. population and FDA 
concluded that although the SAKOS study was performed in Europe, the 
final study demographics were very similar to what has been reported in 
the literature for U.S.-based studies of BKP. The applicant also 
explained that FDA determined that the data was acceptable

[[Page 58695]]

for the SpineJack[supreg] system 510(k) clearance including two 
clinical superiority claims versus BKP.
    The SAKOS study reported that analysis on the intent to treat 
population using the observed case method resulted in a 12-month 
responder rate of 89.8 percent and 87.3 percent, for the 
SpineJack[supreg] system and BKP respectively (p=0.0016). The 
additional composite endpoint analyzed in observed cases resulted in a 
higher responder rate for the SpineJack[supreg] system compared to BKP 
at both 6 months (88.1% vs. 60.9%; p<0.0001) and 12 months (79.7% vs. 
59.3%; p<0.0001). Midline VB height restoration, tested for superiority 
using a t test with one-sided 2.5 percent alpha in the ITT population, 
was greater with the SpineJack[supreg] system than BKP at 6 months 
(1.142.61 mm vs 0.312.22 mm; p=0.0246) and at 
12 months (1.312.58 mm vs. 0.102.23 mm; 
p=0.0035), with similar results in the per protocol (PP) population.
    Also, according to the SAKOS study, decrease in pain intensity 
versus baseline was more pronounced in the SpineJack[supreg] system 
group compared to the BKP group at 1 month (p=0.029) and 6 months 
(p=0.021). At 12 months, the difference in pain intensity was no longer 
statistically significant between the groups, and pain intensity at 5 
days post-surgery was not statistically different between the groups. 
The SAKOS study publication also reported that at each timepoint, the 
percentage of patients with reduction in pain intensity >20 mm was 
>=90% in the SpineJack[supreg] system group and >=80% in the BKP group, 
with a statistically significant difference in favor of 
SpineJack[supreg] at 1 month post-procedure (93.8% vs 81.4%; p=0.03). 
The study also reported--(1) no statistically significant difference in 
disability (ODI score) between groups during the follow-up period, 
although there was a numerically greater improvement in the 
SpineJack[supreg] system group at most time points; (2) at each time 
point, the percentage of patients with maintenance or improvement in 
functional capacity was at or close to 100 percent; and (3) in both 
groups, a clear and progressive improvement in quality of life was 
observed throughout the 1-year follow-up period without any 
statistically significant between-group differences.
    In the SAKOS study, both groups had similar proportions of VCFs 
with cement extravasation outside the treated VB (47.3% for TIVAD, 
41.0% for BKP; p=0.436). No symptoms of cement leakage were reported. 
The SAKOS study also reported that the BKP group had a rate of adjacent 
fractures more than double the SpineJack[supreg] system group (27.3% 
vs. 12.9%; p=0.043). The SAKOS study also reported that the BKP group 
had a rate of non-adjacent subsequent thoracic fractures nearly 3 times 
higher than the SpineJack[supreg] system group (21.9% vs. 7.4%) (a p-
value was not reported for this result). The most common AEs reported 
over the study period were back pain (11.8 percent with the 
SpineJack[supreg] system, 9.6 percent with BKP), new lumbar vertebral 
fractures (11.8 percent with the SpineJack[supreg] system, 12.3 percent 
with BKP), and new thoracic vertebral fractures (7.4 percent with the 
SpineJack[supreg] system, 21.9 percent with BKP). The most frequent 
SAEs were lumbar vertebral fractures (8.8 percent with the 
SpineJack[supreg] system; 6.8 percent with BKP) and thoracic vertebral 
fractures (5.9 percent with the SpineJack[supreg] system, 9.6 percent 
with BKP). We also note that the length of hospital stay (in days) for 
osteoporotic VCF patients treated in the SAKOS trial was 3.8  3.6 days for the SpineJack[supreg] system group and 3.3 2.4 days for the BKP group (p=0.926, Wilcoxon test).
    The applicant also submitted seven additional studies, which are 
described in more detail in this section, related to the applicant's 
specific assertions regarding substantial clinical improvement.
    As stated previously, the applicant asserted that the 
SpineJack[supreg] system represents a substantial clinical improvement 
over existing technologies because it will reduce future interventions, 
hospitalizations, and physician visits through a decrease in ALFs. The 
applicant explained that ALFs are considered clinically significant 
adverse events associated with osteoporotic VCFs, citing studies by 
Lindsay et al.\319\ and Ross et al.\320\ The applicant explained that 
these studies reported, respectively, that having one or more VCFs 
(irrespective of bone density) led to a 5-fold increase in the 
patient's risk of developing another vertebral fracture, and the 
presence of two or more VCFs at baseline increased the risk of ALF by 
12-fold. The applicant asserted that analysis of the additional 
composite endpoint in the SAKOS study demonstrated statistical 
superiority of the SpineJack[supreg] system over BKP (p<0.0001) for 
freedom from ALFs at both 6 months (88.1 percent vs. 60.9 percent) and 
12 months (79.7 percent vs. 59.3 percent) post-procedure. The applicant 
noted that the results were similar on both the intent to treat and PP 
patient populations. In addition, the applicant asserted the 
SpineJack[supreg] system represents a substantial clinical improvement 
because in the SAKOS study, compared to patients treated with the 
SpineJack[supreg] system, BKP-treated patients had more than double the 
rate of ALFs (27.3 percent vs. 12.9 percent; p=0.043) and almost triple 
the rate of non-adjacent thoracic VCFs (21.9 percent vs. 7.4 percent).
---------------------------------------------------------------------------

    \319\ Lindsay R. et al., ``Risk of new vertebral fracture in the 
year following a fracture,'' Journal of the American Medical 
Association, 2001, vol. 285(3), pp. 320-323.
    \320\ Ross P. et al., Pre-existing fractures and bone mass 
predict vertebral fracture incidence in women. Annals of Internal 
Medicine. 1991, vol. 114(11), pp. 919-923.
---------------------------------------------------------------------------

    The applicant also asserted superiority with respect to mid-
vertebral body height restoration with the SpineJack[supreg] system. 
The applicant explained that historical treatments of osteoporotic VCFs 
have focused on anterior VB height restoration and kyphotic Cobb angle 
correction; however, research indicates that the restoration of middle 
VB height may be as important as Cobb angle correction in the 
prevention of ALFs.\321\
---------------------------------------------------------------------------

    \321\ Lin J et al. Better height restoration, greater kyphosis 
correction, and fewer refractures of cemented vertebrae by using an 
intravertebral reduction device: A 1-year follow-up study. World 
Neurosurgery. 2016; 90:391-396.
---------------------------------------------------------------------------

    According to the applicant, the depression of the mid-vertebral 
endplate leads to decreased mechanics of the spinal column by 
transferring the person's weight to the anterior wall of the level 
adjacent to the fracture, and as a result the anterior wall is the most 
common location for ALFs. The applicant further asserted that by 
restoring the entire fracture, including mid-VB height, the vertebral 
disc above the superior vertebral endplate is re-pressurized and 
transfers the load evenly, preventing ALFs.\322\ The applicant stated 
that the SpineJack[supreg] system showed superiority over BKP with 
regard to midline VB height restoration at both 6 and 12 months, 
pointing to the SAKOS study results in the intent to treat population 
at 6 months (1.142.61 mm vs 0.312.22 mm; 
p=0.0246) and 12 months (1.312.58 mm vs. 0.102.23 mm; p=0.0035) post-procedure. The applicant noted that 
similar results were also observed in the PP population (134 patients 
in the intent-to-treat population without any major protocol 
deviations).
---------------------------------------------------------------------------

    \322\ Tzermiadianos M., et al., ``Altered disc pressure profile 
after an osteoporotic vertebral fracture is a risk factor for 
adjacent vertebral body fracture,'' European Spine Journal, 2008, 
vol. 17(11), pp. 1522-1530.
---------------------------------------------------------------------------

    The applicant also provided two prospective studies, a 
retrospective study, and two cadaveric studies in

[[Page 58696]]

support of its assertions regarding superior VB height restoration. The 
applicant stated that in a prospective comparative study by Noriega D., 
et al.,\323\ VB height restoration outcomes utilizing the 
SpineJack[supreg] system were durable out to 3 years. This study was a 
safety and clinical performance pilot that randomized 30 patients with 
painful osteoporotic vertebral compression fractures to the 
SpineJack[supreg] system (n=15) or BKP (n=15).\324\ Twenty-eight 
patients completed the 3-year study (14 in each group). The clinical 
endpoints of analgesic consumption, back pain intensity, ODI, and 
quality of life were recorded preoperatively and through 36-months 
post-surgery.\325\ Spine X-rays were also taken 48 hours prior to the 
procedure and at 5 days, 6, 12, and 36 months post-surgery.\326\ The 
applicant explained that over the 3-year follow-up period, VB height 
restoration and kyphosis correction was better compared to BKP, 
specifically that VB height restoration and kyphotic correction was 
still evident at 36 months with a greater mean correction of anterior 
VB height (10  13% vs 2  8% for BKP, p=0.007) 
and midline VB height (10  11% vs 3  7% for 
BKP, p=0.034), while there was a larger correction of the VB angle (-
4.97[deg]  5.06[deg] vs 0.42[deg]  3.43[deg]; 
p=0.003) for the SpineJack[supreg] system group. The applicant stated 
that this study shows superiority with regards to VB height 
restoration.
---------------------------------------------------------------------------

    \323\ Noriega D., et al., ``Long-term safety and clinical 
performance of kyphoplasty and SpineJack procedures in the treatment 
of osteoporotic vertebral compression fractures: A pilot, 
monocentric, investigator-initiated study,'' Osteoporosis 
International, 2019, vol. 30, pp. 637- 645.
    \324\ Ibid.
    \325\ Ibid.
    \326\ Ibid.
---------------------------------------------------------------------------

    The applicant asserted that Arabmotlagh M., et al., also supported 
superiority with regard to VB height restoration. Arabmotlagh M., et 
al. reported a single-arm observational case series of the 
SpineJack[supreg] system. They enrolled 42 patients with osteoporotic 
vertebral compression fracture of the thoracolumbar, who were 
considered for kyphoplasty, 31 of whom completed the clinical and 
radiological evaluations up to 12 months after the procedure.\327\ 
According to materials provided by the applicant, the purpose of the 
study was to evaluate the efficacy of kyphoplasty with the 
SpineJack[supreg] system to correct the kyphotic deformity and to 
analyze parameters affecting the restoration and maintenance of spinal 
alignment. The applicant explained that the mean VB height calculated 
prior to fracture was 2.8 cm (standard deviation (SD) of 0.47), which 
decreased to 1.5 cm (SD of 0.59) after the fracture. According to the 
applicant, following the procedure performed with the SpineJack[supreg] 
system device, the VB height significantly increased to 1.9 cm (SD of 
0.64; p<0.01), but was reduced to 1.8 cm (SD of 0.61; p<0.01) at 12 
months post-procedure. We note that according to Arabmotlagh M., et al. 
(2018), these results were specifically for mean anterior VB height. 
The study does not appear to report results for midline VB height.\328\ 
The applicant also stated that the mean kyphotic angle (KA) calculated 
prior to fracture was -1[deg] (SD of 5.8), which increased to 13.4[deg] 
(SD of 8.1) after the fracture. The applicant also stated that 
following the procedure performed with the SpineJack[supreg] system 
device, KA significantly decreased to 10.8[deg] (SD of 9.1; p<0.01); 
however, KA correction was lost at 12 months post-procedure with an 
increase to 13.3[deg] (SD of 9.5; p<0.01).
---------------------------------------------------------------------------

    \327\ Arabmotlagh M., et al., ``Radiological Evaluation of 
Kyphoplasty With an Intravertebral Expander After Osteoporotic 
Vertebral Fracture,'' Journal of Orthopaedic Research, 2018. Doi: 
10.1002.jor.24180.
    \328\ Arabmotlagh M., et al., ``Radiological Evaluation of 
Kyphoplasty With an Intravertebral Expander After Osteoporotic 
Vertebral Fracture,'' Journal of Orthopaedic Research, 2018. Doi: 
10.1002.jor.24180.
---------------------------------------------------------------------------

    The applicant provided a Lin et al., retrospective study of 75 
patients that compared radiologic and clinical outcomes of kyphoplasty 
with the SpineJack[supreg] system to vertebroplasty (VP) in treating 
osteoporotic vertebral compression fractures to support its assertions 
regarding superiority with regard to midline VB height 
restoration.\329\ The applicant stated that the radiologic outcomes 
from this study were: (1) The mean KA and mean KA restoration was more 
efficient after the SpineJack[supreg] system than VP at all time points 
(up to 1 year), except for mean KA observed postoperatively at 1 week; 
and (2) the mean middle VB heights and mean VB height restoration was 
more favorable after the SpineJack[supreg] system than VP.\330\ We note 
that this study did not compare the SpineJack[supreg] system to BKP, 
which the applicant stated is the gold-standard in vertebral 
augmentation.
---------------------------------------------------------------------------

    \329\ Lin J., et al., ``Better Height Restoration, Greater 
Kyphosis Correction, and Fewer Refractures of Cemented Vertebrae by 
Using an Intravertebral Reduction Device: A 1-Year Follow-up 
Study,'' World Neurosurg. 2016, vol. 60, pp. 391-396.
    \330\ Ibid.
---------------------------------------------------------------------------

    In the two cadaveric studies, Kruger A., et al. (2013) and Kruger 
A., et al. (2015), wedge compression fractures were created in human 
cadaveric vertebrae by a material testing machine and the axial load 
was increased until the height of the anterior edge of the VB was 
reduced by 40 percent.\331\ The VBs were fixed in a clamp and loaded 
with 100 N in a custom made device. In Kruger A., et al. (2013), 
vertebral heights were measured at the anterior wall as well as in the 
center of the vertebral bodies in the medial sagittal plane in 36 human 
cadaveric vertebrae pre- and post-fracture as well as after treatment 
and loading in (27 vertebrae were treated with the SpineJack[supreg] 
system with different cement volumes (maximum, intermediate, and no 
cement), and 9 vertebrae were treated with BKP). In Kruger A., et al. 
(2015), anterior, central, and posterior height as well as the Beck 
index were measured in 24 vertebral bodies pre-fracture and post-
fracture as well as after treatment (twelve treated with the 
SpineJack[supreg] system and twelve treated with BKP).
---------------------------------------------------------------------------

    \331\ Kruger A., et al., ``Height restoration and maintenance 
after treating unstable osteoporotic vertebral compression fractures 
by cement augmentation is dependent on the cement volume used,'' 
Clinical Biomechanics, 2013, vol. 28, pp. 725-730; and Kruger A., et 
al., ``Height restoration of osteoporotic vertebral compression 
fractures using different intervertebral reduction devices: A 
cadaveric study,'' The Spine Journal, 2015, vol. 15, pp. 1092-1098.
---------------------------------------------------------------------------

    The applicant asserted that Kruger A., et al. (2013) showed 
superiority on VB height restoration and height maintenance, and 
summarized that: (1) Height restoration was significantly better for 
the SpineJack[supreg] system group compared to BKP; (2) height 
maintenance was dependent on the cement volume used; and (3) the group 
with the SpineJack[supreg] system without cement nevertheless showed 
better results in height maintenance, yet the statistical significance 
could not be demonstrated.\332\
---------------------------------------------------------------------------

    \332\ Ibid.
---------------------------------------------------------------------------

    The applicant asserted that Kruger A., et al. (2015) showed 
superiority on VB height restoration, because the height restoration 
was significantly better in the SpineJack[supreg] system group compared 
with the BKP group. The applicant explained that the clinical 
implications include a better restoration of the sagittal balance of 
the spine and a reduction of the kyphotic deformity, which may relate 
to clinical outcome and the biological healing process.\333\
---------------------------------------------------------------------------

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

    The applicant also asserted that use of the SpineJack[supreg] 
system represents a substantial clinical improvement with respect to 
pain relief. According to the applicant, pain is the first and most 
prominent symptom associated with osteoporotic VCFs, which drives many 
elderly patients to seek hospital treatment and negatively impacts on

[[Page 58697]]

their quality of life. The applicant provided the SAKOS randomized 
controlled study, a prospective consecutive observational study, and a 
retrospective case series to support its assertions regarding pain 
relief with the SpineJack[supreg] system.
    The applicant cited the SAKOS trial for statistically significant 
greater pain relief achieved at 1 month and 6 months after surgery with 
the SpineJack[supreg] system. The applicant summarized that in the 
SAKOS trial (1) progressive improvement in pain relief was observed 
over the follow-up period in the SpineJack[supreg] system group only; 
(2) the decrease in pain intensity versus baseline was more pronounced 
in the SpineJack[supreg] system group compared to the BKP group at 1 
month (p=0.029) and 6 months (p=0.021); and (3) at each time point, the 
percentage of patients with reduced pain intensity >20 mm was >=90 
percent in the SpineJack[supreg] system group and >=80 percent in the 
BKP group, with a statistically significant difference in favor of the 
SpineJack[supreg] system at 1 month post-procedure (93.8% vs 81.5%; 
p=0.030). The applicant also noted that although continued pain score 
improvements were seen out to 1 year for patients treated with the 
SpineJack[supreg] system, the difference between the treatment groups 
did not meet statistical significance (p=0.061).
    The applicant also explained that in the SAKOS study, at 5 days 
after surgery, there were significantly fewer patients taking central 
agent medications in the SpineJack[supreg] system implant-treated group 
as compared to those in the BKP-treated group (SJ 7.4% vs. BKP 21.9%, 
p=0.015). According to the applicant, central analgesic agents included 
medications such as non-steroidal anti-inflammatory drugs (NSTATEDS), 
salicylates, or opioid analgesics.
    The applicant also cited a prospective consecutive observational 
study by Noriega D., et al. for statistically significant pain relief 
immediately after surgery and at both 6 and 12 months. Noriega D., et 
al. was a European multicenter, single-arm registry study that aimed to 
confirm the safety and clinical performance of the SpineJack[supreg] 
system for the treatment of vertebral compression fractures of 
traumatic origin (no comparison procedure).\334\ The study enrolled 103 
patients (median age: 61.6 years) with 108 VCFs due to trauma (n=81), 
or traumatic VCF with associated osteoporosis (n=22) who had the 
SpineJack[supreg] system procedure. Twenty-three patients withdrew from 
the study before the 12-month visit.
---------------------------------------------------------------------------

    \334\ Noriega D., et al., ``Clinical performance and safety of 
108 SpineJack implantations: 1-year results of a prospective 
multicentre single arm registry study.'' BioMed Research 
International. 2015, 173872.
---------------------------------------------------------------------------

    The study reported a significant improvement in back pain at 48 
hours after the SpineJack[supreg] system procedure, with the mean VAS 
pain score decreasing from 6.6  2.6 cm at baseline to 1.4 
 1.3 cm (mean change: -5.2  2.7 cm; p<0.001) 
(median relative decrease in pain intensity of 81.5 percent) for the 
total study population. Noriega D., et al. also reported that the 
improvement was maintained over the 12-month follow-up period and 
similar results were observed with both pure traumatic VCF and 
traumatic VCF in patients with osteoporosis. The traumatic VCF with 
osteoporosis sub-group had a mean change of -5.5 (SD=1.9) (median 
relative change of 81.0%) (p<0.001) at 48 hours post-surgery (n=22), 
and -5.7 (SD=2.3) mean change (90.3% median relative change) (p<0.001) 
at 12 months (n=16). The applicant stated that this study supported a 
claim of statistically significant pain relief immediately after 
surgery and at both 6 and 12 months.
    The applicant summarized that (1) pain relief and improvements in 
pain scores were statistically significant immediately after treatment 
(48-72 hours) and at 6 and 12 months following surgery (p<0.001); and 
(2) the mean improvement between baseline and at 48-72 hours after the 
procedure (n=31) was -4.6 (2.6) (p<0.001), while the mean improvement 
between baseline and at the 12-month follow-up (n=22) was -6.0 (3.4) 
(p<0.001). We note that Noriega D., et al. did not report results for 6 
months (although it does include results for 3 months versus baseline) 
and does not include the results of mean improvement stated by the 
applicant.\335\ It is also unclear if the applicant intended to rely on 
the overall results of the study or the subgroup of traumatic VCF with 
osteoporosis.
---------------------------------------------------------------------------

    \335\ Ibid.
---------------------------------------------------------------------------

    The applicant also cited a retrospective case series, Renaud C., et 
al., for statistically significant pain relief after surgery with the 
SpineJack[supreg] system. Renaud C., et al., included 77 patients with 
a mean age of 60.9 years and 83 VCFs (51 due to trauma and 32 to 
osteoporosis) treated with 164 SpineJack[supreg] system devices (no 
comparison procedure).\336\ The applicant summarized that--(1) pain 
relief was statistically significant (p<0.001), with a pain score 
decrease from 7.9 pre-operatively to 1.8 at 1 month after the 
procedure; (2) the pain score improvement was 77 percent at hospital 
discharge and gradually increased to 86 percent after 1 year following 
surgery; and (3) the study outcomes demonstrated that the 
SpineJack[supreg] system provided both immediate and long-lasting pain 
relief.
---------------------------------------------------------------------------

    \336\ Renaud C., ``Treatment of vertebral compression fractures 
with the cranio-caudal expandable implant SpineJack: Technical note 
and outcomes in 77 consecutive patients.'' Orthopaedics & 
Traumatology: Surgery & Research, 2015, vol. 101, pp. 857-859.
---------------------------------------------------------------------------

    After reviewing the information submitted by the applicant as part 
of its FY 2021 new technology add-on payment application for the 
SpineJack[supreg] system, we noted that the results of the SAKOS trial 
did not appear to have been corroborated in any other randomized 
controlled study. Additionally, although the applicant stated that BKP 
is the gold standard in VA, we noted that there appeared to be a lack 
of data comparing the SpineJack[supreg] system to other existing 
technology, such as the PEEK coiled implant (the Kiva[supreg] system), 
particularly since the PEEK coiled system was considered the predicate 
device for the SpineJack[supreg] system FDA 510(k) clearance. 
Furthermore, we noted that there appeared to be a lack of data 
comparing the SpineJack[supreg] system to conservative medical therapy, 
although there was an active study posted on clinicaltrials.gov 
comparing the SpineJack[supreg] system to conservative orthopedic 
management, the latter consisting of brace and pain medication in acute 
stable traumatic vertebral fractures in subjects aged 18 to 60 years 
old. The clinicaltrials.gov entry indicated that findings should be 
forthcoming in 2020.
    Additionally, we noted that two recent systematic reviews of the 
management of vertebral compression fracture (Buchbinder et al. for 
Cochrane (2018), Ebeling et al. (2019) for the American Society for 
Bone and Mineral Research (ASBMR)) did not support vertebral 
augmentation procedures due to lack of evidence compared to 
conservative medical management.\337\ The ASBMR recommended more 
rigorous study of treatment options including ``larger sample sizes, 
inclusion of a placebo control and more data on serious AEs (adverse 
events).'' We invited public comment on whether

[[Page 58698]]

the SpineJack[supreg] system meets the substantial clinical improvement 
criterion.
---------------------------------------------------------------------------

    \337\ Buchbinder R., Johnston R.V., Rischin K.J., Homik J., 
Jones C.A., Golmohammadi K., Kallmes D.F., ``Percutaneous 
vertebroplasty for osteoporotic vertebral compression fracture,'' 
Cochrane Database Syst Rev. 2018 Apr 4 and Nov 6. PMID: 29618171; 
Ebeling P.R., Akesson K., Bauer D.C., Buchbinder R., Eastell R., 
Fink H.A., Giangregorio L., Guanabens N., Kado D., Kallmes D., 
Katzman W., Rodriguez A., Wermers R., Wilson H.A., Bouxsein M.L., 
``The Efficacy and Safety of Vertebral Augmentation: A Second ASBMR 
Task Force Report.'' J Bone Miner Res., 2019, vol. 34(1), pp. 3- 21.
---------------------------------------------------------------------------

    Comment: The applicant submitted comments in response to CMS's 
concerns in the FY 2021 IPPS/LTCH PPS proposed rule regarding whether 
the SpineJack[supreg] system meets the substantial clinical improvement 
criterion.
    With respect to the FY 2021 IPPS/LTCH PPS proposed rule concern 
that recent systematic reviews of the management of VCF for Cochrane 
and ASBMR did not support vertebral augmentation procedures due to lack 
of evidence compared to conservative medical management, the applicant 
responded that the latest clinical evidence and a policy statement from 
the International Society for the Advancement of Spine Surgery (ISASS) 
do provide robust support for the use of vertebral augmentation (VA) 
over non-surgical management (NSM) in the treatment of osteoporotic 
VCFs.
    According to the applicant, a recent systematic review and meta-
analysis by Beall et al. (2018) \338\ included 25 prospective studies 
(either level 1 or level 2 evidence), comparing vertebral augmentation 
over NSM for the treatment of thoracic and lumbar VCFs. Again according 
to the applicant, the Beall meta-analysis reportedly found that both 
balloon kyphoplasty (BKP)-treated patients and vertebroplasty (VP)-
treated patients had significantly greater pain reduction over those 
treated with NSM.
---------------------------------------------------------------------------

    \338\ Beall D et al., ``Review of vertebral augmentation: An 
updated meta-analysis of the effectiveness,'' International Journal 
of Spine Surgery, 2018, vol. 12(3), pp. 295-321.
---------------------------------------------------------------------------

    Relatedly, the applicant pointed to a policy statement released by 
the ISASS in 2018, the medical society concluded that, based upon the 
body of clinical evidence available for the international spine 
community, it could ``confidently advocate that there is strong support 
for vertebral augmentation in the treatment of symptomatic VCFs.''
    The applicant also pointed to recent Local Coverage Determinations 
on percutaneous vertebral augmentation (PVA) for osteoporotic VCF, 
published by the seven regional Medicare Administrative Contractors 
(MACs). According to the applicant, the LCD for Noridian in particular 
stated that the preponderance of evidence (including empirical studies) 
favors consideration of PVA in select osteoporotic VCF patients.
    Finally, the applicant asserted that the SAKOS trial for the 
SpineJack[supreg] system was specifically designed to address the ASBMR 
recommendations for more rigorous study of VCF treatments, through 
larger study sample sizes, inclusion of a placebo control, and more 
data on serious adverse events.
    With respect to the FY 2021 IPPS/LTCH PPS proposed rule concern 
that the results of the SAKOS trial have not been corroborated in any 
other randomized controlled trial, and regarding the lack of data 
comparing the SpineJack[supreg] system to technologies other than BKP 
(like the Kiva[supreg] system PEEK coiled implant), the applicant 
responded that multiple randomized trials are often not conducted to 
corroborate level one evidence that has been published in a peer-
reviewed journal, such as the SAKOS trial data for the 
SpineJack[supreg] system.
    The applicant also stated that at least 16 supporting journal 
articles had been cited in its new technology add-on payment 
application, highlighting the significant clinical benefit of the 
SpineJack[supreg] system for osteoporotic VCFs.
    With regard to the Kiva[supreg] system, the applicant stated that 
the Kiva[supreg] system was found to be non-inferior to BKP, but not 
superior to BKP, in the Kiva[supreg] system's own randomized clinical 
trial study. According to the applicant, because the Kiva[supreg] 
system was not found superior to BKP, has not been widely adopted in 
the United States, and because the SpineJack[supreg] system was found 
superior to BKP on some outcomes in the SAKOS trial, the applicant 
concluded that the Kiva[supreg] system was not an appropriate clinical 
comparator for study.
    With respect to the FY 2021 IPPS/LTCH PPS proposed rule concern 
that there is a lack of data comparing the SpineJack[supreg] system to 
conservative medical therapy (or non-surgical management, NSM), the 
applicant asserted that substantial clinical evidence may be found 
throughout the published medical literature on improved outcomes with 
BKP compared to NSM when treating patients with osteoporotic VCFs. 
According to the applicant, examples of publications that highlight the 
benefits of BKP treatment include those from the FREE (Fracture 
Reduction Evaluation) trial, which describe rapid pain reduction and 
clinical improvements in function and quality of life, as well as 
radiologic improvements in VB height and kyphotic angulation, among 
BKP-treated patients vs. NSM-treated patients.\339\ \340\ \341\ A 
publication from the EVOLVE trial also illustrates significant 
improvements in pain scores, functional capability, and quality of life 
among osteoporotic patients treated with BKP.\342\
---------------------------------------------------------------------------

    \339\ Wardlaw D et al. Efficacy and safety of balloon 
kyphoplasty compared with non-surgical care for vertebral 
compression fracture (FREE): A randomised controlled trial. Lancet. 
2009; 373(9668):1016-1024.
    \340\ Boonen S et al. Balloon kyphoplasty for the treatment of 
acute vertebral compression fractures: 2-year results from a 
randomized trial. Journal of Bone and Mineral Research. 2011; 
26(7):1627-1637.
    \341\ Van Meirhaeghe J et al. A randomized trial of balloon 
kyphoplasty and nonsurgical management for treating acute vertebral 
compression fractures: Vertebral body kyphosis correction and 
surgical parameters. Spine. 2013; 38(12):971-983.
    \342\ Beall D et al. Prospective and multicenter evaluation of 
outcomes for quality of life and activities of daily living for 
balloon kyphoplasty in the treatment of vertebral compression 
fractures: The EVOLVE trial. Neurosurgery. 2019; 84(1):169-178.
---------------------------------------------------------------------------

    The applicant then cited to several additional studies showing 
mortality and survival benefits associated with BKP and VP procedures 
in the treatment of VCF, as compared to NSM. According to the 
applicant, based upon the body of evidence available, the use of NSM as 
a comparator treatment to the SpineJack[supreg] system for a new 
clinical study would not be in the best interest of osteoporotic VCF 
patients. This is primarily due to the increased risk of morbidity and 
mortality that has been reported in this patient population, 
particularly among the elderly.
    With regard to the active study noted by CMS listed on 
ClinicalTrials.gov (NCT02657265) that compares the SpineJack[supreg] 
system to conservative orthopedic management, the applicant noted that 
this is an ongoing trial in Europe that has been designed to treat 
patients with acute traumatic VCFs, rather than osteoporotic VCFs. 
Patients enrolled in this study are between the ages of 18 to 60, which 
reflects the younger age demographic found among traumatic VCF 
patients. Since patients 65 years and older are not included in the 
study population, the results from this European trial will not be 
applicable to the Medicare patient population with osteoporotic VCFs. 
Finally, the applicant provided additional clarifications or minor 
corrections with regard to several specific studies that were cited in 
the new technology add-on payment application, for which CMS noted an 
interpretive question or concern. The clarifications provided by the 
applicant addressed each of Lin et al. (2016), Arabmotlagh et al. 
(2018), and Noriega et al. (2015). The applicant also requested the 
correction of a minor typographical error in the FY 2021 IPPS proposed 
rule regarding the SAKOS study results for one of the values concerning 
VB height restoration at 12

[[Page 58699]]

months. Specifically, according to the applicant, for the midline VB 
height restoration reported at 12 months for the SpineJack[supreg] 
system compared to BKP in the SAKOS trial, an inadvertent error appears 
in the standard deviation value for the BKP data reported in the 
proposed rule. The applicant stated this value should be revised as 
follows to match the SAKOS trial publication: ``12 months (1.31  2.58 mm vs. 0.10  2.34 mm; p=0.0035) post-
procedure.''
    One commenter who is a manufacturer of BKP implants made several 
criticisms of the evidence put forward by the applicant, with regard to 
whether the SpineJack[supreg] system meets the substantial clinical 
improvement criterion. The commenter emphasized that although the 
applicant cited the SAKOS study as the basis for concluding that the 
SpineJack[supreg] system meets the substantial clinical improvement 
criterion, the SAKOS study compared the SpineJack[supreg] system to 
older BKP technology (KyphX), rather than to the most current BKP 
technology available at the time of the study (Xpander II and Express 
II). According to the commenter, these second-generation balloons have 
been available since 2014, generate lift force in excess of 1200 
Newtons, and are the only BKP products indicated for the cement 
resistance technique, whereby one bone tamp is left in place during 
cement injection and curing to maximize height restoration in a 
collapsed vertebral body. The commenter suggested that if the SAKOS 
study had compared the SpineJack[supreg] system to these second-
generation BKP implants, then the SpineJack[supreg] system might not 
have demonstrated superior performance on secondary outcome measures.
    The commenter also offered several additional criticisms of the 
SAKOS study. The commenter pointed out that the SAKOS study design did 
not involve an even distribution of the spine levels treated across 
study arms, and that it is possible that a difference in the levels 
treated could have contributed to the reduction of ALFs in the 
SpineJack[supreg] system group. The commenter asserted that the 
vertebral levels T11-L1 are commonly known for higher number of 
fractures, and that these spinal segments had 14 more levels treated 
with BKP than with the SpineJack[supreg] system in the SAKOS study. 
According to the commenter, further analysis would be needed to 
determine if the location of fractures had an effect on the occurrence 
of ALFs between the two study arms in SAKOS. The commenter also pointed 
out that it was unclear whether there was any difference in the two 
treatment groups' bone density metrics, as this was not disclosed in 
the SAKOS study.
    The commenter went on to emphasize that the clinical comparison in 
the SAKOS study demonstrated the SpineJack[supreg] system was non-
inferior to BKP at the time of the primary endpoint (12 months); 
however, there was no significant difference between groups in pain 
intensity visual analog scale (VAS) score at the final time point, and 
no difference in Oswestry Disability Index (ODI) or the EQ-5D health 
status questionnaire at any time point during the study. The commenter 
acknowledged that SAKOS demonstrated superiority for the 
SpineJack[supreg] system for mid-vertebral height restoration, but 
emphasized that measures of anterior height, posterior height, and cobb 
angle showed no difference across the study arms, within the secondary 
endpoints. The commenter also observed that the SAKOS study showed a 
similar number of adverse events between study arms, with the 
SpineJack[supreg] system population seeing a higher percentage of 
serious adverse events.
    Finally, the commenter disputed the applicant's assertion that 
vertebral augmentation treatment with vertebroplasty may alleviate 
pain, but cannot restore vertebral body height or correct spinal 
deformity. The commenter likewise disputed the applicant's assertion 
that BKP attempts to restore vertebral body height, but the temporary 
correction obtained cannot be sustained over the long-term (85 FR 
32656). In countering the applicant's assertions, the commenter 
referenced three published articles with empirical evidence regarding 
the impact of BKP on kyphotic angle and VB height restoration.\343\ 
\344\ \345\
---------------------------------------------------------------------------

    \343\ Van Meirhaeghe JV, et al. 2013;38(12): 971-983.
    \344\ Dohm M, et al. Am J Neuroradiol. 2014;35:2227-2236.
    \345\ Bozkurt M, et al. Asian Spine J. 2014; 8(1):27-34.
---------------------------------------------------------------------------

    Another commenter provided a detailed technical criticism of 
several aspects of the SAKOS trial, and asserted that the 
SpineJack[supreg] system does not meet the substantial clinical 
improvement criterion. This commenter also stated that the BKP arm of 
the SAKOS study used an older generation of balloon implants with less 
ability to deliver lift force and to improve VB height. The commenter 
asserted that in order to claim superiority for the SpineJack[supreg] 
system, the SAKOS trial should have used the newer generation balloon 
implants, and that the failure to do so calls into question the SAKOS 
findings of improved height restoration and reduced ALFs for the 
SpineJack[supreg] system.
    The commenter also noted that the SAKOS study reported an 
exceedingly high 40% rate of disc space extravasation in the balloon 
kyphoplasty arm. The commenter disputed that this high rate of disc 
space extravasation is typical based on the literature on BKP, and the 
commenter cited to two BKP trials which found much lower rates of disc 
space extravasation.\346\ \347\ According to the commenter, the high 
rate of disc extravasation in the BKP arm of the SAKOS trial calls into 
question the claims that the SpineJack[supreg] system reduced the 
occurrence of ALFs, since disc extravasation has itself been shown to 
induce ALFs in other empirical studies. The commenter also suggested 
that the difference in ALFs across the two SAKOS study arms could also 
help to explain the finding of improved pain intensity scores for the 
SpineJack[supreg] system at different secondary time points.
---------------------------------------------------------------------------

    \346\ Wardlaw D, Cummings SR, Van Meirhaeghe J, Bastian L, 
Tillman JB, Ranstam J, Eastell R, Shabe P, Talmadge K, Boonen S. 
Efficacy and safety of balloon kyphoplasty compared with non-
surgical care for vertebral compression fracture (FREE): A 
randomised controlled trial. Lancet. 2009. PubMed PMID: 19246088.
    \347\ Beall DP, Chambers MR, Thomas S, Amburgy J, Webb JR, 
Goodman BS, et al. Prospective and multicenter evaluation of 
outcomes for quality of life and activities of daily living for 
balloon kyphoplasty in the treatment of vertebral compression 
fractures: The EVOLVE trial. Neurosurg 2019;84(1):169-178.
---------------------------------------------------------------------------

    The commenter offered several additional criticisms with regard to 
the SAKOS study, including that fractures in the T11-L1 junctional zone 
were not evenly distributed across study arms, and might have mediated 
the observed difference in the occurrence of ALFs. The commenter also 
raised questions about whether the degree of osteoporosis was held 
consistent across the SAKOS study arms, and whether the inclusion 
criteria for SAKOS (requiring an initial period of at least 6 weeks of 
conservative medical therapy) might make the study findings less 
applicable to the American Medicare population generally. The commenter 
challenged the applicant's assertion that BKP does not sustain VB 
height recovery over the long term, and the commenter provided several 
citations to empirical studies stating the 
contrary.348 349 350 351 352 353

[[Page 58700]]

The commenter challenged the importance of the SAKOS finding of 
superiority for the SpineJack[supreg] system on mid-vertebral height 
restoration, and reiterated that the SAKOS study findings on measures 
of anterior VB height, posterior VB height, and Cobb Angle measurements 
showed no differences between the SpineJack[supreg] system and BKP.
---------------------------------------------------------------------------

    \348\ Dohm M, Black C, Dacre A, Tillman JB, Fueredi G, KAVIAR 
Investigators. A randomized trial comparing balloon kyphoplasty and 
vertebroplasty for vertebral compression fractures due to 
osteoporosis. AJNR 2014;35:2227-36.
    \349\ Beall DP, Chambers MR, Thomas S, Amburgy J, Webb JR, 
Goodman BS, et al. Prospective and multicenter evaluation of 
outcomes for quality of life and activities of daily living for 
balloon kyphoplasty in the treatment of vertebral compression 
fractures: the EVOLVE trial. Neurosurg 2019;84(1):169-178.
    \350\ Morozumi M, Matsubara Y, Muramoto A, Morita Y, Ando K, 
Kobayashi K, Machino M, Ota K, Tanaka S, Kanbara S, Ito S, Ishiguro 
N, Imagama S. A Study of Risk Factors for Early-Onset Adjacent 
Vertebral Fractures After Kyphoplasty. Global Spine Journal 2019 
10:1, 13-20.
    \351\ Van Meirhaeghe JV., Bastian L., Boonen S., et al. A 
Randomized trial of balloon kyphoplasty and nonsurgical management 
for treating acute vertebral compression fractures. Spine 2013; 
38(12): 971-983.
    \352\ Significantly Better Height Restoration vs. Unilateral BKP 
and VP (p < 0.001) Bozkurt M, et al. Asian Spine J. 2014; 8(1):27-
34.
    \353\ Gu C., Brinjikji W., Evans A., et al. Outcomes of 
vertebroplasty compared with kyphoplasty: A systematic review and 
meta-analysis. J NeuroIntervent Surg. 2016 Jun;8(6):636-42.
---------------------------------------------------------------------------

    The commenter further noted that the applicant only cited one study 
to support the statement that ``research indicates that the restoration 
of middle VB height may be as important as Cobb angle correction in the 
prevention of ALFs,'' and the commenter asserted that the cited study 
does not actually support that statement.
    The commenter concluded that the current medical standard for 
prevention of ALFs remains the Cobb angle and anterior VB height 
measurements. Finally, the commenter also challenged the applicant's 
assertion that ``by restoring the entire fracture, including mid-VB 
height, the vertebral disc above the superior vertebral endplate is re-
pressurized and transfers the load evenly, preventing ALFs,'' based on 
results from a single cadaveric study.
    Several commenters agreed that the SpineJack[supreg] system 
provides pain reduction based on their clinical experiences. Several 
commenters also agreed that patients are either pain-free or nearly 
pain-free based on their clinical experiences. One commenter agreed 
that the SpineJack[supreg] system would theoretically decrease pain 
based on the study provided. Several commenters believed that decreased 
pain enhances activities of daily living (ADLs) and overall quality of 
life for older patients, which may further reduce long term care 
resource consumption. Several commenters also expressed their belief 
that the pain reduction the SpineJack[supreg] system provides causes 
patients to require less opioid prescriptions for pain. The commenters 
cited both the inability of the older adult population to tolerate 
opioids, the abuse or dependency potential for patients, and potential 
for misuse by persons other than the prescribed as benefits of a 
reduction in opioid prescriptions written and dispensed.
    Many commenters agreed that they have seen evidence of increased VB 
height restoration in their clinical experience, and many commenters 
believed based on their clinical experiences that the SpineJack[supreg] 
system is superior to other product options for these fractures. 
Commenters cited improved posture, sagittal alignment, improved 
pulmonary function, and/or better disc health. Several commenters also 
noted that the SpineJack[supreg] system is especially useful in certain 
subsets of patients, with commenters citing various subgroups including 
older patients, patients who have already experienced previous 
compression fractures, who have complex fractures, who have fractures 
under 3 months old, who have older fractures, who have greater than 25% 
vertebral body height loss, and/or who have mild to moderate 
retropulsion of the posterior endplate. Several commenters further 
noted that in their clinical experience the SpineJack[supreg] system 
requires less cement for stabilization, leading to less risk of cement 
leakage.
    Many commenters believed that the SpineJack[supreg] system will 
reduce ALFs based on their clinical experience, or on review of the 
SAKOS study. A few commenters believed that the SpineJack[supreg] 
system allows patients to have increased posture correction and 
locomotion, and that, combined with the reduced ALFs, will lead to a 
higher quality of life in the future. Many commenters asserted that the 
SpineJack[supreg] system is their preferred treatment option generally.
    One commenter believed that the literature regarding vertebral 
augmentation techniques is inconsistent because of multiple guidelines 
from various societies that are inconsistent with each other. The 
commenter believed this disagreement leads to variation in the 
methodology of research papers to evaluate this technique. The 
commenter asserted that as a result, the large Cochrane and ASBMR 
reviews are conglomerations of heterogeneous data which will invariably 
show no statistical difference.
    A few commenters believed that conservative medical management as 
an option for patients with VCFs is no longer an accepted standard of 
care. One commenter stated the ASBMR view is inconsistent with multiple 
Medicare Administrative Contractor local coverage determinations, which 
indicate that earlier intervention in some patients is supported by the 
literature.
    A few commenters believed that the SAKOS study was well designed 
despite the lack of a control arm, and supported its claims, including 
with regard to ALFs, VB height, and superior pain relief. One commenter 
believed that BKP was the correct comparator for the SAKOS study as the 
Kiva[supreg] system was unable to demonstrate improvement over BKP in a 
separate study.
    Response: We appreciate all the comments received related to the 
SpineJack[supreg] system, and we have taken them into consideration in 
making our determination, including the applicant's submission of 
additional information to address the concerns presented in the 
proposed rule and the comments expressing concerns with the design and 
results of the SAKOS study.
    After consideration of the public comments received, we believe 
that commenters have addressed our concerns regarding whether the 
SpineJack[supreg] system meets the substantial clinical improvement 
criterion and that the SpineJack[supreg] system represents a 
substantial clinical improvement over existing technologies based on 
the data received from commenters. The data provided from the 
commenters with clinical experience with vertebral augmentation 
procedures and the SpineJack[supreg] system which included improved 
pain, VB height restoration and ALF outcomes for patients with 
osteoporotic VCFs when compared with existing treatments demonstrates 
substantial clinical improvement.
    After consideration of the public comments we received, we have 
determined that the SpineJack[supreg] system meets all of the criteria 
for approval for new technology add-on payments. Therefore, we are 
approving new technology add-on payments for the SpineJack[supreg] 
system for FY 2021. Cases involving the use of the SpineJack[supreg] 
system that are eligible for new technology add-on payments will be 
identified by ICD-10-PCS procedure codes XNU0356 (Supplement lumbar 
vertebra with mechanically expandable (paired) synthetic substitute, 
percutaneous approach, new technology group 6) and XNU4356 (Supplement 
thoracic vertebra with mechanically expandable (paired) synthetic 
substitute, percutaneous approach, new technology group 6).
    In its application, the applicant estimated that the average cost 
of the SpineJack[supreg] system is $5,622.64 per patient. Under Sec.  
412.88(a)(2), we limit

[[Page 58701]]

new technology add-on payments to the lesser of 65 percent of the 
average cost of the technology, or 65 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, the maximum new 
technology add-on payment for a case involving the use of the 
SpineJack[supreg] system is $3,654.72 for FY 2021.
j. WavelinQTM (4F) EndoAVF System
    Becton Dickinson & Company (BD) submitted an application for new 
technology add-on payments for the WavelinQTM (4F) EndoAVF 
System for FY 2021. According to the applicant, the predicate device, 
the WavelinQTM (6F) EndoAVF System (formerly named the 
everlinQ endoAVF system) received FDA marketing authorization on June 
22, 2018 for the indication of the creation of an arteriovenous fistula 
(AVF) using concomitant ulnar artery and ulnar vein or concomitant 
radial artery and radial vein in patients with minimum artery and vein 
diameters of 2.0 mm at the fistula creation site who have chronic 
kidney disease and need hemodialysis. On February 6, 2019 the FDA 
cleared the WavelinQTM (4F) EndoAVF System via its 510(k) 
(premarket notification). The WavelinQTM 4F EndoAVF System 
is indicated for the creation of an AVF using concomitant ulnar artery 
and ulnar vein or concomitant radial artery and radial vein in patients 
with minimum artery and vein diameters of 2.0 mm at the fistula 
creation site who have chronic kidney disease and need hemodialysis. It 
is our understanding that the WavelinQTM (4F) EndoAVF System 
replaces the WavelinQTM (6F) EndoAVF System. The applicant 
noted that it is applying for new technology add-on payments for the 
WavelinQTM (4F) EndoAVF System and not the 
WavelinQTM (6F) EndoAVF System. The applicant also noted 
that the WavelinQTM (4F) EndoAVF System has been cleared to 
treat both the radial arteries and veins and the ulnar arteries and 
veins. Per the applicant, the only difference between the two 
technologies and their respective approvals is the size of the 
catheters (6F vs. 4F) and the expanded indication to treat the radial 
arteries and veins for the WavelinQTM (4F) EndoAVF System.
    Hemodialysis, a form of treatment for kidney failure patients, is a 
procedure that removes wastes, salts, and fluid from a patient's blood 
when the kidneys can no longer perform these functions. To receive 
dialysis, patients require a vascular access, such as an arteriovenous 
(AV) fistula, to connect to the dialysis machine.
    The applicant asserted that Endovascular AV fistula creation with 
the WavelinQTM (4F) EndoAVF System is achieved using 
flexible magnetic-guided arterial and venous catheters that utilize 
radiofrequency energy and includes vascular embolization of the 
brachial vein, fistulogram, angiography (to fluoroscopically guide 
placement of the arterial magnetic catheter), and venography (to 
fluoroscopically guide placement and alignment of the venous magnetic 
radiofrequency [RF] catheter), ultrasound, and final fistulogram to 
document AV fistula creation).
    The applicant asserted that the following ICD-10-CM diagnosis codes 
are applicable to the WavelinQTM (4F) EndoAVF System: N18.4 
(Chronic kidney disease, stage 4), N18.5 (Chronic kidney disease, stage 
5), and N18.6 (End stage renal disease). The applicant also asserted 
that the following ICD-10-PCS procedure codes identify cases involving 
use of the WavelinQTM (4F) EndoAVF System: 03193ZF (Bypass 
right ulnar artery to lower arm vein, percutaneous approach), 031A3ZF 
(Bypass left ulnar artery to lower arm vein, percutaneous approach), 
031B3ZF (Bypass right radial artery to lower arm vein, percutaneous 
approach), and 031C3ZF (Bypass left radial artery to lower arm vein, 
percutaneous approach).
    As stated previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and, therefore, would not be 
considered ``new'' for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, the 
applicant asserted that the WavelinQTM (4F) EndoAVF System 
uses a different mechanism of action than any commercially available 
technology on the market for hemodialysis fistula creation. The 
applicant stated the WavelinQTM (4F) EndoAVF System is not 
an open surgical approach, and that this is the first differentiating 
factor from previous methods used to create an arteriovenous fistula. 
The applicant also explained that WavelinQTM (4F) EndoAVF 
System consists of flexible magnetic-guided arterial and venous 
catheters that utilize radiofrequency energy to create a communicating 
channel between the arterial and venous system via an endovascular 
approach. Additionally, the applicant explained that as part of the 
procedure, the WavelinQTM (4F) EndoAVF System also requires 
vascular embolization of the brachial vein, fistulogram, angiography, 
venography, and ultrasound, as discussed above. The applicant asserted 
that in summary, the endovascular creation of an AV fistula using 
radiofrequency energy delivered through magnetic-guided catheters is a 
unique mechanism of action.
    The applicant indicated the Ellipsys[supreg] Vascular Access System 
(Avenu Medical) has recently been granted marketing authorization by 
the FDA (January 25, 2019). The applicant asserted that while 
Ellipsys[supreg] is also an endovascular method of creating an AV 
fistula, there are several important points of differentiation between 
the two devices and their corresponding procedures. According to the 
applicant, there are different mechanisms of action, procedural 
processes, and anatomical locations of fistula creation as follows:
     Fistula creation: WavelinQTM utilizes 
radiofrequency ablation; Ellipsys[supreg] utilizes thermal resistance 
(heat).
     Embolization: WavelinQTM requires coil 
embolization of the brachial vein at the time of EndoAVF creation; 
Ellipsys[supreg] does not.
     Guidance: WavelinQTM utilizes magnetic 
catheters to guide and align the location of the EndoAVF creation site 
and Ellipsys[supreg] does not have a mechanism for aligning the fistula 
creation site.
     Fistula location: WavelinQTM offers two options 
for fistula creation compared to Ellipsys[supreg]: First, the 
WavelinQTM can create a fistula between the concomitant 
ulnar artery and ulnar vein. According to the applicant, this is an 
unused vascular bed for traditional surgical fistula options which does 
not interfere with necessary blood flow for hemodialysis purposes, thus 
preserving all future surgical AV fistula options such as 
radiocephalic, brachiocephalic, and brachiobasilic fistulas. Second, 
the WavelinQTM can create a fistula between the concomitant 
radial artery and radial vein. This method eliminates the ability to 
perform a future radiocephalic fistula. In comparison, the 
Ellipsys[supreg] device is only able to create a fistula from the 
proximal radial artery to the perforating vein, thus eliminating any 
future use of a radiocephalic fistula.
     Access methods: WavelinQTM accesses both the 
arterial system and venous system and Ellipsys[supreg] utilizes only 
the venous system.
     Imaging: There are different methods of visualization in 
that WavelinQTM uses including ultrasound and fluoroscopy, 
whereas Ellipsys[supreg] only uses ultrasound.
     Subsequent procedures: Ellipsys[supreg] requires a 
secondary balloon

[[Page 58702]]

angioplasty procedure at a later date, while WavelinQTM does 
not.
     Procedure Times and Complexity: EndoAVF creation with 
WavelinQTM is an 85-minute procedure, whereas EndoAVF 
creation with Ellipsys[supreg] is a 23-minute procedure, which the 
applicant states represents a marked difference in procedure 
complexities.
    With regard to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant asserted that its MS-
DRG analysis showed that cases using the WavelinQTM (4F) 
EndoAVF System will most often be mapped to MS-DRG 264 (Other 
Circulatory System O.R. Procedures), per the assignment of recently 
created ICD-10-PCS codes for endovascular fistula creation. The 
applicant anticipated that cases using the Ellipsys[supreg] Vascular 
Access System will also be frequently mapped to this MS-DRG as MS-DRG 
264 is the most common MS-DRG for patients with surgical AV fistula 
creations. As such, the applicant does not see a difference in MS-DRG 
assignment between WavelinQTM (4F) EndoAVF procedures, other 
endovascular AVF systems, and traditional surgical AV fistula creation 
procedures.
    With regard to the third criterion, whether the use of the new 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population when compared to an 
existing technology, the applicant stated the WavelinQTM 
(4F) EndoAVF System is indicated for the creation of an arteriovenous 
fistula using concomitant ulnar artery and ulnar vein or concomitant 
radial artery and radial vein in patients with minimum artery and vein 
diameters of 2.0 mm at the fistula creation site who have chronic 
kidney disease and need hemodialysis. The applicant further explained 
that the diagnoses associated with this treatment and the patient 
population are similar to those treated by existing procedures and 
technologies that are commercially available, such as surgical AV 
fistula creation and the Ellipsys[supreg] Vascular Access System.
    As stated above, the WavelinQTM (6F) EndoAVF System 
received FDA approval on June 22, 2018 for use in the ulnar arteries 
and veins. The WavelinQTM (4F) EndoAVF System is an expanded 
access of the WavelinQTM (6F) EndoAVF System and received 
FDA clearance on February 6, 2019 for use in the radial arteries and 
veins as well as the ulnar arteries and veins. In the proposed rule, we 
stated that it seems that for purposes of use in the ulnar arteries and 
veins, the WavelinQTM (4F) EndoAVF System would be 
considered substantially similar to the WavelinQTM (6F) 
EndoAVF System as there are only minor differences (the size of the 
catheters) between the two devices as explained previously. As a 
result, we stated that we believe the newness period for the use in the 
ulnar arteries and veins would begin with the FDA approval of the 
WavelinQTM (6F) EndoAVF System (formerly named the everlinQ 
endoAVF system), which occurred on June 22, 2018, rather than the FDA 
clearance of the WavelinQTM (4F) EndoAVF System, which 
occurred on February 6, 2019. Finally, because the 
WavelinQTM (4F) EndoAVF System received FDA clearance on 
February 6, 2019 for use in the radial arteries and veins, we stated 
that it seems the newness period for the use of the device in the 
radial arteries and veins would begin on February 6, 2019.
    We also noted that as summarized previously, the applicant provided 
an explanation for why it believes the WavelinQTM (4F) 
EndoAVF System is not substantially similar to the Ellipsys[supreg], 
specifically with regard to mechanism of action. In the proposed rule 
we welcomed additional comments on whether the WavelinQTM 
(4F) EndoAVF System and the Ellipsys[supreg] are substantially similar 
to each other. We also invited public comments on whether the 
WavelinQTM (4F) EndoAVF System is substantially similar to 
existing technologies and whether it meets the newness criterion.
    Comment: The applicant submitted public comments. The applicant 
stated WavelinQTM uses an entirely different mechanism of 
action than any commercially available product or surgical technique.
    The applicant also stated that the predicate device, the 
WavelinQTM (6F) EndoAVF System received FDA approval on June 
22, 2018 for AVFs of the ulnar arteries and ulnar veins. The applicant 
also agreed that the newness period for the WavelinQTM 4F 
EndoAVF System for the radial arteries and radial veins would begin on 
February 6, 2019.
    Another commenter agreed that the creation of endovascular AVFs 
clearly differs in method of action from surgical AVF creation. 
However, the commenter stated that while WavelinQTM and 
Ellipsys[supreg] exhibit differences from each other in their technical 
characteristics, they do not have fundamentally different mechanisms of 
action. The commenter further stated that the main differences between 
the two endovascular systems include the use of two catheters with 
WavelinQTM and one with Ellipsys[supreg] and the technical 
characteristics of the catheters, differences in the fistula sites, 
differences in imaging requirements, and in the source of energy. The 
commenter added that key similarities include the percutaneous ``side-
to-side'' technique, treatment of the same population of patients, and 
the requirement of additional procedures for blood flow control such as 
coil embolization with WavelinQTM and angioplasty with 
Ellipsys[supreg]. They further stated the two technologies could be 
best described as having a substantially similar mechanism of action 
and should be considered jointly for purposes of new technology add-on 
payments eligibility.
    Response: We thank the applicant and commenter for their comments. 
After consideration of the comments received, we agree with the 
applicant that the WavelinQTM uses a unique mechanism of 
action with its dual catheter access of both venous and arterial 
systems, magnetic linking of the vessels, and additional fistula site, 
which differs from that of other commercially available devices. 
Therefore, we believe the WavelinQTM meets the newness 
criterion.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that the technology meets the cost 
criterion. The applicant searched the FY 2018 MedPAR database for 
claims reporting an ICD-10-CM diagnosis code of N18.4, N18.5, or N18.6 
to identify cases that may be eligible for the WavelinQTM 
(4F) EndoAVF System. The applicant limited their analysis to the 
following five most common MS-DRGs that the cases mapped to, which 
accounted for 66 percent of all cases: MS-DRG 252 (Other Vascular 
Procedures with MCC), 264 (Other Circulatory System O.R. Procedures), 
673 (Other Kidney and Urinary Tract Procedures with MCC), 674 (Other 
Kidney and Urinary Tract Procedures with CC), and 981 (Extensive O.R. 
Procedure Unrelated to Principal Diagnosis with MCC). This resulted in 
2,472 cases across these five MS-DRGs.
    The applicant first removed supply charges with a revenue code of 
027X and also removed charges for the operating room. Then the 
applicant standardized the charges. The applicant noted that in order 
to provide a conservative estimate it did not inflate the charges. The 
applicant then added charges for the new technology as well as 
procedure related charges which included operating room charges.
    Based on the FY 2020 IPPS/LTCH PPS final rule correction notice 
data file thresholds, the average case-weighted threshold amount was 
$83,372. In the

[[Page 58703]]

applicant's analysis, the final inflated average case-weighted 
standardized charge per case was $121,749. Because the final inflated 
average case-weighted standardized charge per case exceeds the average 
case-weighted threshold amount, the applicant maintained that the 
technology meets the cost criterion.
    We invited public comments on whether the WavelinQTM 
(4F) EndoAVF System meets the cost criterion.
    Comment: The applicant commented that a conservative approach was 
taken when calculating WavelinQTM procedure costs. For 
example, all supply and operating room charges were backed out and 
inflation was not accounted for in the final calculation. The applicant 
stated that analysis clearly demonstrates WavelinQTM (4F) 
EndoAVF System meets the new technology add-on payments cost criterion.
    Response: We appreciate the applicant's comments concerning the 
cost criterion. After consideration of the public comments we received 
and based on the cost analysis as described previously, we agree that 
the WavelinQTM (4F) EndoAVF System meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that the WavelinQTM (4F) EndoAVF System 
represents a substantial clinical improvement over existing 
technologies because it offers a treatment option for a patient 
population unresponsive to or ineligible for currently available 
treatments. The applicant also stated that WavelinQTM (4F) 
EndoAVF System represents a substantial clinical improvement over 
existing technologies because the WavelinQTM (4F) EndoAVF 
System significantly improves clinical outcomes for patients requiring 
hemodialysis in comparison to arteriovenous surgical fistula creation 
and the Ellipsys[supreg] Vascular Access System; offers higher patient 
satisfaction; provides a beneficial resolution to disease process 
treatment; and provides additional vascular access options for 
dialysis.
    Surgical arteriovenous fistulae are the recommended type of 
vascular access for hemodialysis.\354\ Despite initiatives to increase 
AVF use, fistulas are still underutilized with only 17 percent of 
patients initiating dialysis with an AVF and 67 percent of patients 
still using a central venous catheter (CVC) at 3 months after dialysis 
initiation.\355\ Failure rates (failure to mature and become usable) 
for surgical AVF range from 20-60 
percent.356 357 358 359 360 AVFs also take a long time to 
mature--approximately 132 days.\361\ Furthermore, >83 percent of AVF 
patients need at least one intervention in the first year,\362\ 
typically receiving 1.5 to 3.3 additional interventions per year to 
mature and maintain patency.363 364 365 366 367
---------------------------------------------------------------------------

    \354\ National Kidney Foundation Disease Outcomes Quality 
Initiative (NKF-KDOQI). ``KDOQI Clinical practice guideline for 
vascular access, American Journal of Kidney Diseases, 2006, 48 
(suppl 1), S176-S276.
    \355\ USRDS Annual Report, 2017.
    \356\ Asif, et al., ``Early arteriovenous fistula failure: A 
logical proposal for when and how to intervene,'' Clinical Journal 
of American Society of Nephrology, 2006, 1: pp. 332-339.
    \357\ Dember, et al., ``Effect of clopidogrel on early failure 
of arteriovenous fistulas for hemodialysis: A randomized controlled 
trial,'' JAMA, 2008, 299, pp. 2164-2171.
    \358\ Al-Jaishi, et al., ``Patency rates of the arteriovenous 
fistula for hemodialysis: A systematic review and meta-analysis,'' 
American Journal of Kidney Diseases, 2014, 63, pp. 464-478.
    \359\ USRDS Annual Report, 2017.
    \360\ Thamer, et al., ``Medicare costs associated with 
arteriovenous fistulas,'' American Journal of Kidney Diseases, 
72(1), pp. 10-8. Published online March 28, 2018.
    \361\ USRDS Annual Report, 2017.
    \362\ Thamer, et al., ``Medicare costs associated with 
arteriovenous fistulas,'' American Journal of Kidney Diseases, 
72(1), pp. 10-18. Published online March 28, 2018.
    \363\ Lee, et al., ``Tradeoffs in vascular access selection in 
elderly patients initiating hemodialysis with a catheter,'' American 
Journal of Kidney Diseases, 2018.
    \364\ Yang, et al., ``Comparison of post-creation procedures and 
costs between surgical and an endovascular approach to arteriovenous 
fistula creation,'' The Journal of Vascular Access, 2017, 18, pp. 8-
14.
    \365\ Arnold, et al., ``Evaluation of hemodialysis arteriovenous 
fistula interventions and associated costs: Comparison between 
surgical and endovascular AV fistula,'' Journal of Vascular and 
Interventional Radiology 2018, pp. 1-9.
    \366\ Buickians, et al., ``The natural history of autologous 
fistulas as first-time dialysis access in the KDOQI era,'' Journal 
of Vascular Surgery,'' 2008, 47, pp. 415-421, discussion 20-1.
    \367\ Falk, et al., ``Maintenance and salvage of arteriovenous 
fistulas,'' Journal of Vascular Interventional Radiology, 2006, 17, 
pp. 807-813.
---------------------------------------------------------------------------

    According to the applicant, in contrast, results of AVFs created 
using the WavelinQTM 4F EndoAVF System have shown that 
endovascular AVFs (endoAVFs) have better results than surgical AVF. The 
applicant stated that these results include higher patency with fewer 
post-creation interventions and higher fistula maturation as compared 
to the surgical AVF results reported in the literature. For example, a 
recent meta-analysis included four clinical studies with pooled 
efficacy and safety data from 157 patients using the 
WavelinQTM EndoAVF System.\368\ According to the applicant, 
the results include high procedure success of 96.8 percent and higher 
cannulation success than surgical AVF--82.4 percent of patients were 
successfully used for dialysis by 6 months. Also, the applicant 
asserted that the results include higher patency than surgical AVF, 
demonstrated by 74.8 percent primary patency (unobstruction without 
additional intervention) at 12 months, 79.0 percent secondary patency 
(unobstruction) at 12 months, and 98.12 percent functional patency 
(durability post-cannulation) at 12 months. The FLEX study was a 
prospective, single arm safety and feasibility study (using the 
WavelinQTM (6F) EndoAVF System) that reported a procedure 
success rate of 97 percent and that 96 percent of endoAVFs were used 
for dialysis and remained patent after 6 months.\369\
---------------------------------------------------------------------------

    \368\ BD WavelinQ Instructions for Use, BAW1469200 Rev. 0 02/19.
    \369\ Rajan, et al., ``Percutaneous creation of an arteriovenous 
fistula for hemodialysis access,'' Journal of Vascular Intervenous 
Radiology, 2015, 26, pp. 484-490.
---------------------------------------------------------------------------

    The applicant indicated that a second study, the Novel Endovascular 
Access Trial (NEAT), which was a statistically powered, prospective, 
single-arm, multi-center study of 60 evaluable patients and 20 roll-ins 
using the WavelinQTM (6F) EndoAVF System, confirmed previous 
results with high procedure and cannulation success of 98 percent and 
67 percent (within 12 months), respectively. Additionally, the study 
demonstrated a low thrombosis rate of 10.5 percent, low intervention 
rate of 0.46 per patient-year, and high 12-month primary and secondary 
patency of 69 percent and 84 percent, respectively.\370\
---------------------------------------------------------------------------

    \370\ Lok, et al., ``Endovascular proximal forearm arteriovenous 
fistula for hemodialysis access: Results of the prospective, 
multicenter novel endovascular access trial (NEAT),'' American 
Journal of Kidney Diseases, 2017, 70, pp. 486-497.
---------------------------------------------------------------------------

    The applicant stated that additional analyses comparing endoAVF 
(using the WavelinQTM (6F) EndoAVF System) to surgical AVF 
showed that patients with an endoAVF had fewer secondary interventions 
in the first year as compared to patients with a surgical AVF, 
resulting in overall cost savings to payers. According to the 
applicant, 67 percent of endoAVF patients were free from intervention 
after 1 year compared to only 18 percent of surgical AVF 
patients.371 372
---------------------------------------------------------------------------

    \371\ Yang, et al., ``Comparison of post-creation procedures and 
costs between surgical and an endovascular approach to arteriovenous 
fistula creation,'' The Journal of Vascular Access, 2017, 18, pp. 8-
14.
    \372\ Arnold, et al., ``Evaluation of hemodialysis arteriovenous 
fistula interventions and associated costs: Comparison between 
surgical and endovascular AV fistula,'' Journal of Vascular 
Intervenous Radiology, 2018, pp. 1-9.
---------------------------------------------------------------------------

    The applicant also included a third study, the EASE study, which 
was a single-center, single-arm prospective study of 32 patients that 
evaluated the

[[Page 58704]]

safety and efficacy of the WavelinQTM (4F) EndoAVF System. 
The applicant stated that results from EASE were consistent with 
previous studies, demonstrating 100 percent procedure success with a 
low adverse event rate, 1/32 (3.1 percent). The lower adverse event 
rate was attributed to arterial access from the wrist, which was 
utilized in 79 percent of patients. We note that arterial wrist access 
is not approved in the U.S. 6-month primary patency was 83 percent. At 
6 months, 86 percent of patients were successfully cannulated for 
dialysis using the WavelinQTM (4F) EndoAVF System.\373\
---------------------------------------------------------------------------

    \373\ Berland, et al., Endovascular Creation of an Arteriovenous 
Fistula with a Next Generation 4Fr Device Design for Hemodialysis 
Access: Clinical Experience from the EASE Study.
---------------------------------------------------------------------------

    Additionally, the applicant noted that a fourth study, the EndoAVF 
EU Study (using the WavelinQTM (4F) EndoAVF System), is 
still enrolling. Outcomes for the first 32 patients were tabulated and 
included in the meta-analysis and showed consistent results to previous 
studies.\374\
---------------------------------------------------------------------------

    \374\ Rajan, et al., ``Percutaneous creation of an arteriovenous 
fistula for hemodialysis access,'' Journal of Vascular Intervenous 
Radiology, 2015, 26, pp. 484-490.
---------------------------------------------------------------------------

    The applicant asserted the FLEX, NEAT, EASE, and EndoAVF EU Study 
support that the WavelinQTM (4F) EndoAVF System results in 
much lower maintenance and morbidity than the traditional surgical AVF 
in end-stage renal failure patients, with intervention rates for 
endoAVF ranging from 0.21-0.6 per patient-year and fistula maturation 
rates up to 86 percent at 6 months.375 376 377
---------------------------------------------------------------------------

    \375\ Lee, et al., ``Tradeoffs in vascular access selection in 
elderly patients initiating hemodialysis with a catheter,'' American 
Journal of Kidney Diseases, 2018.
    \376\ Harms, et al., ``Outcomes of arteriovenous fistulas and 
grafts with or without intervention prior to successful use,'' 
Journal of Vascular Surgery,'' 2016, 64(1), pp. 155-162.
    \377\ Berland et al., Endovascular Creation of an Arteriovenous 
Fistula with a Next Generation 4Fr Device Design for Hemodialysis 
Access: Clinical Experience from the EASE Study.
---------------------------------------------------------------------------

    The applicant also asserted the reduction in interventions with the 
WavelinQTM (4F) EndoAVF System is a result of the unique 
procedure that minimizes vessel trauma. According to the applicant, the 
system creates a fistula by using radiofrequency to vaporize tissue 
between the artery and concomitant vein with minimal vessel trauma or 
manipulation of the vessels, potentially lessening the stimulus for 
negative remodeling that leads to frequent interventions.
    The applicant stated the WavelinQTM (4F) EndoAVF System 
offers higher patient satisfaction and beneficial resolution to disease 
process treatment compared to surgical AVF. According to the applicant, 
the team Lok, C et al. was interested in patient acceptance of an 
endoAVF (based on the WavelinQTM (6F) EndoAVF System) 
because up to 30 percent of patients refuse a surgically created AV 
fistula according to the reported literature.378 379 
Therefore, the team collected data on patient satisfaction using a 
validated patient questionnaire to learn more about the patient 
experience with this new technology using responses from patients in 
the NEAT trial. The applicant asserted that results indicate patients 
are very satisfied with their endoAVF and would not change to another 
type of access.
---------------------------------------------------------------------------

    \378\ Lok, C. et al., ``Patient perceptions of a new non-
surgical approach to arteriovenous fistula creation and use for 
hemodialysis,'' Nephrology Dialysis Transplantation, 2017, 32 
(Supplement 3) iii329-iii343.
    \379\ Casey, et al., ``Patients' perspectives on hemodialysis 
vascular access: A systematic review of qualitative studies,'' 
American Journal of Kidney Diseases, 2014, vol. 64, pp. 937-953.
---------------------------------------------------------------------------

    The applicant explained some of the clinical and patient benefits 
of the WavelinQTM (4F) EndoAVF System. The applicant 
asserts, for example, that endoAVF allows the patient to avoid open 
surgery, scarring, and arm disfigurement, which is important to many 
patients. The applicant further asserted that the endoAVF procedure 
improves the process of administering hemodialysis as the endoAVF 
matures faster compared to a surgical AVF, allowing the patient to more 
quickly transition away from a central venous catheter, which the 
applicant stated has a high rate of complication including infection. 
In addition, the applicant stated that WavelinQTM (4F) 
EndoAVF requires less follow-on maintenance such that patients are not 
in and out of the hospital for additional interventions to maintain the 
primary patency of the fistula.380 381 The applicant stated 
that this has the potential to increase patient acceptance of an AVF as 
surgical fatigue is cited as the primary reason patients elect a 
permanent CVC over a surgical AVF.\382\ The applicant also suggested 
the WavelinQTM (4F) EndoAVF System provides additional 
vascular access options for dialysis in comparison to surgical AVF and 
the Ellipsys[supreg] Vascular Access System.383 384
---------------------------------------------------------------------------

    \380\ Yang, et al., ``Comparison of post-creation procedures and 
costs between surgical and an endovascular approach to arteriovenous 
fistula creation,'' The Journal of Vascular Access, 2017, 18, pp. 8-
14.
    \381\ Arnold, et al., ``Evaluation of hemodialysis arteriovenous 
fistula interventions and associated costs: Comparison between 
surgical and endovascular AV fistula,'' Journal of Vascular 
Intervenous Radiology, 2018, pp. 1-9.
    \382\ Chaudhry, et al., ``Seeing eye to eye: The key to reducing 
catheter use,'' The Journal of Vascular Access, 2011, 12, pp. 120-
126.
    \383\ BD WavelinQ Instructions for Use, BAW1469200 Rev. 0 02/19.
    \384\ Avenue Medical Ellypsis Instructions for Use, LB015-002 
Rev B, Released 11/2018.
---------------------------------------------------------------------------

    The applicant asserted the WavelinQTM (4F) EndoAVF 
System creates additional options for establishing arteriovenous 
access, that is another anatomic site for creating a fistula that 
neither traditional surgical AVFs nor the Ellipsys[supreg] Vascular 
Access System can offer. According to the applicant, patients are given 
an extra location in the mid-arm for a fistula because the 
WavelinQTM (4F) EndoAVF System uses vessels deep in the arm 
that are not used in surgical fistula creation and are only accessible 
endovascularly via the unique mechanism of WavelinQTM 
consisting of action using magnetically-guided arterial and venous 
catheters. The applicant suggested this additional access creation site 
extends the potential time a patient can undergo dialysis with an 
autogenous fistula before exhausting vessels and requiring an AV graft 
or CVC.
    The applicant asserted the WavelinQTM (4F) EndoAVF 
System is indicated for the creation of an arteriovenous fistula using 
concomitant ulnar artery and ulnar vein or concomitant radial artery 
and radial vein in patients with minimum artery and vein diameters of 
2.0 mm at the fistula creation site who have chronic kidney disease and 
need hemodialysis. According to the applicant, the ulnar artery to 
ulnar vein fistula is unique to the WavelinQTM (4F) EndoAVF 
System in comparison to both traditional surgical fistula creation and 
the Ellipsys[supreg] Vascular Access System. The applicant stated that 
it enables the preservation of all future surgical AVF options such as 
a radiocephalic, brachiocephalic and brachiobasilic fistula as it 
utilizes an entirely different vascular bed for both arterial and 
venous blood flow.
    With regard to the information previously summarized, we stated in 
the proposed rule that we are concerned that there is no study directly 
comparing WavelinQTM (4F) EndoAVF System to surgical AVF or 
Ellipsys[supreg] Vascular Access System; rather, the studies provided 
compare historical data for surgical AVF to data on the results of AVF 
created using both the WavelinQTM EndoAVF (6F) and (4F) 
systems. We stated that we are also concerned as to whether the data 
demonstrates if the WavelinQTM (4F) EndoAVF System 
significantly improves clinical outcomes for patients requiring

[[Page 58705]]

hemodialysis in comparison to surgical AVF and the Ellipsys[supreg] 
Vascular Access System due to the limited number of participants in the 
clinical trials, and whether the results are generalizable to the 
entire Medicare population due to the limited number of participants.
    We invited public comments on whether the WavelinQTM 
(4F) EndoAVF System meets the substantial clinical improvement 
criterion.
    Comment: The applicant submitted public comments regarding CMS' 
concerns. The applicant asserted that the peer-reviewed, published data 
from controlled clinical studies demonstrates that the 
WavelinQTM (4F) EndoAVF system offers multiple clinical 
advantages over surgical AVFs for patients in end-stage renal disease 
who require hemodialysis via an arteriovenous fistula.\385\
---------------------------------------------------------------------------

    \385\ Berland Presentation NTAP Town Hall on December 16, 2019.
---------------------------------------------------------------------------

    The applicant also addressed a question regarding available 
randomized, controlled studies comparing the WavelinQTM (4F) 
EndoAVF System to surgical AVFs. The applicant asserted, that as stated 
during the Town Hall, while there are no current head-to-head RCTs 
comparing the two fistula types, there are two published retrospective 
studies that utilize a Propensity Score Matching Analysis to compare 
WavelinQTM data from the NEAT study with two separate data 
sources for AVF patients.
    The applicant stated that the first study was conducted by Yang et 
al. and was published in the Journal of Vascular Access in 2017. This 
study compared AVF post-creation procedures and their associated costs 
for patients with surgical AV fistulas to patients with fistulas 
created using WavelinQTM. A random 5 percent sample from 
Medicare's Standard Analytic Files was extracted and used in comparison 
to patients from the NEAT study. Patients were matched 1:1 using 
propensity score matching of baseline demographic and clinical 
characteristics. Patient follow up data from inpatient, outpatient, and 
physician claims were used to identify post-creation procedures and to 
estimate average procedure costs. Of 3,764 Medicare surgical AVF 
patients, 60 successfully matched 1:1 with patients from the NEAT 
study. Key results were as follows:
     Post-creation procedural event rate was 3.43 per patient 
year and 0.59 per patient-year (p<0.05) for surgical and 
WavelinQTM fistulas, respectively.
     Average first year post-AVF creation costs per patient-
year for patients who received a WavelinQTM fistula were 
$11,240 USD lower than costs for a surgical fistula.
    The second study was conducted by Arnold et al. and was published 
in the Journal of Vascular Interventional Radiology in 2018. This study 
compared the rate of AVF interventions in both incident and prevalent 
end-stage kidney disease patients, their associated costs, and 
intervention-free survival between patients with surgically created 
AVFs vs. patients with an endoAVF created using WavelinQTM. 
Data from the USRDS was abstracted and matched 1:1 with patients from 
the NEAT study using propensity score matching. Post fistula creation 
event rates, intervention-free survival, and costs were compared 
between patients with surgically created fistulas and patients with a 
WavelinQTM fistula. The applicant stated that key results 
were as follows:
     In incident patients, post-creation event rates were 7.22 
per patient-year and 0.74 per patient-year (p<0.0001) for surgical and 
WavelinQTM fistulas, respectively.
     In prevalent patients, post-creation event rates were 4.10 
per patient-year and 0.46 per patient-year (p<0.0001) for surgical and 
WavelinQTM fistulas, respectively.
     Expenditures for post-creation interventions were $16,494 
and $13,389 less in incident and prevalent patients with a 
WavelinQTM fistula, respectively.
    The applicant also provided written comments addressing the 
availability of data from the EU Post-Market Study. The applicant 
stated that while there are no plans at this time to publish the EU 
Post-Market Study in a medical journal, the data have been made 
available to the public via WavelinQTM's Instructions for 
Use (IFU). The applicant also provided a PDF copy of the most recent 
IFU which contained a summary of the study safety and effectiveness 
measures.
    The applicant also explained the peer-reviewed, published data from 
controlled clinical studies. The applicant stated that the studies 
demonstrate that the WavelinQTM 4F EndoAVF System offers 
multiple clinical advantages over surgical AVFs for patients suffering 
from end-stage renal disease who require hemodialysis via an 
arteriovenous fistula.\386\
---------------------------------------------------------------------------

    \386\ During the NTAP Town Hall on December 16, 2019, Dr. Todd 
Berland from NYU Langone Medical Center presented evidence that 
clearly showed WavelinQ provided a substantial clinical improvement 
over surgical AVF creation. See You Tube video on CMS.gov.
---------------------------------------------------------------------------

    The applicant included a JVA 2020 publication to address concerns 
raised by CMS in the proposed rule that there is no study directly 
comparing WavelinQTM 4F EndoAVF System to surgical AVF. The 
applicant provided the recent Inston et al. publication,\387\ which 
outlines a single center study that compared 30 WavelinQTM 
4F EndoAVF procedures with a matched cohort of 40 surgical AVFs. The 
applicant further pointed out that prospective data was collected on 
both cohorts from 2016-2019 and analyzed to evaluate outcomes. The 
applicant provided the following highlights from the publication:
---------------------------------------------------------------------------

    \387\ Inston, N., et al. WavelinQ created arteriovenous fistulas 
v, surgical radiocephalic arteriovenous fistulas? A single-centre 
observational study. The Journal of Vascular Access. 2020 
Jan;21(1):7-18 https://doi.org/10.1177/1129729819897168.
---------------------------------------------------------------------------

     Outcomes from Inston et al. demonstrated that the 
WavelinQTM group provided better results as compared to the 
surgical radiocephalic AVF (sAVF) group in every major clinical 
category:

[cir] Procedural success rate, time to cannulation, primary and 
secondary patency
[cir] These metrics were used to evaluate efficacy in the other major 
WavelinQTM publications such as EASE, EASE-2, FLEX, NEAT and 
the EU Post-Market Study \388\
---------------------------------------------------------------------------

    \388\ WavelinQTM EndoAVF System Instructions for Use, 
BAW1469200 Rev. 0 02/19.

     Procedural success was 96.7% in WavelinQTM 
group, and 92.6% in sAVF group
     Mean time to cannulation was 130 days (86) in 
the WavelinQTM group, and 141 days (118) in the 
sAVF group
     Primary patency at 6 and 12 months:

[cir] WavelinQTM group was 65.5% and 56.5% respectively
[cir] sAVF group was 53.4% and 44%, respectively (p = 0.69 and 0.63)

     Mean primary patency was significantly better for the 
WavelinQTM group (362  240 days) vs. the sAVF 
group (235  210 days) (p <0.05)
     Secondary patency at 6 and 12 months:

[cir] WavelinQTM group at 6 and 12 months was 75.8% and 
69.5%, respectively
[cir] sAVF group was lower at 66.7% and 57.6% at 6 and 12 months, 
respectively

     The ages in both groups in the study were also generally 
consistent with other published literature: 57  15 in the 
WavelinQTM group, and 54  17 in the sAVF group.
    The applicant stated that patients that received the 
WavelinQTM EndoAVF demonstrated superior outcomes when 
compared to a contemporaneous group

[[Page 58706]]

of patients that received surgical AVFs. The applicant asserted these 
data not only support that the WavelinQTM 4F EndoAVF System 
is effective, but that it may be considered as a first treatment option 
over surgical AVF, particularly if vessels at the wrist are absent or 
less than ideal. The applicant stated that it is important to note that 
the Inston et al., published clinical data on WavelinQTM are 
similar to other results in published literature.\389\
---------------------------------------------------------------------------

    \389\ Inston, N., et al. WavelinQ created arteriovenous fistulas 
v, surgical radiocephalic arteriovenous fistulas? A single-centre 
observational study. The Journal of Vascular Access. 2020 
Jan;21(1):7-18 https://doi.org/10.1177/1129729819897168.
---------------------------------------------------------------------------

    The applicant asserted that Inston et al. also provides an 
alternative to retrospective propensity-matched analyses (Yang and 
Arnold, et al.), and is a new, positive contribution to the overall 
body of evidence in that it is more reflective of the real-world 
setting. The applicant claimed these data further support the efficacy 
of endoAVF with WavelinQTM and demonstrate substantial 
clinical improvement of endoAVF with WavelinQTM over 
surgical AVFs.
    The applicant claimed that in addition to demonstrating significant 
improvements in efficacy vs. a surgically created fistula, 
WavelinQTM endoAVFs provide a significant improvement in 
patients' quality of life. The study by Lok et al. evaluated end-stage 
renal disease (ESRD) patients with a WavelinQTM EndoAVF for 
dialysis to determine patient satisfaction with vascular access-related 
issues that impact quality of life at baseline, 6 months and 12 months 
post-procedure. The applicant asserted the study results showed that 96 
percent of patients were satisfied with the WavelinQTM 
EndoAVF, 72 percent would recommend the WavelinQTM EndoAVF 
to a friend, 88 percent found it easy to use, and only 16 percent would 
change their AVF access type if possible.\390\
---------------------------------------------------------------------------

    \390\ Lok, C. et al., Patient Perceptions of a New Non-Surgical 
Approach to Arteriovenous Fistula Creation and Use for Hemodialysis. 
Nephrology Dialysis Transplantation 32 (Supplement 3): iii329-
iii343, 2017.
---------------------------------------------------------------------------

    The applicant also provided a clinical comparison of the 
WavelinQTM 4F EndoAVF System to the Ellipsys[supreg] 
Vascular Access System. The applicant stated that CMS noted the lack of 
a study directly comparing WavelinQTM to Ellipsys[supreg]. 
The applicant explained there are several reasons why a head-to-head 
study was not conducted. According to the applicant, the first reason 
is the WavelinQTM 6F EndoAVF System, and the 
Ellipsys[supreg] Vascular Access System were both approved by FDA on 
June 22, 2018. According to the applicant, the FDA would not allow a 
study comparing two unapproved technologies to each other. The second 
reason, according to the applicant, is both WavelinQTM and 
Ellipsys[supreg] were studied/compared to surgical AVFs, the current 
standard of care, which is generally the recommended approach. Given 
the timeline for planning, enrolling, and completing a study and then 
having a journal article published, it would have been logistically 
impossible to conduct and publish a robust, multi-center head-to-head 
study (WavelinQTM vs. Ellipsys[supreg]) in the short period 
of time from FDA approval of the two devices to date. The applicant 
further explained any such study results would likely be available only 
after expiration of WavelinQTM's new technology add-on 
payment newness eligibility.
    The applicant further stated that the clinical, technological, and 
procedural differences between WavelinQTM and 
Ellipsys[supreg] would contribute to the complexity of structuring a 
head-to-head study. The applicant claimed any direct comparison would 
need to account for the subsequent procedure(s) that are needed when 
the Ellipsys[supreg] system is used. Ellipsys[supreg] typically 
requires balloon angioplasty to assist with maturation. The applicant 
stated that additionally, the limited access points and visualization 
options of Ellipsys[supreg] are different from WavelinQTM. 
The applicant stated these differences would make it extremely 
challenging to find physicians with adequate ultrasound skills, and 
because Ellipsys[supreg] allows only one site for a creation of an AVF, 
patient enrollment would have been very difficult. Thus, the applicant 
stated the differences in both products, product indications, and the 
procedures would provide significant hurdles to designing and 
completing such a study.
    The applicant also commented in response to CMS's concern regarding 
whether the composition of clinical trial enrollees is generalizable to 
the Medicare population. The applicant asserted that an analysis of the 
2018 USRDS data shows that patients enrolled in the 
WavelinQTM clinical trials are representative of the 
Medicare population, based on the average age in the studies. 
Additionally, the applicant asserted ESRD patients commonly access the 
Medicare program outside of traditional age-based enrollment.
    The applicant noted that according to the 2018 USRDS report, 47.9 
percent of all incident hemodialysis patients are under the age of 65 
(52,201/108,895) and that 52.6 percent of all prevalent hemodialysis 
patients are also under the age of 65 (241,037/457,957).\391\
---------------------------------------------------------------------------

    \391\ https://www.usrds.org/2018/view/v2_01.aspx, Data Table 
T1.6 incident ESRD patients and Table T1.7 prevalent ESRD patients.
---------------------------------------------------------------------------

    The applicant asserted that before WavelinQTM was 
cleared by the FDA, industry discussed the WavelinQTM 
procedure and initial data with CMS medical officers and the Coverage 
and Analysis Group. The applicant stated CMS medical officers indicated 
current Medicare ESRD patients had more comorbidities as compared to 
ESRD populations studied 20 years ago. CMS' recommendations from this 
meeting were to (1) compare WavelinQTM study data to the 
current data available in the USRDS database to determine if 
WavelinQTM study populations were representative of the 
current Medicare population, and (2) compare the number of re-
interventions with surgical and WavelinQTM endoAVFs.\392\ As 
a result of these discussions, the applicant compared a contemporaneous 
patient cohort to USRDS data to demonstrate that the 
WavelinQTM endoAVF patient population was representative of 
Medicare population.\393\ The applicant stated that while fewer 
African-American patients were enrolled in the early study, later 
studies included more diverse patient populations including more 
patients who are Hispanic and Asian.
---------------------------------------------------------------------------

    \392\ Arnold, R.J., Han, Y., Balakrishnan, R., Layton, A., Lok, 
C.E., Glickman, M., Rajan, D.K. Comparison between Surgical and 
Endovascular Hemodialysis Arteriovenous Fistula Interventions and 
Associated Costs. Journal of Vascular and Interventional Radiology. 
2018 Oct; 29(11), 1558-1566. doi:10.1016/j.jvir.2018.05.014.
    \393\ Inston, N., et al. WavelinQ created arteriovenous fistulas 
v, surgical radiocephalic arteriovenous fistulas? A single-centre 
observational study. The Journal of Vascular Access. 2020 
Jan;21(1):7-18 https://doi.org/10.1177/1129729819897168.
---------------------------------------------------------------------------

    The applicant stated the Arnold et al. analysis also demonstrated 
that WavelinQTM patients had fewer subsequent re-
interventions and therefore created cost-savings for Medicare.\394\ The 
applicant stated that the published results from this analysis 
comparing surgical and endoAVFs clearly demonstrate that the existing 
published study results from WavelinQTM are generalizable to 
the Medicare population in that these patients have ESRD and require 
dialysis.
---------------------------------------------------------------------------

    \394\ Arnold, R.J., Han, Y., Balakrishnan, R., Layton, A., Lok, 
C.E., Glickman, M., Rajan, D.K. Comparison between Surgical and 
Endovascular Hemodialysis Arteriovenous Fistula Interventions and 
Associated Costs. Journal of Vascular and Interventional Radiology. 
2018 Oct; 29(11), 1558-1566. doi:10.1016/j.jvir.2018.05.014.
---------------------------------------------------------------------------

    The applicant also stated that a propensity score matched analysis 
was conducted by Yang et al. that compared

[[Page 58707]]

patients with a WavelinQTM endoAVF fistula from the Novel 
Endovascular Access Trial (NEAT) with a 5 percent random sample of 
patients with surgically created AVFs from the Medicare Standard 
Analytic files.\395\ The applicant further stated post-fistula creation 
procedures and their associated costs were analyzed. The applicant 
added that of the 3,764 Medicare surgical AVF (sAVF) patients, 60 
successfully matched to the endoAVF patients from the NEAT study using 
1:1 propensity score matching of baseline demographic and clinical 
characteristics. The applicant concluded that after propensity score-
matching, there were no statistical differences baseline demographic or 
clinical characteristics between groups.
---------------------------------------------------------------------------

    \395\ Yang, S., Lok, C., et al. Comparison of Post-Creation 
Procedures and Costs between Surgical and an Endovascular Approach 
to AVF Creation. The Journal of Vascular Access. 2017 Mar; 
18(Supplement 2), S8-S14. doi:10.5301/jva.5000723.
[GRAPHIC] [TIFF OMITTED] TR18SE20.161

    The applicant asserted the study by Yang et al.\396\ demonstrated 
that a WavelinQTM EndoAVF outperformed a surgical AVF in a 
propensity score-matched U.S. population with similar baseline 
demographics and clinical characteristics. The applicant also asserted 
that the WavelinQTM EndoAVF demonstrated a monetary savings 
for the health system due to a reduced post-AVF creation procedure 
event rate.
---------------------------------------------------------------------------

    \396\ Yang, S., Lok, C., et al. Comparison of Post-Creation 
Procedures and Costs between Surgical and an Endovascular Approach 
to AVF Creation. The Journal of Vascular Access. 2017 Mar; 
18(Supplement 2), S8-S14. doi:10.5301/jva.5000723.
---------------------------------------------------------------------------

    The applicant also stated that Arnold et al.\397\ conducted a 
second propensity score matched analysis comparing the patients from 
the NEAT study to a sample of patients from the USRDS database. 
Patients were matched 1:1 according to baseline demographics and 
clinical characteristics. Both incident and prevalent patients were 
evaluated separately. Results for both groups were as follows:
---------------------------------------------------------------------------

    \397\ Arnold, R.J., Han, Y., Balakrishnan, R., Layton, A., Lok, 
C.E., Glickman, M., Rajan, D.K. Comparison between Surgical and 
Endovascular Hemodialysis Arteriovenous Fistula Interventions and 
Associated Costs. Journal of Vascular and Interventional Radiology. 
2018 Oct; 29(11), 1558-1566. doi:10.1016/j.jvir.2018.05.014.
---------------------------------------------------------------------------

Incident Patients
[GRAPHIC] [TIFF OMITTED] TR18SE20.162

    The applicant stated in the incident patient population, 
WavelinQTM EndoAVF demonstrated 6.472 fewer events per 
patient-year compared to a surgically created fistula. Correspondingly, 
the total cost difference to treat these patients was $16,494.50 less 
expensive in the WavelinQTM EndoAVF group.
Prevalent Patients
[GRAPHIC] [TIFF OMITTED] TR18SE20.163

    The applicant further stated that in the prevalent patient 
population, WavelinQTM EndoAVF demonstrated 3.639 fewer 
events per patient-year compared to a surgically created fistula. 
Correspondingly, the total cost difference to treat these patients was 
$13,388.92 less expensive in the WavelinQTM EndoAVF group.
    The applicant also stated that a voluntary recall of 
WavelinQTM 4F was initiated in April 2019 that was specific 
to one lot (150 units) of catheters. Of these, 136 units were never 
sold or were successfully returned to BD prior to use. Of the 14 
remaining catheters that were not returned to BD, there have been no 
reported patient injuries. This lot of catheters was found to have 
magnets that did not meet BD's requirements for magnetic strength. The 
magnets are used to pull the arterial and venous vessels into close 
approximation to create the endovascular fistula using RF energy. 
Without the necessary coaptation of the magnets, endoAVF cannot be 
performed. BD was able to identify the root cause of the weak magnets 
and implemented corrective actions that were completed in June 2019 and 
submitted to the FDA. The applicant stated that they have not received 
any additional complaints of a similar nature.
    We also received another public comment regarding whether 
WavelinQTM provides a substantial clinical improvement over 
existing technologies. The commenter asserted that Ellipsys[supreg] is 
not clinically inferior to WavelinQTM, and in fact the 
evidence available shows that the Ellipsys[supreg] has a

[[Page 58708]]

better record of a number of key outcomes, including technical success 
and cumulative patency. The commenter cited a recently published 
abstract \398\ which reported on a retrospective review of a single-
center, single-operator case series of 100 pAVFs created from December 
2017 to July 2019, 65 with Ellipsys[supreg] and 35 with 
WavelinQTM. The study reported technical success with 
Ellipsys[supreg] was 100 percent vs. 97 percent with 
WavelinQTM. Maturation at four weeks was 68.3 percent vs. 
54.3 percent; median time to cannulation was 60 vs. 90 days. Successful 
dialysis access was achieved in 79.5 percent of Ellipsys[supreg] cases 
vs. 58 percent for WavelinQTM cases. Interventions were 
performed in approximately 27 percent of cases for both technologies, 
and the number of interventions per patient-year was 0.96 vs. 0.46. At 
12 months, secondary patency was significantly higher for 
Ellipsys[supreg] patients (82 percent) vs. WavelinQTM 
patients (60 percent), according to the study.
---------------------------------------------------------------------------

    \398\ Shahverdyan R, et al., ``Comparison of Outcomes of 
Percutaneous Arteriovenous Fistulae Creation by Ellipsys and 
WavelinQ Devices,'' Journal of Vascular and Interventional 
Radiology; accepted for publication: In press. See also an earlier 
abstract reporting on a preliminary stage of this study: Shahverdyan 
R, et al., ``Single-Center Experience of Endovascular Arteriovenous 
Fistula Creation with Both WavelinQ and Ellipsys Systems,'' Journal 
of Vascular Surgery 2019; 70: e173-e174. (November Supplement 2019.)
---------------------------------------------------------------------------

    The commenter stated that percutaneous AVF technology represents a 
significant clinical improvement relative to surgical AVFs, for 
patients for which this approach is anatomically suitable. The 
commenter asserted that WavelinQTM has not demonstrated a 
significant clinical improvement relative to Ellipsys[supreg].
    Response: After consideration of the comments we received and upon 
further review, we continue to have concerns with respect to whether 
WavelinQTM meets the substantial clinical improvement 
criterion for new technology add-on payments. In our proposed rule, we 
stated that we were concerned there is no study directly comparing the 
WavelinQTM 4F EndoAVF System to surgical AVF or the 
Ellipsys[supreg] Vascular Access System; rather, the studies provided 
compare historical data for surgical AVF to data on the results of AVF 
created using both the WavelinQTM EndoAVF (6F) and (4F) 
systems. The applicant cited a recent study by Inston et al.\399\ which 
outlines a single-center study that compared 30 WavelinQTM 
4F EndoAVF procedures with a matched cohort of 40 surgical AVFs. The 
study reported that the mean primary patency was significantly better 
for the WavelinQTM group (362  240 days) vs. the 
sAVF group (235  210 days) (p <0.05) which was a 
statistically significant difference. However, all other parameters 
reported in the study did not demonstrate statistically significant 
differences, including procedural success rate, time to cannulation, 6 
and 12 month primary patency, and secondary patency with 
WavelinQTM. In addition, the number of interventions per 
patient year were higher in the WavelinQTM arm than in the 
sAVF arm (0.402 vs 0.273). Another study comparing the use of 
WavelinQTM and Ellipsys[supreg] showed Ellipsys outperformed 
WavelinQ at multiple endpoints, with 12 month secondary patency 
significantly higher for Ellipsys[supreg] (82 percent vs 60 percent).
---------------------------------------------------------------------------

    \399\ Inston, N., et al. WavelinQ created arteriovenous fistulas 
v, surgical radiocephalic arteriovenous fistulas? A single-centre 
observational study. The Journal of Vascular Access. 2020 
Jan;21(1):7-18 https://doi.org/10.1177/1129729819897168.
---------------------------------------------------------------------------

    We appreciate the comments and additional information regarding 
whether the WavelinQTM represents a significant clinical 
improvement.
    In addition to the comments we received, CMS also reviewed a 
published study on the real-world usage of the WavelinQTM 
EndoAVF System.\400\ This study examined a single center's success 
rates and short-term follow-up using the WavelinQTM EndoAVF. 
Study subjects included patients who underwent placement of a fistula 
using the WavelinQTM EndoAVF system from October 2018 to 
July 2019. Preoperative/intraoperative variables including 
demographics, preoperative/postoperative duplex ultrasonography, 
success rate of procedure, and subsequent endovascular/surgical 
procedures were obtained. Descriptive statistics and comparison of 
groups requiring subsequent intervention were performed.
---------------------------------------------------------------------------

    \400\ Zemela MS, Minami HR, Alvarez AC, Smeds MR. Real-World 
Usage of the WavelinQ EndoAVF System [published online ahead of 
print, 2020 May 15]. Ann Vasc Surg. 2020;S0890-5096(20)30376-9. 
doi:10.1016/j.avsg.2020.05.006.
---------------------------------------------------------------------------

    Thirty-five patients underwent placement of the 
WavelinQTM AVF, with 32 patients (91 percent) having at 
least one documented follow-up. These patients were predominantly male 
(23/32, 72 percent) with an average age of 60.2 and 23 of 32 patients 
(72 percent) were on dialysis. Initial fistula creation success rate 
was 100 percent. Average procedural length was 120 minutes, fluoroscopy 
time 9.6 minutes, and contrast usage 52.2 mL. Eight of 32 patients (25 
percent) had perioperative complications (3 hematomas, 3 contrast 
extravasations, 1 resolved vessel spasm all resolving spontaneously, 
and 1 pseudoaneurysm requiring surgical repair). Thirteen of 32 
patients (41 percent) underwent subsequent endovascular interventions 
to assist with maturation [9/32 (28 percent) branch coiling, 5/32 (16 
percent) angioplasty/stenting, and 3/32 (9 percent) access 
thrombectomy] and 4 of 32 patients (13 percent) required subsequent 
surgical interventions (1 pseudoaneurysm repair, 1 revision of fistula, 
and 2 definitive AVF creation in thrombosed grafts). The majority of 
accesses (30/32, 94 percent) were ulnar-ulnar fistulas and overall 
patency at average follow-up of 73 days was 88 percent (28/32) with 
average brachial artery inflow volume of 1,078 cc/min and average 
cephalic vein (18/32) outflow volume of 447 cc/min. Eleven of 23 
patients (48 percent) on dialysis were successfully using the endoAVF 
at follow-up.
    The study concluded that the WavelinQTM EndoAVF System 
has a high initial procedural success rate (100 percent), although a 
significant portion of patients require subsequent endovascular 
procedures to aid in maturation. According to the study's conclusion, 
further work is needed on determining factors predictive of the need 
for re-intervention for patients with fistulas created using the 
WavelinQTM EndoAVF System. In follow-up, 15 of 32 patients 
(47 percent) underwent surgical and/or endovascular procedures, with 4 
of 32 patients (13 percent) requiring subsequent surgical 
interventions. This included 1 pseudoaneurysm repair, 1 revision of 
fistula, and 2 definitive AVF creation in thrombosed grafts. In 13 of 
32 patients (41 percent), an endovascular procedure was performed 
subsequent to the fistula placement, most of which were needed to aid 
in fistula maturation. This included 3 of 32 (9 percent) graft 
thrombectomies (2 ultimately unsuccessful requiring definitive AVF 
creation), 5 of 32 (16 percent) angioplasties/stenting of outflow 
veins, and 9 of 32 (28 percent) vein branch coiling.
    After consideration of the public comments we received and based on 
the information stated above, we believe additional data is needed to 
demonstrate that WavelinQTM represents a substantial 
clinical improvement over existing therapies. Therefore, we are not 
approving new technology add-on payments for the WavelinQTM 
4F EndoAVF System for FY 2021.

[[Page 58709]]

l. Zulresso\TM\
    Sage Therapeutics submitted an application for new technology add-
on payments for ZULRESSO\TM\ for FY 2021. 
ZULRESSO\TM\ (brexanolone) is a neuroactive steroid gamma-
aminobutyric acid (GABA)A receptor positive modulator 
indicated for the treatment of postpartum depression (PPD) in adults 
that is administered via a continuous intravenous infusion.
    According to the applicant, PPD is a major depressive episode that 
occurs following delivery, though onset of symptoms may occur during 
pregnancy. Per the applicant, mothers with PPD may present with a 
variety of symptoms, which must be present most of the time for 2 weeks 
or more in order for PPD to be diagnosed. These depressive symptoms may 
persist throughout and beyond the first postnatal year if PPD is left 
untreated. As described by the applicant, these symptoms may include 
trouble bonding with, and doubt in ability to care for, their baby; 
thoughts of self-harm or harm to the baby; feelings of worry, anxiety, 
sadness, moodiness, irritability, and/or restlessness; crying more 
often or without apparent reason; experiencing anger or rage; sleep 
disturbances; changes in appetite; difficulty concentrating; and 
withdrawal from friends and family. According to the applicant, PPD may 
affect the mother's ability to function with potential considerable 
risks such as self-harm, and PPD may also be associated with suicidal 
ideation.
    The applicant stated that PPD is one of the most common 
complications during and after pregnancy, affecting more than 400,000 
women in the United States. The applicant noted that women diagnosed 
with PPD who are disabled may be otherwise eligible for Medicare, and 
some may be eligible for Medicaid as well. While the studies summarized 
did not specifically target Medicare patients, the applicant believes 
that these results can be generalized to Medicare patients diagnosed 
with PPD.
    The applicant stated that the precise cause of PPD is unknown, 
though there are multiple hypotheses about the mechanism of disease of 
PPD. The applicant reported that levels of allopregnanolone, the 
predominant metabolite of progesterone, increase during pregnancy and 
decrease substantially after childbirth. Per the applicant, preclinical 
evidence indicated that rapid changes in levels of allopregnanolone 
confer dramatic behavioral changes and may trigger PPD in some 
women.\401\
---------------------------------------------------------------------------

    \401\ Kanes, SJ, Colquhoun, H, Doherty, J, Raines, S, Hoffmann, 
E, Rubinow, DR, Meltzer-Brody, S. ``Open-label, proof-of-concept 
study of brexanolone in the treatment of severe postpartum 
depression,'' Human Psychopharmacology: Clinical & Experimental, 
2017, Vol. 32(2).
---------------------------------------------------------------------------

    As reported in a study submitted by the applicant, the GABAergic 
deficit hypothesis of depression states that a deficit of GABAergic 
transmission in defined neural circuits is causal for depression. 
According to the study, conversely, an enhancement of GABA 
transmission, including that triggered by selective serotonin reuptake 
inhibitors or ketamine, has antidepressant effects. The study reported 
that ZULRESSO\TM\, an intravenous formulation of the 
endogenous neurosteroid allopregnanolone, showed clinically significant 
antidepressant activity in postpartum depression. According to the 
study, by allosterically enhancing GABAA receptor function, 
the antidepressant activity of allopregnanolone is attributed to an 
increase in GABAergic inhibition. In addition, allopregnanolone may 
stabilize normal mood by decreasing the activity of stress-responsive 
dentate granule cells and thereby sustain resilience behavior. The 
researchers concluded that therefore, allopregnanolone may augment and 
extend its antidepressant activity by fostering resilience.\402\
---------------------------------------------------------------------------

    \402\ L[uuml]scher, B, M[ouml]hler, H, ``Brexanolone, a 
neurosteroid antidepressant, vindicates the GABAergic deficit 
hypothesis of depression and may foster resilience,'' F1000Research, 
2019, vol. 751.
---------------------------------------------------------------------------

    The applicant stated that prior to FDA approval of 
ZULRESSO\TM\, there were no medications specifically 
indicated for PPD. The applicant indicated that the regimens 
historically employed for the treatment of patients who have been 
diagnosed with PPD have generally consisted of medications typically 
used for major depression or other mood disorders. As described by the 
applicant, these pharmacological therapies include--
     Selective serotonin reuptake inhibitors (SSRIs), such as 
sertraline, fluoxetine, and paroxetine, which selectively block the 
reuptake of serotonin;
     Serotonin and norepinephrine reuptake inhibitors (SNRIs) 
such as venlafaxine, duloxetine, and milnacipran, which selectively 
block the reuptake of serotonin and norepinephrine;
     Monoamine oxidase inhibitors (MAOIs) such as phenelzine, 
which cause an accumulation of amine neurotransmitters and are not 
commonly used, owing to the adverse reactions with concomitant 
medications and various food groups; and
     Tricyclic antidepressants (TCAs), like nortriptyline, 
which are antimuscarinic drugs that block the reuptake of both 
serotonin and norepinephrine and have variable sedative properties.
    The applicant indicated that non-pharmacological treatments, such 
as psychotherapies, including cognitive behavioral therapy, 
psychosocial community-based intervention, and dynamic therapy have 
also been used to treat PPD.
    Based on market research conducted by the applicant, the applicant 
asserted that current treatment options for patients who have been 
diagnosed with PPD present potential challenges for patients such as: 
Long wait times for an appointment and difficulties scheduling follow-
up appointments with providers; insurance coverage challenges; delays 
or interruptions in treatment; changes in medications or doses (which 
may or may not be effective): And the lengths of the treatment plan 
being longer than expected.
    With respect to the newness criterion, FDA granted 
ZULRESSO\TM\ Priority Review and Breakthrough Therapy 
designations, and on March 19, 2019, approved ZULRESSO\TM\ 
for the treatment of PPD in adult women. On June 17, 2019, the Drug 
Enforcement Administration (DEA) placed ZULRESSO\TM\ into 
Schedule IV of the Controlled Substances Act (84 FR 27938 through 
27943), after which it became commercially available. The applicant 
submitted a request for approval for two unique ICD-10-PCS procedure 
codes for the administration of ZULRESSO\TM\ beginning in FY 
2021 and was granted approval for the following procedure codes 
effective October 1, 2020: XW03306 (Introduction of Brexanolone into 
peripheral vein, percutaneous approach, new technology group 6) and 
XW04306 (Introduction of Brexanolone into central vein, percutaneous 
approach, new technology group 6).
    As discussed previously, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would not be considered ``new'' 
for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, 
according to the applicant, ZULRESSOTM does not use the same 
or a similar mechanism of action when compared to existing treatments. 
The applicant indicated that

[[Page 58710]]

prior to the approval of ZULRESSOTM, certain antidepressants 
were prescribed for the treatment of PPD; however, these 
antidepressants are not specifically indicated for PPD. In addition, 
the applicant asserted that ZULRESSOTM does not use the same 
or a similar mechanism of action as current antidepressants, including 
SSRIs, SNRIs, MAOIs, and TCAs. The applicant stated that 
ZULRESSOTM works differently because it does not directly 
affect monoaminergic systems, with the mechanism of action believed to 
be related to ZULRESSOTM's positive allosteric modulation of 
GABAA receptors. Therefore, the applicant asserted that 
ZULRESSOTM utilizes a different mechanism of action than 
currently available treatment options.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant stated that the 
antidepressants and non-pharmacological treatments historically used to 
treat PPD are traditionally used in the outpatient setting; however, 
patients with more severe symptoms of PPD who are hospitalized would 
likely have the same diagnosis (F53.0--Postpartum depression) and be 
assigned to the same MS-DRG as ZULRESSOTM patients, MS-DRG 
881 (Depressive Neuroses).
    With respect to the third criterion, whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, according to the 
applicant, the use of ZULRESSOTM for treating PPD would 
involve treatment of a similar patient population as compared to other 
therapies historically used to treat PPD. However, the applicant noted 
that there are no other treatments or technologies that are 
specifically indicated for the treatment of PPD.
    As summarized previously, the applicant maintains that 
ZULRESSOTM meets the newness criterion and is not 
substantially similar to existing technologies because it has a unique 
mechanism of action for treating PPD and is the only therapy 
specifically indicated for the treatment of PPD. We invited public 
comments on whether ZULRESSOTM is substantially similar to 
any existing technologies and whether ZULRESSOTM meets the 
newness criterion.
    Comment: The applicant submitted a comment reiterating that 
ZULRESSOTM meets the newness criterion and is not 
substantially similar to existing technologies because 
ZULRESSOTM does not use the same or a similar mechanism of 
action as the antidepressants commonly prescribed to treat PPD. The 
applicant stated that ZULRESSOTM works differently than 
these antidepressants because it does not directly affect monoaminergic 
systems, with the mechanism of action believed to be related to 
ZULRESSOTM's positive allosteric modulation of 
GABAA receptors. The applicant also asserted that 
ZULRESSOTM meets the newness criterion because it does not 
involve the treatment of the same or similar type of disease and the 
same or similar patient population because ZULRESSOTM is the 
first and only therapy specifically indicated to treat adult patients 
with PPD.
    Response: Based on the applicant's comment and information 
submitted by the applicant as part of its FY 2021 new technology add-on 
payment application for ZULRESSOTM, as discussed in the 
proposed rule (85 FR 32673) and previously summarized, we disagree that 
the use of the technology does not involve the treatment of the same or 
similar type of disease and the same or similar patient population as 
existing technologies. As noted by the authors of the Phase III study 
submitted by the applicant, PPD is considered a subtype of major 
depression in the DSM-5 and the International Classification of 
Diseases.\403\ Given that there are antidepressants indicated for 
treating major depressive disorders (of which PPD is a subtype) that 
are currently being used to treat PPD, we believe there are existing 
technologies available to treat patients with PPD. However, we agree 
with the applicant that ZULRESSOTM does not use the same or 
a similar mechanism of action to achieve a therapeutic outcome when 
compared to existing treatments. Therefore, we believe that 
ZULRESSOTM is not substantially similar to an existing 
technology and meets the newness criterion. We consider the beginning 
of the newness period to commence when the DEA placed 
ZULRESSOTM into Schedule IV of the Controlled Substances Act 
on June 17, 2019, after which it became commercially available.
---------------------------------------------------------------------------

    \403\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R., 
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh, 
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S., 
``Brexanolone injection in post-partum depression: Two multicentre, 
double-blind, randomised, placebo-controlled, phase 3 trials,'' The 
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

    With regard to the cost criterion, the applicant used the FY 2018 
MedPAR Hospital Limited Data Set (LDS) to determine the MS-DRGs to 
which cases representing potential patient hospitalizations that may be 
eligible for treatment involving ZULRESSOTM may be assigned. 
The applicant identified these potential cases as those with a 
principal or secondary diagnosis code of F53 (Puerperal psychosis), 
excluding MA cases and claims submitted only for GME payment. The 
applicant noted that ICD-10-CM diagnosis code F53.0 (Postpartum 
depression) became effective October 1, 2018, and was not found on any 
FY 2018 inpatient claims. The applicant identified 76 cases reporting 
ICD-10-CM diagnosis code F53.0 spanning 26 different MS-DRGs, with 
approximately 58 percent of these potential cases mapping to the 
following 3 MS-DRGs, out of which approximately 49 percent of those 
potential cases mapped to the top 2 MS-DRGs:
[GRAPHIC] [TIFF OMITTED] TR18SE20.164

    The applicant did not remove charges for the prior technology or 
the technology being replaced because the historical treatment 
regimens, such as oral anti-depressants, do not need to be stopped 
during treatment with ZULRESSOTM. The applicant also noted 
that ZULRESSOTM is the first and only FDA-approved treatment 
specifically indicated for PPD so there are no prior technology charges 
to remove. The applicant then standardized the FY 2018 charges using 
the FY 2018 impact file and inflated the charges to FY 2020 using the 
2-year inflation factor of 11.1

[[Page 58711]]

percent (1.11100) published in the FY 2020 IPPS/LTCH PPS final rule 
(see 84 FR 42629). The applicant then added charges for 
ZULRESSOTM, based on the average per discharge cost of 
ZULRESSOTM inflated by the inverse of the national average 
CCR for pharmacy costs of 0.189. The applicant calculated a final 
average case-weighted standardized charge per case of $225,056. Based 
on the FY 2020 IPPS/LTCH PPS final rule correction notice data file 
thresholds, the applicant calculated an average case-weighted threshold 
amount of $33,012. The applicant stated that ZULRESSOTM 
exceeded the average-case-weighted threshold amount and, therefore, 
meets the cost criterion.
    As noted previously, the 76 cases reporting ICD-10-CM diagnosis 
code F53.0 span 26 different MS-DRGs, with very few observations in 
most of these MS-DRGs. We noted in the proposed rule that a sub-
analysis of the top 2 MS-DRGs--which represent 49 percent of the 
cases--would still exceed the threshold. We also noted that a sub-
analysis assigning 100 percent of the cases to the highest paying of 
these 26 MS-DRGs would also still exceed the threshold.
    We stated in the proposed rule that we are concerned with the 
limited number of cases in the sample the applicant analyzed. However, 
we acknowledged the difficulty in obtaining cost data for a condition 
that has low prevalence in the Medicare population. We invited public 
comments on whether ZULRESSOTM meets the cost criterion.
    Comment: The applicant submitted a comment asserting that, as 
demonstrated in its application, ZULRESSOTM meets the cost 
criterion, despite the low volume, and the applicant noted that CMS has 
approved new technology add-on payment for other low volume procedures. 
The applicant also raised the possibility that the implementation of a 
new ICD-10-CM code for PPD in October 2018 might have led to 
underreporting of the diagnosis code in the data available for 
analysis.
    Response: Based on the applicant's comment and information 
submitted by the applicant as part of its FY 2021 new technology add-on 
payment application for ZULRESSOTM, as discussed in the 
proposed rule (85 FR 32673 through 32674) and previously summarized, 
the average case-weighted standardized charge per case exceeded the 
average case-weighted threshold amount. Therefore, 
ZULRESSOTM meets the cost criterion.
    With regard to substantial clinical improvement, the applicant 
asserted that, because there is no other treatment option specifically 
approved by FDA to treat PPD, ZULRESSOTM represents a 
substantial clinical improvement over existing technologies. In support 
of this statement, the applicant submitted the FDA approval letter and 
news release indicating that the approval of ZULRESSOTM 
marks the first time a drug has been specifically approved to treat 
PPD.\404\ The applicant also asserted that ZULRESSOTM 
represents a substantial clinical improvement because the technology 
significantly reduces depressive symptoms and improves patients' 
functioning. The applicant submitted three studies to support its 
assertion that ZULRESSOTM represents a substantial clinical 
improvement over existing technologies by improving depressive symptoms 
and patients' functioning.
---------------------------------------------------------------------------

    \404\ Food and Drug Administration, ``FDA approves first 
treatment for post-partum depression,'' https://www.fda.gov/news-events/press-announcements/fda-approves-first-treatment-post-partum-depression.
---------------------------------------------------------------------------

    The first study submitted (202A) was a Phase II, multicenter, 
randomized, double-blind, parallel-group, placebo-controlled clinical 
trial with 30-day follow-up in women diagnosed with severe PPD. 
Patients with severe PPD (n=21) were randomized to receive a single, 
continuous intravenous infusion of ZULRESSOTM or placebo for 
60 hours. The primary endpoint was the change from baseline in the 17-
item Hamilton Depression Rating Scale (HAM-D) total score at the end of 
the 60-hour treatment period, compared to placebo. At the end of the 
60-hour intravenous infusion, the least-squared (LS) mean reduction in 
HAM-D total score from baseline was 21.0 points in the 
ZULRESSOTM group compared with 8.8 points in the placebo 
group. The researchers concluded that in women with severe PPD, 
infusion of ZULRESSOTM resulted in a significant and 
clinically meaningful reduction in HAM-D total score, compared with 
placebo.\405\
---------------------------------------------------------------------------

    \405\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S., 
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N., 
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D., 
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547 
injection) in post-partum depression: A randomised controlled 
trial.'' The Lancet. 2017,vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

    The second and third studies submitted (202B and 202C) were Phase 
III, multicenter, randomized, double-blind, parallel-group, placebo-
controlled clinical trials with 30-day follow-up conducted at 30 
clinical research centers and specialized psychiatric units in the 
United States. The studies included women between the ages of 18-45 
years, 6 months postpartum or less at screening, with PPD and a 
qualifying score on the HAM-D. In both studies, patients were randomly 
assigned to receive a single, continuous 60-hour intravenous infusion 
of ZULRESSOTM or matching placebo. The primary endpoint in 
both studies was the change from baseline in the 17-item HAM-D total 
score at 60 hours, compared with placebo. Study 202B consisted of 
patients who were diagnosed with severe PPD (HAM-D score >=26) who were 
randomly assigned to receive a single intravenous infusion of either 
ZULRESSOTM 90 [mu]g/kg per h (BRX90), ZULRESSOTM 
60 [mu]g/kg per hour (BRX60), or matching placebo for 60 hours. Study 
202C consisted of patients who were diagnosed with moderate PPD (HAM-D 
score of 20 to 25) who were randomly assigned to BRX90 or matching 
placebo for 60 hours. Three hundred and seventy-five women were 
simultaneously screened across both studies, of whom 138 were randomly 
assigned to receive either BRX90 (n=45), BRX60 (n=47), or placebo 
(n=46) in Study 202B, and 108 were randomly assigned to receive BRX90 
(n=54) or placebo (n=54) in Study 202C. In study 202B, at hour 60, the 
LS mean reduction in HAM-D total score from baseline was 19.5 points in 
the BRX60 group and 17.7 points in the BRX90 group, compared with 14.0 
points in the placebo group. In Study 202C, at hour 60, the LS mean 
reduction in HAM-D total score from baseline was 14.6 points in the 
BRX90 group compared with 12.1 points for the placebo group. The 
researchers concluded that administration of ZULRESSOTM for 
PPD resulted in significant and clinically meaningful reductions in 
HAM-D total score at hour 60 compared with placebo, with rapid onset of 
action and durable treatment response during the study period of 30 
days.\406\
---------------------------------------------------------------------------

    \406\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R., 
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh, 
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S., 
``Brexanolone injection in post-partum depression: Two multicentre, 
double-blind, randomised, placebo-controlled, phase 3 trials,'' The 
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

    The applicant provided data from the clinical studies cited 
previously to support that ZULRESSOTM improves patients' 
depressive symptoms as measured by a reduction in the HAM-D score at 
hour 60, and sustained at day 30. The applicant cited data from the 
Phase II study (202A) that, at the end of the 60-hour infusion, the LS 
mean

[[Page 58712]]

reduction in HAM-D total score was significantly larger for the 
ZULRESSOTM (90 [mu]g/kg/h) group compared with the placebo 
group (21.0 vs 8.8 points, respectively). Prespecified secondary 
analyses showed a mean difference of -11.3 points between groups as 
early as 24 hours after infusion, with significant improvements also 
seen for the ZULRESSOTM group at 36, 48, 60, and 72 hours, 
as well as days 7 and 30. A greater percentage of patients in the 
ZULRESSOTM group achieved a treatment response (defined as 
>=50% reduction from baseline in HAM-D total score) compared to the 
placebo group, with a significant difference observed at hour 72 (80% 
vs. 27%) and day 7 (80% vs. 20%). At hour 60, 70 percent of patients in 
the ZULRESSOTM group and 36 percent of patients in the 
placebo group had a treatment response. A greater percentage of 
patients treated with ZULRESSOTM achieved remission (HAM-D 
total score <=7) at hour 60 compared with the placebo group (70.0% vs. 
9.1%). The difference was significant at hours 24, 48, 60, and 72, and 
days 7 and 30.\407\
---------------------------------------------------------------------------

    \407\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S., 
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N., 
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D., 
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547 
injection) in post-partum depression: A randomised controlled 
trial.'' The Lancet. 2017,vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III multicenter study of 
patients with severe PPD (202B) that at hour 60, and sustained at day 
30, the LS mean reduction in HAM-D total score was significantly 
greater for the ZULRESSOTM groups, compared to the placebo 
groups. At hour 60, the LS mean reduction in HAM-D total score was 17.7 
points in the BRX90 group and 19.5 points in the BRX60 group, compared 
to 14.0 points in the placebo group. At all-time points from hour 24 to 
day 30, the percentage of patients achieving HAM-D response (>=50% 
reduction from baseline in HAM-D total score) was higher in both 
ZULRESSOTM groups compared with placebo, with statistical 
significance achieved for both ZULRESSOTM groups across 
multiple timepoints compared with placebo. The percentage of patients 
achieving HAM-D remission (total score <=7) was numerically higher in 
both ZULRESSOTM groups between 24 and 72 hours and at day 30 
compared with the placebo group.\408\
---------------------------------------------------------------------------

    \408\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R., 
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh, 
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S., 
``Brexanolone injection in post-partum depression: Two multicentre, 
double-blind, randomised, placebo-controlled, phase 3 trials,'' The 
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III multicenter study of 
patients with moderate PPD (202C) that at the end of the 60 hour 
infusion, the LS mean reduction in HAM-D total score was significantly 
greater in the ZULRESSOTM BRX90 group compared with the 
placebo group (14.6 vs 12.1, respectively). At all time points from 
hour 8 through day 14, the percentage of patients achieving HAM-D 
remission (total score <=7) was numerically higher for the 
ZULRESSOTM BRX90 group compared with the placebo group, with 
statistical significance achieved at multiple time points, including at 
the end of the 60 hour infusion.\409\
---------------------------------------------------------------------------

    \409\ Ibid.
---------------------------------------------------------------------------

    The applicant cited pooled data from the ZULRESSOTM 
BRX90 groups in the Phase II (202A) and Phase III (202B and 202C) 
studies showing a significant LS mean reduction in HAM-D total score 
compared with the placebo group at hour 60 (17.0 vs 12.8 points). 
Similar to the individual studies, the integrated BRX90 analysis showed 
a rapid decrease in HAM-D scores (that is, depressive symptoms) in the 
BRX90 group compared with the placebo groups, which was sustained until 
day 30. At the end of the 60 hour infusion, the LS mean reduction in 
HAM-D total score from baseline was significantly larger in the BRX90 
group than the placebo group (LS mean difference -4.1), which was also 
observed at 24 hours (LS mean difference -3.0) and was sustained at day 
30 (LS mean difference -2.6).\410\
---------------------------------------------------------------------------

    \410\ Ibid.
---------------------------------------------------------------------------

    The applicant provided data from the clinical studies cited 
previously to support that ZULRESSOTM improves patients' 
functioning scores, as measured by the Clinical Global Impressions 
Scale-Improvement (CGI-I). The applicant cited data from the Phase II 
study (202A) that the observed improvement in symptoms of postpartum 
depression following ZULRESSOTM administration was evidenced 
by the significant treatment difference observed for CGI-I response. At 
day 30, 3 (27.3%) patients in the placebo group vs. 8 (80.0%) patients 
treated with ZULRESSOTM were considered CGI-I responders 
with a score of ``1--very much improved'' or ``2--much improved''.\411\
---------------------------------------------------------------------------

    \411\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S., 
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N., 
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D., 
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547 
injection) in post-partum depression: A randomised controlled 
trial.'' The Lancet. 2017,vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III study of patients with 
severe PPD (202B) that patients' functioning scores, as measured by 
CGI-I, improved at hour 60, and sustained at day 30. The proportion of 
patients who achieved a CGI-I response (score of ``1--very much 
improved,'' or ``2--much improved'') at 60 hours was significantly 
higher in both ZULRESSOTM groups. The proportion of BRX90 
patients who achieved a CGI-I response was also significantly higher 
than the placebo group at hour 72 and day 30 and significantly higher 
in the BRX60 group compared to placebo at timepoints from hours 36 to 
72 and days 7 and 30.\412\
---------------------------------------------------------------------------

    \412\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R., 
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh, 
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S., 
``Brexanolone injection in post-partum depression: Two multicentre, 
double-blind, randomised, placebo-controlled, phase 3 trials,'' The 
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III study of patients with 
moderate PPD (202C) that the proportion of patients who achieved a CGI-
I response was significantly higher for the BRX90 group compared with 
the placebo group at hour 60. These significant increases in CGI-I 
response occurred as early as 36 hours and were sustained at day 
7.\413\
---------------------------------------------------------------------------

    \413\ Ibid.
---------------------------------------------------------------------------

    The applicant provided data from the clinical studies cited 
previously to support that ZULRESSOTM improves patients' 
depressive symptoms, as measured by the Montgomery-Asberg Depression 
Rating Scale (MADRS). The applicant cited data from the Phase II study 
(202A) that ZULRESSOTM improved patients' depressive 
symptoms, as measured by the MADRS, at hour 60 and sustained at day 30. 
Through the study period, patients in the ZULRESSOTM (90 
[mu]g/kg/h) group showed significant differences in MADRS score 
compared with the placebo group (hour 24, P=0.004; hour 60, P=0.01; day 
30, P=0.01).\414\
---------------------------------------------------------------------------

    \414\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S., 
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N., 
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D., 
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547 
injection) in post-partum depression: A randomised controlled 
trial.'' The Lancet. 2017,vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III study of patients with 
severe PPD (202B) that ZULRESSOTM improved patients' 
depressive symptoms, as measured by the MADRS, at hour 60. Numerically 
greater improvement from baseline in MADRS total score was observed for 
both ZULRESSOTM (60 [mu]g/kg/h and 90 [mu]g/kg/h) treatment 
groups compared with the

[[Page 58713]]

placebo group at hour 60 and day 30. This difference was statistically 
significant at hour 60 for ZULRESSO 60 [mu]g/kg/h (LS mean difference 
vs placebo, -6.9).\415\
---------------------------------------------------------------------------

    \415\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R., 
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh, 
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S., 
``Brexanolone injection in post-partum depression: Two multicentre, 
double-blind, randomised, placebo-controlled, phase 3 trials,'' The 
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

    The applicant cited data from the Phase III study of patients with 
moderate PPD (202C) that ZULRESSOTM improved patients' 
depressive symptoms, as measured by the MADRS, at hour 60. There was a 
statistically significant improvement from baseline in the MADRS total 
score for the ZULRESSOTM (90 [mu]g/kg/h) group compared to 
placebo at hour 60 (LS mean difference vs. placebo, -4.9).\416\
---------------------------------------------------------------------------

    \416\ Ibid.
---------------------------------------------------------------------------

    The applicant cited data from the Phase II study (202A) cited 
previously that ZULRESSOTM improves patients' depressive 
symptoms as measured by the Bech-6 Subscale, a secondary endpoint. In 
the Phase II study (202A), significant improvement in the core 
depressive symptoms of the HAM-D Bech-6 Subscale score were observed at 
day 30 in the ZULRESSOTM (90 [mu]g/kg/h) group compared with 
the placebo group.\417\
---------------------------------------------------------------------------

    \417\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S., 
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N., 
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D., 
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547 
injection) in post-partum depression: A randomised controlled 
trial.'' The Lancet. 2017,vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

    We stated in the proposed rule that after reviewing the information 
submitted by the applicant as part of its FY 2021 new technology add-on 
payment application for ZULRESSOTM, we are concerned that 
the patients in the clinical trials were followed up for only 30 days, 
and the durability of the effects of ZULRESSOTM, including 
whether patients in remission relapse after 30 days, is not clear. We 
also noted that the small sample sizes of the trials and the 
demographic characteristics of the patients recruited for these studies 
may not have included or sufficiently represented populations that may 
be at high-risk to develop PPD, such as women who are financially or 
socially vulnerable and individuals with pre-existing mental illness, 
and it is not clear whether the study participants had time-limited PPD 
that might have resolved with the passage of time. We stated that it is 
also unclear whether the outcomes chosen for these studies (for 
example, test scores) translate into clinically significant observable 
improvements in maternal functioning and child interactions; for 
example, has maternal-child bonding been shown to improve as a result 
of the infusion. We also noted that these studies compare the effects 
of ZULRESSOTM to placebo, and not current regimens being 
used to treat PPD, and do not seem to include patients who were 
unresponsive to existing therapies. In addition, we stated that we are 
concerned whether results of studies of otherwise healthy women with 
PPD would be generalizable to the Medicare population, in which women 
with PPD would likely be eligible for Medicare based on disabilities 
that could potentially present comorbidities for which 
ZULRESSOTM would not be appropriate or effective. We also 
noted that because of possible side effects of excessive sedation or 
sudden loss of consciousness, ZULRESSOTM is only available 
through a restricted Risk Evaluation and Mitigation (REMS) program, and 
stated that we are concerned whether these or other adverse events 
associated with ZULRESSOTM would be unsafe for women with 
PPD in the Medicare population. We invited public comments on whether 
ZULRESSOTM meets the substantial clinical improvement 
criterion, including with respect to the concerns we have raised.
    Comment: We received public comments, including additional 
information submitted by the applicant, in response to CMS's concerns 
in the proposed rule regarding whether ZULRESSOTM meets the 
substantial clinical improvement criterion.
    With respect to the concern that the patients in the clinical 
trials were followed up for only 30 days, and the durability of the 
effects of ZULRESSOTM, including whether patients in 
remission relapse after 30 days, is not clear, the applicant stated 
that the 30-day follow-up period was accepted by FDA as an appropriate 
follow-up period for women with PPD enrolled in the 
ZULRESSOTM studies. The applicant explained further that the 
clinical trials were designed to enroll women diagnosed with PPD, and 
DSM-5 defines PPD as a major depressive episode with symptom onset 
during pregnancy or in the first 4 weeks following delivery. As such, 
if a patient achieves remission after being successfully treated in the 
postpartum and then experiences a relapse episode beyond 4 weeks, this 
may no longer meet the DSM-5 definition of PPD. The applicant also 
stated that due to the rapidity of the treatment effect observed with 
ZULRESSOTM at 60 hours in the phase 2 trial (202A), it was 
determined in conjunction with FDA that 30 days was an appropriate 
follow-up period for the ZULRESSOTM studies. The applicant 
acknowledged that the efficacy and safety of ZULRESSOTM 
beyond 30 days has not been evaluated. The applicant also acknowledged 
that there is limited data in PPD, though the applicant referenced 
studies that per the applicant show that an improvement of depressive 
symptoms as early as 2 weeks after treatment initiation may be a 
predictor of achieving stable response and remission for patients with 
major depressive disorders, and referenced other studies that per the 
applicant suggest that failure to treat depressive episodes rapidly and 
effectively to remission may have long-term negative effects. The 
applicant noted that the effects of ZULRESSOTM were 
sustained through Day 30, and the applicant cited data from the 
integrated Phase III analysis that 94% of patients who received BRX90 
and had a HAM-D response at hour 60 did not relapse at Day 30.\418\ One 
commenter asserted that the 30-day timeframe is an essential component 
of preserving the immediate long-term health and wellbeing of many 
postpartum women and their infants, as per the commenter it is around 
this timeframe that postpartum women bond with their infants, initiate 
or choose to continue breastfeeding, and navigate and receive treatment 
for other postpartum health complications.
---------------------------------------------------------------------------

    \418\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R., 
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh, 
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S., 
``Brexanolone injection in post-partum depression: Two multicentre, 
double-blind, randomised, placebo-controlled, phase 3 trials,'' The 
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

    With respect to the concern that the small sample sizes of the 
trials and the demographic characteristics of the patients recruited 
for these studies may not have included or sufficiently represented 
populations that may be at high-risk to develop PPD, the applicant 
stated that the sample sizes were developed in conjunction with FDA 
based on FDA guidelines for designing trials with sufficient 
statistical power to detect the anticipated treatment effect and safety 
of drugs being developed to treat major depressive disorders. The 
applicant also stated that in the Phase III studies, 
ZULRESSOTM demonstrated a statistically significant 
improvement in depressive symptoms at hour 60 across a diverse patient 
population, and the applicant highlighted some of the subgroups who are 
at high-risk of developing PPD that were represented in the Phase III 
studies. Further, the applicant stated that in study 202B of

[[Page 58714]]

patients with severe PPD, 47% of patients treated with BRX90 had a 
personal history of depression, and 47% had a history of anxiety. The 
applicant noted that in study 202C of patients with moderate PPD, 
patients with a personal history of depression and anxiety accounted 
for 24% and 31% of patients respectively. The applicant also noted 
that, in both Phase III studies, approximately \1/3\ of patients had a 
family history of PPD, with 27% in 202B and 35% in 202C experiencing a 
previous episode of PPD. Per the applicant, subgroup analyses showed 
greater LS mean differences in HAM-D total score at hour 60 in the 
BRX90 group compared with the placebo group from baseline in all 
subgroups examined for ethnicity, personal history of PPD, a family 
history of PPD or major depressive disorders.\419\
---------------------------------------------------------------------------

    \419\ Ibid.
---------------------------------------------------------------------------

    With respect to the concern whether study participants had time-
limited PPD that might have resolved with the passage of time, the 
applicant stated that untreated PPD may not resolve with time. The 
applicant referenced studies of major depressive disorders that, per 
the applicant, show that duration of untreated depression correlates 
with worse outcomes. The applicant also referenced studies that, per 
the applicant, suggest that symptoms that may have begun as PPD may 
persist throughout and beyond the first postnatal year if left 
untreated.
    With respect to the concern whether the outcomes chosen for these 
studies translate into clinically significant observable improvements 
in maternal functioning and child interaction, the applicant explained 
that they selected change in baseline HAM-D scale as the primary 
endpoint because it is validated, reliable, and accepted by FDA as a 
primary efficacy endpoint in a patient population with depression, and 
they selected the CGI-I scale because is accepted by FDA as a secondary 
endpoint to measure other domains of symptom improvement. The applicant 
acknowledged that there is no specific data related to 
ZULRESSOTM with respect to maternal functioning and long 
term child development. However, the applicant asserted that improving 
depressive symptoms in mothers with PPD may translate into clinically 
significant and observable improvements in maternal functioning and 
child interactions, and the applicant referenced various studies that 
found associations between maternal PPD symptoms and impairments to 
maternal bonding and multiple aspects of child development and 
functioning. The applicant also referenced studies that, per the 
applicant, show significant improvements in child development and 
functioning after successfully treating women with maternal depression.
    With respect to the concern that these studies compare the effects 
of ZULRESSOTM to placebo, and not current regimens being 
used to treat PPD, and do not seem to include patients who were 
unresponsive to existing therapies, the applicant stated that the 
ZULRESSOTM clinical development program was designed in 
accordance with FDA and aligns to current guidance related to 
developing drugs to treat major depressive disorders. In referencing 
these guidelines, the applicant noted that these guidelines provide 
that the standard for such trials include randomized, double-blinded, 
placebo controlled, parallel short-term efficacy trials in patients 
with depression. The applicant also noted that patients with a history 
of PPD and non-PPD depression were included across all placebo-
controlled studies. Patients who were taking antidepressants at a 
stable dose for at least 14 days prior to enrollment were allowed to 
participate in the ZULRESSOTM clinical trials if they met 
other inclusion/exclusion criteria. The applicant noted that across 
both phase III trials 22% of patients had baseline antidepressant use 
and either a HAM-D score between 20-25 (moderate depression) or greater 
than 26 (severe depression). Per the applicant, subgroup analyses at 
hour 60 also showed statistically significant LS mean differences in 
change from baseline in all subgroups examined, including baseline 
antidepressant use.\420\ One commenter agreed that the existing 
evidence base for the use of ZULRESSOTM as a treatment for 
PPD is limited but believes that the existing studies on 
ZULRESSOTM satisfy the clinical improvement criteria. The 
commenter stated that there is a dearth of evidence available on the 
effectiveness of other treatments for PPD, and the commenter noted that 
the studies demonstrated that improvements for those who received 
ZULRESSOTM were significantly greater than the improvements 
shown by the placebo group.
---------------------------------------------------------------------------

    \420\ Ibid.
---------------------------------------------------------------------------

    With respect to the concern whether the results of the studies 
would be generalizable to the Medicare population, the applicant 
believes that these results can be generalized to the patient 
population that qualifies for Medicare due to disability. The applicant 
stated that two of the first patients that were treated with 
ZULRESSOTM since it became commercially available were dual-
eligible beneficiaries. The applicant also observed that as with any 
drug or procedure, ZULRESSOTM may not be appropriate for 
every patient, and decisions regarding its use should be made between 
the patient and their healthcare provider based on the risks and 
benefits of treatment.
    With respect to the concern whether the adverse events associated 
with ZULRESSOTM would be unsafe for women with PPD in the 
Medicare population, the applicant stated that the safety precautions 
that are in place for women with PPD being treated with 
ZULRESSOTM, including the restrictive program requirements 
of the ZULRESSOTM REMS, would apply to patients from both 
the general and Medicare population. The applicant also stated that as 
with any treatment, the prescriber should use his or her clinical 
judgment whether ZULRESSOTM is an appropriate treatment 
option for PPD and discuss the risks and benefits, including reviewing 
the Patient Information Guide with the patient.
    We also received other public comments urging CMS to approve the 
application for new technology add-on payment for 
ZULRESSOTM, stating it alleviates symptoms of PPD within 
hours or days, rather than the weeks that may be required to relieve 
symptoms using other regimens that are prescribed to treat post-partum 
women with PPD. One commenter stated that mothers and providers have 
reported positive outcomes from the use of ZULRESSOTM and 
submitted examples of these reports. Commenters noted that 
ZULRESSOTM is not currently widely available to women 
despite being FDA-approved, and they suggested that hospitals may be 
unwilling to provide this treatment due to its cost. Commenters 
observed that state Medicaid programs and private health insurers often 
base their coverage and payment policies off of those established by 
CMS for Medicare. Commenters expressed concern that without approval of 
the new technology add-on payment application for 
ZULRESSOTM, women could be denied access to the only FDA-
approved treatment specifically indicated to treat PPD, with some 
commenters adding that all FDA-approved treatments should be readily 
accessible to women experiencing PPD.
    Response: We thank the commenters for their input and responses to 
our concerns, and we appreciate the

[[Page 58715]]

additional information the applicant provided with regard to the safety 
and efficacy of ZULRESSOTM in reducing depressive symptoms 
rapidly and significantly when compared to placebo. Although commenters 
asserted that ZULRESSOTM starts to work more rapidly than 
other treatments, we remain concerned that the studies and additional 
information submitted by commenters do not provide sufficient evidence 
to determine that the use of ZULRESSOTM represents a 
substantial clinical improvement when compared to existing treatments.
    We remain concerned that all of the studies submitted by the 
applicant used placebo as control and did not compare the use of 
ZULRESSOTM to the use of existing treatments. As noted by 
the applicant in their comments, patients who were taking 
antidepressants at a stable dose for at least 14 days prior to 
enrollment were allowed to participate in the ZULRESSOTM 
clinical trials if they met other inclusion/exclusion criteria, and 
analysis of this subgroup showed statistically significant LS mean 
differences in change in HAM-D at hour 60 compared to baseline.\421\ 
Given that these Phase III studies were not designed to compare the use 
of ZULRESSOTM to currently available treatments, we do not 
believe that the analysis of a subgroup is sufficient evidence that the 
use of ZULRESSOTM provides a substantial clinical 
improvement over the use of existing technologies, especially since 
traditional antidepressants may take 4-6 weeks to have full therapeutic 
effect (not 14 days). We also note that there are multiple medications 
approved to treat major depressive disorders (of which PPD is a 
subtype), and it is unclear whether there was uniformity in the type or 
dosage of antidepressant used by this subgroup in the Phase III studies 
that could suggest that the use of ZULRESSOTM represents a 
substantial clinical improvement over a specific regimen of 
antidepressant medications used to treat PPD.
---------------------------------------------------------------------------

    \421\ Ibid.
---------------------------------------------------------------------------

    With regard to the superiority of ZULRESSOTM versus 
placebo, the primary endpoint of improvement in HAM-D scores from 
baseline at the conclusion of the 60-hour infusion was met in both 
Phase III studies submitted by the applicant, demonstrating the 
efficacy of the use of ZULRESSOTM in rapidly reducing 
depressive symptoms compared with placebo at this timepoint (60-hour 
infusion). However, we note that the study authors observed variable 
placebo response across the three placebo-controlled trials, with 
robust placebo response in studies 2 and 3. For example, in the third 
study, placebo had a stronger effect than treatment at 30 days. We also 
note that the secondary endpoint of HAM-D remission at 30 days was not 
statistically significant in any of the treatment groups or in the 
integrated analysis when compared to placebo.\422\
---------------------------------------------------------------------------

    \422\ Ibid.
---------------------------------------------------------------------------

    We also remain concerned over the durability of the effects of 
ZULRESSOTM beyond the 30-day follow-up period. As noted by 
the study authors, an important limitation of these trials is that the 
effects of ZULRESSOTM after the 30-day follow-up period are 
unknown. We believe that this is particularly important since 
ZULRESSOTM is a one-time infusion while other 
antidepressants are continued long-term. In addition, data on the 
effectiveness of current antidepressants in post-partum women are 
scarce so the long-term efficacy of the use of ZULRESSOTM 
compared with currently available oral antidepressants is unclear.\423\
---------------------------------------------------------------------------

    \423\ Ibid.
---------------------------------------------------------------------------

    We also remain concerned as to whether study participants had time-
limited PPD that might have resolved with the passage of time and 
whether the outcomes chosen for these studies translate into clinically 
significant observable improvements in maternal functioning and child 
interaction.
    After consideration of all the information from the applicant, as 
well as the public comments we received, we are unable to determine 
that ZULRESSOTM represents a substantial clinical 
improvement over existing technologies, and we are not approving new 
technology add-on payments for ZULRESSOTM for FY 2021.
6. FY 2021 Applications for New Technology Add-On Payments (Alternative 
Pathways)
    As discussed previously, for applications received for new 
technology add-on payments for FY 2021 and subsequent fiscal years, if 
a medical device is part of FDA's Breakthrough Devices Program or a 
product is designated by FDA as a Qualified Infectious Disease Product 
(QIDP), and received FDA marketing authorization, it will be considered 
new and not substantially similar to an existing technology for 
purposes of the new technology add-on payment under the IPPS, and will 
not need to meet the requirement that it represent an advance that 
substantially improves, relative to technologies previously available, 
the diagnosis or treatment of Medicare beneficiaries. These 
technologies must still meet the cost criterion.
    We received 10 applications for new technology add-on payments for 
FY 2021 under this alternative new technology add-on payment pathway. 
One applicant withdrew its application prior to the issuance of the 
proposed rule. Of the remaining nine applications, three of the 
technologies received a Breakthrough Device designation from FDA and 
six have been designated as a QIDP by FDA. In accordance with the 
regulations under Sec.  412.87(e), applicants for new technology add-on 
payments must have FDA approval or clearance by July 1 of the year 
prior to the beginning of the fiscal year for which the application is 
being considered. While we do not typically address in the final rule 
those applications for which the technology has not received FDA 
approval for the relevant indication by the July 1 deadline, we are 
summarizing and responding to comments we received regarding whether 
the applicant for the NanoKnife System[supreg] received the required 
FDA marketing authorization for this product by July 1. A discussion of 
these remaining nine applications is presented in this final rule.
    Typically, in the annual proposed rule, we provide a summary of 
each application and describe any concerns we may have regarding 
whether the technology meets a specific new technology add-on payment 
criterion. As we discussed in the FY 2020 IPPS/LTCH PPS final rule, we 
believe it is appropriate to facilitate access to these transformative 
new technologies and antimicrobials as part of the Administration's 
commitment to addressing barriers to healthcare innovation and ensuring 
Medicare beneficiaries have access to critical and life-saving new 
cures and technologies that improve beneficiary health outcomes. To 
that end, to provide additional transparency and predictability with 
respect to these technologies, in the FY 2021 IPPS/LTCH PPS proposed 
rule we proposed to approve or disapprove each of these nine 
applications based on whether the technology met the cost criterion. In 
this section of this final rule, we discuss whether or not each 
technology will be eligible for the new technology add-on payment for 
FY 2021. We refer readers to section II.H.8. of the preamble of the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42292 through 42297) for a 
complete discussion of the alternative new technology add-on payment 
pathways for these technologies.

[[Page 58716]]

a. Alternative Pathway for Breakthrough Devices
(1) BAROSTIM NEO[supreg] System
    CVRx submitted an application for the BAROSTIM NEO[supreg] System. 
According to the applicant, the BAROSTIM NEO[supreg] System is 
indicated for the improvement of symptoms of heart failure--quality of 
life, six-minute hall walk and functional status--for patients who 
remain symptomatic despite treatment with guideline-directed medical 
therapy, are NYHA Class III or Class II (who had a recent history of 
Class III), have a left ventricular ejection fraction <=35%, a NT-
proBNP <1600 pg/ml and excluding patients indicated for Cardiac 
Resynchronization Therapy (CRT) according to AHA/ACC/ESC guidelines.
    The BAROSTIM NEO[supreg] System received FDA approval on August 16, 
2019 and is a Breakthrough Device designated by FDA. Additionally, 
according to the applicant, the device was available on the market 
immediately upon FDA approval. Currently, the following ICD-10-PCS 
procedure codes can be used to uniquely identify the BAROSTIM 
NEO[supreg] System: 0JH60MZ (Insertion of stimulator generator into 
chest subcutaneous tissue and fascia, open approach) in combination 
with 03HK0MZ (Insertion of stimulator lead into right internal carotid 
artery, open approach) or 03HL0MZ (Insertion of stimulator lead into 
left internal carotid artery, open approach).
    With regard to the cost criterion, the applicant used the FY 2018 
MedPAR Limited Data Set (LDS) to assess the MS-DRGs to which potential 
cases representing hospitalized patients who may be eligible for 
treatment involving the BAROSTIM NEO[supreg] System would mapped. The 
applicant searched for cases with the following combination of existing 
ICD-10-PCS codes: 0JH60MZ in combination with 03HK0MZ or 03HL0MZ. The 
applicant determined its search using these procedure codes mapped to 
MS-DRGs 252, 253, and 254 (Other Vascular Procedures with MCC, with CC, 
and without CC/MCC, respectively), resulting in 71,431 total claims 
across these three MS-DRGs.
    The applicant then removed charges for the prior technology since 
the BAROSTIM NEO[supreg] System will replace all of the current device 
charges included in the claims. The applicant explained that it removed 
all charges associated with the service category Medical/Surgical 
Supply Charge Amount, which include revenue centers 027x.
    The applicant then standardized the charges and inflated the 
charges by applying the FY 2020 IPPS/LTCH PPS final rule outlier charge 
inflation factor of 1.11100 (84 FR 42629). The applicant then added the 
charges for the new technology by converting the cost of the device to 
charges by dividing the costs by the national average cost-to-charge 
ratio of 0.299 for implantable devices from the FY2020 IPPS Final Rule 
(84 FR 42179).
    Based on the previous information, the applicant calculated a final 
average case-weighted standardized charge per case of $194,393 and an 
average case-weighted threshold of $85,559. Because the final inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount, the applicant asserted that the 
technology meets the cost criterion.
    According to the applicant, since the BAROSTIM NEO[supreg] System 
is used in heart failure patients, the applicant submitted an 
additional analysis to demonstrate that the technology meets the cost 
criterion. The applicant revised its first analysis by assessing MS-DRG 
291 (Heart Failure and Shock with MCC), 292 (Heart Failure and Shock 
with CC), and 293 (Heart Failure and Shock without CC/MCC), 242 
(Permanent Cardiac Pacemaker Implant with MCC), 243 (Permanent Cardiac 
Pacemaker Implant with CC), 244 (Permanent Cardiac Pacemaker Implant 
without CC/MCC), 222 (Cardiac Defibrillator Implant with Cardiac 
Catheterization with AMI/HF/Shock with MCC), 223 (Cardiac Defibrillator 
Implant with Cardiac Catheterization with AMI/HF/Shock without MCC), 
224 (Cardiac Defibrillator Implant with Cardiac Catheterization without 
AMI/HF/Shock with MCC), 225 (Cardiac Defibrillator Implant with Cardiac 
Catheterization without AMI/HF/Shock without MCC), 226 (Cardiac 
Defibrillator Implant without Cardiac Catheterization with MCC) and 227 
(Cardiac Defibrillator Implant without Cardiac Catheterization without 
MCC) using the same aforementioned ICD-10-PCS codes. The applicant used 
the same methodology, as previously indicated and calculated a final 
inflated average case-weighted standardized charge per case of $161,332 
and an average case-weighted threshold amount of $55,697. Because the 
final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount, the applicant 
asserted that the technology meets the cost criterion.
    In the proposed rule, we stated that we agree with the applicant 
that the BAROSTIM NEO[supreg] System meets the cost criterion and 
therefore proposed to approve the BAROSTIM NEO[supreg] System for new 
technology add-on payments for FY 2021. As previously noted, there is a 
combination of ICD-10-PCS procedure codes that can uniquely identify 
cases involving the BAROSTIM NEO[supreg] System.
    Based on information from the applicant at the time of the proposed 
rule, the cost of the BAROSTIM NEO[supreg] System is $35,000. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we proposed that the maximum new technology add-on payment for 
a case involving the use of the BAROSTIM NEO[supreg] System would be 
$22,750 for FY 2021(that is 65 percent of the average cost of the 
technology).
    We invited public comments on whether the BAROSTIM NEO[supreg] 
System meets the cost criterion and our proposal to approve new 
technology add-on payments for the BAROSTIM NEO[supreg] System for FY 
2021.
    Comment: A commenter, the applicant, supported CMS' proposal to 
approve new technology add-on payments for FY 2021 for BAROSTIM 
NEO[supreg] System.
    Response: We appreciate the applicant's support.
    Based on the information provided in the application for new 
technology add-on payments, and after consideration of the public 
comments we received, we believe the BAROSTIM NEO[supreg] System meets 
the cost criterion. The BAROSTIM NEO[supreg] System received marketing 
authorization from the FDA on August 16, 2019 for the indication 
covered by its Breakthrough Device designation.
    Therefore, we are finalizing our proposal to approve new technology 
add-on payments for BAROSTIM NEO[supreg] System for FY 2021, and we 
consider the beginning of the newness period to commence on August 16, 
2019 which is when the technology received FDA marketing authorization 
for the indication covered by its Breakthrough Device designation. 
Under Sec.  412.88(a)(2)(ii)(A), we limit new technology add-on 
payments to the lesser of 65 percent of the average cost of the 
technology, or 65 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, we are finalizing a maximum new technology 
add-on payment of $22,750 for a case involving the use of the BAROSTIM 
NEO[supreg] System for FY 2021 (that is 65 percent of the average cost 
of the technology). Cases involving the use of

[[Page 58717]]

BAROSTIM NEO[supreg] System that are eligible for new technology add-on 
payments will be identified by ICD-10-PCS codes: 0JH60MZ in combination 
with 03HK0MZ or 03HL0MZ.
(2) The NanoKnife[supreg] System
    Angiodynamics submitted an application for new technology add-on 
payments for the NanoKnife[supreg] System for FY 2021. The applicant is 
seeking new technology-add on payments for the use of the 
NanoKnife[supreg] System with six outputs for the treatment of Stage 
III pancreatic cancer. We noted in the proposed rule that FDA has not 
yet granted market approval of the NanoKnife[supreg] System for use in 
the treatment of pancreatic cancer. We also noted that the 
NanoKnife[supreg] System has been previously approved by FDA for the 
use for surgical ablation of soft tissue. Per the applicant, the 
Nanoknife[supreg] System is a medical device consisting of a dedicated 
generator and specialized electrode probes currently used for inpatient 
hospital ablation procedures for surgical treatment of soft tissue 
ablation procedures. The NanoKnife[supreg] System is considered a FDA 
class II device when indicated for soft tissue ablation.
    The applicant stated that the NanoKnife[supreg] System delivers a 
series of high voltage direct current electrical pulses between at 
least two electrode probes placed within a target area of tissue. The 
electrical pulses produce an electric field which induces 
electroporation on cells within the target area. The number of 
electrodes used is dependent on the size and shape of the tumor, and 
the individual patient's clinical needs.
    According to the applicant, electroporation is a technique in which 
an electrical field is applied to cells in order to increase the 
permeability of the cell membranes through the formation of nanoscale 
defects in the lipid bilayer. The result is creation of nanopores in 
the cell membrane and disruption of intracellular homeostasis, 
ultimately causing cell death. The applicant stated that after 
delivering a sufficient number of high voltage pulses, the cells 
surrounded by the electrodes will be irreversibly damaged. This 
mechanism, which causes permanent cell damage, is referred to as 
Irreversible Electroporation (IRE). Per the applicant, benefits of IRE 
over other ablation methods include: (1) Localized ablation of targeted 
tissue; (2) lack of damaging heat-sink effect often seen with 
traditional thermal ablation techniques; and (3) preservation of 
critical anatomic structures in the vicinity of the ablation. 
Furthermore, according to the applicant, in studies to date, the 
NanoKnife[supreg] System has been shown to be safe and effective in 
patients presenting with unresectable tumors, who, given current 
treatment standards, have few viable treatment options.
    The NanoKnife[supreg] System with six outputs for the treatment of 
Stage III pancreatic cancer received FDA Breakthrough Device 
designation on January 18, 2018 and approval of an FDA investigational 
device exemption (IDE G180278) on March 28, 2019. We noted in the 
proposed rule, as discussed previously, that although the 
NanoKnife[supreg] System received FDA Breakthrough Device designation 
for treatment of pancreatic cancer, FDA has not yet market approved or 
cleared the NanoKnife[supreg] System for use in the treatment of 
pancreatic cancer. The NanoKnife[supreg] System is currently being used 
for the treatment of Stage III pancreatic cancer in the DIRECT clinical 
trial in which the first patient was enrolled on May 13, 2019. 
Completion of the clinical trial is not expected until approximately 
December 2023.\424\
---------------------------------------------------------------------------

    \424\ https://clinicaltrials.gov/ct2/show/study/NCT03899636?term=NanoKnife&draw=2&rank=6.
---------------------------------------------------------------------------

    The applicant noted that earlier iterations of the 
NanoKnife[supreg] System indicated for the surgical ablation of soft 
tissue were available on the market after FDA clearances in 2008 and 
2015. According to the applicant, NanoKnife 3.0[supreg], the most 
recent iteration of the NanoKnife[supreg] System device consisting of 
improvements and advancements as compared to prior versions of the 
device, was cleared by FDA on June 19, 2019 for the surgical ablation 
of soft tissue and per the applicant became commercially available on 
the U.S. market in June 2019. Consistent with prior versions of the 
device, NanoKnife 3.0[supreg] is labeled for soft tissue ablation. We 
note that since the earlier versions of the NanoKnife[supreg] System 
have been available commercially on the U.S. market following FDA 
clearances in 2008 and 2015, these versions are not considered new. As 
noted previously, under the first criterion, a specific medical service 
or technology will be considered ``new'' for purposes of new medical 
service or technology add-on payments until such time as Medicare data 
are available to fully reflect the cost of the technology in the MS-DRG 
weights through recalibration. Therefore, the indication associated 
with the device during that timeframe, soft tissue ablation, would not 
be relevant for purposes of the new technology add-on payment 
application for FY 2021. Only the use of the NanoKnife[supreg] System 
with six outputs for the treatment of Stage III pancreatic cancer, for 
which the applicant submitted its application for new technology-add on 
payments for FY 2021, and the FDA Breakthrough Device designation it 
received for that use, are relevant for purposes of the new technology 
add-on payment application for FY 2021.
    According to the applicant, ICD-10- PCS procedure codes 0F5G0ZF 
(Destruction of pancreas using irreversible electroporation, open 
approach), 0F5G3ZF (Destruction of pancreas using irreversible 
electroporation, percutaneous approach), and 0F5G4ZF (Destruction of 
pancreas using irreversible electroporation, percutaneous endoscopic 
approach) may be used to distinctly identify cases involving the 
NanoKnife[supreg] System because the NanoKnife[supreg] System is 
currently the only device used for irreversible electroporation in the 
United States.
    The applicant conducted the following analysis to demonstrate that 
the technology meets the cost criterion. The applicant used the FY 2018 
MedPAR Limited Data Set (LDS) to identify the MS-DRGs to which 
potential cases representing hospitalized patients who may be eligible 
for treatment involving the NanoKnife[supreg] System would be mapped. 
The applicant searched for cases reporting the following predecessor 
ICD-10-PCS codes: 0F5G0ZZ (Destruction of pancreas, open approach), 
0F5G3ZZ (Destruction of pancreas, percutaneous approach) and 0F5G4ZZ 
(Destruction of pancreas, percutaneous endoscopic approach). According 
to the applicant, this resulted in 40 cases mapped to MS-DRGs 405, 406, 
and 407 (Pancreas, Liver and Shunt Procedures with MCC, with CC, and 
without CC/MCC, respectively). The applicant noted that cases eligible 
for use of the NanoKnife[supreg] System would likely map to MS-DRGs 
628, 629, or 630 (Other Endocrine, Nutritional and Metabolic O.R. 
procedures with MCC, with CC, and without CC/MCC, respectively) as well 
but none of the 40 cases mapped to these MS-DRGs. However, the 
applicant stated that had there been cases assigned to MS-DRGs 628, 
629, or 630, these would have been selected as well. The applicant also 
noted that cases where the open approach Whipple procedure (ICD-10- PCS 
code 0FBG0ZZ (Excision of pancreas, open approach)) was coded were 
removed, as according to the applicant it is unlikely this procedure 
would be performed in conjunction with IRE because the Whipple 
procedure is an extensive surgical

[[Page 58718]]

procedure that may not be necessary with IRE. The applicant only 
disclosed the percentage of cases assigned to MS- DRG 406 because, 
according to the applicant, the number of cases assigned to MS-DRGs 405 
and 407 was less than 12 for each MS-DRG, making the exact percentage 
for these two MS-DRGs unavailable.
    The applicant examined associated charges per MS-DRG. According to 
the applicant, since the 40 cases mapped to MS-DRGs 405, 406 and 407 
could include charges for various technologies for destruction of 
pancreatic tumors, and in order to exclude charges for prior 
technology, the applicant removed all charges billed to the medical 
supplies cost center for MS-DRGs 405, 406 and 407, as this cost center 
could include charges associated with use of various predecessor 
technologies for destruction of pancreatic tumors. The applicant noted 
it did not remove charges related to the predecessor technology as it 
believes that remaining charges associated with the cases would stay 
the same. According to the applicant, related charges consist of 
operating room, routine, intensive care, drug, radiology and Computed 
Tomography charges. The applicant then standardized the charges for 
each case and inflated each case's charges by applying the FY 2020 
IPPS/LTCH PPS final rule outlier charge inflation factor of 1.11100 (84 
FR 42629). The applicant then added the charges for the 
Nanoknife[supreg] System by dividing the costs of the device and 
required ancillary supplies per patient by the national average cost-
to-charge ratio of 0.299 for implantable devices from the FY 2020 IPPS 
Final Rule (84 FR 42179). The applicant calculated a final inflated 
average case-weighted standardized charge per case of $175,836 and an 
average case-weighted threshold amount of $102,842. Because the final 
inflated average case-weighted standardized charge per case exceeded 
the average case-weighted threshold amount, the applicant maintained 
that the technology met the cost criterion.
    In the proposed rule, we agreed with the applicant that it meets 
the cost criterion. We also stated that, as noted previously, subject 
to our proposed conditional approval process for technologies for which 
an application is submitted under the alternative pathway for certain 
antimicrobial products, applicants for new technology add-on payments 
must have FDA approval or clearance by July 1 of the year prior to the 
beginning of the fiscal year for which the application is being 
considered. As also summarized previously, the applicant is seeking new 
technology-add on payments for the use of the NanoKnife[supreg] System 
with six outputs for the treatment of Stage III pancreatic cancer, and 
it is only that use, and the FDA Breakthrough Device designation it 
received for that use, that are relevant for purposes of the new 
technology add-on payment application for FY 2021. Therefore, subject 
to the NanoKnife[supreg] System receiving FDA clearance or approval for 
use in the treatment of Stage III pancreatic cancer by July 1, 2020, we 
proposed to approve the NanoKnife[supreg] System for new technology 
add-on payments for FY 2021.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the cost of the NanoKnife[supreg] System is $11,086. 
Under Sec.  412.88(a)(2), we limit new technology add-on payments to 
the lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we proposed that the maximum new technology add-on payment for 
a case involving the use of the NanoKnife[supreg] System would be 
$7,205.90 for FY 2021.
    We invited public comments on whether the NanoKnife[supreg] System 
meets the cost criterion and our proposal to approve new technology 
add-on payments for the NanoKnife[supreg] System for FY 2021, subject 
to the NanoKnife[supreg] System receiving FDA clearance or approval for 
use in the treatment of Stage III pancreatic cancer by July 1, 2020.
    Comment: We received a few comments expressing general support for 
the approval of the NanoKnife[supreg] System for new technology add-on 
payment for FY 2021.
    We also received two comments from the applicant. (The applicant 
and its consultant submitted individual comments. We consider these 
comments to be from the applicant and on behalf of the applicant). The 
applicant stated, the new technology add on payment regulation 
applicable to medical devices that are part of FDA's Breakthrough 
Devices Program, 42 CFR 412.87(c)(1), has no explicit limit to the type 
of marketing authorization and no mandate that the marketing 
authorization indication be the same as Breakthrough Device Designation 
indication. According to the applicant, the NanoKnife[supreg] System 
has sufficient FDA market authorization under the broad regulatory 
provision in that it has a 510(k) clearance for surgical ablation of 
soft tissue. The applicant also stated that the NanoKnife[supreg] 
System has FDA Breakthrough Designation for treatment of pancreatic 
cancer. According to the commenter, based on the 510(k) clearance and 
FDA Breakthrough Designation, the NanoKnife[supreg] System should be 
approved for new technology add-on payment for FY 2021. Furthermore, 
the applicant conveyed that an FDA approved indication should reflect 
both regulatory and medical factors, explaining that medical 
authorities confirm that pancreatic cancer tissue is a form of soft 
tissue.\425\ According to the applicant, scientific articles describe 
the NanoKnife[supreg] System studies including the pancreas as, ``Early 
Results of Irreversible Electroporation (IRE) for Tumor Ablation in 
Soft Tissue Tumors.'' \426\ The applicant concluded that the 510(k) 
clearance indication covers the Breakthrough Device indication and 
medical facts reinforce a straightforward application of ``marketing 
authorization'' to recognize the overlapping the NanoKnife[supreg] 
System indications.
---------------------------------------------------------------------------

    \425\ National Comprehensive Cancer Network Clinical Practice 
Guideline Pancreatic Adenocarcinoma NCCN Evidence Blocks Version 
1.2020--November 26, 2019. See for example PANC-C 2 of 2. https://www.nccn.org/professionals/physician_gls/pdf/pancreatic_blocks.pdf.
    \426\ Walsh et al. THE AMERICAN SURGEON November 2018 Vol. 84, 
E446. Irreversible electroporation (IRE) is NanoKnife's surgical 
ablation technology. See also Martin et al. Annals of Surgery; 
Volume 262, Number 3, September 2015.
---------------------------------------------------------------------------

    The applicant commented that even if CMS were to reject the 510(k) 
clearance indication, FDA has approved the NanoKnife[supreg] System's 
investigational device exemption (IDE) for treatment of pancreatic 
cancer and that in the absence of an explicit regulatory definition 
that limits marketing authorization to only 510(k) clearances or pre-
market approvals (PMA), CMS should allow an IDE indication to satisfy 
the marketing authorization standard. According to the applicant, an 
approved IDE is an FDA authorization to; (1) advertise, promote and use 
the device for the indication under the clinical trial and (2) notify 
patients, physicians and hospitals of the availability of the device 
for the particular indication under the clinical trial.
    According to the applicant, FDA approval of an IDE signals that the 
device is safe enough and offers enough potential for effectiveness to 
be available under the controls of the IDE. Furthermore, the applicant 
stated that even if limited to the clinical trial, an IDE is clearly 
marketing authorization and that the regulation does not exclude an IDE 
as market authorization. According to the applicant, if CMS

[[Page 58719]]

wanted or looks ahead to specific types of authorizations, CMS must 
make those explicit in the regulation.
    According to the applicant, in addition to the NanoKnife[supreg] 
System's 510(k) clearance and IDE, CMS has approved a number of 
Medicare reimbursement policies recognizing the NanoKnife[supreg] 
System's use for treatment of pancreatic cancer through the following:
     Approval of national Medicare coverage for treatment of 
pancreatic cancer under the IDE;
     Approval of ICD-10-PCS codes for treatment of the 
pancreas: 0F5G0ZF Destruction of pancreas using irreversible 
electroporation, open approach; and
     Assignment of the ICD-10-PCS codes into pancreas MS DRGs: 
MS DRG 405 Pancreas, liver and shunt procedures w mcc.
    According to the applicant, these CMS coverage, coding and payment 
approvals recognizing the NanoKnife[supreg] System for pancreatic 
cancer, together with the 510(k) clearance and IDE indications 
certainly fulfill the marketing authorization new technology 
requirement.
    Finally, the applicant asserted that there would be an 
inconsistency if CMS approved of national coverage under the clinical 
trial, allowing reimbursement for the device and the routine costs of 
patient care, but denied new technology add-on payment during this 
clinical trial. According to the applicant, the current new technology 
add-on payment regulation should be applied to harmonize CMS coverage, 
coding and payment, along with FDA policies to ensure Medicare patient 
access to life-saving breakthrough devices and is fully in line with 
the statutory authority for Breakthrough Devices under the 21st Century 
Cures Act. Public Law 114-255, Section 3051.
    Response: We thank the applicant for their recommendations and 
feedback.
    Regarding the applicant's comment that based on the 510(k) 
clearance for soft tissue ablation and FDA Breakthrough Device 
designation for treatment of Stage III pancreatic cancer, the 
NanoKnife[supreg] System should be approved for new technology add-on 
payment for FY 2021 under the alternative pathway for certain 
transformative devices, we disagree. As discussed in response to 
comments in section II.G.8, we believe the applicant is asking CMS to 
evaluate this technology inconsistent with longstanding policy and to 
start the newness period prior to the time a product receives marketing 
authorization. As discussed in the proposed rule and elsewhere in this 
final rule, in the September 7, 2001 final rule that established the 
new technology add-on payment regulations (66 FR 46915), we indicated 
that an existing technology can receive new technology add on payments 
for a new use or indication. As we stated in the proposed rule, while 
we recognize that a technology can have multiple indications, each 
indication has its own newness period and must meet the new technology 
add on payment criteria. The applicable criteria will depend on whether 
the technology is eligible for an alternative new technology add-on 
payment pathway. However, each indication for the technology is 
evaluated separately from any other indication, including with respect 
to the start of the newness period, to determine whether the technology 
is eligible for new technology add-on payments when used for that 
indication. CMS did not modify this longstanding policy for evaluating 
whether a technology with multiple indications has received the 
required marketing authorization when it adopted the alternative 
pathway for certain transformative new devices in FY 2020.
    Regarding the applicant's comment that the 510(k) clearance 
indication for soft tissue covers the Breakthrough Device designation 
indication for treatment of Stage III pancreatic cancer and that the 
medical facts reinforce a straightforward application of ``marketing 
authorization'' to recognize the overlapping the NanoKnife[supreg] 
System indications should result in the approval of the 
NanoKnife[supreg] System for FY 2021 under the alternative pathway for 
certain transformative devices, we also disagree. First, as previously 
discussed, each indication for the technology is evaluated separately 
from any other indication, including with respect to the start of the 
newness period, to determine whether the technology is eligible for new 
technology add-on payments when used for that indication. Also as 
explained previously, and in the FY 2005 IPPS final rule (69 FR 49002), 
the intent of section 1886(d)(5)(K) of the Act and regulations under 
Sec.  412.87(b)(2) is to pay for new medical services and technologies 
for the first 2 to 3 years that a product comes on the market, during 
the period when the costs of the new technology are not yet fully 
reflected in the DRG weights. Therefore, as discussed in the proposed 
rule, since the earlier versions of the NanoKnife[supreg] System, 
indicated for soft tissue ablation, have been available commercially on 
the U.S. market following FDA clearances in 2008 and 2015 and are not 
considered new, the 510(k) clearance indication for soft tissue 
ablation would not be relevant for purposes of the new technology add-
on payment application for FY 2021. Also as discussed in the proposed 
rule, only the indication with six outputs for the treatment of Stage 
III pancreatic cancer is relevant for purposes of the new technology 
add-on payment application for FY 2021 under the alternative pathway 
for certain transformative devices. We refer readers to our response to 
comments in section II.G.8 of the preamble of this final rule for 
further discussion of these existing policies.
    Regarding the suggestion that an IDE can qualify as marketing 
authorization and that the IDE determination can match the Breakthrough 
Designation indication for new technology add-on payment eligibility, 
we disagree. It is our understanding that an IDE allows the 
investigational device to be used in a clinical study in order to 
collect safety and effectiveness data prior to the device receiving FDA 
marketing authorization (that is, received PMA approval, 510(k) 
clearance, or the granting of De Novo classification request). 
Therefore, we do not believe that an IDE qualifies as marketing 
authorization.\427\
---------------------------------------------------------------------------

    \427\ https://www.fda.gov/medical-devices/how-study-and-market-your-device/investigational-device-exemption-ide.
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    For these same reasons, we disagree that any separate policies 
relating to coverage, coding and payment, combined with the 510(k) 
clearance for the separate indication of soft tissue ablation and IDE 
indication for treatment of Stage III pancreatic cancer, should allow 
for the approval of new technology add-on payments for the 
NanoKnife[supreg] System for FY 2021 when used for treatment of Stage 
III pancreatic cancer. Regarding the comments about national coverage 
determinations, payment and coding, we note that the new technology 
add-on payment policy is separate and distinct from the specific 
processes for coverage, coding, and payment. As discussed previously, 
those with further questions about Medicare's coverage, coding, and 
payment processes, or those who want further guidance about how they 
can navigate these processes, can contact The Council on Technology and 
Innovation (CTI) at [email protected].
    Therefore, for the reasons stated in the proposed rule and in this 
final rule, because the NanoKnife[supreg] System did not receive FDA 
clearance or approval by July 1, 2020 for use in the treatment of

[[Page 58720]]

Stage III pancreatic cancer, which is the indication for which it 
received FDA Breakthrough Device Designation and for which it applied 
for new technology add-on payments for FY 2021, we are not approving 
new technology add-on payments for the NanoKnife[supreg] System for FY 
2021. The applicant for the NanoKnife[supreg] System would remain 
eligible to apply for the new technology add on payment under the 
alternative pathway for certain transformative new devices for a future 
fiscal year.
(3) Optimizer System
    Impulse Dynamics submitted an application for The Optimizer[supreg] 
System (QFV). The Optimizer[supreg] System is intended for the 
treatment of chronic heart failure in patients with advanced symptoms 
that have normal QRS duration and are not indicated for cardiac 
resynchronization therapy.
    Per the applicant, the Optimizer System consists of three 
components. First, the Optimizer Rechargeable Implantable Pulse 
Generator (IPG) is designed for subcutaneous implant and delivers 
cardiac contractility modulation to the heart via two standard pacing 
leads attached to the right ventricular septum. Second, the Optimizer 
Mini Charger recharges the Optimizer IPG. Finally, the Omni II 
Programmer with Omni SMART Software gives a qualified healthcare 
professional the ability to program the Optimizer IPG over a large 
range of clinical settings.
    The applicant explained that the Optimizer IPG is implanted in the 
right pre-pectoral region, similar to cardiac rhythm management 
devices. According to the applicant, the procedure is performed in a 
cardiac catheterization laboratory under fluoroscopic guidance with the 
patient under light sedation. The applicant stated that since three 
intracardiac leads are used, subclavian venous access is preferred over 
access via the axillary or cephalic vein. The applicant stated that the 
Optimizer IPG is connected to the heart via two standard implantable 
pacing leads that are each placed into the right ventricular septum.
    With respect to the newness criterion, the applicant indicated that 
FDA granted Breakthrough Device designation for the Optimizer System on 
March 21, 2019. The applicant received FDA premarket approval for the 
two-lead Optimizer System, which included placement of the two leads in 
the right ventricular septum, on October 23, 2019. The device was 
available in the market immediately following FDA approval.
    The applicant asserted that the current ICD-10-PCS codes 0JH60AZ 
(Insertion of contractility modulation device into chest subcutaneous 
tissue and fascia, open approach), 0JH63AZ (Insertion of contractility 
modulation device into chest subcutaneous tissue and fascia, 
percutaneous approach), 0JH80AZ (Insertion of contractility modulation 
device into abdomen subcutaneous tissue and fascia, open approach) and 
0JH83AZ (Insertion of contractility modulation device into abdomen 
subcutaneous tissue and fascia, percutaneous approach) identify the 
Optimizer System.
    With regard to the cost criterion, the applicant conducted an 
analysis using the FY 2018 MedPAR Limited Data Set (LDS) to demonstrate 
that the Optimizer System meets the cost criterion.
    The applicant first searched the FY 2018 MedPAR data for cases 
reporting the procedure codes listed in this section to identify 
potential cases representing hospitalized patients who may be eligible 
for treatment using the Optimizer[supreg] System. The applicant limited 
its search to MS-DRG 245 (AICD Generator Procedures), which it asserts 
is the typical MS-DRG assignment for implanting a contractility 
modulation device. The applicant identified 2,049 cases that met the 
criterion of having at least one of the following relevant ICD-10-PCS 
procedure codes:
[GRAPHIC] [TIFF OMITTED] TR18SE20.165

    The applicant determined an average unstandardized charge per case 
of $180,319. The applicant then removed all charges for prior 
technology by removing charges associated with the service categories 
Prosthetic/Orthotic (revenue center 0274), Pacemakers (revenue center 
0275) and other implantables (revenue center 0278), as the applicant 
believed the Optimizer[supreg] System will typically not be implanted 
concomitantly with other devices during the hospital admission. The 
applicant then standardized the charges and applied the FY 2020 IPPS/
LTCH PPS final rule outlier charge inflation factor of 1.11100 (84 FR 
42629) to update the charges from FY 2018 to FY 2020.
    The applicant added the charges for the new technology by dividing 
its cost per patient by the national average cost-to-charge ratio of 
0.299 for implantable devices from the FY2020 IPPS Final Rule (84 FR 
42179).
    The applicant calculated a final inflated average case-weighted 
standardized charge per case of $190,167, which it stated exceeded the 
average case-weighted threshold amount of $148,002 by $42,165.
    The applicant also conducted a subsequent analysis that only 
included patients with a diagnosis of heart failure. The applicant once 
again limited its search to MS-DRG 245 and refined its sample by 
including only cases with one of the ICD-10-PCS

[[Page 58721]]

procedure codes listed previously and an ICD-10-CM diagnosis code from 
Category I50 (Heart Failure) on the claim. This resulted in 1,698 cases 
with an average unstandardized charge per case of $183,243. After 
following the same order of operations as the first analysis, the final 
inflated average case weighted standardized charge per case was 
$192,237, which exceeded the average case weighted threshold amount of 
$148,002. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount 
under both analyses described previously, the applicant maintains that 
the technology meets the cost criterion.
    In the proposed rule, we stated that we agree with the applicant 
that the technology meets the cost criterion and therefore proposed to 
approve the Optimizer[supreg] System for new technology add-on payments 
for FY 2021. As previously noted, the applicant asserted that ICD-10-
PCS codes 0JH60AZ, 0JH63AZ, 0JH80AZ and 0JH83AZ identify the 
Optimizer[supreg] System.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the cost of the Optimizer[supreg] System is $23,000. 
Under Sec.  412.88(a)(2), we limit new technology add-on payments to 
the lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we proposed that the maximum new technology add-on payment for 
a case involving the use of the Optimizer[supreg] System would be 
$14,950 for FY 2021.
    We invited public comments on whether the Optimizer[supreg] System 
meets the cost criterion and our proposal to approve new technology 
add-on payments for the Optimizer[supreg] System for FY 2021.
    Comment: Commenters supported CMS' intent to improve beneficiary's 
access to new technology and supported CMS' proposal to approve new 
technology add-on payments for FY 2021 for Optimizer[supreg] System.
    Response: We appreciate the commenters' support.
    Based on the information provided in the applicant's new technology 
add-on payment application and after consideration of the public 
comments we received, we believe that Optimizer[supreg] System meets 
the cost criterion. The Optimizer[supreg] System received marketing 
authorization from the FDA on October 23, 2019 for the indication 
covered by its Breakthrough Device designation.
    Therefore, we are finalizing our proposal to approve new technology 
add-on payments for Optimizer[supreg] System for FY 2021, and we 
consider the newness period to commence on October 23, 2019 when the 
technology received FDA marketing authorization for the indication 
covered by its Breakthrough Device designation. Under Sec.  
412.88(a)(2)(ii)(A), we limit new technology add-on payments to the 
lesser of 65 percent of the average cost of the technology, or 65 
percent of the costs in excess of the MS-DRG payment for the case. As a 
result, we are finalizing a maximum new technology add-on payment of 
$14,950 for a case involving the use of the Optimizer[supreg] System 
for FY 2021(that is 65 percent of the average cost of the technology). 
Cases involving the use of Optimizer[supreg] System that are eligible 
for new technology add-on payments will be identified by ICD-10-PCS 
codes 0JH60AZ, 0JH63AZ, 0JH80AZ or 0JH83AZ.
b. Alternative Pathways for Qualified Infectious Disease Products 
(QIDPs)
(1) Cefiderocol (Fetroja)
    Shionogi & Co. Ltd (Company) submitted an application for 
Cefiderocol (Fetroja), a [beta]-lactam antibiotic indicated for the 
treatment of complicated urinary tract infections (cUTI), including 
pyelonephritis, caused by the following susceptible Gram-negative (GN) 
pathogens: Escherichia coli (including with concurrent bacteremia), 
Klebsiella pneumoniae, Proteus mirabilis, Pseudomonas aeruginosa, 
Citrobacter freundii, Enterobacter cloacae, Morganella morganii, and 
Serratia marcescens. Per the applicant, Cefiderocol should be used to 
treat infections where limited or no alternative treatment options are 
available and where cefiderocol is likely to be an appropriate 
treatment option, which may include use in patients with infections 
caused by documented or highly suspected carbapenem-resistant (CR) and/
or multidrug-resistant GN pathogens.
    The applicant describes Cefiderocol as an injectable siderophore 
cephalosporin. The applicant asserts that the principal antibacterial/
bactericidal activity of Cefiderocol occurs with inhibiting GN 
bacterial cell wall synthesis by binding to penicillin-binding 
proteins. The applicant contends that Cefiderocol is unique in that it 
can enter the bacterial periplasmic space (in addition to the typical 
entry point via porin channels) as a result of its siderophore-like 
property, has enhanced stability to [beta]-lactamases, and has activity 
limited to GN aerobic bacteria only.
    Per the applicant, cUTIs are the second leading cause of 
hospitalization in the elderly and have substantial morbidity and worse 
outcomes if the causative pathogens are carbapenem-resistant (CR). 
According to the applicant, bloodstream infection (BSI) is often 
associated with cUTI, known as urosepsis, with an associated mortality 
rate of 9 to 31 percent. The applicant asserts that patients who 
develop cUTI due to a CR pathogen are at greater risk for prolonged 
hospital stays and progression to a BSI or urosepsis. The applicant 
stated that CR is a growing problem in the US and around the world, 
with increasing infections due to strains that are resistant to most or 
all currently available antibiotics. The applicant further states that, 
compared to susceptible pathogens, CR pathogens cause prolonged 
hospital and intensive care unit (ICU) stays, worse discharge status, 
and greater mortality.
    Cefiderocol is designated as a QIDP and received FDA approval on 
November 19, 2019. However, according to the applicant, Cefiderocol was 
not commercially available until February 24, 2020 due to the 
finalization of the materials associated with the commercial launch of 
a drug, which could not be completed until the final label with FDA was 
determined. The applicant submitted a request for approval of unique 
ICD 10 PCS procedure codes for the administration of Cefiderocol 
beginning in FY 2021 and was granted approval for the following 
procedure codes effective October 1, 2020: XW03366 or XW04366.
    With regard to the cost criterion, the applicant conducted two 
analyses based on 100% and 75% of identified claims. For both 
scenarios, the applicant used the FY 2018 MedPAR Limited Data Set (LDS) 
to assess the MS-DRGs to which potential cases representing 
hospitalized patients who may be eligible for Cefiderocol treatment 
would be mapped. The applicant identified eligible cases by searching 
the FY 2018 MedPAR for cases reporting one of the following ICD-10-CM 
codes:

[[Page 58722]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.166

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

[[Page 58723]]

Because the final inflated average case-weighted standardized charge 
per case for each scenario exceeds the average case-weighted threshold 
amount for each scenario, the applicant asserted that the technology 
meets the cost criterion.
    In the proposed rule we stated that we agree with the applicant 
that Cefiderocol meets the cost criterion and therefore proposed to 
approve Cefiderocol for new technology add-on payments for FY 2021. As 
previously noted, the applicant has received unique ICD-10-PCS 
procedure codes to identify cases involving the administration of 
Cefiderocol.
    In its application, the applicant stated that the cost of 
Cefiderocol is $10,559.81. Under 412.88(a)(2), we limit new technology 
add-on payments for QIDPs to the lesser of 75 percent of the costs of 
the new medical service or technology, or 75 percent of the amount by 
which the costs of the case exceed the MS-DRG payment. As a result, we 
proposed that the maximum new technology add-on payment for a case 
involving the administration of Cefiderocol would be $7,919.86 for FY 
2021 (that is 75 percent of the average cost of the technology).
    We invited public comments on whether Cefiderocol meets the cost 
criterion and our proposal to approve new technology add-on payments 
for Cefiderocol for FY 2021.
    Comment: Several commenters, including the applicant, supported 
CMS' proposal to approve new technology add-on payments for FY 2021 for 
Cefiderocol Infusion. The applicant also further confirmed CMS' 
methodology of arriving at the maximum new technology add-on payment as 
stated in the FY 2021 proposed rule for Cefiderocol as appropriate.
    Response: We appreciate the commenters' support.
    Based on the information provided in the applicant's new technology 
add-on payment application and after consideration of the public 
comments we received, we believe that Cefiderocol meets the cost 
criterion. As previously discussed, Cefiderocol received FDA approval 
on November 19, 2019 for use in the treatment of (cUTI) but was not 
commercially available until February 24, 2020. Therefore, we are 
finalizing our proposal to approve new technology add-on payments for 
Cefiderocol for FY 2021, and we consider the beginning of the newness 
period to commence when the technology became commercially available on 
February 24, 2020. Under Sec.  412.88(a)(2)(ii)(B), we limit new 
technology add-on payments for QIDPs to the lesser of 75 percent of the 
average cost of the technology, or 75 percent of the amount by which 
the costs of the case exceed the standard MS-DRG payment. As a result, 
we are finalizing a maximum new technology add-on payment of $7,919.86 
for a case involving the use of Cefiderocol for FY 2021(that is 75 
percent of the average cost of the technology). Cases involving the use 
of Cefiderocol that are eligible for new technology add-on payments 
will be identified by ICD-10-PCS procedure codes XW03366 or XW04366.
(2) Contepo
    CONTEPOTM (fosfomycin for injection), is intended for 
treatment of complicated urinary tract infections (cUTI) and is 
designated by FDA as a QIDP. In October 2018, Nabriva Therapeutics 
submitted a New Drug Application (NDA) to the US-FDA seeking marketing 
approval of IV fosfomycin for injection (ZTI-01) for the treatment of 
patients 18 years and older with cUTI including acute pyelonephritis 
(AP) caused by designated susceptible bacteria. The applicant noted 
that once approved, CONTEPO will represent the first FDA-approved IV 
epoxide antibiotic in the United States.
    On April 30, 2019, Nabriva received a Complete Response Letter 
(CRL) from FDA for the NDA seeking marketing approval of CONTEPO 
(fosfomycin) for injection. The applicant stated that the CRL from FDA 
requests that Nabriva address issues related to facility inspections 
and manufacturing deficiencies at one of Nabriva's contract 
manufacturers prior to FDA approving the NDA. Nabriva had resubmitted 
its NDA to FDA with FDA setting a Prescription Drug User Fee Act 
(PDUFA) goal date of June 19, 2020 for the completion of its review of 
the NDA.
    The applicant applied for and received a unique ICD-10-PCS 
procedure code to identify cases involving the administration of 
CONTEPOTM in 2019. Effective October 1, 2019, 
CONTEPOTM administration can be identified by ICD-10-PCS 
procedure codes XW033K5, (Introduction of Fosfomycin anti-infective 
into peripheral vein, percutaneous approach, new technology group 5) 
and XW043K5 (Introduction of Fosfomycin anti-infective into central 
vein, percutaneous approach, new technology group 5), which the 
applicant states are unique to CONTEPO administration.
    With regard to the cost criterion, the applicant used the FY 2018 
MedPAR Limited Data Set (LDS) to assess the MS-DRGs to which potential 
cases representing hospitalized patients who may be eligible for 
treatment involving CONTEPO\TM\ would most likely be mapped. According 
to the applicant, CONTEPO\TM\ is anticipated to be indicated for the 
treatment of hospitalized patients who have been diagnosed with 
complicated urinary tract infections (cUTIs). The applicant identified 
199 ICD-10-CM diagnosis code combinations that identify hospitalized 
patients who have been diagnosed with a cUTI. Searching the FY 2018 
MedPAR data file for these ICD-10-CM diagnosis codes resulted in a 
total of 684,664 potential cases that span 570 unique MS-DRGs, 522 of 
which contained more than 10 cases. The applicant excluded MS-DRGs with 
minimal volume (that is, 10 cases or less) from the cohort of the 
analysis (a total of 252 cases and 48 MS-DRGs), and this resulted in a 
total of 684,412 cases across 522 MS-DRGs.
    The applicant examined associated charges per MS-DRG and removed 
charges for potential antibiotics that may be replaced by the use of 
CONTEPO\TM\. Specifically, the applicant identified 5 antibiotics 
currently used for the treatment of patients who have been diagnosed 
with a cUTI and calculated the cost of each of these drugs for 
administration over 14 day inpatient hospitalization. Because patients 
who have been diagnosed with a cUTI would typically only be treated 
with one of these antibiotics at a time, the applicant estimated an 
average of the 14-day cost for the 5 antibiotics. The applicant then 
converted the cost to charges by dividing the costs by the national 
average CCR of 0.189 for drugs from the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42179).
    The applicant then standardized the charges for each case and 
inflated each case's charges by applying the FY 2020 IPPS/LTCH PPS 
final rule outlier charge inflation factor of 1.11100 (84 FR 42629). 
The applicant then added the charges for the new technology by 
calculating the per-day cost per patient. The applicant noted that the 
duration of therapy of up to 14 days (patients that had a cUTI with 
concurrent bacteremia) is consistent with the prospective prescribing 
information, and that it used this 14-day duration of therapy to 
calculate total inpatient cost. The applicant then converted these 
costs to charges by dividing the costs per patient by the national 
average cost-to charge ratio of 0.189 for drugs from the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42179). The applicant calculated a final 
inflated average case-weighted standardized charge per case of $75,533 
and a case weighted threshold of

[[Page 58724]]

$55,447. Because the final inflated average case-weighted standardized 
charge per case for CONTEPOTM exceeded the average case-
weighted threshold amount, the applicant maintained it meets the cost 
criterion.
    As summarized, the applicant used a 14-day duration of therapy to 
calculate total inpatient cost for purposes of its cost analysis. 
However, the applicant noted that the average number of days a patient 
would be administered CONTEPOTM will most likely fall 
between 10-14 days of therapy given the current guideline 
recommendations. Of these treatment days, the applicant noted that 
nearly all would occur during the inpatient hospital stay. Consistent 
with our historical practice, we stated in the proposed rule that we 
believe the new technology add-on payment for CONTEPOTM, if 
approved, would be based on the average cost of the technology and not 
the maximum. For example, in the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53358), we approved new technology add-on payments for 
DIFICIDTM based on the average dosage of 6.2 days rather 
than the maximum 10 day dosage. Without further information from the 
applicant regarding the average number of days CONTEPOTM is 
administered, we stated that we believe using the middle ground of 12.5 
days, based on the 10-14 day period indicated by the applicant, is 
appropriate for this analysis to determine the average number of days 
CONTEPOTM is administered in the hospital. To assess whether 
the technology would meet the cost criterion using an average cost for 
the technology based on this 12.5-day period for CONTEPOTM 
administration, we converted the costs to charges by dividing the costs 
per patient by the national average cost-to charge ratio of 0.189 for 
drugs from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179). Based on 
data from the applicant, this resulted in a final inflated average 
case-weighted standardized charge per case of $73,548 which exceeds the 
case weighted threshold of $55,447.
    Because of the large number of cases included in this cost 
analysis, the applicant supplemented the analysis as described 
previously with additional sensitivity analyses. In these analyses, the 
previous cost analysis was repeated using only the top 75 percent of 
cases, the top 20 MS-DRGs, and the top 10 MS-DRGs. In these three 
additional sensitivity analyses, the final inflated average case-
weighted standardized charge per case for CONTEPOTM of 
$64,019, $62,486 and $61,158 exceeded the average case-weighted 
threshold amount of $51,085, $50,704 and $49,889, respectively. We note 
that the applicant did not use the thresholds from the correction 
notice to case weight the charges, however the variance is minimal with 
the final inflated average case-weighted standardized charge per case 
well in excess of the case weighted threshold amounts. Because the 
final inflated average case-weighted standardized charge per case for 
CONTEPOTM exceeded the average case-weighted threshold 
amount, the applicant asserts that CONTEPOTM meets the cost 
criterion.
    In the proposed rule, we stated that we believe that 
CONTEPOTM meets the cost criterion and therefore proposed to 
approve CONTEPOTM for new technology add-on payments for FY 
2021. As previously noted, the applicant has received a unique ICD-10-
PCS procedure code to identify cases involving the administration of 
CONTEPOTM.
    As discussed previously, we stated in the proposed rule that 
without further information from the applicant regarding the average 
number of days CONTEPOTM is administered, we believe using a 
12.5 day duration of therapy is a reasonable approach for estimating 
the average cost of the technology. Based on preliminary information 
from the applicant at the time of the proposed rule, the cost of 
CONTEPOTM administered over 12.5 days is $3,125. Under Sec.  
412.88(a)(2), we limit new technology add-on payments for QIDPs to 75 
percent of the costs of the new medical service or technology, or 75 
percent of the amount by which the costs of the case exceed the MS-DRG 
payment. As a result, we proposed that the maximum new technology add-
on payment for a case involving the administration of 
CONTEPOTM would be $2,343.75 for FY 2021 (that is 75 percent 
of the average cost of the technology).
    We invited public comments on whether CONTEPOTM meets 
the cost criterion and our proposal to approve new technology add-on 
payments for CONTEPOTM for FY 2021.
    Comment: Several commenters supported CMS' proposal to approve new 
technology add-on payments for FY 2021 for CONTEPOTM 
infusion.
    Response: We appreciate the commenters' support.
    Comment: A commenter, the applicant, supported CMS' proposal to 
approve new technology add-on payments for FY 2021 for 
CONTEPOTM and notified CMS that the applicant plans to 
request a Type A meeting with FDA to discuss appropriate next steps and 
FDA's plans for completing foreign facility inspections. The applicant 
stated that it will inform CMS on the status of the CONTEPO NDA once 
the application is resubmitted and a new PDUFA date is confirmed. The 
applicant also agrees with CMS of using 12.5-day duration of therapy 
for estimating the average cost of the technology. The applicant 
further agrees that using the thresholds from the FY 2020 final rule as 
opposed to the correction notice to case weight the charges for 
CONTEPOTM has no impact on meeting the cost criterion (final 
inflated average case-weighted standardized charges per case are well 
in excess of the case weighted threshold).
    Response: We appreciate the applicant's comments. We agree that 
CONTEPOTM meets the cost criterion.
    As discussed later in this section of this rule, we are finalizing 
our proposal to provide for conditional approval for a technology for 
which an application is submitted under the alternative pathway for 
certain antimicrobial products at Sec.  412.87(d) that does not receive 
FDA marketing authorization by the July 1 deadline specified in Sec.  
412.87(e)(2), provided that the technology receives FDA marketing 
authorization by July 1 of the particular fiscal year for which the 
applicant applied for new technology add-on payments. We refer the 
reader to the later discussion in this section of this rule for 
complete details regarding this final policy. Therefore, because 
CONTEPOTM otherwise meets the new technology add-on payment 
criteria under the alternative pathway for products designated as 
QIDPs, we are granting a conditional approval for CONTEPOTM 
for new technology add-on payments, subject to the technology receiving 
FDA marketing authorization by July 1, 2021 (that is, by July 1 of the 
fiscal year for which the applicant applied for new technology add-on 
payments (2021)). If CONTEPOTM receives FDA marketing 
authorization before July 1, 2021, the new technology add-on payment 
for cases involving the use of this technology would be made effective 
for discharges beginning in the first quarter after FDA marketing 
authorization is granted. If the FDA marketing authorization is 
received on or after July 1, 2021, no new technology add-on payments 
will be made for cases involving the use of CONTEPOTM for FY 
2021.
    After consideration of the comments received, we are also 
finalizing our proposal to use a 12.5 day duration of therapy to 
estimate the average cost of the technology. Under Sec.  
412.88(a)(2)(ii)(B), we limit new

[[Page 58725]]

technology add-on payments for QIDPs to the lesser of 75 percent of the 
average cost of the technology, or 75 percent of the amount by which 
the costs of the case exceed the standard MS-DRG payment. If 
CONTEPOTM receives FDA approval prior to July 1, 2021, the 
maximum new technology add-on payment for a case involving the 
administration of CONTEPOTM is $2,343.75 for FY 2021 (that 
is 75 percent of the average cost of the technology). Cases involving 
the use of CONTEPOTM that would be eligible for new 
technology add-on payments will be identified by ICD-10-PCS procedure 
codes XW033K5, (Introduction of Fosfomycin anti-infective into 
peripheral vein, percutaneous approach, new technology group 5) or 
XW043K5 (Introduction of Fosfomycin anti-infective into central vein, 
percutaneous approach, new technology group 5).
(3) NUZYRA[supreg] for Injection
    Paratek Pharmaceuticals submitted an application for new technology 
add-on payments for NUZYRA[supreg] (omadacycline) for Injection for FY 
2021. According to the applicant, NUZYRA[supreg] for Injection is a 
tetracycline class antibacterial indicated for the treatment of adult 
patients with the following infections caused by susceptible 
microorganisms:
     Community-acquired bacterial pneumonia (CABP) caused by 
the following susceptible microorganisms: Streptococcus pneumoniae, 
Staphylococcus aureus (methicillin-susceptible isolates), Haemophilus 
influenzae, Haemophilus parainfluenzae, Klebsiella pneumoniae, 
Legionella pneumophila, Mycoplasma pneumoniae, and Chlamydophila 
pneumoniae.
     Acute bacterial skin and skin structure infections 
(ABSSSI) caused by the following susceptible microorganisms: 
Staphylococcus aureus (methicillin susceptible and resistant isolates), 
Staphylococcus lugdunensis, Streptococcus pyogenes, Streptococcus 
anginosus grp. (includes S. anginosus, S. intermedius, and S. 
constellatus), Enterococcus faecalis, Enterobacter cloacae, and 
Klebsiella pneumoniae.
    The applicant explained that NUZYRA[supreg] for Injection is 
supplied as a lyophilized powder in a single-dose colorless glass vial, 
with each vial containing 100 mg of NUZYRA[supreg] (equivalent to 131 
mg omadacycline tosylate). 100-mg single dose vials are packaged in 
cartons of 10. The NDC number is 71715-001-02. Additionally, the 
applicant noted that while an oral formulation of NUZYRA[supreg] is 
available, NUZYRA[supreg] can also be administered through intravenous 
infusion. Providers may determine which method of administration is 
clinically appropriate for each patient. Adult patients with CABP must 
receive their initial loading dose of NUZYRA[supreg] via intravenous 
infusion. The applicant specified that NUZYRA[supreg] for Injection 
should not be administered with any solution containing multivalent 
cations, for example, calcium and magnesium, through the same 
intravenous line. Co-infusion with other medications has not been 
studied. The applicant conveyed that for treatment of adults with CABP, 
the recommended dosage regimen of NUZYRA[supreg] for Injection is as 
follows (Use NUZYRA for injection administered by intravenous infusion 
for the loading dose in CABP patients):
[GRAPHIC] [TIFF OMITTED] TR18SE20.167

    For treatment of adults with ABSSSI, the recommended dosage regimen 
of NUZYRA[supreg] for injection is as follows (Use NUZYRA[supreg] for 
injection administered by intravenous infusion or NUZYRA[supreg] 
tablets orally administered for the loading dose in ABSSSI patients):
[GRAPHIC] [TIFF OMITTED] TR18SE20.168

    Finally, the applicant indicated that no dose adjustment is 
warranted in patients with renal or hepatic impairment.
    According to the applicant, NUZYRA[supreg] for Injection was 
submitted for FDA approval under a New Drug Application (identified as 
NDA 209817). After Fast Track and Priority Review consideration, 
NUZYRA[supreg] for Injection received FDA approval on October 2, 2018. 
According to information provided by the applicant, NUZYRA[supreg] for 
Injection was designated as a QIDP and granted priority review. 
According to the applicant, NUZYRA[supreg] for Injection became 
commercially available in February 2019. The applicant explained that 
the delay in commercial availability was due to an effort to prepare 
the distribution and supply channel (pharmacies and wholesalers) and to 
prepare for a full promotional launch.
    The applicant submitted a request for approval of unique ICD-10-PCS 
procedure codes for the administration of NUZYRA[supreg] for Injection 
beginning in FY 2021 and was granted approval for the following ICD-10-
PCS procedure codes effective October 1, 2020: XW033B6 (Introduction of 
omadacycline anti-infective into peripheral vein, percutaneous 
approach, new technology group 6) or XW043B6 (Introduction of 
omadacycline anti-infective into peripheral vein, percutaneous 
approach, new technology group 6).
    With regard to the cost criterion, the applicant used the FY 2018 
MedPAR Limited Data Set (LDS) to identify potential cases that may be 
eligible for treatment involving NUZYRA[supreg] for Injection. To 
ensure appropriate discharges were used from the dataset, the following 
edits were made:
     Claims paid by a Managed Care Organization were removed.
     Duplicated records with the same beneficiary ID, provider, 
admission data, and discharge date were removed.

[[Page 58726]]

     Interim claims were combined into discharge records.
     Discharges with covered charges of zero dollars and 
discharges with zero covered days were removed.
     Discharges from IPPS hospitals, as determined by the FY 
2020 IPPS Impact File and discharges with discharge dates from October 
1, 2017 to September 30, 2018 were included.
     Statistical outliers with standard charges that were 
outside of the range of +/-3 standard deviations from the geometric 
mean standardized charge by MS-DRG were removed.
    After these edits were made, the applicant selected discharges that 
had a primary or secondary diagnosis for ABSSSI or CABP, using a wide 
list of ICD-10-PCS codes, which resulted in a total of 1,745,649 
discharges. Using these 1,745,649 discharges, 37 MS-DRGs were selected 
based on one of the following criteria:
     MS-DRGs with the highest volume of discharges with a 
primary or secondary diagnosis for ABSSSI or CABP (which represent 70 
percent of all discharges with ABSSSI or CABP).
     MS-DRGs with at least two-thirds of discharges with a 
primary or secondary diagnosis of ABSSSI or CABP.
    Using this method, the applicant identified 1,226,429 total cases 
which mapped to the following 37 unique MS-DRGs:
[GRAPHIC] [TIFF OMITTED] TR18SE20.169


[[Page 58727]]


    Next, using the cases mapping to these selected MS-DRGs, the 
applicant removed pharmacy charges for other drugs and standardized the 
charges. Then, the applicant inflated the standardized charges from FY 
2018 to FY 2020 using a 2-year charge inflation factor of 11.1 percent, 
based on the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629).
    The applicant estimated the cost of NUZYRA[supreg] for Injection 
based on an average inpatient stay of 5 days in the clinical 
trial.\428\ Some patients may be required to stay longer than 5 days, 
resulting in increased charges. Using a loading dose for day 1 and 
maintenance doses in days 2 through 5 results in use of 6 vials. Each 
vial costs $345, resulting in a total cost for the new technology of 
$2,070. The applicant estimated charges for the drug by dividing the 
cost by the national average cost-to-charge (CCR) for drugs of 0.189, 
as set forth in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179). 
This resulted in estimated charges of $10,952. The applicant then added 
$10,952 of charges for the drug which resulted in a final inflated 
average case-weighted standardized charge per case of $58,922. The 
applicant determined an average case-weighted threshold amount of 
$53,899. Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount, 
the applicant maintained that the technology met the cost criterion.
---------------------------------------------------------------------------

    \428\ Doe, et al., ``Reducing mortality in disease X population: 
Analysis,'' JAMA 2019, vol. 2(5), pp. 12-23.
---------------------------------------------------------------------------

    In the proposed rule we stated that we agreed with the applicant 
that it meets the cost criterion and therefore proposed to approve 
NUZYRA[supreg] for Injection for new technology add-on payments for FY 
2021. As previously noted, the applicant has received unique ICD-10-PCS 
procedure codes to identify cases involving the administration of 
NUZYRA[supreg] for Injection.
    Based on preliminary information from the applicant at the time of 
the proposed rule, the cost of NUZYRA[supreg] for Injection is $2,070. 
Under Sec.  412.88(a)(2), we limit new technology add-on payments for 
QIDPs to 75 percent of the costs of the new medical service or 
technology, or 75 percent of the amount by which the costs of the case 
exceed the MS-DRG payment. As a result, we proposed that the maximum 
new technology add-on payment for a case involving the use of 
NUZYRA[supreg] for Injection would be $1,552.50 for FY 2021 (that is 75 
percent of the average cost of the technology).
    We invited public comments on whether NUZYRA[supreg] for Injection 
meets the cost criterion and our proposal to approve new technology 
add-on payments for NUZYRA[supreg] for Injection for FY 2021.
    Comment: A commenter supported CMS' proposal to approve new 
technology add-on payments for FY 2021 for NUZYRA[supreg] for 
Injection.
    Response: We appreciate the commenter's support.
    Based on the information included in the applicant's new technology 
add-on payment application and after consideration of the public 
comments we received, we believe that NUZYRA[supreg] for Injection 
meets the cost criterion. As previously discussed, NUZRYRA for 
Injenction received FDA approval on October 2, 2018, but was not 
commercially available until February 1, 2019. Therefore, we are 
finalizing our proposal to approve new technology add-on payments for 
NUZRYA for Injection for FY 2021, and we consider the beginning of the 
newness period to commence when the technology became commercially 
available on February 1, 2019. Under Sec.  412.88(a)(2)(ii)(B), we 
limit new technology add-on payments for QIDPs to the lesser of 75 
percent of the average cost of the technology, or 75 percent of the 
amount by which the costs of the case exceed the standard MS-DRG 
payment. Therefore, we are finalizing a maximum new technology add-on 
payment of $1,552.50 for a case involving the use of NUZYRA[supreg] for 
Injection for FY 2021(that is 75 percent of the average cost of the 
technology). Cases involving the use of NUZYRA[supreg] for Injection 
that are eligible for new technology add-on payments will be identified 
by ICD-10-PCS procedure codes XW033B6 or XW043B6.
(4) RECARBRIOTM
    Merck submitted an application for new technology add-on payments 
for RECARBRIOTM for FY 2021. RECARBRIOTM is a 
fixed-dose combination of imipenem, a penem antibacterial; cilastatin, 
a renal dehydropeptidase inhibitor; and relebactam, a novel [beta]-
lactamase inhibitor (BLI). According to the applicant, 
RECARBRIOTM is intended for the treatment of complicated 
urinary tract infections (cUTI) and complicated intra-abdominal 
infections (cIAI) for patients 18 years of age and older. 
RECARBRIOTM is administered via intravenous infusion.
    The applicant explained that the recommended dose of 
RECARBRIOTM is 1.25 grams administered by intravenous 
infusion over 30 minutes every 6 hours in patients 18 years of age and 
older with creatinine clearance (CLcr) 90 mL/min or greater. According 
to the applicant, the recommended treatment course suggests that a 
patient will receive 1 vial per dose and 4 doses per day. Per 
RECARBRIOTM's prescribing information, the recommended 
duration of treatment with RECARBRIOTM is 4 days to 14 days.
    According to information provided by the applicant, 
RECARBRIOTM is designated by FDA as a QIDP and received FDA 
approval on July 16, 2019 for injection in patients 18 years of age and 
older who have limited or no alternative treatment options for the 
treatment of the following infections caused by certain susceptible 
gram-negative bacteria: cUTI including pyelonephritis and cIAI. 
According to the applicant, RECARBRIOTM became commercially 
available on the U.S. market on January 6, 2020. The applicant stated 
that the delay in commercial availability was due to manufacturing 
considerations. According to the applicant, RECARBRIOTM can 
be identified with ICD-10-PCS codes XW033U5 (Introduction of imipenem-
cilastatin-relebactam anti-infective into peripheral vein, percutaneous 
approach, new technology group 5) or XW043U5 (Introduction of imipenem-
cilastatin-relebactam antiinfective-into central vein, percutaneous 
approach, new technology group 5).
    To demonstrate that the technology meets the cost criterion, the 
applicant searched the FY 2018 MedPAR Limited Data Set (LDS) for cases 
reporting ICD-10-CM diagnosis codes for either cUTI or cIAI with ICD-
10-PCS codes XW033U5 (Introduction of imipenem-cilastatin-relebactam 
anti-infective into peripheral vein, percutaneous approach, new 
technology group 5 or XW043U5 (Introduction of imipenem-cilastatin-
relebactam anti-infective into central vein, percutaneous approach, new 
technology group 5) to identify the MS-DRGs to which potential cases 
representing hospitalized patients who may be eligible for treatment 
involving RECARBRIOTM would be mapped. The applicant 
identified a total 25,379 cases which were mapped to 453 unique MS-
DRGs. There were 299 MS-DRGs with minimal frequencies (fewer than 11 
cases), with a total of 1,140 cases associated with such low-volume MS-
DRGs. After excluding the cases that were mapped to these low-volume 
MS-DRGs, the applicant identified 24,239 cases that were mapped to 153 
unique MS-DRGs. The applicant examined associated charges per MS-DRG 
and

[[Page 58728]]

removed all pharmacy charges that will be replaced through the use of 
RECARBRIOTM. The applicant standardized the charges and 
inflated the charges by applying the FY 2020 IPPS/LTCH PPS final rule 
outlier charge inflation factor of 1.11100 (84 FR 42629). The applicant 
estimated an average cost of RECARBRIOTM for the treatment 
of cUTI or cIAI in the inpatient setting based on the recommended dose 
of 1.25 grams (imipenem 500 mg, cilastatin 500 mg, relebactam 250 mg) 
administered by intravenous infusion over 30 minutes every 6 hours in 
patients 18 years of age and older with creatinine clearance (CLcr) 90 
mL/min or greater. As previously stated, according to the applicant, 
the recommended treatment course suggests that a patient will receive 1 
vial per dose, 4 doses per day within a recommended treatment duration 
of 4 to 14 days. To determine the cost per patient, the applicant 
stated it used the FY 2018 MedPAR analysis of total cases representing 
hospitalized patients who may be eligible for treatment involving 
RECARBRIOTM to identify a percentage of total cases per 
indication: cUTI equaled 88.6 percent of cases and cIAI equaled 11.4 
percent. According to the applicant, it next identified the average 
length of stay per indication: cUTI 6.4 days and cIAI 9.7 days. 
According to the applicant, it also assumed that 70 percent of patients 
would receive RECARBRIOTM beginning on the fourth day after 
admission while the remaining 30 percent of these patients would 
receive RECARBRIOTM beginning on the second day of their 
hospitalization. According to the applicant, it multiplied the daily 
dose cost by the two scenarios for each cUTI and cIAI indication to 
determine the cost per stay for each indication by days of drug use. 
According to the applicant, next it multiplied the cost per stay for 
each indication by the share of cases by days in use (70/30 percent 
split) to determine the weighted cost for days in use estimation. 
According to the applicant, it summed the 70/30 percent case breakdown 
(weighted cost) for patients initiating on day 2 and 4 to determine the 
average cost per indication for cUTI and cIAI. Finally, according to 
the applicant, it multiplied the average cost per indication by the 
percent of total cases for cUTI and cIAI, then summed them to get the 
overall average cost. The applicant converted this cost to a charge by 
dividing the costs by the national average cost-to-charge ratio of 
0.189 for drugs from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179) 
and added the resulting charges to determine the final inflated average 
caseweighted-standardized charge per case. The applicant calculated a 
final inflated average caseweighted-standardized charge per case of 
$75,122 and an average case-weighted threshold amount of $52,216.
    The applicant also calculated an average case-weighted standardized 
charge per case for cUTI and cIAI separately using the same methodology 
previously described and determined final inflated average case-
weighted standardized charges per case of $70,765 for cUTI and $109,403 
for cIAI and average case-weighted thresholds of $50,210 for cUTI and 
$67,531 for cIAI. Because the final inflated average case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount in each scenario, the applicant maintained that the 
technology met the cost criterion.
    We agreed with the applicant that it meets the cost criterion and 
therefore proposed to approve RECARBRIOTM for new technology 
add-on payments for FY 2021. As previously noted, the applicant stated 
that RECARBRIOTM can be identified by ICD-10-PCS codes 
XW033U5 (Introduction of imipenem-cilastatin-relebactam anti-infective 
into peripheral vein, percutaneous approach, new technology group 5) or 
XW043U5 (Introduction of imipenem-cilastatin-relebactam antiinfective-
into central vein, percutaneous approach, new technology group 5).
    Based on preliminary information from the applicant at the time of 
the proposed rule, the cost of RECARBRIOTM is $4,710.37 
(which is based on the cost per patient determined using the 
methodology as previously described in the analysis of the cost 
criterion). Under Sec.  412.88(a)(2), we limit new technology add-on 
payments for QIDPs to 75 percent of the costs of the new medical 
service or technology, or 75 percent of the amount by which the costs 
of the case exceed the MS-DRG payment. As a result, we proposed that 
the maximum new technology add-on payment for a case involving 
RECARBRIOTM would be $3,532.78 for FY 2021 (that is 75 
percent of the average cost of the technology).
    We invited public comments on whether RECARBRIOTM meets 
the cost criterion and our proposal to approve new technology add-on 
payments for the RECARBRIOTM for FY 2021.
    Comment: A commenter supported CMS' proposal to approve new 
technology add-on payments for FY 2021 for RECARBRIOTM 
infusion. The commenter also encouraged CMS to extend the duration of 
eligibility of new technology add-on payment from three to five years, 
as well as streamline the overall new technology add-on payment process 
(including submission, tracking, usage and education).
    Response: We appreciate the commenter's support for the proposal 
and other suggestions. We note that the period of time that a 
technology may receive the new technology add-on payment is limited by 
statute.
    Comment: According to the applicant, RECARBRIOTM was 
approved by FDA on June 5, 2020 and granted QIDP status for the 
additional indications of hospital-acquired bacterial pneumonia (HABP) 
and ventilator-associated bacterial pneumonia (VABP) caused by 
susceptible gram-negative microorganisms in patients 18 years of ages 
and older. (As previously noted, RECARBRIOTM received FDA 
approval on July 16, 2019 for injection in patients 18 years of age and 
older who have limited or no alternative treatment options for the 
treatment of the following infections caused by certain susceptible 
gram-negative bacteria: cUTI including pyelonephritis and cIAI.) 
Accordingly, the applicant provided an updated cost analysis to 
incorporate the additional indications to demonstrate that both 
indications meet the cost criterion.
    Response: We appreciate the updated information submitted by the 
applicant. However, the applicant did not apply for new technology add-
on payments for the additional indications of HABP and VABP caused by 
susceptible gram-negative microorganisms in patients 18 years of ages 
and older. Therefore, we are unable to consider these additional 
indications for new technology add on payments for FY 2021.
    Based on the information in the applicant's new technology add-on 
payment application and after consideration of the public comments we 
received, we believe that RECARBRIOTM meets the cost 
criterion. As previously discussed, RECARBRIOTM received FDA 
approval for the treatment of cUTI including pyelonephritis and cIAI 
for patients 18 years of age and older on July 16, 2019, but was not 
commercially available until January 6, 2020. Therefore, we are 
finalizing our proposal to approve new technology add-on payments for 
RECARBRIOTM for FY 2021, and we consider the beginning of 
the newness period to commence when the technology became commercially 
available on January 6, 2020. Under Sec.  412.88(a)(2)(ii)(B), we limit 
new technology add-on payments for QIDPs to the lesser of 75 percent of 
the average cost of the technology, or 75 percent of the amount by 
which the costs of the

[[Page 58729]]

case exceed the standard MS-DRG payment. As a result, we are finalizing 
as proposed a maximum new technology add-on payment for a case 
involving the use of RECARBRIOTM as indicated for the 
treatment of cUTI and cIAI for patients 18 years of age and older of 
$3,532.78 for FY 2021 (that is 75 percent of the average cost of the 
technology). Cases involving the use of RECARBRIOTM that are 
eligible for new technology add-on payments will be identified by ICD-
10-PCS codes XW033U5 or XW043U5.
(5) XENLETA
    Nabriva Therapeutics submitted an application for XENLETA, a 
pleuromutilin antibacterial agent representing the first intravenous 
(IV) and oral treatment option from a novel class of antibiotics for 
community-acquired bacterial pneumonia (CABP). XENLETA is indicated for 
the treatment of adults with CABP caused by the following susceptible 
microorganisms: Streptococcus pneumoniae, Staphylococcus aureus 
(methicillin-susceptible isolates), Haemophilus influenzae, Legionella 
pneumophila, Mycoplasma pneumoniae, and Chlamydophila pneumoniae. Per 
the applicant, XENLETA also has in vitro activity against methicillin 
resistant Staphylococcus aureus.
    Per the applicant, pleuromutilins inhibit bacterial protein 
synthesis by binding to the A- and P-sites of the peptidyl transferase 
center (PTC) in the large ribosomal subunit of the bacterial ribosome. 
The applicant asserts that this unique binding site in the highly 
conserved core of the ribosomal PTC is specific to pleuromutilins, and 
it confers a lack of cross-resistance with other classes, as well as a 
low propensity for developing bacterial resistance.
    The applicant noted that there are two methods of administering 
XENLETA. As a tablet containing 600 mg of XENLETA, it is administered 
orally every 12 hours for a duration of 5 days. As an injection, 
XENLETA contains 150 mg of the drug and is administered every 12 hours 
by IV infusion over 60 minutes for a duration of 5 to 7 days, with the 
option to switch to XENLETA tablets administered every 12 hours to 
complete the treatment course.
    With respect to the newness criterion, the applicant indicated that 
XENLETA was approved by FDA under the QIDP designation, and granted 
fasttrack- designation. XENLETA received FDA approval on August 19, 
2019 for a new drug application indicated for the oral and IV 
formulations of XENLETA for the treatment of CABP in adults. The 
applicant indicated that XENLETA was commercially available on the U.S. 
market on September 10, 2019 and the slight delay from approval to 
availability was due to the shipment of drug to the distribution 
channels.
    The applicant's submitted a request for approval of a unique ICD-
10-PCS procedure code to identify the administration of XENLETA and was 
granted approval for the following procedure codes effective October 1, 
2020: XW03366 (Introduction of lefamulin anti-infective into peripheral 
vein, percutaneous approach, new technology group 6), XW04366 
(Introduction of lefamulin anti-infective into central vein, 
percutaneous approach, new technology group 6) or XW0DX66 (Introduction 
of efamulin anti-infective into mouth and pharynx, external approach, 
new technology group 6).
    With respect to the cost criterion, the applicant presented three 
scenarios varying in the assumptions regarding the form of XENLETA used 
to treat the patient and the duration of treatment. For the first 
analysis, the applicant assumed that a patient population with CABP 
received 7 days of IV treatment with XENLETA. For the second analysis, 
the applicant assumed the patient population received 3.2 days of IV 
treatment with XENLETA before switching to oral XENLETA for 3.8 days. 
For the third analysis, the applicant assumed the patient population 
received oral XENLETA for 5 days. The applicant explained that patients 
receiving XENLETA in the inpatient hospital setting would receive it 
through IV treatment. However, some patients may be switched to oral 
form during care, which was observed for some patients in clinical 
trial. While the applicant does not expect many patients to be treated 
with only oral XENLETA in the inpatient setting, they conducted a 
sensitivity analysis based on 5 days of treatment with oral XENLETA, as 
oral treatment is possible in hospital.
    Across all three analyses, the applicant first searched the FY 2018 
MedPAR Final Rule Limited Data Set for potential cases representing 
patients diagnosed with CABP and eligible for treatment with XENLETA. 
The applicant limited the cohort to cases that had an indication on the 
claim that the pneumonia was present on admission. The applicant 
searched for claims that had one of the following ICD-10-CM diagnosis 
codes as a principal or secondary diagnosis:

[[Page 58730]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.170

    The applicant identified 1,225,713 cases from the FY 2018 MedPAR 
LDS file spanning 357 MS-DRGs. The applicant then excluded cases that 
mapped to MS-DRGs with a volume of 10 cases or fewer, resulting in a 
total of 1,225,561 cases spanning 319 unique MS-DRGs. The applicant 
considered these cases to be the primary cohort of the cost analysis. 
The applicant noted that the most common MS-DRGs in the cohort are 871, 
193, 194, 291, and 190, which account for 61 percent of cases. The 
applicant presented the following table of the top 20 MS-DRGs in the 
primary cohort with more than 10 cases:
[GRAPHIC] [TIFF OMITTED] TR18SE20.171


[[Page 58731]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.172

    For all three scenarios, the applicant calculated an average case-
weighted unstandardized charge per case of $73,911. The applicant then 
removed charges for the prior technology being replaced, which included 
the average charge associated with the cost of antibiotics that are the 
current standard of care. The applicant varied assumptions by scenario 
to reflect appropriate substitute treatments for the different forms of 
XENLETA, as noted previously. For each scenario, the applicant 
calculated the cost of therapy for each standard of care drug using 
dosing information, the duration of treatment, and wholesale 
acquisition costs and converted them to charges using the national 
pharmacy cost-to-charge ratio published in the FY 2020 IPPS final rule 
(84 FR 42179). After adjusting for prior technology, the applicant 
standardized the charges and applied an inflation factor of 11.1 
percent, which is the 2-year inflation factor used by CMS to calculate 
outlier threshold charges in the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42629), to update the charges from FY 2018 to FY 2020. The applicant 
added charges for the new technology, which it again calculated using 
the national pharmacy cost-to-charge ratio.
    For all three scenarios, the applicant conducted a sensitivity 
analysis testing alternative assumptions regarding the charges 
associated with prior technology that could be replaced by XENLETA. The 
applicant acknowledged that it is possible for some patients with CABP 
to receive more than one antibiotic. The applicant examined the cost 
criterion for each scenario after doubling the charges associated with 
prior technology to account for multiple antibiotics. Furthermore, the 
applicant tested alterative assumptions regarding the MS-DRGs that 
cases representing patients eligible for treatment with XENLETA mapped. 
Specifically, the applicant examined the cost criterion for the top 10 
MS-DRGs, the top 20 MS-DRGs, and the top MS-DRGs that accounted for 75 
percent of cases.
    Across all three scenarios and the sensitivity analyses testing 
alternative assumptions, the applicant determined that the final 
inflated average standardized charge per case exceeded the case-
weighted threshold, with the difference ranging from $4,547 to $17,907. 
The following table summarizes the results of the applicant's cost 
analyses. The applicant maintained that XENLETA meets the cost 
criterion.
[GRAPHIC] [TIFF OMITTED] TR18SE20.173


[[Page 58732]]


    In the proposed rule, we stated that we agreed with the applicant 
that XENLETA meets the cost criterion and therefore proposed to approve 
XENLETA for new technology add-on payments for FY 2021. As previously 
noted, the applicant has received unique ICD-10-PCS procedure codes to 
identify cases involving the administration of XENLETA.
    In its application, the applicant stated that XENLETA is 
commercially available in two dosage forms (Intravenous and Oral). 
According to the applicant, the pricing for each dosage form is $102.50 
per single use vial of XENLETA and $137.50 for one tablet of XENLETA. 
The recommended dosage per the applicant is 150 mg every 12 hours by 
intravenous (IV) infusion for 5 to 7 days or one 600 mg tablet every 12 
hours for 5 days. The applicant estimates that the cost per patient of 
XENLETA is $1,701 based on the combination of IV and oral usage in two 
of the applicants' clinical trials. Under Sec.  412.88(a)(2), we limit 
new technology add-on payments for QIDPs to 75 percent of the costs of 
the new medical service or technology, or 75 percent of the amount by 
which the costs of the case exceed the MS-DRG payment. As a result, we 
proposed that the maximum new technology add-on payment for a case 
involving the use of XENLETA would be $1,275.75 for FY 2021 (that is 75 
percent of the average cost of the technology).
    We invited public comments on whether XENLETA meets the cost 
criterion and our proposal to approve new technology add-on payments 
for XENLETA for FY 2021.
    Comment: Commenters supported our proposal to approve XENLETA for 
new technology add-on payments for FY 2021.
    Response: We appreciate the commenters' support for our proposal.
    Based on the information in the applicant's new technology add-on 
payment application and after consideration of the public comments, we 
believe that XENLETA meets the cost criterion. As previously discussed, 
XENLETA received FDA approval for use in the treatment of community-
acquired bacterial pneumonia (CABP) in adults on August 19, 2019 but 
was not commercially available until September 10, 2019. Therefore, we 
are finalizing our proposal to approve new technology add-on payments 
for XENLETA for FY 2021, and we consider the beginning of the newness 
period to commence on September 10, 2019, which is the date that 
XENLETA became commercially available. Under Sec.  412.88(a)(2)(ii)(B), 
we limit new technology add-on payments for QIDPs to the lesser of 75 
percent of the average cost of the technology, or 75 percent of the 
amount by which the costs of the case exceeds the standard MS-DRG 
payment. As a result, we are finalizing as proposed a maximum new 
technology add-on payment for a case involving the use of XENLETA of 
$1,275.75 for FY 2021 (that is 75 percent of the average cost of the 
technology). Cases involving the use of XENLETA that are eligible for 
new technology add-on payments will be identified by ICD-10-PCS 
procedure codes: XW03366, XW04366 or XW0DX66.
(6) ZERBAXA[supreg]
    Merck submitted an application for new technology add-on payments 
for ZERBAXA[supreg] for FY 2021. ZERBAXA[supreg] (ceftolozane and 
tazobactam) is a combination of ceftolozane, a cephalosporin 
antibacterial; and tazobactam, a [beta]-lactamase inhibitor (BLI), 
indicated in patients 18 years or older for the treatment of the 
following infections caused by designated susceptible microorganisms:
     Complicated Intra-abdominal Infections (cIAI), used in 
combination with metronidazole;
     Complicated Urinary Tract Infections (cUTI), Including 
Pyelonephriti;
     Hospital-acquired Bacterial Pneumonia and Ventilator-
associated Bacterial Pneumonia (HABP/VABP).
    According to the applicant, FDA initially approved ZERBAXA[supreg] 
on December 19, 2014 for the treatment of complicated intra-abdominal 
infections (cIAI) and for complicated urinary tract infections (cUTI) 
under a New Drug Application (NDA). ZERBAXA[supreg] was then approved 
on June 3, 2019 for the indication of hospital-acquired bacterial 
pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP), 
also under a NDA. The applicant noted that ZERBAXA[supreg] was 
designated as a Quality Infectious Disease Product (QIDP) as well as 
provided Fast Track and Priority Review consideration by FDA. The 
applicant also indicated that ZERBAXA[supreg] was commercially 
available on the U.S. market upon FDA approval. We believe only the 
indication approved in 2019 for treatment of hospital-acquired 
bacterial pneumonia and ventilator-associated bacterial pneumonia 
(HABP/VABP) is eligible for new technology add on payments for FY 2021 
because the first indication was approved in 2014 and is therefore 
beyond the 3-year newness period.
    The applicant submitted a request for approval for a unique ICD-10-
PCS procedure code to identify the administration of ZERBAXA[supreg] 
and was granted approval for FY 2021 for the following procedure codes 
effective October 1, 2020: XW03396 or XW04396.
    According to the applicant, to reduce the development of drug-
resistant bacteria and maintain the effectiveness of ZERBAXA[supreg] 
and other antibacterial drugs, ZERBAXA[supreg] should be used only to 
treat or prevent infections that are proven or strongly suspected to be 
caused by susceptible bacteria. According to the applicant, when 
culture and susceptibility information are available, they should be 
considered in selecting or modifying antibacterial therapy. In the 
absence of such data, local epidemiology and susceptibility patterns 
may contribute to the empiric selection of therapy.
    The applicant explained that the recommended dosage of 
ZERBAXA[supreg] for injection when used for HABP/VABP is 3 g 
(ceftolozane 2 g and tazobactam 1 g) administered every 8 hours by 
intravenous infusion over 1 hour in patients 18 years or older and with 
a creatinine clearance (CrCl) greater than 50 mL/min. The duration of 
therapy should be guided by the severity and site of infection and the 
patient's clinical and bacteriological progress. Dose adjustment is 
required for patients with CrCl 50 mL/min or less. All doses of 
ZERBAXA[supreg] are administered over 1 hour. For patients with 
changing renal function, CrCl is monitored at least daily and dosage of 
ZERBAXA[supreg] adjusted accordingly.
    With regard to the cost criterion, the applicant used the FY 2018 
MedPAR Limited Data Set (LDS) to identify the MS-DRGs to which 
potential cases representing hospitalized patients who may be eligible 
for treatment involving ZERBAXA[supreg] would be mapped. According to 
the applicant, ZERBAXA[supreg] is indicated for the treatment of 
hospitalized patients who have been diagnosed with cUTI, cIAI, VABP, or 
HABP conditions. The applicant conducted multiple analyses based on 
ICD-10-CM diagnosis codes for various scenarios involving patients 
diagnosed with cUTI, cIAI, VABP, or HABP. The applicant stated that 
cases representing patients who may be eligible to receive treatment 
through the administration of ZERBAXA[supreg] are identified with ICD-
10-PCS codes 3E03329 (Introduction of other anti-infective into 
peripheral vein, percutaneous approach) or 3E04329 (Introduction of 
other antiinfective--into central vein, percutaneous approach). For the 
purposes of analyzing the cost criterion for this technology for new 
technology add-on payment for FY 2021, we are only discussing the 
applicant's cost analysis related to the HABP and VABP

[[Page 58733]]

indications because, as we noted previously, the first indications 
(cUTI, cIAI) were approved in 2014 and are therefore beyond the 3-year 
newness period. For the HABP and VABP scenarios, the applicant 
submitted the following three cost analysis scenarios: Cases with a 
HABP diagnosis only, cases with a VABP diagnosis only and cases with 
either a HABP or VABP diagnosis. For all three scenarios, the applicant 
calculated the average charges per case for each MS-DRG without 
standardizing the charges. Next, the applicant removed 100 percent of 
the drug charges from the relevant cases to conservatively estimate the 
charges for drugs that potentially may be replaced by or avoided 
through use of ZERBAXA[supreg]. After removing these drug charges from 
unstandardized average charge amounts, the applicant calculated the 
average standardized charge per case for each MS-DRG. Then, the 
applicant inflated the standardized average charges by 11.1 percent, 
which is the 2-year inflation factor used by CMS to calculate outlier 
threshold charges in the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42629), to update the charges from FY 2018 to FY 2020. The applicant 
added charges for the new technology, which it again calculated using 
the national pharmacy cost-to-charge ratio. Finally, the applicant 
calculated the final inflated average case-weighted standardized charge 
per case as well as the case-weighted threshold amount. The following 
table summarizes the results of the applicant's cost analyses. The 
applicant maintained that ZERBAXA[supreg] meets the cost criterion.
[GRAPHIC] [TIFF OMITTED] TR18SE20.174

    As stated in the proposed rule, we agree with the applicant that 
ZERBAXA[supreg] meets the cost criterion and therefore proposed to 
approve ZERBAXA[supreg] for new technology add-on payments for FY 2021. 
As previously noted, the applicant has received unique ICD-10-PCS 
procedure codes to identify cases involving the administration of 
ZERBAXA[supreg].
    Based on preliminary information from the applicant at the time of 
the proposed rule, the cost of ZERBAXA[supreg] is $2,449.31. Under 
Sec.  412.88(a)(2), we limit new technology add-on payments for QIDPs 
to 75 percent of the costs of the new medical service or technology, or 
75 percent of the amount by which the costs of the case exceed the MS-
DRG payment. As a result, we proposed that the maximum new technology 
add-on payment for a case involving the use of ZERBAXA[supreg] would be 
$1,836.98 for FY 2021 (that is 75 percent of the average cost of the 
technology).
    We invited public comments on whether ZERBAXA[supreg] meets the 
cost criterion and our proposal to approve new technology add-on 
payments for ZERBAXA[supreg] for FY 2021.
    Comment: Commenters agreed that ZERBAXA[supreg] meets the cost 
criterion and supported CMS's proposal to approve ZERBAXA[supreg] for 
new technology add-on payments for FY 2021.
    Response: We thank the commenters for their support.
    Based on the information in the applicant's new technology add-on 
payment application and after consideration of the public comments, we 
believe that ZERBAXA[supreg] meets the cost criterion. As previously 
discussed, ZERBAXA[supreg] received FDA approval on June 3, 2019 for 
the indication of HABP/VABP and was commercially available on the U.S. 
market upon FDA approval. Therefore, we are finalizing our proposal to 
approve new technology add-on payments for ZERBAXA[supreg] for FY 2021, 
and we consider the beginning of the newness period to commence when 
the technology received FDA approval on June 3, 2019. Under Sec.  
412.88(a)(2)(ii)(B), we limit new technology add-on payments for QIDPs 
to the lesser of 75 percent of the average cost of the technology, or 
75 percent of the amount by which the costs of the case exceed the 
standard MS-DRG payment. As a result, we are finalizing as proposed a 
maximum new technology add-on payment for a case involving the use of 
ZERBAXA[supreg] of $1,836.98 for FY 2021 (that is 75 percent of the 
average cost of the technology). Cases involving the use of 
ZERBAXA[supreg] that are eligible for new technology add-on payments 
will be identified by ICD-10-PCS procedure codes XW03396 or XW04396.
7. Technical Revision to the New Technology Add-On Payment Regulations 
at 42 CFR 412.88
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 through 42300, 
and 42612), we finalized an increase in the new technology add-on 
payment percentage. Specifically, for a new technology other than a 
medical product designated by FDA as a QIDP, beginning with discharges 
on or after October 1, 2019, if the costs of a discharge involving a 
new technology (determined by applying CCRs as described in Sec.  
412.84(h)) exceed the full DRG payment (including payments for IME and 
DSH, but excluding outlier payments), Medicare will make an add-on 
payment equal to the lesser of: (1) 65 percent of the costs of the new 
medical service or technology; or (2) 65 percent of the amount by which 
the costs of the case exceed the standard DRG payment. We also 
finalized a separate increase in the new technology add-on payment 
percentage to 75 percent for a new technology that is a medical product 
designated by FDA as a QIDP. Under this finalized policy, unless the 
discharge qualifies for an outlier payment, the additional Medicare 
payment will be limited to the full MS-DRG payment plus 65 percent (or 
75 percent for a medical product designated by FDA as a QIDP) of the 
estimated costs of the new technology or medical service. We also 
finalized revisions to paragraphs (a)(2) and (b) under Sec.  412.88 to 
reflect these changes to the calculation of the new technology add-on 
payment amount beginning in FY 2020, including the finalized percentage 
for a medical product designated by FDA as a QIDP. Specifically, the 
new technology add-on payment percentage of 65 percent for a new 
technology other than a medical product designated by FDA as a QIDP is

[[Page 58734]]

set forth in Sec.  412.88(a)(2)(ii)(A). The new technology add-on 
payment percentage of 75 percent for a medical product designated by 
FDA as a QIDP is set forth at Sec.  412.88(a)(2)(ii)(B). However, in 
our revision to paragraph (a)(2)(ii), in setting forth the new 
technology add-on payment amounts for discharges occurring on or after 
October 1, 2019, we made an inadvertent error when referencing the 
separate new technology add-on payment percentage for QIDPs under Sec.  
412.88(a)(2)(ii)(B). Specifically, in referencing the add-on percentage 
for QIDPs, Sec.  412.88(a)(2)(ii)(A) refers to ``paragraph 
(a)(2)(ii)(2) of this section'' when the correct citation should be 
``paragraph (a)(2)(ii)(B) of this section''. In the FY 2021 IPPS/LTCH 
PPS proposed rule, we proposed to revise Sec.  412.88(a)(2)(ii)(A) to 
correct this technical error. No comments were received regarding this 
proposal. Therefore, in this final rule, we are finalizing this 
revision as proposed.
8. Technical Clarification to the Alternative Pathway for Certain 
Transformative New Devices
    As described previously, in the FY 2020 IPPS/LTCH PPS final rule, 
we finalized an alternative pathway for new technology add-on payments 
for certain transformative new devices. Under the existing regulations 
at Sec.  412.87(c), to be eligible for approval under this alternative 
pathway, the device must be part of FDA's Breakthrough Devices Program 
and have received FDA marketing authorization.
    We have received questions from the public regarding CMS's intent 
with respect to the ``marketing authorization'' required for purposes 
of approval under the alternative pathway for certain transformative 
new devices at Sec.  412.87(c). Some of the public appear to assert 
that so long as a technology has received marketing authorization for 
any indication, even if that indication differs from the indication for 
which the technology was designated by FDA as part of the Breakthrough 
Devices Program, the technology would meet the marketing authorization 
requirement at Sec.  412.87(c). For example, consider a device that 
received FDA marketing authorization in 2019 for use in the heart. The 
same device is then designated by FDA as part of the Breakthrough 
Devices Program for use in the liver in 2020, but has not yet received 
marketing authorization for indicated use in the liver. Some of the 
public have asserted that in such a scenario, the original marketing 
authorization for use in the heart could be used with FDA's 
Breakthrough Device indication for use in the liver to qualify under 
the alternative pathway for certain transformative new devices and 
receive new technology add-on payments for use in the liver in FY 2021. 
Because of this potential confusion, we clarified in the proposed rule 
that, consistent with our existing policies for determining newness 
where a product has more than one indication, an applicant cannot 
combine a marketing authorization for an indication that differs from 
the technology's indication under the Breakthrough Device Program, and 
for which the applicant is seeking to qualify for the new technology 
add-on payment, for purposes of approval under the alternative pathway 
for certain transformative devices.
    Section 1886(d)(5)(K)(ii)(II) of the Act provides for the 
collection of data with respect to the costs of a new medical service 
or technology described in subclause (I) for a period of not less than 
2 years and not more than 3 years beginning on the date on which an 
inpatient hospital code is issued with respect to the service or 
technology. As explained in the FY 2005 IPPS final rule (69 FR 49002), 
the intent of section 1886(d)(5)(K) of the Act and regulations under 
Sec.  412.87(b)(2) is to pay for new medical services and technologies 
for the first 2 to 3 years that a product comes on the market, during 
the period when the costs of the new technology are not yet fully 
reflected in the DRG weights. Generally, we use FDA approval (that is, 
marketing authorization) as the indicator of the time when a technology 
begins to become available on the market and data reflecting the costs 
of the technology begin to become available for recalibration of the 
DRGs. In some specific circumstances, we have recognized a date later 
than FDA approval as the appropriate starting point for the 2-year to 
3-year period. The costs of the new medical service or technology, once 
paid for by Medicare for this 2-year to 3-year period, are accounted 
for in the MedPAR data that are used to recalibrate the DRG weights on 
an annual basis. Therefore, we limit the add-on payment window for 
those technologies that have passed this 2-to 3-year timeframe. In the 
September 7, 2001 final rule that established the new technology add-on 
payment regulations (66 FR 46915), we also indicated that an existing 
technology can receive new technology add on payments for a new use or 
indication. While we recognize that a technology can have multiple 
indications, each indication has its own newness period and must meet 
the new technology add on payment criteria. The applicable criteria 
will depend on whether the technology is eligible for an alternative 
new technology add-on payment pathway. However, each indication for the 
technology is evaluated separately from any other indication, including 
with respect to the start of the newness period, to determine whether 
the technology is eligible for new technology add-on payments when used 
for that indication.
    Based on this policy, using the previous example, the newness 
period for the heart indication began in 2019 when the technology 
received marketing authorization from FDA for that indication, while 
the newness period for the liver indication would begin when the device 
receives marketing authorization specifically indicated for the liver. 
These are two distinct newness periods. Consistent with this policy, 
the newness period that began with the original marketing authorization 
for indicated use in the heart cannot be combined with FDA's 
Breakthrough Device indication for use in the liver for purposes of the 
marketing authorization required for approval under the alternative 
pathway to receive new technology add-on payments in FY 2021.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we stated that to 
address this potential confusion, we are clarifying our policy that a 
new medical device under this alternative pathway must receive 
marketing authorization for the indication covered by the Breakthrough 
Devices Program designation and making a conforming change to the 
regulations at Sec.  412.87(c)(1). Specifically, with regard to the 
eligibility criteria for approval under the alternative pathway for 
certain transformative new devices, we proposed to amend the 
regulations in Sec.  412.87(c)(1) to state that ``A new medical device 
is part of FDA's Breakthrough Devices Program and has received 
marketing authorization for the indication covered by the Breakthrough 
Device designation.'' We also proposed to make similar amendments to 
the regulations at Sec.  412.87(d) for the alternative pathway for 
certain antimicrobial products, as discussed in section II.G.9.b. of 
this preamble of this final rule.
    Comment: Commenters were mostly supportive of the policy 
clarification. Commenters supportive of the clarification indicated 
that they support CMS's efforts to recognize devices that are part of 
the FDA Breakthrough Devices Program and applauded CMS for providing 
revisions to these

[[Page 58735]]

regulations to provide clarification to the ``market authorization'' 
component.
    One commenter requested clarification if a device that received FDA 
Breakthrough designation and was approved for marketing under the 
Humanitarian Device Exemption (HDE) pathway for a HUD (Section 520(m) 
of the Federal Food, Drug, and Cosmetic Act (FD&C Act)), would still be 
eligible for the alternative new technology add-on payment pathway 
based on the FDA Breakthrough designation.
    Furthermore, two commenters (including the applicant for the 
Nanoknife, which did not meet the deadline of July 1 for FDA approval 
or clearance, as discussed previously) did not support this policy 
clarification. According to these commenters, if the proposed 
conforming changes are finalized, an otherwise broad eligibility 
standard would become limited. These commenters stated that the 
requirement that a new medical device must have received FDA marketing 
authorization sets a broad standard and the current regulation has no 
explicit limit to the type of marketing authorization and no mandate 
that the FDA marketing authorization indication be the same as the 
indication covered by the Breakthrough Device designation.
    According to the same two commenters, the policy clarification also 
constitutes a new regulatory provision that will limit new technology 
add-on payment eligibility to only those devices where the marketing 
authorization indication matched exactly the Breakthrough Device 
indication. The commenters stated that although it was described as a 
technical clarification, the denial of access to new-technology add-on 
payment for Medicare beneficiaries makes the proposed amendment a 
significant regulatory change. According to the commenters, consistent 
with the Administrative Procedure Act, the proposed new regulatory 
language must first go through a full notice and comment period prior 
to finalizing any new changes. Then, according to the commenters, the 
earliest the new regulation could be applied is in the next regulatory 
cycle, beginning with applications submitted for new technology add-on 
payments for FY 2022. Finally, they asserted that with what they 
described as CMS' application of the proposal retroactively, applicants 
for new technology add-on payment for FY 2021 had no prior notice in 
either the regulations or CMS' new technology add-on payment 
application, which caused the denial of new technology add-on payment 
to applicants and Medicare beneficiaries.
    The same two commenters also suggested that CMS should align 
eligibility for new technology add-on payment with FDA's IDE 
determination which supports hospitals providing innovative care early 
in product development. According to the commenters, CMS should include 
in the regulation at Sec.  412.87(c)(1) that an IDE can qualify as 
marketing authorization and that the IDE determination can match the 
Breakthrough Designation indication for new technology add-on payment 
eligibility criteria. According to the commenters, waiting until 
traditional PMA or 510(k) marketing authorization will delay the 
availability of new technology add-on payment for years which can have 
a serious adverse impact on patients.
    Response: We appreciate commenters' support regarding the 
clarification that a new medical device under the alternative pathway 
for certain transformative new devices must receive marketing 
authorization for the indication covered by the Breakthrough Devices 
Program designation.
    We disagree with the commenters that asserted this technical 
clarification is instead a significant change in our new technology 
add-on payment policy and that the associated conforming revisions are 
a significant regulatory change. This technical clarification, and the 
proposed conforming change to the regulations, are consistent with 
CMS's longstanding policy to require marketing authorization for the 
specific indication for which the applicant is seeking the new 
technology add-on payment. As discussed in the proposed rule and 
previously in this final rule, in the September 7, 2001 final rule that 
established the new technology add-on payment regulations (66 FR 
46915), we indicated that an existing technology can receive new 
technology add-on payments for a new use or indication. As we also 
discussed in the proposed rule, while we recognize that a technology 
can have multiple indications, each indication has its own newness 
period and must meet the new technology add-on payment criteria. This 
is consistent with how we have evaluated prior applications for the new 
technology add-on payment, as discussed in prior rulemaking 
(InFUSETM Bone Graft (Bone Morphogenetic Proteins (BMPs) for 
Tibia Fractures 69 FR 49010, VERASENSETM Knee Balancer 
System 80 FR 49471, Stelara[supreg] 82 FR 38216, KYMRIAH and YESCARTA 
83 FR 41285, Titan Spine nanoLock[supreg] 83 FR 41322, 
ZEMDRITM 83 FR 41327). The applicable criteria will depend 
on whether the technology is eligible for an alternative new technology 
add-on payment pathway, however the submission of an application under 
such an alternative pathway does not change that each indication for 
the technology will be evaluated separately from any other indication, 
including with respect to the start of the newness period, to determine 
whether the technology is eligible for new technology add-on payments 
when used for that indication. CMS did not modify this longstanding 
policy for evaluating whether a technology with multiple indications 
has received the required marketing authorization when it adopted the 
alternative pathway for certain transformative new devices in FY 2020. 
We believe the commenter is asking CMS to evaluate a technology 
inconsistent with this longstanding policy and to start the newness 
period prior to the time a product receives marketing authorization. As 
previously explained, and in the FY 2005 IPPS final rule (69 FR 49002), 
the intent of section 1886(d)(5)(K) of the Act and regulations under 
Sec.  412.87(b)(2) is to pay for new medical services and technologies 
for the first 2 to 3 years that a product comes on the market, during 
the period when the costs of the new technology are not yet fully 
reflected in the DRG weights. Our longstanding policy explained 
previously has applied this intent to new technology add-on payment 
applications for new indications of an existing technology and initial 
uses of a new technology. The device would remain eligible to apply for 
the new technology add-on payment under this alternative pathway for 
the indication covered by the Breakthrough Devices Program for a future 
fiscal year.
    For these reasons, we disagree with the commenters that our 
clarification and proposed conforming amendment are a change to the 
existing eligibility standards for new technology add-on payments. 
However, even if this were to be considered a change in policy rather 
than a clarification, CMS would not be applying the proposal 
retroactively, as asserted by the commenters, because the policy would 
apply only prospectively to future payments beginning with the start of 
the next fiscal year, after finalization of the policy through notice 
and comment rulemaking.
    Regarding the request for clarification on whether a device that 
received FDA Breakthrough Device designation and was approved for 
marketing under the HDE pathway for a HUD (Section 520(m) of the FD&C 
Act), would still be eligible for the alternative new

[[Page 58736]]

technology add-on payment pathway based on the FDA Breakthrough Device 
designation, we are unsure what specifically the commenter is 
requesting clarification on, and refer the commenter to the eligibility 
criteria for approval under the alternative pathway for certain 
transformative new devices at Sec.  412.87(c)(1). Additionally, as 
previously stated and in the FY 2005 IPPS final rule (69 FR 49002), the 
intent of section 1886(d)(5)(K) of the Act and regulations under Sec.  
412.87(b)(2) is to pay for new medical services and technologies for 
the first 2 to 3 years that a product comes on the market, during the 
period when the costs of the new technology are not yet fully reflected 
in the DRG weights. If a product was on the market for 5 years and then 
the device became part of FDA's Breakthrough Devices Program, it would 
not be eligible for new technology add-on payments since the device is 
already reflected in the DRG weights and is beyond the 2-3 year newness 
period. Conversely, if a product received marketing authorization for 
the indication covered by the Breakthrough Devices Program designation 
within the past 2 to 3 years, it may be eligible for new technology 
add-on payments under the alternative pathway for certain 
transformative new devices; however, we would encourage any prospective 
applicant to review the eligibility criteria for approval under the 
alternative pathway for certain transformative new devices to evaluate 
whether they should apply for the new technology add-on payment. We 
also refer the commenter the FY 2010 IPPS Final Rule (74 FR 43819) 
which discusses the Spiration[supreg] IBV[supreg] Valve System which 
received a HDE approval from the FDA and was approved for new 
technology add-on payments for FY 2010.
    Regarding the suggestion that CMS should include in the regulation 
at Sec.  412.87(c)(1) that an IDE can qualify as marketing 
authorization and that the IDE determination can match the Breakthrough 
Designation indication for new technology add-on payment eligibility 
criteria, we disagree. As discussed previously, it is our understanding 
that an IDE allows the investigational device to be used in a clinical 
study in order to collect safety and effectiveness data prior to the 
device receiving FDA marketing authorization (that is, received PMA 
approval, 510(k) clearance, or the granting of De Novo classification 
request). Therefore, we do not believe it would be appropriate to 
update the regulations to reflect that an IDE qualifies as marketing 
authorization.\429\
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    \429\ https://www.fda.gov/medical-devices/how-study-and-market-your-device/investigational-device-exemption-ide.
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    After consideration of the comments received and for the reasons 
discussed, we are finalizing our proposed conforming change to the 
regulations at Sec.  412.87(c)(1) to reflect our policy that a new 
medical device under this alternative pathway must receive marketing 
authorization for the indication covered by the Breakthrough Devices 
Program designation. Specifically, with regard to the eligibility 
criteria for approval under the alternative pathway for certain 
transformative new devices, we are finalizing our proposal to amend the 
regulations in Sec.  412.87(c)(1) to state that ``A new medical device 
is part of FDA's Breakthrough Devices Program and has received 
marketing authorization for the indication covered by the Breakthrough 
Device designation.'' We note that we are also finalizing our proposal 
to make similar amendments to the regulations at Sec.  412.87(d) for 
the alternative pathway for certain antimicrobial products, as 
discussed in section II.G.9.b. of this preamble of this final rule.
9. Revisions to New Technology Add-On Payments for Certain 
Antimicrobial Products
a. Background
    In the FY 2020 IPPS/LTCH PPS final rule, after consideration of 
public comments, we finalized changes to the new technology add-on 
payment policy related to certain antimicrobial products. These changes 
were finalized in recognition of the significant concerns related to 
antimicrobial resistance and its serious impact on Medicare 
beneficiaries and public health overall, and consistent with the 
Administration's commitment to address issues related to antimicrobial 
resistance, in order to help secure access to antibiotics, and improve 
health outcomes for Medicare beneficiaries in a manner that is as 
expeditious as possible. Firstly, as described earlier in this section, 
we finalized an alternative new technology add-on payment pathway for a 
product that is designated by FDA as a QIDP. Under this alternative 
pathway, at existing Sec.  412.87(d), for applications received for new 
technology add-on payments for FY 2021 and subsequent fiscal years, if 
a technology receives FDA's QIDP designation and received FDA marketing 
authorization, it will be considered new and not substantially similar 
to an existing technology for purposes of new technology add-on 
payments and will not need to meet the requirement that it represent an 
advance that substantially improves, relative to technologies 
previously available, the diagnosis or treatment of Medicare 
beneficiaries. Under this pathway, a medical product that has received 
FDA marketing authorization and is designated by FDA as a QIDP will 
need to meet the cost criterion under Sec.  412.87(b)(3), as reflected 
in Sec.  412.87(d)(3) (84 FR 42292 through 42297).
    In addition, beginning with FY 2020, we adopted a general increase 
in the maximum new technology add-on payment amount from 50 percent to 
65 percent; however, we adopted a higher increase to 75 percent for a 
product that is designated by FDA as a QIDP. Therefore, under existing 
Sec.  412.88(a)(2)(ii)(B), for a new technology that is a medical 
product designated by FDA as a QIDP, the new technology add-on payment 
is equal to the lesser of: (1) 75 percent of the costs of the new 
medical service or technology; or (2) 75 percent of the amount by which 
the costs of the case exceed the standard DRG payment (84 FR 42297 
through 42300).
    We stated that we believe Medicare beneficiaries may be 
disproportionately impacted by antimicrobial resistance, due in large 
part to the elderly's unique vulnerability to drug-resistant infections 
(for example, due to age-related and/or disease-related 
immunosuppression and greater pathogen exposure via catheter use). As 
such, antimicrobial resistance results in a substantial number of 
additional hospital days for Medicare beneficiaries, resulting in 
significant unnecessary health care expenditures. In November 2019, the 
CDC released its updated ``Antibiotic Resistance Threats in the United 
States'' (AR Threats Report) \430\ indicating that antibiotic-resistant 
bacteria and fungi cause more than 2.8 million infections and 35,000 
deaths in the United States each year. This report also shows that 
there were nearly twice as many annual deaths from antibiotic 
resistance as CDC originally reported in 2013, and underscores the 
continued threat of antibiotic resistance in the U.S. This recent 
information highlights the significant concerns and impacts related to 
antimicrobial resistance and emphasizes the continued importance of 
this issue both with respect to Medicare beneficiaries and public 
health overall. In this section of the final rule, we

[[Page 58737]]

discuss our proposals and final policies for FY 2021 regarding new 
technology add-on payments and certain antimicrobials, including QIDPs.
---------------------------------------------------------------------------

    \430\ https://www.cdc.gov/drugresistance/biggest-threats.html.
---------------------------------------------------------------------------

b. Changes and Technical Clarification to the Alternative Pathway for 
Certain Antimicrobial Products
    As described previously, in the FY 2020 IPPS/LTCH PPS final rule, 
we finalized an alternative pathway for new technology add-on payments 
for certain antimicrobial products. Under the existing regulations at 
Sec.  412.87(d), to be eligible for approval under this alternative 
pathway, the antimicrobial product must be designated by FDA as a QIDP 
and have received FDA marketing authorization. Under this alternative 
pathway, such a QIDP will be considered new and not substantially 
similar to an existing technology for purposes of new technology add-on 
payments and will not need to meet the requirement that it represent an 
advance that substantially improves, relative to technologies 
previously available, the diagnosis or treatment of Medicare 
beneficiaries.
    FDA also has the Limited Population Pathway for Antibacterial and 
Antifungal Drugs (LPAD pathway), which encourages the development of 
safe and effective drug products that address unmet needs of patients 
with serious bacterial and fungal infections.431 432 
Specifically, an antibacterial or antifungal drug approved under the 
LPAD pathway is used to treat a serious or life-threatening infection 
in a limited population of patients with unmet needs. We stated in the 
proposed rule that we believe that in order to address the continued 
issues related to antimicrobial resistance discussed previously, as 
well as further help to support access to antibiotics and improve 
health outcomes for Medicare beneficiaries, it is appropriate to expand 
our policy for an alternative new technology add-on payment pathway for 
a product that is designated by FDA as a QIDP to include products 
approved as a LPAD as well. Therefore, in the FY 2021 IPPS/LTCH PPS 
proposed rule, we proposed to expand our current alternative new 
technology add-on payment pathway for QIDPs to include products 
approved under the LPAD pathway as well to further address the 
continued issues related to antimicrobial resistance discussed 
previously. Under this proposed policy, for applications received for 
new technology add-on payments for FY 2022 and subsequent fiscal years, 
if an antimicrobial drug is approved by FDA under the LPAD pathway it 
will be considered new and not substantially similar to an existing 
technology for purposes of the new technology add-on payment under the 
IPPS, and not need to meet the requirement that it represent an advance 
that substantially improves, relative to technologies previously 
available, the diagnosis or treatment of Medicare beneficiaries. Under 
this proposal, an antimicrobial product that is approved by FDA under 
the LPAD pathway will need to meet the cost criterion under Sec.  
412.87(b)(3).
---------------------------------------------------------------------------

    \431\ Section 506(h) of the FD&C Act, 21 U.S.C. 356(h).
    \432\ https://www.fda.gov/media/113729/download.
---------------------------------------------------------------------------

    We proposed to revise Sec.  412.87(d)(1) to reflect this proposal, 
by adding drugs approved under FDA's LPAD pathway to the current 
alternative new technology add-on payment pathway for QIDPs at proposed 
new Sec.  412.87(d)(1)(ii), beginning with discharges occurring on or 
after October 1, 2021. We also proposed to revise the title of existing 
Sec.  412.87(d) to refer more broadly to ``certain antimicrobial 
products'' rather than specifying in this title the particular FDA 
programs for antimicrobial products (that is, QIDPs and LPADs) that are 
the subject of this alternative new technology add-on payment pathway.
    As we noted in the proposed rule, FDA may approve a drug under the 
LPAD pathway if it meets certain statutory standards for approval, as 
applicable, including that FDA receives a written request from the 
sponsor to approve the drug as a limited population drug. Sponsors 
seeking approval of a drug under the LPAD pathway are not precluded 
from seeking designation or approval under any other applicable 
provision for which the drug otherwise qualifies (for example, fast 
track designation, breakthrough therapy designation, regenerative 
medicine advanced therapy designation, accelerated approval, priority 
review designation). A sponsor who seeks approval of a drug under the 
LPAD pathway may also seek designation, as applicable, for other 
programs, including QIDP or orphan drug designation. Although FDA may 
provide advice on potential eligibility, FDA intends to make the 
determination of whether a drug meets the criteria for the LPAD pathway 
at the time of the drug's approval. (For additional information, see 
https://www.fda.gov/media/113729/download.)
    We stated in the proposed rule that as such, an applicant that has 
not received FDA approval and which has requested approval under the 
LPAD pathway may not know with certainty at the time it applies for new 
technology add-on payments under the proposed expanded alternative 
pathway for certain antimicrobial products whether it will qualify for 
approval under that pathway. As noted previously in section II.G.1.d. 
of the preamble of this final rule, CMS will review the application 
based on the information provided by the applicant under the 
alternative pathway specified by the applicant. If the applicant drug 
ultimately does not receive approval under the LPAD pathway (but 
receives FDA approval otherwise) and is not designated as a QIDP, the 
technology would not be eligible for the alternative pathway for 
certain antimicrobial products and the applicant would need to re-apply 
for new technology add-on payments under the traditional pathway at 
Sec.  412.87(b) for the following fiscal year in order to seek approval 
for new technology add-on payments.
    Comment: Several commenters supported this proposal. These 
commenters described the proposal as a common-sense solution that will 
address concerns from hospitals regarding inadequate payment for new 
antimicrobial products. Commenters also indicated that the proposal 
works hand-in-hand with the policy change finalized in the FY 2020 
IPPS/LTCH PPS final rule regarding the alternative pathway for QIDPs.
    However, other commenters were not supportive of this proposal. 
MedPAC expressed that it did not support the use of FDA's LPAD for 
qualification for new technology add-on payment unless the drug in 
question also meets the current substantial clinical improvement 
criterion and there is some evidence that the new drug results in 
improved care for beneficiaries. According to MedPAC, the FDA approval 
process may or may not include the new device or pharmaceutical's 
safety or effectiveness with regard to the Medicare population and 
Medicare should not pay more for technological advances that have not 
yet been proven to provide better outcomes for beneficiaries. MedPAC 
also stated that it is concerned that, if this proposal is adopted, the 
additional payment would also provide an incentive for increased use 
(including off-label use) of drugs approved under the LPAD pathway. 
MedPAC explained that the drugs approved under the LPAD pathway are for 
a limited population, based on a more flexible risk-benefit assessment, 
and prescribing these products outside of the targeted approved 
indication could endanger patients unnecessarily. Finally, MedPAC 
conveyed that if CMS finalizes its proposal to expand the alternative 
pathway to include products approved under the LPAD pathway,

[[Page 58738]]

CMS could attempt to mitigate incentives for off-label use by limiting 
new technology add-on payments to cases that meet FDA's approved and 
targeted indications.
    According to a commenter, current and proposed reforms are 
insufficient to ensure patients have access to effective antimicrobial 
treatments and lack significant impact on the AMR crisis. The commenter 
stated that while the increase in new technology add-on payment for 
QIDPs from 50 percent to 75 percent in the FY 2020 IPPS/LTCH PPS final 
rule was appreciated and a step in the right direction, the change has 
proven to be ineffective in promoting increased use of the new 
technology add-on payment pathway, thereby limiting the impact of this 
reform on patient access to novel antimicrobials, the sustainability of 
the antimicrobial marketplace, and the crisis of AMR generally. This 
commenter, in addition to a few other commenters, went on to say that 
the proposal to expand our current alternative new technology add-on 
payment pathway for QIDPs to include products approved under the LPAD 
pathway will not effectively broaden or increase the impact of the new 
technology add-on payment program for antimicrobials, as drugs that 
qualify for LPAD will likely also have QIDP designation and are 
therefore already eligible for the alternative new technology add-on 
payment pathway. Instead, the commenters suggested the expansion of the 
alternative new technology add-on payment pathway so that it may be 
applied more broadly to achieve greater overall impact. Specifically, 
these commenters suggested the expansion include eligible products 
beyond LPAD and QIDP such as biologics, other non-traditional therapies 
that treat or prevent infections caused by a qualifying pathogen, as 
well as drugs that are approved by FDA to treat COVID-19.
    Similar to the comments received in response to the FY 2020 IPPS/
LTCH PPS proposed rule, commenters requested that CMS extend or develop 
similar alternative new technology add-on payment pathways for all 
expedited FDA pathways (for example, Fast Track, Accelerated Approval, 
Breakthrough Therapy, and Priority Review, including other categories 
of technologies such as those with a Regenerative Medicine Advanced 
Therapy (RMAT) designation, devices granted a HDE.
    Response: We appreciate the commenters' support of the proposed 
expansion of the current alternative new technology add-on payment 
pathway for QIDPs to include products approved under the LPAD pathway.
    In response to comments that requested that the alternative 
inpatient new technology add-on payment pathway be extended to, or an 
alternative pathway similarly be created for, drugs and biologicals 
(that is, Priority Review, Accelerated Approval, Fast Track, and 
Breakthrough Therapy, including other categories of technologies such 
as those with a RMAT designation, devices granted a HDE, we continue to 
recognize that the goal of facilitating access to new technologies for 
Medicare beneficiaries could also apply to other special designations 
for drugs or devices. However, as we discussed in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42295 through 42296), we continue to believe that 
making this policy applicable to drugs more generally would further 
increase incentives for innovation but without decreasing cost, a key 
priority of this Administration. We also continue to believe that, in 
general, it is prudent to gain experience under the alternative pathway 
for certain transformative new devices before expanding it to other 
special designations to allow us to evaluate the benefits of this 
alternative pathway to facilitate beneficiary access to transformative 
new medical devices as well as any other considerations that may come 
to light after implementation of this new pathway. We will continue to 
consider these issues for future rulemaking, including the suggestions 
to develop additional criteria to qualify under an alternative pathway 
for technologies that receive FDA marketing authorization under or are 
designated for an FDA expedited program for drugs or devices.
    In response to the commenter that did not support the use of FDA's 
LPAD for qualification for new technology add-on payment unless the 
drug in question also meets the current substantial clinical 
improvement criterion and unless there is some evidence that the new 
drug results in improved care for beneficiaries, and expressed concern 
regarding the potential for additional Medicare program expenditures, 
as we stated in response to similar concerns in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42295), we believe that with respect to these 
technologies, even though, as the commenter may assert, there may be 
less certainty of clinical benefit or data representing the Medicare 
beneficiary population as compared to the evidence standard for 
substantial clinical improvement under the current new technology add-
on payment policy, the benefits of providing early access to critical 
and life-saving new cures and technologies that improve beneficiary 
health outcomes support expanding this alternative pathway. 
Additionally, while we continue to appreciate the commenter's concern 
regarding additional Medicare program expenditures, for the previously 
stated reasons, in order to address the significant ongoing concerns 
related to the public health crisis represented by antimicrobial 
resistance, consistent with the Administration's commitment to address 
issues related to antimicrobial resistance, and to continue to help 
secure access to antibiotics and improve health outcomes for Medicare 
beneficiaries in a manner that is as expeditious as possible, we 
believe it is appropriate to further facilitate beneficiary access to 
antimicrobial resistant products by expanding this alternative pathway 
to include products approved through FDA's LPAD pathway.
    In response to the comment suggesting that CMS mitigate incentives 
for off-label use by limiting new technology add-on payment to cases 
that meet FDA's approved and targeted indications, we note that when 
CMS approves a new technology add-on payment for any technology, it is 
based on the applicant's FDA indicated market authorization use, and 
payment is limited to cases involving the use of technology for the 
indication for which the new technology add-on payment application was 
approved.
    Finally, in response to the commenters' concern that the proposal 
will not effectively broaden or increase the impact of the new 
technology add-on payment program for antimicrobials, as drugs that 
qualify for LPAD will likely also have QIDP designation and are 
therefore already eligible for the alternative new technology add-on 
payment pathway, we disagree. As we discussed in the proposed rule, 
although FDA may provide advice on potential eligibility, FDA intends 
to make the determination of whether a drug meets the criteria for the 
LPAD pathway at the time of the drug's approval. As such, an applicant 
that has not received FDA approval and which has requested approval 
under the LPAD pathway may not know with certainty at the time it 
applies for new technology add-on payments under the proposed expanded 
alternative pathway for certain antimicrobial products whether it will 
qualify for approval under that pathway. Although we acknowledge, as we 
also discussed in the proposed rule, that a sponsor who seeks approval 
of a drug under the LPAD pathway may also seek designation, as 
applicable, for other

[[Page 58739]]

programs including QIDP or orphan drug designation, resulting in more 
than one FDA designation (LPAD and QIDP) for the same drug, there may 
also be instances where a drug receives only one of these two 
designations or one earlier than the other. Therefore, CMS believes 
this proposed expansion of the alternative new technology add-on 
payment pathway for QIDPs to include products approved under the LPAD 
pathway is a reasonable approach to broadening, rather than minimizing, 
access to antimicrobial products.
    Regarding the requests to expand the alternative new technology 
add-on payment pathway to include eligible products beyond LPAD and 
QIDP such as biologics, other non-traditional therapies that treat or 
prevent infections caused by a qualifying pathogen, as well as drugs 
that are approved by FDA to treat COVID-19, while we recognize that the 
goal of facilitating access to antimicrobial products for Medicare 
beneficiaries could also apply to other designations, similar to our 
discussion previously, in general we believe it is prudent to gain 
experience under this newly expanded alternative pathway for certain 
antimicrobial products, before further expanding it to other special 
designations, to allow us to evaluate the benefits of this expansion to 
facilitate beneficiary access to antimicrobial products as well as any 
other considerations that may come to light after implementation of 
this expanded pathway. We will keep these suggestions in mind for 
consideration in future rulemaking.
    After consideration of the comments received and for the reasons 
explained previously, we are finalizing our proposal to expand our 
current alternative new technology add-on payment pathway for certain 
antimicrobial products to include products approved under the LPAD 
pathway. Under this final policy, for applications received for new 
technology add-on payments for FY 2022 and subsequent fiscal years, if 
an antimicrobial drug receives market authorization from FDA under the 
LPAD pathway it will be considered new and not substantially similar to 
an existing technology for purposes of the new technology add-on 
payment under the IPPS, and not need to meet the requirement that it 
represent an advance that substantially improves, relative to 
technologies previously available, the diagnosis or treatment of 
Medicare beneficiaries. Under this final policy, an antimicrobial 
product that receives market authorization by FDA under the LPAD 
pathway will need to meet the cost criterion under Sec.  412.87(b)(3).
    We received no comments on our proposed amendments to the 
regulations to reflect this policy. Therefore we are finalizing our 
proposal to revise Sec.  412.87(d)(1) to reflect this final policy, by 
adding drugs approved under FDA's LPAD pathway to the current 
alternative new technology add-on payment pathway for QIDPs at new 
Sec.  412.87(d)(1)(ii), beginning with discharges occurring on or after 
October 1, 2021. We are also finalizing our proposal to revise the 
title of existing Sec.  412.87(d) to refer more broadly to ``certain 
antimicrobial products'' rather than specifying in this title the 
particular FDA programs for antimicrobial products (that is, QIDPs and 
LPADs) that are the subject of this alternative new technology add-on 
payment pathway.
    We also proposed to increase the maximum new technology add-on 
payment percentage for a product approved under FDA's LPAD pathway, 
from 65 percent to 75 percent, consistent with the new technology add-
on payment percentage that currently applies for a product that is 
designated by FDA as a QIDP. As previously noted, an antibacterial or 
antifungal drug approved under the LPAD pathway is used to treat a 
serious or life-threatening infection in a limited population of 
patients with unmet needs, and therefore we stated in the proposed rule 
that we believe increasing the add-on payment amount for these products 
would further the goal of helping secure access to antibiotics and 
improving health outcomes for Medicare beneficiaries to address the 
continued significant concerns related to antimicrobial resistance as 
discussed previously. Therefore, we proposed to revise Sec.  
412.88(a)(2)(ii)(B) and (b)(2) by adding products approved under FDA's 
LPAD pathway, beginning with discharges occurring on or after October 
1, 2020.
    We did not receive any comments on our proposal to increase the 
maximum new technology add-on payment percentage for products approved 
under FDA's LPAD pathway. Therefore, we are also finalizing our 
proposal to increase the maximum new technology add-on payment 
percentage for a product approved under FDA's LPAD pathway, from 65 
percent to 75 percent, consistent with the new technology add-on 
payment percentage that currently applies for a product that is 
designated by FDA as a QIDP. Therefore, we are revising Sec.  
412.88(a)(2)(ii)(B) and (b)(2) by adding products approved under FDA's 
LPAD pathway, beginning with discharges occurring on or after October 
1, 2020.
    In addition to adding drugs approved under FDA's LPAD pathway to 
the alternative new technology add-on payment pathway for certain 
antimicrobial products, we stated in the proposed rule that we are 
clarifying our policy regarding marketing authorization for QIDPs. As 
discussed previously, we stated that we have received questions from 
the public regarding the ``marketing authorization'' required for 
purposes of approval under the alternative pathway for certain 
transformative new devices, and are therefore clarifying our policy 
regarding the marketing authorization requirement under this pathway 
and proposing conforming amendments to the regulations at Sec.  
412.87(c)(1). We refer the reader to the previous discussion in section 
II.G.8. of this preamble of this final rule for complete details 
regarding this clarification.
    The current regulations at Sec.  412.87(d)(1) regarding the 
alternative pathway for new technology add-on payments for certain 
antimicrobial products also require marketing authorization for a QIDP 
to be eligible for approval under this pathway. Therefore, similar to 
the clarification regarding the transformative new devices alternative 
pathway, we stated in the proposed rule that we are clarifying that a 
new medical product seeking approval for the new technology add-on 
payment under the alternative pathway for QIDPs must receive marketing 
authorization for the indication covered by the QIDP designation. We 
proposed to amend the regulations at Sec.  412.87(d)(1) describing the 
alternative pathway for QIDPs (which, as amended, would appear at Sec.  
412.87(d)(1)(i)) to state that ``A new medical product is designated by 
FDA as a Qualified Infectious Disease Product and has received 
marketing authorization for the indication covered by the Qualified 
Infectious Disease Product designation.''
    We did not receive comments on our proposal to amend the 
regulations at Sec.  412.87(d)(1) to clarify that a new medical product 
seeking approval for the new technology add-on payment under the 
alternative pathway for QIDPs must receive marketing authorization for 
the indication covered by the QIDP designation. Therefore, we are 
finalizing this amendment as proposed.
c. Change to Announcement of Determinations and Deadline for 
Consideration of New Medical Service or Technology Applications for 
Certain Antimicrobial Products
    As noted previously, in the FY 2009 IPPS final rule (73 FR 48562), 
we

[[Page 58740]]

amended Sec.  412.87(c) (now Sec.  412.87(e) of the existing 
regulations) to specify that all applicants for new technology add-on 
payments must have FDA approval or clearance by July 1 of the year 
prior to the beginning of the fiscal year for which the application is 
being considered. We stated that this deadline would provide us with 
enough time to fully consider all of the new medical service or 
technology add-on payment criteria for each application and maintain 
predictability in the IPPS for the coming fiscal year. We also stated 
and further explained that we believe that July 1 of each year provides 
an appropriate balance between the necessity for adequate time to fully 
evaluate the applications, the requirement to publish the IPPS final 
rule by August 1 of each year, and the commenters' concerns that 
potential new technology applicants have some flexibility with respect 
to when their technology receives FDA approval or clearance.
    We continue to believe that our policy of requiring FDA approval or 
clearance by July 1 of the year prior to the beginning of the fiscal 
year for which the application is being considered appropriately 
balances the length of time required to fully consider all of the new 
medical service or technology add-on payment criteria for each 
application while also providing flexibility to potential new 
technology add-on payment applicants. As we stated in the proposed 
rule, at the same time, we also believe the significant ongoing 
concerns regarding antimicrobial resistance, and the need to help 
secure access to antibiotics for Medicare beneficiaries in a manner 
that is as expeditious as possible, may warrant additional flexibility 
with respect to applications for new technology add-on payments for 
certain antimicrobial products. Further, we noted that under the new 
alternative pathway for certain antimicrobial products, upon FDA 
marketing authorization, such products are considered new and not 
substantially similar to an existing technology and do not need to 
demonstrate substantial clinical improvement, resulting in a difference 
in the amount of information and time required for CMS to complete its 
evaluation as compared to technologies for which it must fully consider 
of all of the new medical service or technology add-on payment 
criteria. For these reasons, and for the reasons stated previously 
regarding the significant ongoing concerns related to the public health 
crisis represented by antimicrobial resistance, consistent with the 
Administration's commitment to address issues related to antimicrobial 
resistance, and to continue to help secure access to antibiotics and 
improve health outcomes for Medicare beneficiaries in a manner that is 
as expeditious as possible, we proposed a process by which a technology 
that meets the new technology add-on payment criteria under the 
alternative pathway for products designated as QIDPs or, as proposed 
and finalized, approved under FDA's LPAD pathway, would receive 
conditional approval for such payment even if the product has not been 
granted FDA marketing authorization by July 1 (the existing deadline by 
which any technology must be granted FDA marketing authorization in 
order to be eligible for a new technology add-on payment). (We note 
that for the remainder of this discussion, we refer to the alternative 
pathway at Sec.  412.87(d), which, as finalized, will also include 
products approved under the LPAD pathway beginning with applications 
submitted for new technology add-on payments for FY 2022, as the 
``alternative pathway for certain antimicrobial products'').
    Under our proposal, a technology eligible for the new technology 
add-on payment alternative pathway for certain antimicrobial products 
would begin receiving the new technology add-on payment effective for 
discharges the quarter after FDA marketing authorization is granted. We 
proposed that the cutoff or deadline for this conditional approval 
would be FDA marketing authorization by July 1 of the fiscal year for 
which the applicant is applying for new technology add-on payments. We 
would consider July 1 to be the cutoff for conditional approval because 
under this proposal, if the FDA marketing authorization is received on 
or after July 1, the new technology add-on payment would not be 
effective for discharges until the beginning of the next quarter on 
October 1, which would be the start of the next fiscal year. For 
example, an eligible antimicrobial product is conditionally approved 
for the new technology add-on payment in the FY 2021 IPPS final rule. 
However, FDA marketing authorization is not granted until February 1, 
2021. The new technology add-on payment for such an antimicrobial 
product would be made for discharges that use the technology on or 
after April 1, 2021 (the beginning of the quarter after the FDA 
marketing authorization was granted). Using the same example, if the 
eligible antimicrobial product received FDA marketing authorization on 
or after July 1, 2021, no new technology add-on payments would be made 
for FY 2021, because the beginning of the next quarter would be October 
1, which is the beginning of FY 2022, the next fiscal year. As we 
discuss further, to be eligible for new technology add-on payments for 
FY 2022, the applicant would have needed to re-apply for such payments 
for FY 2022 by the applicable deadline.
    In the FY 2009 IPPS final rule (73 FR 48562), we also stated that 
applications that receive FDA approval of the medical service or 
technology after July 1 would be able to reapply for the new medical 
service or technology add-on payment the following year (at which time 
they would be given full consideration in both the IPPS proposed and 
final rules). Consistent with this policy, an applicant for an eligible 
antimicrobial product that does not receive FDA marketing authorization 
during the conditional approval period described previously would need 
to evaluate whether it believes it is necessary to re-apply for new 
technology add-on payments for the following fiscal year. For example, 
an applicant for an eligible antimicrobial product for FY 2021 that 
receives conditional approval for FY 2021 (with a conditional approval 
period of on or after July 1, 2020 and before July 1, 2021) would still 
need to submit an application for FY 2022 in order to be eligible for 
new technology add-on payments in FY 2022. The applicant would need to 
evaluate whether it believes it is necessary to re-apply for new 
technology add-on payments for the next fiscal year based on when the 
applicant anticipates receiving FDA marketing authorization. However, 
we stated that we would encourage eligible antimicrobial product 
applicants to reapply for new technology add-on payments for the next 
fiscal year in case they do not receive FDA marketing authorization 
prior to July 1 of the fiscal year for which they initially applied. We 
also noted, as discussed previously, although FDA may provide advice on 
potential eligibility, FDA intends to make the determination of whether 
a drug meets the criteria for the LPAD pathway at the time of the 
drug's approval. As such, an applicant may not know with certainty at 
the time it applies for new technology add on payments under the 
alternative pathway for certain antimicrobial products whether it 
qualifies for that pathway. If the applicant drug ultimately does not 
receive approval under the LPAD pathway (but receives FDA approval 
otherwise) and is not designated as a QIDP, the applicant would not be 
eligible for approval under the

[[Page 58741]]

alternative pathway for certain antimicrobial products, and therefore, 
even if the product received conditional approval under this proposal, 
no new technology add-on payments would be made for that fiscal year. 
As described previously, the applicant would need to re-apply for new 
technology add on payments under the traditional pathway at Sec.  
412.87(b) for the following fiscal year if the applicant wishes to 
continue to seek approval for new technology add-on payments.
    We proposed to revise Sec.  412.87(e) to reflect this proposal by 
adding a new paragraph (3) which would provide for conditional approval 
for a technology for which an application is submitted under the 
alternative pathway for certain antimicrobial products at Sec.  
412.87(d) that does not receive FDA marketing authorization by the July 
1 deadline specified in Sec.  412.87(e)(2), provided that the 
technology receives FDA marketing authorization by July 1 of the 
particular fiscal year for which the applicant applied for new 
technology add-on payments. We also proposed related revisions to the 
paragraph (e) introductory text and to paragraph (e)(2) to reflect this 
proposed new policy.
    Comment: We received supportive comments for this proposal. 
According to these commenters, the proposal will be beneficial to 
manufacturers because it will prevent circumstances where products 
approved shortly after the fiscal year deadline have to wait until the 
next fiscal year to receive the new technology add-on payment. These 
commenters also noted that the drug development process does not always 
follow a consistent schedule and this change would ensure that all 
QIDP-designated antibiotics receive the same benefits upon approval.
    Other commenters indicated the agency should consider establishing 
a subregulatory process to recognize products that qualify for a new 
technology add-on payment under the alternative pathway, rather than 
adopting the process for conditional approval described in the proposed 
rule. According to these commenters, providing conditional approval 
through an accelerated subregulatory process will allow alternative 
pathway products to rapidly receive new technology add-on payment 
designation after FDA approval and will maximize the new technology 
add-on payment eligibility period for those products. These commenters 
also stated that this access will be particularly important to drugs 
indicated for COVID-19 for which a new technology add-on payment 
application was most likely not submitted in the current year and that 
under the conditional approval process described in the proposed rule, 
could not receive new technology add-on payments until October 1, 2021 
at the earliest.
    In recommending a faster review process for medical devices that 
are part of FDA's Breakthrough Devices Program, commenters recommended 
that at a minimum, CMS should conduct a bi-annual review rather than 
the current annual review timeline. However, the commenters asserted 
that it is more appropriate that CMS instead review new technology add-
on payment applications for medical devices that are part of FDA's 
Breakthrough Devices Program on the same quarterly timeline as it 
reviews traditional pass-through (TPT) applications for Breakthrough 
Designated technologies. The commenters acknowledged that although 
there would be increased burden on CMS associated with holding required 
public meetings and soliciting public comment for a more frequent 
review cycle, the need for earlier access to medical devices that are 
part of FDA's Breakthrough Devices Program outweighed considerations of 
administrative burden.
    Similar to the comments received in response to the proposal to 
expand our current alternative new technology add-on payment pathway 
for QIDPs to include products approved under the LPAD pathway, many 
commenters requested expansion of the proposal to include conditional 
new technology add-on payment approval for products outside of the QIDP 
definition, but that have received fast track designation, breakthrough 
therapy designation, RMAT designation, are intended to treat a serious 
or life-threatening infection caused by a qualifying pathogen as listed 
in Section 505E(f) of the FD&C Act and include innovative non-
antibiotic treatments for serious or life-threatening infections. 
Another commenter requested expansion of this proposal to generally 
include novel therapies that address an unmet medical need--a condition 
whose treatment or diagnosis is not addressed adequately by available 
therapy. According to this commenter, an unmet medical need includes an 
immediate need for a defined population (that is, to treat a serious 
condition with no or limited treatment) or a longer-term need for 
society (for example, to address the development of resistance to 
antibacterial drugs).
    Finally, other commenters pointed to the justification CMS provided 
in the FY 2021 IPPS/LTCH PPS proposed rule for why certain 
antimicrobial products should receive conditional approval for NTAP, 
specifically the statement that, ``such products are considered new and 
not substantially similar to an existing technology and do not need to 
demonstrate substantial clinical improvement, resulting in a difference 
in the amount of information and time required for CMS to complete its 
evaluation as compared to technologies for which it must fully consider 
of all of the new medical service or technology add-on payment 
criteria.'' According to the commenters, this justification also 
applies to medical devices that are part of FDA's Breakthrough Devices 
Program. The commenters explained that while antimicrobial resistance 
is a critical need for the Medicare program, many products approved 
under FDA's Breakthrough Devices Program also fill critical needs for 
the Medicare population and may reduce administrative burden on CMS. 
According to the commenters, based on this justification, CMS should 
expand the proposed policy to provide for conditional new technology 
add-on payment approval for certain antimicrobial products that do not 
receive FDA marketing authorization by July 1 but otherwise meet the 
applicable add-on payment criteria to also include medical devices that 
are part of FDA's Breakthrough Devices Program that do not receive FDA 
marketing authorization by July 1 but otherwise meet the applicable 
add-on payment criteria.
    Response: We appreciate the commenters' support for our proposal. 
We also appreciate the commenters' suggestions for other modifications 
to the new technology add-on payment policy, such as developing a more 
frequent approval process, which we will consider for future 
rulemaking.
    In response to comments that requested expansion of the proposal to 
include conditional new technology add-on payment approval for products 
that fall outside of the QIDP definition, including products intended 
to treat a serious or life-threatening infection caused by a qualifying 
pathogen as listed in section 505E(f) of the FD&C Act, innovative non-
antibiotic treatments for serious or life-threatening infections, novel 
therapies that address an unmet medical need and products that have 
received fast track designation, breakthrough therapy designation, or 
RMAT designation, as we discuss in section II.G.9.a. of this final rule 
with regard to our proposal to expand our current alternative new 
technology add-on payment pathway for QIDPs to include products 
approved

[[Page 58742]]

under the LPAD pathway, we continue to recognize that the goal of 
facilitating access to new technologies for Medicare beneficiaries 
could also apply to other special designations. We will continue to 
consider this issue for future rulemaking. As we stated in the proposed 
rule and previously in this final rule, we believe that in order to 
address the significant ongoing concerns related to the public health 
crisis represented by antimicrobial resistance, consistent with the 
Administration's commitment to address issues related to antimicrobial 
resistance, and to continue to help secure access to antibiotics and 
improve health outcomes for Medicare beneficiaries in a manner that is 
as expeditious as possible, additional flexibility regarding new 
technology add-on payment applications for certain antimicrobial 
products is warranted and should be considered. We believe the 
alternative pathway for certain antimicrobials allows for this 
additional flexibility. Therefore, for the reasons discussed in this 
final rule, at this time we believe it would be appropriate to limit 
this proposed process for conditional approval to products designated 
as QIDPs or approved under FDA's LPAD pathway.
    In response to the commenters that suggested expansion of the 
proposed policy to also include medical devices that are part of FDA's 
Breakthrough Devices Program that do not receive FDA marketing 
authorization by July 1 but otherwise meet the applicable add-on 
payment criteria, we agree that, as noted by the commenter, medical 
devices that are part of FDA's Breakthrough Device Program are 
evaluated under the alternative pathway for certain transformative new 
devices similar to how antimicrobial products are evaluated under the 
alternative pathway for certain antimicrobials with respect to the 
newness and substantial clinical improvement criteria. However, as we 
discussed in the proposed rule and in this final rule, in order to 
continue to help secure access to antibiotics and improve health 
outcomes for Medicare beneficiaries in a manner that is as expeditious 
as possible, we believe that additional flexibility is warranted with 
respect to the new technology payment applications for antimicrobial 
products to address the particular ongoing concerns relating to 
antimicrobial resistance. For these reasons, at this time we are not 
expanding our proposed process for conditional approval to include 
medical devices that are part of FDA's Breakthrough Devices Program 
that do not receive FDA marketing authorization by July 1 but otherwise 
meet the applicable add-on payment criteria. We may consider this 
further in the future as we gain more experience with this conditional 
approval process for a technology for which an application is submitted 
under the alternative pathway for certain antimicrobial products that 
does not receive FDA marketing authorization by the July 1 deadline.
    After consideration of the comments received and for the reasons 
stated previously, we are finalizing our policy, as proposed, to 
establish a process by which a technology that meets the new technology 
add-on payment criteria under the alternative pathway for products 
designated as QIDPs or, as finalized in this final rule, approved under 
FDA's LPAD pathway, would receive conditional approval for such payment 
even if the product has not been granted FDA marketing authorization by 
July 1 but otherwise meets the applicable add-on payment criteria. 
Under this final policy, cases involving eligible antimicrobial 
products would begin receiving the new technology add-on payment 
effective for discharges the quarter after the date of FDA marketing 
authorization provided that the technology receives FDA marketing 
authorization by July 1 of the particular fiscal year for which the 
applicant applied for new technology add-on payments.
    We received no comments on our proposed amendments to the 
regulations to reflect this policy. Therefore, we are finalizing our 
proposal to revise 412.87(e) by adding a new paragraph (3) which 
provides for conditional approval for a technology for which an 
application is submitted under the alternative pathway for certain 
antimicrobial products at Sec.  412.87(d) that does not receive FDA 
marketing authorization by the July 1 deadline specified in Sec.  
412.87(e)(2), provided that the technology receives FDA marketing 
authorization by July 1 of the particular fiscal year for which the 
applicant applied for new technology add-on payments. We are also 
finalizing our proposal to make related revisions to the paragraph (e) 
introductory text and to paragraph (e)(2) to reflect this new policy.
    In addition, we proposed to make technical clarifications to the 
regulations in paragraph (e)(2) of Sec.  412.87 by replacing the words 
``FDA approval or clearance'' with ``FDA marketing authorization'' 
which conforms to the existing regulations in paragraphs (c)(1) and 
(d)(1) of Sec.  412.87. We believe this more precisely describes the 
current policy and does not change or modify the policy set forth in 
existing Sec.  412.87(e)(2). For example, under our current policy, in 
evaluating whether a technology is eligible for new technology add-on 
payment for a given fiscal year, we consider whether the technology has 
received marketing authorization by July 1 (such as Premarket Approval 
(PMA); 510(k) clearance; the granting of a De Novo classification 
request; or approval of a New Drug Application (NDA)). Therefore, we 
believe the term ``marketing authorization'' would more precisely 
describe the various types of potential FDA approvals, clearances and 
classifications that we currently consider under our new technology 
add-on payment policy.
    We received no comments on our proposal to make technical 
clarifications to the regulations in paragraph (e)(2) of Sec.  412.87 
by replacing the words ``FDA approval or clearance'' with ``FDA 
marketing authorization''. Therefore, we are finalizing as proposed.

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

A. Background

1. Legislative Authority
    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary adjust the standardized amounts for area differences in 
hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level. We 
currently define hospital labor market areas based on the delineations 
of statistical areas established by the Office of Management and Budget 
(OMB). A discussion of the FY 2021 hospital wage index based on the 
statistical areas appears under section III.A.2. of the preamble of 
this final rule.
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index annually and to base the update on a survey of wages and 
wage-related costs of short-term, acute care hospitals. (CMS collects 
these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-
3, Parts II, III, and IV. The OMB control number for approved 
collection of this information is 0938-0050, which expires on March 31, 
2022.) This provision also requires that any updates or adjustments to 
the wage index be made in a manner that ensures that aggregate payments 
to hospitals are not affected by the change in the wage index. The 
adjustment for

[[Page 58743]]

FY 2021 is discussed in section II.B. of the Addendum to this final 
rule.
    As discussed in section III.I. of the preamble of this final rule, 
we also take into account the geographic reclassification of hospitals 
in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act 
when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of 
the Act, the Secretary is required to adjust the standardized amounts 
so as to ensure that aggregate payments under the IPPS after 
implementation of the provisions of sections 1886(d)(8)(B), 
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate 
prospective payments that would have been made absent these provisions. 
The budget neutrality adjustment for FY 2021 is discussed in section 
II.A.4.b. of the Addendum to this final rule.
    Section 1886(d)(3)(E) of the Act also provides for the collection 
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in 
order to construct an occupational mix adjustment to the wage index. A 
discussion of the occupational mix adjustment that we proposed to apply 
to the FY 2021 wage index appears under sections III.E.3. and F. of the 
preamble of this final rule.
2. Core-Based Statistical Areas (CBSAs) for the FY 2021 Hospital Wage 
Index
a. General
    The wage index is calculated and assigned to hospitals on the basis 
of the labor market area in which the hospital is located. Under 
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate 
hospital labor market areas based on OMB-established Core-Based 
Statistical Areas (CBSAs). The current statistical areas (which were 
implemented beginning with FY 2015) are based on revised OMB 
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01. 
OMB Bulletin No. 13-01 established revised delineations for 
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and 
Combined Statistical Areas in the United States and Puerto Rico based 
on the 2010 Census, and provided guidance on the use of the 
delineations of these statistical areas using standards published in 
the June 28, 2010 Federal Register (75 FR 37246 through 37252). We 
refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 
through 49963 and 49973 through 49982) for a full discussion of our 
implementation of the OMB statistical area delineations beginning with 
the FY 2015 wage index.
    Generally, OMB issues major revisions to statistical areas every 10 
years, based on the results of the decennial census. However, OMB 
occasionally issues minor updates and revisions to statistical areas in 
the years between the decennial censuses through OMB Bulletins. On July 
15, 2015, OMB issued OMB Bulletin No. 15-01, which provided updates to 
and superseded OMB Bulletin No. 13-01 that was issued on February 28, 
2013. The attachment to OMB Bulletin No. 15-01 provided detailed 
information on the update to statistical areas since February 28, 2013. 
The updates provided in OMB Bulletin No. 15-01 were based on the 
application of the 2010 Standards for Delineating Metropolitan and 
Micropolitan Statistical Areas to Census Bureau population estimates 
for July 1, 2012 and July 1, 2013. In the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 56913), we adopted the updates set forth in OMB Bulletin 
No. 15-01 effective October 1, 2016, beginning with the FY 2017 wage 
index. For a complete discussion of the adoption of the updates set 
forth in OMB Bulletin No. 15-01, we refer readers to the FY 2017 IPPS/
LTCH PPS final rule. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38130), we continued to use the OMB delineations that were adopted 
beginning with FY 2015 to calculate the area wage indexes, with updates 
as reflected in OMB Bulletin No. 15-01 specified in the FY 2017 IPPS/
LTCH PPS final rule.
    On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which 
provided updates to and superseded OMB Bulletin No. 15-01 that was 
issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01 
provided detailed information on the update to statistical areas since 
July 15, 2015, and were based on the application of the 2010 Standards 
for Delineating Metropolitan and Micropolitan Statistical Areas to 
Census Bureau population estimates for July 1, 2014 and July 1, 2015. 
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41362 through 41363), we 
adopted the updates set forth in OMB Bulletin No. 17-01 effective 
October 1, 2018, beginning with the FY 2019 wage index. For a complete 
discussion of the adoption of the updates set forth in OMB Bulletin No. 
17-01, we refer readers to the FY 2019 IPPS/LTCH PPS final rule. In the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42300 through 42301), we 
continued to use the OMB delineations that were adopted beginning with 
FY 2015 (based on the revised delineations issued in OMB Bulletin No. 
13-01) to calculate the area wage indexes, with updates as reflected in 
OMB Bulletin Nos. 15-01 and 17-01.
    On April 10, 2018 OMB issued OMB Bulletin No. 18-03 which 
superseded the August 15, 2017 OMB Bulletin No. 17-01. On September 14, 
2018, OMB issued OMB Bulletin No. 18-04 which superseded the April 10, 
2018 OMB Bulletin No. 18-03. Typically, interim OMB bulletins (those 
issued between decennial censuses) have only contained minor 
modifications to labor market delineations. However the April 10, 2018 
OMB Bulletin No. 18-03 and the September 14, 2018 OMB Bulletin No. 18-
04 included more modifications to the labor market areas than are 
typical for OMB bulletins issued between decennial censuses, including 
some material modifications that have a number of downstream effects, 
such as reclassification changes (as discussed later in this preamble). 
CMS was unable to complete an extensive review and verification of the 
changes made by these bulletins until after the development of the FY 
2020 IPPS/LTCH PPS proposed rule. These bulletins established revised 
delineations for Metropolitan Statistical Areas, Micropolitan 
Statistical Areas, and Combined Statistical Areas, and provided 
guidance on the use of the delineations of these statistical areas. A 
copy of OMB Bulletin No. 18-04 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf. 
According to OMB, ``[t]his bulletin provides the delineations of all 
Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan 
Statistical Areas, Combined Statistical Areas, and New England City and 
Town Areas in the United States and Puerto Rico based on the standards 
published on June 28, 2010 (75 FR 37246), and Census Bureau data.'' (We 
noted in the proposed rule 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 that it was not issued 
in time for development of the FY 2021 IPPS/LTCH PPS proposed rule.)
    As noted previously and in the FY 2021 IPPS/LTCH PPS proposed rule 
(85 FR 32967), while OMB Bulletin No. 18-04 is not based on new census 
data, it includes some material changes to the OMB statistical area 
delineations. Specifically, under the revised OMB delineations, there 
would be some new CBSAs, urban counties that would become rural, rural 
counties that would become urban, and some existing CBSAs would be 
split apart. In addition,

[[Page 58744]]

as we stated in the proposed rule, the revised OMB delineations would 
affect various hospital reclassifications, the out-migration adjustment 
(established by section 505 of Pub. L. 108-173), and treatment of 
hospitals located in certain rural counties (that is, ``Lugar'' 
hospitals) under section 1886(d)(8)(B) of the Act. We discuss the 
revised OMB delineations and the effects of these revisions in this 
section of this rule. As previously noted, the March 6, 2020 OMB 
Bulletin 20-01 was not issued in time for development of the proposed 
rule. We stated in the proposed rule that we did not believe the 
updates included in OMB Bulletin 20-01 would impact the changes 
discussed in the proposed rule, and that if appropriate, we would 
propose any updates from this bulletin in the FY 2022 IPPS/LTCH PPS 
proposed rule.
b. Implementation of Revised Labor Market Area Delineations
    We stated in the proposed rule (85 FR 32697) that we believe that 
using the revised delineations based on OMB Bulletin No. 18-04 will 
increase the integrity of the IPPS wage index system by creating a more 
accurate representation of geographic variations in wage levels. 
Therefore, we proposed to implement the revised OMB delineations as 
described in the September 14, 2018 OMB Bulletin No. 18-04, effective 
October 1, 2020 beginning with the FY 2021 IPPS wage index. We proposed 
to use these revised delineations to calculate area wage indexes in a 
manner that is generally consistent with the CBSA-based methodologies. 
Because of the previously described material changes, we also proposed 
a wage index transition applicable to hospitals that experience a 
significant decrease in their FY 2021 wage index compared to their 
final FY 2020 wage index. This transition is discussed in more detail 
in this section of this rule.
    Comment: We received multiple comments supporting CMS's proposed 
adoption of the revised OMB delineations. MedPAC supported the adoption 
of the revised delineations in conjunction with the continuation of 
policies to reduce wage index disparities and mitigate the impact of 
changes to the wage index.
    Several commenters opposed CMS's proposed implementation of the 
revised OMB delineations. Several commenters argued the CMS is not 
bound to adopt the revised delineations, and urged CMS to delay 
adoption of the revised delineations until the completion of the 2020 
decennial census. Several comments specifically cited the lack of 
advance notice and the significant negative financial impacts to 
hospitals in several counties in the New York-Newark-Jersey City MSA 
resulting from the adoption of the revised delineations. These 
commenters cited past examples where CMS exercised discretion in 
modifying or delaying the implementation of OMB definitions and 
delineations in order to review and verify the impacts and 
ramifications. For instance, the revised delineations posted in 
February of 2012 (OMB Bulletin No: 13-01) were not adopted by CMS until 
FY 2015. One commenter presented the following considerations they 
consider compelling reasons for CMS to alter or postpone the adoption 
of the revised delineations. First, the commenter cites the effect of 
the COVID-19 pandemic, which has caused extraordinary increases in 
costs and revenue losses, particularly for hospitals in this New York-
Newark-Jersey City, NY-NY MSA. The commenter contends that, given the 
timing of when the FY 2021 IPPS/LTCH proposed rule was in development, 
the proposed policies could not have fully considered the effect of the 
crisis. Second, the commenter contends that adopting the proposed 
delineation changes is inconsistent with prior agency action because, 
as referenced by the agency in the proposed rule, CMS has typically 
only made minor changes to delineations between decennial census 
periods. The commenter stated that it is unprecedented for CMS to 
establish a new CBSA (the New Brunswick-Lakewood, NJ CBSA) based on 
OMB's delineation of a new Metropolitan Division outside of a decennial 
census. The commenter contends that OMB Bulletin 18-04 warned that 
comparing Metropolitan Divisions with entire MSAs would be 
inappropriate and further contend that neither CMS, nor OMB, have 
presented any evidence that the counties that constitute the New 
Brunswick-Lakewood, NJ CBSA function as a distinct area within the 
larger New York-Newark-Jersey City, NY-NJ MSA. Third, the commenter 
contends that while CMS cites an increase in the integrity of the IPPS 
wage index system as a rationale for implementing the revised OMB 
delineations, CMS has neither provided an explanation as to the 
integrity shortcomings within the current delineations, nor how they 
would be corrected by implementing the new delineations. The commenter 
highlights OMB's statement in Bulletin 18-04 instructing any agency 
using these delineations to seek public comment on their proposed use. 
They further explain that the New Brunswick-Lakewood Metropolitan 
Division was created because an OMB commuting threshold between 
Monmouth and Middlesex Counties was narrowly exceeded, meeting the 
criteria for Middlesex, Monmouth, and Ocean Counties to be deemed a 
separate division within the larger New York-Newark-Jersey City MSA, 
leading to their fourth point that the underlying commuting data used 
to create the delineations is fundamentally flawed. They specifically 
cite the effects of Superstorm Sandy, which came ashore in New York and 
New Jersey in late October of 2012 and caused many months of severe 
disruption to the area. Since the commuting patterns data utilized by 
OMB were based on the 2011-2015 5-Year ACS Commuting Flows dataset, the 
commenter states it is unreasonable to assume that Superstorm Sandy did 
not affect the commute-to-work data that OMB used to create Bulletin 
No. 18-04. Given this event, they believe relying on the commuting data 
used by OMB actually distorts the integrity of wage index system, 
rather than improving it.
    Given these considerations discussed by this commenter and 
generally cited by several additional commenters, commenters urged CMS 
to delay implementation of the revised OMB delineations. Commenters 
warned that the adoption would create a ``downward spiral'' effect when 
hospitals may not have sufficient Medicare payments to meet future wage 
costs. One commenter specifically cited CMS's FY 2020 wage index 
``compression'' policy as an additional financial challenge placed on 
hospitals the New York City metropolitan area, which will only be 
compounded through adopting the revised delineations. Another commenter 
stated, that while some affected hospitals may be eligible to obtain 
MGCRB reclassifications as early as FY 2022, the negative financial 
impacts for hospitals unable to reclassify would only further create 
competitive inequalities between hospitals within the same labor market 
area. Additional commenters urged CMS to engage further with 
stakeholders to develop a more comprehensive wage index reform to 
address the disparities that exist within the current wage index 
system.
    Response: We appreciate the comments supporting adoption of the 
revised OMB delineations, including the supportive comment from MedPAC, 
and refer commenters to section III.G.3 of this final rule for 
additional discussion of the continuation of the policies CMS finalized 
in the FY 2020 IPPS/LTCH PPS final rule to reduce wage index

[[Page 58745]]

disparities, including the low wage index hospital policy. In response 
to commenters who urged CMS to engage further with stakeholders to 
develop a more comprehensive wage index reform to address wage index 
disparities, we appreciate the continued interest in wage index reform. 
We note that, as a first step toward comprehensive wage index reform, 
the FY 2021 President's Budget proposes the Secretary conduct and 
report on a demonstration to improve the Medicare inpatient hospital 
wage index.
    We have closely reviewed all the comments received. While we 
understand implementing revisions to labor market area delineations may 
have either positive or negative effects on payment rates for some 
hospitals, we believe it is important for the IPPS to use the updated 
labor market area delineations in order to maintain a more accurate and 
up-to date payment system that reflects the reality of current labor 
market conditions. We believe that the updated OMB delineations 
increase the integrity of the IPPS wage index by creating a more 
accurate, updated representation of variations in area wage levels as 
compared to the current OMB delineations. In particular, while the 
revised delineations do not reflect the results of a new decennial 
census, they do incorporate the results from updated commuting survey 
data, the 2011-2015 American Commuting Survey (ACS). As such, we 
believe that the revised OMB delineations would help ensure more 
accurate and appropriate payments as compared to the current OMB 
delineations. We concur with commenters that CMS is not bound by 
statute to adhere to OMB definitions or delineations in calculating the 
IPPS wage index. However, because we believe we have broad authority 
under section 1886(d)(3)(E) of the Act to determine the labor market 
areas used for the IPPS wage index, and because we believe the updated 
delineations reflected in OMB Bulletin No. 18-04 better reflect the 
local economies and wage levels of the areas in which hospitals are 
currently located, we believe it is appropriate to implement the 
revised OMB delineations as described in the September 14, 2018 OMB 
Bulletin No. 18-04, for the IPPS wage index effective beginning in FY 
2021. In response to commenters who stated that we have in the past 
delayed implementation of revised delineations in order to better 
evaluate their impacts on the IPPS wage index, we note that we have 
reviewed our findings and impacts relating to the revised OMB 
delineations set forth in OMB Bulletin No. 18-04, and for the reasons 
discussed above, we find no compelling reason to further delay 
implementation. Furthermore, as explained in section III.A.2.c of this 
final rule, we are implementing a wage index transition for FY 2021 
under which we will apply a 5 percent cap on any decrease in a 
hospital's wage index compared to its wage index for FY 2020 to 
mitigate significant negative impacts of, and provide time for 
hospitals to adapt to, the revised OMB delineations. We believe that 
the transition described in Section III.A.2.c will provide negatively 
affected hospitals the necessary time to adjust and explore newly 
available reclassification options (please note, we address comments 
regarding this proposed transition in section III.A.2.c). Thus, for 
these reasons, we do not believe it is necessary or appropriate to 
delay or alter implementation of the revised delineations.
    With regard to the comments that would seek a delay in adopting the 
revised delineations given the effects of the COVID-19 related public 
health emergency, because the revised OMB delineations would help 
ensure more accurate payments than under the current OMB delineations, 
we believe it is important to adopt the revised delineations as soon as 
possible. Nothing about the COVID-19 related public health emergency 
would diminish the importance of ensuring that payments are as accurate 
as possible. In addition, we note that CMS has taken unprecedented 
steps to provide the healthcare community, including hospitals, with 
flexibilities and support to respond to the COVID-19 public health 
emergency (for example, see https://www.cms.gov/files/document/covid-accomplishments.pdf). While we continue our critical work in this area, 
for the reasons discussed previously, we believe it is appropriate to 
implement the updated OMB delineations effective beginning in FY 2021.
    In response to the comment that contends that adopting the revised 
delineations would be inconsistent with prior agency action because CMS 
has typically only made minor changes to labor market areas between 
decennial censuses, we note that CMS has routinely adopted revised 
delineations issued by OMB between decennial censuses (for example, the 
revised delineations issued in OMB Bulletin Nos. 15-01 and 17-01). 
Thus, consistent with past agency practice, we proposed to adopt the 
revised delineations in OMB Bulletin No. 18-04. As stated in the 
proposed rule (85 FR 32696 through 32697), we acknowledge that the 
changes outlined in OMB Bulletin No. 18-04 are more significant than 
typical OMB delineation revisions issued between decennial censuses; 
however, the overall impacts of these revised delineations are still 
more limited in scope than revisions that accompany the release of 
decennial censuses. In addition, as we discuss earlier, we believe that 
the updated OMB delineations increase the integrity and accuracy of the 
IPPS wage index by creating a more accurate, updated representation of 
variations in area wage levels as compared to the current OMB 
delineations.
    In response to commenters that contend that CMS should not 
establish a new CBSA based on OMB's delineation of a new Metropolitan 
Division between decennial census results and that comparing 
Metropolitan Divisions with entire MSAs would be inappropriate, we 
acknowledge that when OMB implemented the Statistical Area Definitions, 
including the ``Metropolitan Division'' definitions, OMB included 
guidance in Bulletin 04-02 and subsequent updates that these 
delineations should be evaluated by any Agency before use in program 
funding formulas. As we stated in the FY 2005 IPPS/LTCH final rule (69 
FR 49027), while we recognize that CBSA-based delineations were not 
specifically designed to define labor market areas, we believe they do 
serve as useful proxies for this purpose. In that rule (69 FR 49029), 
we further articulated our finding that Metropolitan Divisions of MSAs 
most closely resembled the labor market configuration of the previous 
OMB ``Primary Metropolitan Statistical Areas'' delineations. That is, 
by treating Metropolitan Divisions of MSAs as separate labor market 
areas, the resulting configuration in FY 2005 would more closely 
resemble the labor market map in place prior to FY 2005. Therefore, we 
finalized our current policy to treat Metropolitan Divisions of MSAs as 
separate labor market areas when calculating wage index values. For 
sake of consistency, it has been CMS's longstanding practice to refer 
to Metropolitan Divisions, undivided MSAs, and State's rural area as 
CBSAs. Because, as discussed above, we believe that OMB's Statistical 
Area Definitions, including Metropolitan Division definitions, serve as 
useful proxies in defining labor market areas for purposes of the IPPS 
wage index, and that the revised OMB delineations, including 
Metropolitan Division delineations, based on updated commuting data 
create a more accurate representation of variations in area wage 
levels, and given

[[Page 58746]]

our long history of adopting updated OMB revisions to Metropolitan 
Division delineations, and our consistent treatment of Metropolitan 
Divisions as separate labor market areas, we believe it is appropriate 
to adopt the revised delineations in OMB Bulletin No. 18-04, including 
the revised Metropolitan Division definitions, beginning with the FY 
2021 wage index.
    We note that the configuration of the New York-Newark-Jersey City 
MSA in 2005 (then titled New York-Northern New Jersey, Long Island) 
consisted of 5 metropolitan divisions. Broadly speaking, the divisions 
consisted of a New York City division (New York-White Plains-Wayne), a 
Long Island division (Nassau-Suffolk), a Mid-Hudson NY division 
(Poughkeepsie-Newburgh-Middletown), a North-Central, NJ division 
(Newark-Union), and a Central NJ-NJ Shore division (Edison). These 
delineations remained in effect until FY 2015 when CMS adopted revised 
delineations based OMB Bulletin No.13-01 (published February 28, 2013). 
This bulletin eliminated the Edison, NJ division, moving 3 of its 4 
counties to the New York City division, and one to the North-Central, 
NJ division. Also in this bulletin, Orange County, NY (in the New York 
City division) and Putnam County, NY (in the Mid-Hudson division) 
swapped division assignments. Under the revised delineations in OMB 
Bulletin No. 18-04, the changes adopted in FY 2015 to the New York-
Newark-Jersey City MSA have reverted back to the CBSA delineations in 
place from FY 2005 through FY 2014. The 4 counties of the former 
Edison, NJ metropolitan division are again joined together in the New 
Brunswick-Lakewood, NJ metropolitan division, and Orange and Putnam 
County, NY once again swapped division assignment. We note that, prior 
to FY 2005, CMS used OMB ``Primary Metropolitan Statistical Areas'' 
delineations (OMB Bulletin 95-04) to define labor market areas. Under 
those delineations, none of the 4 counties of the Edison, NJ/New 
Brunswick-Lakewood, NJ metropolitan division nor Orange County, NY were 
considered part the same labor market area as any county in the New 
York City labor market. Per OMB definitions, it is true that relatively 
small deviations in commuting interchange statistics may cause some 
counties to move between CBSAs if they are close to a specific 
threshold definition; however, we believe that including such changes 
in defining labor market areas would allow the wage index to more 
accurately reflect variations in area wage levels. Based upon our 
analysis of the 2011-2015 5-Year ACS Commuting Flows and Employment 
dataset and the 2010 OMB Standards for Delineating Metropolitan and 
Micropolitan Statistical Areas (75 FR 37249-37252), the New Brunswick-
Lakewood, NJ metropolitan division was created from the larger New 
York-Newark-Jersey City NY-NJ MSA because two contiguous ``secondary 
counties'' (Middlesex County and Monmouth County) had an Employment 
Interchange Measure (EIM) greater than 15. The EIM, as defined by OMB 
(75 FR 37251), between these two counties was 14.8 based of the 
previous 2006-2010 ACS Commuting Flow dataset, and therefore did not 
qualify as a separate metropolitan division. In the updated 2011-2015 
commuting dataset, the EIM between these two counties is 16.1. While 
the commenters claimed the 2011-2015 dataset results in these counties 
only narrowly meeting the threshold to be defined as a separate 
metropolitan division, because the EIM (16.1) based on the updated 
commuting dataset does clearly exceed the threshold, we believe it is 
appropriate to take this into account in updating the labor market area 
delineations. We note that the EIM measure of 14.8 based on the older 
2006-2010 commuting dataset was far closer to the threshold. We are not 
convinced that the proposed delineation changes are unwarranted or that 
there is evidence of any distortion or exceptional statistical anomaly, 
such as the impacts of Superstorm Sandy, as suggested by commenters. In 
fact, by comparing the most recent combined three year average hourly 
wages for all hospitals in the counties being removed from the New 
York-Jersey City-White Plains, NY-NJ CBSA ($47.79) to the hospitals 
remaining in the proposed New York City-Jersey City-White Plains, NY-NJ 
CBSA ($59.21), it is evident that labor costs are significantly lower 
for most hospitals in the counties removed from the CBSA.
    As far as comments regarding the lack of notice provided to 
hospitals regarding the proposed adoption of the revised delineations, 
we note that the delineation files produced by OMB have been public for 
nearly 2 years, and OMB definitions and criteria are subject to 
separate notice and comment rulemaking. In the past, we have delayed 
implementation of delineations in order to fully evaluate their impacts 
on IPPS wage index values, and as previously discussed, we have fully 
assessed the impacts of the revised delineations in OMB Bulletin No. 
18-04. As discussed previously, we believe it would be appropriate to 
adopt the revised delineations to reflect a more accurate, updated 
representation of variations in area wage levels as compared to the 
current OMB delineations.
    After consideration of the public comments we received, for the 
reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS 
proposed rule, we are finalizing, without modification, our proposed 
implementation of the revised OMB delineations as described in the 
September 14, 2018 OMB Bulletin No. 18-04, effective beginning with the 
FY 2021 IPPS wage index.
i. Micropolitan Statistical Areas
    As discussed in the FY 2005 IPPS final rule (69 FR 49029 through 
49032), OMB defines a ``Micropolitan Statistical Area'' as a CBSA 
``associated with at least one urban cluster that has a population of 
at least 10,000, but less than 50,000'' (75 FR 37252). We refer to 
these areas as Micropolitan Areas. Since FY 2005, we have treated 
Micropolitan Areas as rural and include hospitals located in 
Micropolitan Areas in each State's rural wage index. We refer the 
reader to the FY 2005 IPPS final rule (69 FR 49029 through 19032) and 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49952) for a complete 
discussion regarding this policy and our rationale for treating 
Micropolitan Areas as rural. We stated in the proposed rule (85 FR 
32967) that, for the reasons discussed in the FY 2005 IPPS final rule 
and in the FY 2015 IPPS final rule, we believed that the best course of 
action would be to continue this policy and include hospitals located 
in Micropolitan Areas in each State's rural wage index. Therefore, in 
conjunction with our proposal to implement the new OMB statistical area 
delineations beginning in FY 2021, we proposed to continue to treat 
Micropolitan Areas as ``rural'' and to include Micropolitan Areas in 
the calculation of each state's rural wage index. We did not receive 
any comments specific to this proposal, and therefore, for the reasons 
set forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed 
rule, we are finalizing our proposal, without modification, to continue 
to treat Micropolitan Areas as ``rural'' and to include Micropolitan 
Areas in the calculation of each state's rural wage index.
ii. Urban Counties That Would Become Rural Under the Revised OMB 
Delineations
    As previously discussed, we proposed to implement the revised OMB 
statistical area delineations (based upon

[[Page 58747]]

OMB Bulletin No. 18-04) beginning in FY 2021. In the FY 2021 IPPS/LTCH 
PPS proposed rule (85 FR 32697), we stated that our analysis shows that 
a total of 34 counties (and county equivalents) and 10 hospitals that 
were once considered part of an urban CBSA would be considered to be 
located in a rural area, beginning in FY 2021, under these revised OMB 
delineations. In the proposed rule (85 FR 32698 through 32699), we 
included the following chart listing the 34 urban counties that would 
be rural if we finalized our proposal to implement the revised OMB 
delineations.
[GRAPHIC] [TIFF OMITTED] TR18SE20.175

[GRAPHIC] [TIFF OMITTED] TR18SE20.176

    We proposed that the wage data for all hospitals located in the 
counties listed in this chart would now be considered rural when 
calculating their respective State's rural wage index. We stated in the 
proposed rule (85 FR 32699) that we recognize that rural areas 
typically have lower area wage index values than urban areas, and 
hospitals located in these counties may experience a negative impact in 
their IPPS payment due to the adoption of the revised OMB delineations. 
We referred readers to our discussion of our proposed wage index 
transition policy to apply a 5 percent cap in FY 2021 for hospitals 
that may experience any decrease in their final wage index from the 
prior fiscal year. We also referred readers to the discussion of our 
proposed revisions to the list of counties deemed urban under section 
1886(d)(8)(B) of the Act that would affect the hospitals located in 
these proposed rural counties.

[[Page 58748]]

    In addition, we noted in the proposed rule that the provisions of 
Sec.  412.102 of the regulations would continue to apply with respect 
to determining DSH payments. Specifically, we stated that in the first 
year after a hospital loses urban status, the hospital will receive an 
adjustment to its DSH payment that equals two-thirds of the difference 
between the urban DSH payments applicable to the hospital before its 
redesignation from urban to rural and the rural DSH payments applicable 
to the hospital subsequent to its redesignation from urban to rural. In 
the second year after a hospital loses urban status, the hospital will 
receive an adjustment to its DSH payment that equals one third of the 
difference between the urban DSH payments applicable to the hospital 
before its redesignation from urban to rural and the rural DSH payments 
applicable to the hospital subsequent to its redesignation from urban 
to rural.
    We did not receive any comments specific to the proposed list of 
counties that would become rural under the revised OMB delineations. 
Thus, for the reasons set forth in this final rule and in the FY 2021 
IPPS/LTCH PPS proposed rule, we are finalizing, without modification, 
our proposed reassignment of the 34 counties set forth in the chart 
from urban areas to rural areas for purposes of the IPPS wage index 
based on the revised OMB delineations in OMB Bulletin No. 18-04, 
effective beginning with the FY 2021 IPPS wage index.
iii. Rural Counties That Would Become Urban Under the Revised OMB 
Delineations
    As previously discussed, we proposed to implement the revised OMB 
statistical area delineations (based upon OMB Bulletin No. 18-04) 
beginning in FY 2021. In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32699), we indicated that analysis of these OMB statistical area 
delineations shows that a total of 47 counties (and county equivalents) 
and 17 hospitals that were located in rural areas would be located in 
urban areas under the revised OMB delineations. In the proposed rule, 
we included the following chart listing the 47 rural counties that 
would be urban if we finalized our proposal to implement the revised 
OMB delineations.
BILLING CODE 4120-01-P

[[Page 58749]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.177

BILLING CODE 4120-01-C
    We proposed that when calculating the area wage index, the wage 
data for hospitals located in these counties would be included in their 
new respective urban CBSAs. We stated in the proposed rule (85 FR 
32701) that, typically, hospitals located in an urban area would 
receive a wage index value higher than or equal to hospitals located

[[Page 58750]]

in their State's rural area. We referred readers to our discussion of 
our proposed wage index transition policy to apply a 5 percent cap in 
FY 2021 for hospitals that may experience any decrease in their final 
wage index from the prior fiscal year.
    In the proposed rule, we also noted that due to the adoption of the 
revised OMB delineations, some CAHs that were previously located in 
rural areas may be located in urban areas. The regulations at 
Sec. Sec.  412.103(a)(6) and 485.610(b)(5) provide affected CAHs with a 
two-year transition period that begins from the date the redesignation 
becomes effective. We stated that the affected CAHs must reclassify as 
rural during this transition period in order to retain their CAH status 
after the two-year transition period ends. We referred readers to the 
FY 2015 IPPS/LTCH final rule (79 FR 50162 and 50163) for further 
discussion of the two-year transition period for CAHs.
    Comment: We received a comment regarding a hospital in Harnett 
County, NC. Harnett County is a rural county under the current OMB 
delineations. Under the ``Lugar'' policy at section 1886(d)(8)(B) of 
the Act, all hospitals in the county are currently deemed to be 
reclassified as urban to Raleigh, NC (CBSA 39580). Under the revised 
OMB delineations, Harnett County would be considered urban, part of 
Fayetteville, NC (CBSA 22180). The commenters stated that this change 
in status will have a significant financial impact on the hospital. The 
commenter questions how the county-based commuting patterns, which 
supported the county's continued Lugar status in the FY 2019 IPPS/LTCH 
proposed rule, could have changed in such a manner that Harnett is now 
considered an outlying county of the Fayetteville, NC CBSA. The 
commenter requested CMS reconsider the placement of Harnett County, NC 
in the Fayetteville, NC CBSA, believing the data included in the 
upcoming 2020 decennial census would appropriately place Harnett County 
in the Raleigh-Cary, NC CBSA.
    Response: As the commenter recognizes, based on the updated OMB 
delineations in OMB Bulletin No. 18-04, Harnett County is considered 
urban, part of Fayetteville, NC (CBSA 22180). In OMB Bulletin No. 18-
04, OMB is using an updated commuting data set to determine statistical 
area delineations, specifically the 2011-2015 5-Year ACS Commuting 
Flows and Employment, which is available on the internet at https://www.census.gov/topics/employment/commuting/guidance/flows.html. As 
discussed earlier, we believe the updated OMB delineations in OMB 
Bulletin No. 18-04, which are based on this updated commuting data, 
provide a more updated and accurate representation of variations in 
area wage levels. As such, we believe that adoption of the revised OMB 
delineations would increase the integrity of the IPPS wage index and 
help ensure more accurate and appropriate payments as compared to the 
current OMB delineations. Under section 1886(d)(8)(B) of the Act, only 
hospitals located in rural counties (that meet the criteria in section 
1886(d)(8)(b)) can be designated as ``Lugar'' hospitals. Since Harnett 
County, NC would be considered an urban county located in the 
Fayetteville, NC CBSA under the updated OMB delineations, hospitals 
located in Harnett County would no longer be considered ``Lugar'' 
hospitals under section 1886(d)(8)(b) of the Act and would no longer be 
considered reclassified under that statute to the Raleigh-Cary, NC 
(CBSA 39580). Based on the updated delineations in OMB Bulletin No. 18-
04, we believe that Harnett County is appropriately classified as 
urban, part of the Fayetteville, NC CBSA; however, we may consider 
proposing future revisions to the county's geographic classification if 
warranted based on future updates to the OMB delineations.
    Comment: One commenter requested CMS consider a 2-year extension of 
rural status for Medicare Dependent Hospitals (MDH) and Sole Community 
Hospitals (SCH) located in counties that are gaining urban status. 
Since SCH and MDH statuses are dependent upon a hospital being 
considered rural, the commenter states they should be allotted 
additional time to obtain a rural status. The commenter suggested CMS 
adopt a similar transition period policy for SCHs and MDHs as what is 
granted to Critical Access Hospitals at Sec.  412.103(a)(6).
    Response: We appreciate these comments. However, we do not believe 
it would be appropriate to extend rural status for MDHs and SCHs for a 
period of time after implementation of the revised OMB delineations to 
provide additional time to obtain rural reclassification through Sec.  
412.103. As discussed in the FY 2015 IPPS/LTCH final rule (79 FR 
49983), we believe the payment consequences for CAHs of losing rural 
status are generally greater than for other provider types. In 
addition, given the different Conditions of Participation (CoPs) for 
CAHs, and that it would be generally more difficult for a CAH to have 
to meet the hospital CoPs instead of the CAH CoPs, only a CAH also 
faces the potential loss of its ability to continue to participate in 
the Medicare and Medicaid programs if such rural status is lost. We 
believe that the combination of the generally greater payment 
consequences for CAHs relative to other provider types combined with 
the unique consequences for CAHs with respect to the CoPs make it 
appropriate for CAHs to be afforded a 2-year transition period in which 
to reclassify not afforded to other provider types. Furthermore, of the 
17 hospitals located in newly urban counties, fewer than half appear to 
have either SCH or MDH status. We believe all could readily obtain 
rural reclassification under the current criteria in Sec.  412.103 in 
order to retain their status as MDHs and SCHs. We remind hospitals that 
Sec.  412.103 reclassification requests are effective as of the date of 
application. If the application is filed with the appropriate regional 
office by October 1, 2020, when approved, the hospital would experience 
no gap in rural status. We believe that the relatively few SCHs and 
MDHs affected by the revised delineations will have adequate time to 
submit a complete application. Therefore, for the reasons explained 
above, we are not modifying existing regulations to extend rural status 
for MDHs and SCHs for a period of time after implementation of the 
revised OMB delineations.
    After consideration of the public comments we received, for the 
reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS 
proposed rule, we are finalizing, without modification, our proposed 
reassignment of the 47 counties (and county equivalents) listed in the 
chart from rural areas to urban areas for purposes of the IPPS wage 
index based on the revised OMB delineations in OMB Bulletin No. 18-04, 
effective beginning with the FY 2021 IPPS wage index.
iv. Urban Counties That Would Move to a Different Urban CBSA Under the 
Revised OMB Delineations
    As we stated in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32702), in addition to rural counties becoming urban and urban counties 
becoming rural, some urban counties would shift from one urban CBSA to 
another urban CBSA under our proposal to adopt the new OMB 
delineations. We stated that, in other cases, adopting the revised OMB 
delineations would involve a change only in CBSA name and/or number, 
while the CBSA continues to encompass the same constituent counties. 
For example, we noted that CBSA 19380 (Dayton, OH) would experience 
both a change to its number

[[Page 58751]]

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. In the proposed rule (85 FR 32703 through 32704), we provided the 
following list of such CBSAs where we proposed to change the name and/
or CBSA number only.
[GRAPHIC] [TIFF OMITTED] TR18SE20.178

    In the proposed rule, we did not further discuss these changes 
because we stated that they were inconsequential changes with respect 
to the IPPS wage index. However, we stated that in other cases, if we 
adopted the revised OMB delineations, counties would shift between 
existing and new CBSAs, changing the constituent makeup of the CBSAs. 
For example, we noted that Kendall County, IL would be moved from the 
current CBSA 16974 (Chicago-Naperville-Arlington Height, IL) into CBSA 
20994 (Elgin, IL). We further noted that the remaining counties in the 
current CBSA 16974 would be assigned to the CBSA 16984 (Chicago-
Naperville-Evanston, IL). The constituent counties of CBSA 16974 would 
therefore be split into two different urban CBSAs. We also stated that 
there would be a significant rearrangement in the constituent counties 
among the New York City Area Metropolitan Divisions. Most notably, 
Monmouth, Middlesex, and Ocean Counties in NJ would move from the 
current CBSA 35614 (New York-Jersey City-White Plains, NY-NJ) to the 
CBSA 35154 (New Brunswick-Lakewood, NJ). Also, Somerset County, NJ 
would move from current CBSA 35084 (Newark, NJ-PA) to CBSA 35154. In 
the proposed rule, we included the following chart listing the urban 
counties that would move from one urban CBSA to a new or modified CBSA 
if we adopted the revised OMB delineations.
BILLING CODE 4120-01-P

[[Page 58752]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.179

BILLING CODE 4120-01-C
    In the proposed rule (85 FR 32705), we stated that if hospitals 
located in these counties move from one CBSA to another under the 
revised OMB

[[Page 58753]]

delineations, there may be impacts, both negative and positive, upon 
their specific wage index values. We referred readers to our discussion 
of our proposed wage index transition policy to apply a 5 percent cap 
in FY 2021 for hospitals that may experience any decrease in their 
final wage index from the prior fiscal year. We also referred readers 
to our discussion of our proposals to reassign MGCRB wage index 
reclassifications for hospitals currently assigned to these modified 
CBSAs.
    We did not receive any comments on the CBSAs that would undergo a 
change in name and/or CBSA number only. The comments we received 
regarding the list of urban counties that would move from one urban 
CBSA to a new or modified CBSA are discussed in section III.I.2.c.(1) 
of this final rule. As discussed in that section, we are finalizing, 
without modification, our proposal to implement the revised OMB 
delineations as described in the September 14, 2018 OMB Bulletin No. 
18-04, effective beginning with the FY 2021 IPPS wage index. After 
consideration of the public comments we received, for the reasons set 
forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed 
rule, we are finalizing, without modification, our proposed list of 
CBSAs that would move from one urban CBSA to a new or modified CBSA for 
purposes of the IPPS wage index based on the revised OMB delineations 
in OMB Bulletin No. 18-04, effective beginning with the FY 2021 IPPS 
wage index.
c. Transition for Hospitals Negatively Impacted
    We stated in the proposed rule (85 FR 32706) that, overall, we 
believe implementing the revised OMB statistical area delineations 
would result in wage index values being more representative of the 
actual costs of labor in a given area. However, we recognized that some 
hospitals would experience decreases in wage index values as a result 
of our implementation of the revised labor market area delineations. We 
also stated that we realize that some hospitals would have higher wage 
index values due to our implementation of the new labor market area 
delineations.
    In the past, we have proposed and finalized budget neutral 
transition policies to help mitigate negative impacts on hospitals of 
certain wage index proposals. For example, in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 49960 through 49963) when we implemented new OMB 
delineations based on the 2010 decennial census data, we finalized 
budget neutral transitions for certain situations. Specifically, in the 
FY 2015 IPPS/LTCH PPS final rule, for a period of 3 fiscal years, we 
allowed urban hospitals that became rural under the new delineations 
(and that had no form of wage index reclassification or redesignation) 
to maintain the wage index value of the CBSA in which they were 
physically located for FY 2014; and for hospitals that experienced a 
decrease in wage index values due to the change in labor market area 
definitions, we implemented a 1-year blended wage index where hospitals 
received 50 percent of their wage index based on the new OMB 
delineations that went into effect in FY 2015, and 50 percent of their 
wage index based on their FY 2014 labor market area. As we stated in 
the proposed rule, this blended wage index required us to calculate 
wage indexes for all hospitals using both old and new labor market 
definitions even though it only applied to hospitals that experienced a 
decrease in wage index values due to a change in labor market area 
definitions. More recently, in the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42336 through 42338), we finalized a wage index transition to help 
mitigate any significant decreases in the wage index values of 
hospitals compared to their final wage index value from the prior 
fiscal year due to the combined effect of the changes to the FY 2020 
wage index. Specifically, for FY 2020, we implemented a 5-percent cap 
on any decrease in a hospital's wage index from the hospital's final 
wage index in FY 2019.
    As previously mentioned in this final rule and in the proposed rule 
(85 FR 32706), while the revised OMB delineations in OMB Bulletin 18-04 
are not based on new census data, there were some material changes in 
the OMB delineations. Also, as previously mentioned, the revisions in 
this OMB bulletin are updates to the CBSA delineations already adopted 
in FY 2015 based on the 2010 census data. For these reasons, we stated 
in the proposed rule that, for FY 2021, we do not believe it is 
necessary to implement the multifaceted transitions we established in 
FY 2015 for the adoption of the new OMB delineations based on the new 
decennial census data. However, in accordance with our past practice of 
implementing transition policies to help mitigate negative impacts on 
hospitals of certain wage index proposals, we stated in the proposed 
rule that if we adopt the revised OMB delineations, we believe it would 
be appropriate to implement a transition policy since, as previously 
mentioned, some of these revisions are material, and may negatively 
impact payments to hospitals. For example, we explained that changes in 
the county makeup of a CBSA, by adding or removing a constituent 
county, may change the pool of hospitals contributing average hourly 
wage data, potentially resulting in lower wage index values for certain 
areas. We noted that when CMS implemented various changes to the 
hospital wage index in prior rulemaking, commenters frequently 
supported transition policies that ensured wage index values maintain a 
degree of year-to-year consistency (see comments to our FY 2015 IPPS/
LTCH PPS final rule transition policies at 79 FR 49959 through 49961). 
Thus, we stated in the proposed rule that we believe applying a 5-
percent cap on any decrease in a hospital's wage index from the 
hospital's final wage index from the prior fiscal year, as we did for 
FY 2020, would be an appropriate transition for FY 2021 for the revised 
OMB delineations as it provides predictability in payment levels from 
FY 2020 to the upcoming FY 2021. We stated that the FY 2021 5-percent 
cap on wage index decreases would be applied to all hospitals that have 
any decrease in their wage indexes, mitigating significant negative 
decrease in wage index values. Given the significant portion of 
Medicare IPPS payments that are adjusted by the wage index and how 
relatively few hospitals generally see wage index declines in excess of 
5 percent, hospitals may have difficulty adapting to changes in the 
wage index of this magnitude all at once. For these reasons, we 
proposed that, for FY 2021, we would place a 5 percent cap on any 
decrease in a hospital's wage index from the hospital's final wage 
index for FY 2020, such that a hospital's final wage index for FY 2021 
would not be less than 95 percent of its final wage index for FY 2020. 
We stated that this transition would allow the effects of our adoption 
of the revised CBSA delineations to be phased in over 2 years with no 
estimated reduction in the wage index of more than 5 percent in FY 2021 
(that is, no cap would be applied the second year). As we explained in 
the proposed rule, we continue to believe 5 percent is a reasonable 
level for the cap because it would effectively mitigate any significant 
decreases in the wage index for FY 2021. We also stated that we believe 
this transition would afford hospitals adequate time to fully assess 
any additional reclassification options

[[Page 58754]]

available to them (we refer the reader to section III.I.2.c. of the 
preamble of this final rule for a complete discussion regarding the 
revised OMB delineations and their effects regarding hospital 
reclassification). Therefore, for FY 2021, we proposed to again provide 
for a transition of a 5-percent cap on any decrease in a hospital's 
wage index from the hospital's final wage index from the prior fiscal 
year (FY 2020). We stated that, consistent with the application of the 
5 percent cap in FY 2020, the FY 2021 5-percent cap on wage index 
decreases would be applied to all hospitals that have any decrease in 
their wage indexes, regardless of the circumstance causing the decline, 
so that a hospital's final wage index for FY 2021 would not be less 
than 95 percent of its final wage index for FY 2020. As we explained in 
the proposed rule, we believe applying the cap on wage index decreases 
for all hospitals, regardless of the circumstance causing the decrease, 
allows CMS to mitigate any significant negative impacts of adopting the 
new OMB delineations in a manner that is readily identifiable in the 
wage index tables and promotes greater wage index predictability.
    Comment: We received several comments regarding the proposed 5 
percent cap transition policy. Some commenters, while opposing the 
proposed adoption of revised OMB delineations, generally supported the 
concept of the transition cap for FY 2021 (if the delineations are 
finalized). Another commenter supported the 5 percent transition cap as 
a means to reduce overall wage index volatility. Several commenters 
requested that CMS reduce the amount of potential reduction in FY 2021, 
and extend transition adjustments to affected hospitals in future 
years. Other commenters, citing CMS' FY 2015 policy of phasing in 
transitions when adopting revised OMB delineations, suggested a 
multiple year transition period. One set of commenters, citing the 
significant financial losses faced by hospitals and the limited amount 
of time hospitals have had to prepare, suggested CMS adopt the 
transition over a multiple year period, with no reduction in 2021, a 
2.5 percent cap on losses in FY2022, and a 5 percent cap for FY 2022. 
Other commenters requested CMS limit individual hospitals' potential 
losses to 3 percent in FY 2021 and again in FY 2022 to give hospitals a 
fairer chance to adjust to this unexpected proposal.
    Response: We thank all commenters for their suggestions. We note 
that the last time we adopted significantly revised OMB delineations in 
FY 2015, CMS finalized an extended transition policy (79 FR 49957-
49960) for certain hospitals. We allowed urban hospitals that became 
rural under the new delineations (and that had no form of wage index 
reclassification or redesignation) to maintain the wage index value of 
the CBSA in which they were physically located for FY 2014 for a period 
of 3 years. A similar policy was adopted for rural hospitals located in 
counties that lost ``Lugar'' status under section 1886(d)(8)(B) of the 
Act that would no longer be deemed urban and would revert back to rural 
status. Since rural areas of States typically have lower wage index 
values, and given the potentially significant payment impacts for these 
hospitals, we believed additional considerations should be extended to 
this limited number of hospitals. However, as described in section 
III.I.3.b of the preamble of this final rule, all the hospitals that 
would shift from urban to rural in FY 2021 under the revised 
delineations would also be deemed reclassified as urban under section 
1886(d)(8)(B) of the Act to the urban area they currently are assigned. 
Under the revised OMB delineations, no hospital located in a rural 
county is losing its ``Lugar'' status under section 1886(d)(8)(B) of 
the Act and reverting back to rural status. Therefore, the special 
considerations granted to urban hospitals that became rural in FY 2015 
would not be applicable to any hospital in FY 2021.
    The other transition adjustment we finalized in FY 2015 was for 
hospitals that experienced a decrease in wage index values due to the 
change in labor market area definitions. We implemented a 1-year 
blended wage index where hospitals received 50 percent of their wage 
index based on the new OMB delineations that went into effect in FY 
2015, and 50 percent of their wage index based on their FY 2014 labor 
market area. We believe our proposed 5 percent cap transition policy 
for FY 2021 accomplishes the same policy goal as the transition policy 
we finalized in FY 2015; limiting potential losses for the upcoming 
fiscal year, while providing adequate time adjust and evaluate 
reclassification options. We believe the level of the cap amount, 
providing that FY 2021 wage index values are at least 95 percent of a 
hospital's FY 2020 wage index value, would adequately mitigate 
significant wage index decreases and provide wage index stability for 
affected hospitals for FY 2021. While we acknowledge that some 
providers will see negative impacts based upon the adoption of the 
revised OMB delineations, we also point out that some providers will 
experience increases in their wage index values due to the adoption of 
the revised OMB delineations. As we stated previously, CMS has in the 
past provided temporary adjustments to mitigate significant negative 
impacts from the adoption of new policies or procedures. However, we do 
not think it is necessary or appropriate to extend the transition 
period to additional years, as suggested by some commenters, to allow 
additional time to adjust to the revised OMB delineations in OMB 
Bulletin No. 18-04. The revised delineations adopted in FY 2015 were 
significantly more complex and wide ranging than those we proposed for 
FY 2021. Although the changes outlined in OMB Bulletin No. 18-04 are 
more significant than typical OMB delineation revisions issued between 
decennial censuses, the overall impacts of these revised delineations 
are still more limited in scope than revisions that accompany the 
release of decennial censuses. Given this, we do not think it is 
necessary or appropriate extend the transition period to additional 
years.
    Comment: Another commenter, while supportive of the proposed 5 
percent cap for FY 2021, cited that some hospitals obtained rural 
reclassifications during FY 2020 and requested that that CMS apply the 
5 percent cap using the wage index being paid in FY 2020 (which would 
be based on any such mid-year reclassifications) rather than the one 
that was included in the FY 2020 IPPS final rule.
    Response: We appreciate the commenter's support of the proposed 5 
percent cap on wage index decreases for FY 2021. Similar to the policy 
we applied for the 5 percent cap in FY 2020 (see discussion in the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42337)), for purposes of applying 
the 5 percent cap for FY 2021, we are clarifying that the prior year 
``final'' wage index value refers to the final amount published in the 
FY 2020 IPPS/LTCH PPS final rule. We believe that using the publicly 
available wage indexes from the FY 2020 IPPS final rule facilitates 
transparency. A hospital can contact its MAC for assistance if it 
believes the incorrect wage index value was used as the basis for its 
transition and the MAC can make any appropriate correction.
    After consideration of the public comments we received, for the 
reasons discussed in this final rule and the FY 2021 IPPS/LTCH PPS 
proposed rule, we are finalizing, without modification, our proposal to 
place a 5 percent cap, for FY 2021, on any decrease in a hospital's 
wage index from the hospital's final wage index in FY 2020 so that a

[[Page 58755]]

hospital's final wage index for FY 2021 will not be less than 95 
percent of its final wage index for FY 2020.
d. Transition Budget Neutrality
    For FY 2021, we proposed to apply a budget neutrality adjustment to 
the standardized amount so that our transition described in section 
III.A.2.c. is implemented in a budget neutral manner under our 
authority in section 1886(d)(5)(I) of the Act. In the proposed rule (85 
FR 32706), we noted that implementing the transition wage index in a 
budget neutral manner is consistent with past practice (for example, 79 
FR 50372 and 84 FR 42338) where CMS has used its exceptions and 
adjustments authority under section 1886(d)(5)(I)(i) of the Act to 
budget neutralize transition wage index policies when such policies 
allow for the application of a transitional wage index only when it 
benefits the hospital. We stated that we believed, and continue to 
believe, that it would be appropriate to ensure that such policies do 
not increase estimated aggregate Medicare payments beyond the payments 
that would be made had we never proposed these transition policies (79 
FR 50372 and 84 FR 42337 through 42338). Therefore, for FY 2021, we 
proposed to use our exceptions and adjustments authority under section 
1886(d)(5)(I)(i) of the Act to apply a budget neutrality adjustment to 
the standardized amount so that our transition (described in section 
III.A.2.c.) is implemented in a budget neutral manner.
    Specifically, we proposed to apply a budget neutrality adjustment 
to ensure that estimated aggregate payments under our transition 
(described in section III.A.2.c. of the preamble of this final rule) 
for hospitals that have any decrease in their wage indexes for FY 2021 
would equal what estimated aggregate payments would have been without 
the transition. To determine the associated budget neutrality factor, 
we compared estimated aggregate IPPS payments with and without the 
transition.
    In the proposed rule, we calculated a budget neutrality adjustment 
factor (0.998580) based on proposed rule data that we stated would be 
applied to the FY 2021 standardized amount to achieve budget neutrality 
for the proposed transition. We noted that this number would be 
updated, as appropriate, based on final rule data.
    We noted in the proposed rule that, consistent with past practice 
(69 FR 49034 and 79 FR 49963), we were not adopting the revised OMB 
delineations themselves in a budget neutral manner. We do not believe 
that the revision to the labor market areas in and of itself 
constitutes an ``adjustment or update'' to the adjustment for area wage 
differences, as provided under section 1886(d)(3)(E) of the Act.
    We did not receive any comments regarding our proposal to apply a 
budget neutrality adjustment to the FY 2021 standardized amount to 
achieve budget neutrality for the transition described in section 
III.A.2.c. of the preamble of this final rule. Thus, for the reasons 
set forth in the final rule and in the FY 2021 IPPS/LTCH PPS proposed 
rule, we are finalizing this proposal without modification. Please see 
the table in section II.4.h. of the addendum of this final rule which 
contains the final transition budget neutrality factor (which is based 
on final rule data) that will be applied to the FY 2021 standardized 
amount to achieve budget neutrality for the transition.
3. Codes for Constituent Counties in CBSAs
    CBSAs are made up of one or more constituent counties. Each CBSA 
and constituent county has its own unique identifying codes. There are 
two different lists of codes associated with counties: Social Security 
Administration (SSA) codes and Federal Information Processing Standard 
(FIPS) codes. Historically, CMS has listed and used SSA and FIPS county 
codes to identify and crosswalk counties to CBSA codes for purposes of 
the hospital wage index. As we discussed in the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38129 through 38130), we have learned that SSA county 
codes are no longer being maintained and updated. However, the FIPS 
codes continue to be maintained by the U.S. Census Bureau. We believe 
that using the latest FIPS codes will allow us to maintain a more 
accurate and up-to-date payment system that reflects the reality of 
population shifts and labor market conditions.
    The Census Bureau's most current statistical area information is 
derived from ongoing census data received since 2010; the most recent 
data are from 2015. The Census Bureau maintains a complete list of 
changes to counties or county equivalent entities on the website at: 
https://www.census.gov/geo/reference/county-changes.html. We believe 
that it is important to use the latest counties or county equivalent 
entities in order to properly crosswalk hospitals from a county to a 
CBSA for purposes of the hospital wage index used under the IPPS.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through 
38130), we adopted a policy to discontinue the use of the SSA county 
codes and began using only the FIPS county codes for purposes of 
crosswalking counties to CBSAs. In addition, in the same rule, we 
implemented the latest FIPS code updates which were effective October 
1, 2017, beginning with the FY 2018 wage indexes. These updates have 
been used to calculate the wage indexes in a manner generally 
consistent with the CBSA-based methodologies finalized in the FY 2005 
IPPS final rule and the FY 2015 IPPS/LTCH PPS final rule.
    For FY 2021, we are continuing to use only the FIPS county codes 
for purposes of crosswalking counties to CBSAs. For FY 2021, Tables 2 
and 3 associated with this final rule and the County to CBSA Crosswalk 
File and Urban CBSAs and Constituent Counties for Acute Care Hospitals 
File posted on the CMS website reflect the latest FIPS code updates.

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

    The FY 2021 wage index values are based on the data collected from 
the Medicare cost reports submitted by hospitals for cost reporting 
periods beginning in FY 2017 (the FY 2020 wage indexes were based on 
data from cost reporting periods beginning during FY 2016).
1. Included Categories of Costs
    The FY 2021 wage index includes all of the following categories of 
data associated with costs paid under the IPPS (as well as outpatient 
costs):
     Salaries and hours from short-term, acute care hospitals 
(including paid lunch hours and hours associated with military leave 
and jury duty);
     Home office costs and hours;
     Certain contract labor costs and hours, which include 
direct patient care, certain top management, pharmacy, laboratory, and 
nonteaching physician Part A services, and certain contract indirect 
patient care services (as discussed in the FY 2008 final rule with 
comment period (72 FR 47315 through 47317)); and
     Wage-related costs, including pension costs (based on 
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 
through 51590)) and other deferred compensation costs.
2. Excluded Categories of Costs
    Consistent with the wage index methodology for FY 2020, the wage 
index for FY 2021 also excludes the direct and overhead salaries and 
hours for services not subject to IPPS payment, such as skilled nursing 
facility (SNF) services, home health services, costs related to GME 
(teaching physicians and residents) and certified registered nurse

[[Page 58756]]

anesthetists (CRNAs), and other subprovider components that are not 
paid under the IPPS. The FY 2021 wage index also excludes the salaries, 
hours, and wage-related costs of hospital-based rural health clinics 
(RHCs), and Federally qualified health centers (FQHCs) because Medicare 
pays for these costs outside of the IPPS (68 FR 45395). In addition, 
salaries, hours, and wage-related costs of CAHs are excluded from the 
wage index for the reasons explained in the FY 2004 IPPS final rule (68 
FR 45397 through 45398). For FY 2020 and subsequent years, other wage-
related costs are also excluded from the calculation of the wage index. 
As discussed in the FY 2019 IPPS/LTCH final rule (83 FR 41365 through 
41369), other wage-related costs reported on Worksheet S-3, Part II, 
Line 18 and Worksheet S-3, Part IV, Line 25 and subscripts, as well as 
all other wage-related costs, such as contract labor costs, are 
excluded from the calculation of the wage index.
3. Use of Wage Index Data by Suppliers and Providers Other Than Acute 
Care Hospitals Under the IPPS
    Data collected for the IPPS wage index also are currently used to 
calculate wage indexes applicable to suppliers and other providers, 
such as SNFs, home health agencies (HHAs), ambulatory surgical centers 
(ASCs), and hospices. In addition, they are used for prospective 
payments to IRFs, IPFs, and LTCHs, and for hospital outpatient 
services. We note that, in the IPPS rules, we do not address comments 
pertaining to the wage indexes of any supplier or provider except IPPS 
providers and LTCHs. Such comments should be made in response to 
separate proposed rules for those suppliers and providers.
4. Proper Documentation of Physician Time Spent in Part A 
Administrative Versus Part B Billable Activities
    In the last few years, we have received wage index data appeals 
related to MACs' disallowances of wages and hours that hospitals 
believe are associated with Part A administrative physician time, but 
the MACs believe are not properly documented as such, or are in fact, 
associated with Part B billable activities, which are not included in 
the wage index. For physicians employed by a hospital, their salaries 
and hours associated with Part A administrative time, which are 
included in the wage index, are reported on CMS-2552-10 Worksheet S-3, 
Part II, line 4, and the salaries and hours of hospital employed 
physicians associated with billable Part B patient care activities, 
which are NOT included in the wage index, are reported on Worksheet S-
3, Part II, line 5. Specifically, the instructions for lines 4 and 5 
state the following:
     Line 4--Enter the physician Part A administrative 
salaries, (excluding teaching physician salaries), that are included in 
line 1. Also do not include intern and resident (I & R) salary on this 
line. Report I & R salary on line 7. Subscript this line and report 
salaries for Part A teaching physicians on line 4.01.
     Line 5--Enter the total physician, physician assistant, 
nurse practitioner and clinical nurse specialist on-call salaries and 
salaries billed under Part B that are included in line 1. Under 
Medicare, these services are related to direct patient care and billed 
separately under Part B. Also include physician salaries for patient 
care services reported for rural health clinics (RHC) and FQHCs 
included on Worksheet A, column 1, lines 88 and/or 89 as applicable. Do 
not include on this line amounts that are included on lines 9 and 10 
for the SNF or excluded area salaries. Refer to CMS Pub. 15-1, sections 
2313.2.E. and 2182.3.E., for instructions related to keeping time 
studies to track time spent in Part A versus Part B activities. 
However, although section 2313.2.E.2. states that, ``A minimally 
acceptable time study must encompass at least one full week per month 
of the cost reporting period,'' the contractor makes the final 
determination on the adequacy of the records maintained. A 2-week semi-
annual (every 6 months) time study can be adequate unless the 
contractor believes that a significant change in the pattern of 
physician time is likely to occur from one quarter to the next, in 
which case, the contractor may require more frequent time studies. 
Adequate documentation must be maintained to support total hours in a 
manner that is verifiable, and to serve as a condition of payment under 
Part A.
    In addition, for physicians that are not employed by the hospital 
but are under contract, the wages and hours associated with contract 
Physician Part A administrative activities are reported on Worksheet S-
3, Part II, line 13. No salaries and hours related to Part B activities 
are allowed. Line 13 states the following:
    Line 13--Enter from your records the amount paid under contract (in 
accordance with the general instructions for contract labor) for Part A 
physician services--administrative, excluding teaching physician 
services. DO NOT include contract I & R services (to be included on 
line 7). DO NOT include the costs for Part A physician services from 
the home office allocation and/or from related organizations (to be 
reported on line 15). Do not include wages or hours associated with 
Part B services. As stated in the General Instructions for Contract 
Labor, ``the minimum requirement for supporting documentation is the 
contract itself. If the wage costs, hours, and non-labor costs are not 
clearly specified in the contract, other supporting documentation is 
required, such as a representative sample of invoices that specify the 
wage costs, hours, and non-labor costs.'' Refer to CMS Pub. 15-1, 
sections 2313.2E and 2182.3.E, for instructions related to keeping time 
studies to track time spent in Part A versus Part B activities. 
Adequate documentation must be maintained to support total hours in a 
manner that is verifiable.
    In order to accurately report the wages and hours associated with 
Part A and Part B activities on lines 4 and 5 and 13 respectively, the 
providers are required to maintain records as to the allocation of 
physicians' time between various services to keep track of the amount 
of time the physicians spend on Part A versus Part B activities. 42 CFR 
415.60(b) and CMS Pub. 15-1, chapter 21, section 2182.3.B. 
Specifically, 42 CFR 415.60(b) states, except as provided in paragraph 
(d) of the section, each provider that incurs physician compensation 
costs must allocate those costs, in proportion to the percentage of 
total time that is spent in furnishing each category of services, 
among--
     Physician services to the provider (as described in Sec.  
415.55);
     Physician services to patients (as described in Sec.  
415.102); and
     Activities of the physician, such as funded research, that 
are not paid under either Part A or Part B of Medicare.
    To facilitate the MAC's review of whether physician wages and hours 
have been reported correctly, hospitals must submit the physician 
allocation agreements to the MAC. (See CMS Pub. 15-1, Section 
2182.3.E.3. which states that allocation agreements are to be submitted 
annually as part of the cost report filing process.) In the absence of 
a written allocation agreement (such as Exhibit 1 in CMS Pub. 15-II, 
Chapter 40, Section 4004.2 and related instructions for this exhibit on 
Line 34 of Section 4004.2--that is, instructions for Form CMS-2552-10, 
Worksheet S-2, Part II, line 34), the MAC assumes that 100 percent of 
the physician compensation cost is allocated to Part B services (see 42 
CFR 415.60(f)(2)). The hospital must maintain the information used to 
complete the physician allocation agreements as directed in CMS Pub. 
15-

[[Page 58757]]

1 section 2182.3.E. in order to track time spent in Part A versus Part 
B activities. This section specifies that the hospital may choose to 
employ the methodology described in subsection 2313.2.E for a time 
study but may not be required by the MAC to utilize that specific 
methodology. Therefore, although section 2313.2.E. states that ``a 
minimally acceptable time study must encompass at least one full week 
per month of the cost reporting period,'' the MAC makes the final 
determination on the adequacy of the records maintained for the 
allocation of physicians' compensation. A 2-week semi-annual (every 6 
months) time study can be adequate unless the MAC believes that a 
significant change in the pattern of physician time is likely to occur 
from one quarter to the next, in which case, the MAC may require more 
frequent time studies (see CMS-2552-10, Worksheet S-3, Part II line 5 
instructions). Adequate documentation must be maintained to support 
total hours in a manner that is verifiable, and to serve as a condition 
of payment under Part A, that is, total hours worked by the physicians 
must be based on actual data accumulated during the cost reporting 
period and may not be imputed (consistent with 42 CFR 413.24 and 
415.60(f)(1) and (g)). Non-allowable services that are neither Part A 
nor Part B services (for example, research, teaching of residents in 
non-approved programs, teaching and supervision of medical students, 
writing for medical journals, reasonable availability services in 
departments/cost centers other than Emergency Room, etc.) are reported 
as non-reimbursable activities in the designated non-reimbursable cost 
centers of the Medicare cost report, CMS-2552-10 (for example, 
Worksheet A, lines 190-194, see 42 CFR 415.60(b)(3)). Reasonable 
availability services for emergency rooms can be considered Part A in 
certain circumstances (see PRM-I, section 2109.3.A. through C. for 
instances when emergency department physician availability services 
costs are allowable, and for the associated required documentation).
    We did not receive any comments on the discussion in this section.

C. Verification of Worksheet S-3 Wage Data

    The wage data for the FY 2021 wage index were obtained from 
Worksheet S-3, Parts II and III of the Medicare cost report (Form CMS-
2552-10, OMB Control Number 0938-0050 with expiration date March 31, 
2022) for cost reporting periods beginning on or after October 1, 2016, 
and before October 1, 2017. For wage index purposes, we refer to cost 
reports during this period as the ``FY 2017 cost report,'' the ``FY 
2017 wage data,'' or the ``FY 2017 data.'' Instructions for completing 
the wage index sections of Worksheet S-3 are included in the Provider 
Reimbursement Manual (PRM), Part 2 (Pub. 15-2), Chapter 40, Sections 
4005.2 through 4005.4. The data file used to construct the final FY 
2021 wage index includes FY 2017 data submitted to us as of the end of 
June 2020. As in past years, we performed an extensive review of the 
wage data, mostly through the use of edits designed to identify 
aberrant data.
    We asked our MACs to revise or verify data elements that result in 
specific edit failures. For the proposed FY 2021 wage index, we 
identified and excluded 84 providers with aberrant data that should not 
be included in the wage index. However, we stated that if data elements 
for some of these providers were corrected, we intended to include data 
from those providers in the final FY 2021 wage index. We also adjusted 
certain aberrant data and included these data in the wage index. For 
example, in situations where a hospital did not have documentable 
salaries, wages, and hours for housekeeping and dietary services, we 
imputed estimates, in accordance with policies established in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). We 
instructed MACs to complete their data verification of questionable 
data elements and to transmit any changes to the wage data no later 
than March 19, 2020. For the final FY 2021 wage index, we restored 29 
hospitals to the wage index because their data was either verified or 
improved, but we also removed the data of one hospital for the first 
time after the proposed rule due to its data being aberrant. Thus, 56 
hospitals with aberrant data remain deleted from the final FY 2021 wage 
index (84-29 + 1 = 56).
    In constructing the proposed FY 2021 wage index, we included the 
wage data for facilities that were IPPS hospitals in FY 2017, inclusive 
of those facilities that have since terminated their participation in 
the program as hospitals, as long as those data did not fail any of our 
edits for reasonableness. We stated in the proposed rule (85 FR 32709) 
that we believe including the wage data for these hospitals is, in 
general, appropriate to reflect the economic conditions in the various 
labor market areas during the relevant past period and to ensure that 
the current wage index represents the labor market area's current wages 
as compared to the national average of wages. However, we excluded the 
wage data for CAHs as discussed in the FY 2004 IPPS final rule (68 FR 
45397 through 45398); that is, any hospital that is designated as a CAH 
by 7 days prior to the publication of the preliminary wage index public 
use file (PUF) is excluded from the calculation of the wage index. For 
the proposed FY 2021 wage index, we removed 8 hospitals that converted 
to CAH status on or after January 24, 2019, the cut-off date for CAH 
exclusion from the FY 2020 wage index, and through and including 
January 24, 2020, the cut-off date for CAH exclusion from the FY 2021 
wage index. Since the proposed rule, we learned of 1 more hospital that 
converted to CAH status on or after January 24, 2019, and through and 
including January 24, 2020, the cut-off date for CAH exclusion from the 
FY 2021 wage index, for a total of 9 hospitals that were removed from 
the FY 2021 wage index due to conversion to CAH status. In summary, we 
calculated the final FY 2021 wage index using the Worksheet S-3, Parts 
II and III wage data of 3,222 hospitals.
    For the FY 2021 wage index, we allotted the wages and hours data 
for a multicampus hospital among the different labor market areas where 
its campuses are located using campus full-time equivalent (FTE) 
percentages as originally finalized in the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51591). Table 2, which contains the FY 2021 wage index 
associated with this final rule (available via the internet on the CMS 
website), includes separate wage data for the campuses of 16 
multicampus hospitals. The following chart lists the multicampus 
hospitals by CSA certification number (CCN) and the FTE percentages on 
which the wages and hours of each campus were allotted to their 
respective labor market areas:

[[Page 58758]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.180

[GRAPHIC] [TIFF OMITTED] TR18SE20.181

    We note that, in past years, in Table 2, we have placed a ``B'' to 
designate the subordinate campus in the fourth position of the hospital 
CCN. However, for the FY 2019 IPPS/LTCH PPS proposed and final rules 
and subsequent rules, we have moved the ``B'' to the third position of 
the CCN. Because all IPPS hospitals have a ``0'' in the third position 
of the CCN, we believe that placement of the ``B'' in this third 
position, instead of the ``0'' for the subordinate campus, is the most 
efficient method of identification and interferes the least with the 
other, variable, digits in the CCN.

D. Method for Computing the FY 2021 Unadjusted Wage Index

    As we stated in the proposed rule (85 FR 32710), the method used to 
compute

[[Page 58759]]

the FY 2021 wage index without an occupational mix adjustment follows 
the same methodology that we used to compute the wage indexes without 
an occupational mix adjustment in the FY 2020 IPPS/LTCH PPS final rule 
(see 84 FR 42304 through 42307, August 16, 2019), and we did not 
propose any changes to this methodology. We have restated our 
methodology in this section of this rule.
    Step 1.--We gathered data from each of the non-Federal, short-term, 
acute care hospitals for which data were reported on the Worksheet S-3, 
Parts II and III of the Medicare cost report for the hospital's cost 
reporting period relevant to the wage index (in this case, for FY 2021, 
these were data from cost reports for cost reporting periods beginning 
on or after October 1, 2016, and before October 1, 2017). In addition, 
we included data from some hospitals that had cost reporting periods 
beginning before October 2016 and reported a cost reporting period 
covering all of FY 2017. These data were included because no other data 
from these hospitals would be available for the cost reporting period 
as previously described, and because particular labor market areas 
might be affected due to the omission of these hospitals. However, we 
generally describe these wage data as FY 2017 data. We note that, if a 
hospital had more than one cost reporting period beginning during FY 
2017 (for example, a hospital had two short cost reporting periods 
beginning on or after October 1, 2016, and before October 1, 2017), we 
include wage data from only one of the cost reporting periods, the 
longer, in the wage index calculation. If there was more than one cost 
reporting period and the periods were equal in length, we included the 
wage data from the later period in the wage index calculation.
    Step 2.--Salaries.--The method used to compute a hospital's average 
hourly wage excludes certain costs that are not paid under the IPPS. 
(We note that, beginning with FY 2008 (72 FR 47315), we included what 
were then Lines 22.01, 26.01, and 27.01 of Worksheet S-3, Part II of 
CMS Form 2552-96 for overhead services in the wage index. Currently, 
these lines are lines 28, 33, and 35 on CMS Form 2552-10. However, we 
note that the wages and hours on these lines are not incorporated into 
Line 101, Column 1 of Worksheet A, which, through the electronic cost 
reporting software, flows directly to Line 1 of Worksheet S-3, Part II. 
Therefore, the first step in the wage index calculation is to compute a 
``revised'' Line 1, by adding to the Line 1 on Worksheet S-3, Part II 
(for wages and hours respectively) the amounts on Lines 28, 33, and 
35.) In calculating a hospital's Net Salaries (we note that we 
previously used the term ``average'' salaries in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51592), but we now use the term ``net'' salaries) 
plus wage-related costs, we first compute the following: Subtract from 
Line 1 (total salaries) the GME and CRNA costs reported on CMS Form 
2552-10, Lines 2, 4.01, 7, and 7.01, the Part B salaries reported on 
Lines 3, 5 and 6, home office salaries reported on Line 8, and exclude 
salaries reported on Lines 9 and 10 (that is, direct salaries 
attributable to SNF services, home health services, and other 
subprovider components not subject to the IPPS). We also subtract from 
Line 1 the salaries for which no hours were reported. Therefore, the 
formula for Net Salaries (from Worksheet S-3, Part II) is the 
following:
    ((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 
4.01 + Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 
10)).
    To determine Total Salaries plus Wage-Related Costs, we add to the 
Net Salaries the costs of contract labor for direct patient care, 
certain top management, pharmacy, laboratory, and nonteaching physician 
Part A services (Lines 11, 12 and 13), home office salaries and wage-
related costs reported by the hospital on Lines 14.01, 14.02, and 15, 
and nonexcluded area wage-related costs (Lines 17, 22, 25.50, 25.51, 
and 25.52). We note that contract labor and home office salaries for 
which no corresponding hours are reported are not included. In 
addition, wage-related costs for nonteaching physician Part A employees 
(Line 22) are excluded if no corresponding salaries are reported for 
those employees on Line 4. The formula for Total Salaries plus Wage-
Related Costs (from Worksheet S-3, Part II) is the following: ((Line 1 
+ Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 + Line 5 + 
Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) + (Line 11 + 
Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15) + (Line 17 + Line 22 
+ 25.50 + 25.51 + 25.52).
    Step 3.--Hours.--With the exception of wage-related costs, for 
which there are no associated hours, we compute total hours using the 
same methods as described for salaries in Step 2. The formula for Total 
Hours (from Worksheet S-3, Part II) is the following:
    ((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 
4.01 + Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 
10)) + (Line 11 + Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15).
    Step 4.--For each hospital reporting both total overhead salaries 
and total overhead hours greater than zero, we then allocate overhead 
costs to areas of the hospital excluded from the wage index 
calculation. First, we determine the ``excluded rate'', which is the 
ratio of excluded area hours to Revised Total Hours (from Worksheet S-
3, Part II) with the following formula: (Line 9 + Line 10)/(Line 1 + 
Line 28 + Line 33 + Line 35)-(Lines 2, 3, 4.01, 5, 6, 7, 7.01, and 8 
and Lines 26 through 43). We then compute the amounts of overhead 
salaries and hours to be allocated to excluded areas by multiplying the 
above ratio by the total overhead salaries and hours reported on Lines 
26 through 43 of Worksheet S-3, Part II. Next, we compute the amounts 
of overhead wage-related costs to be allocated to excluded areas using 
three steps:
     We determine the ``overhead rate'' (from Worksheet S-3, 
Part II), which is the ratio of overhead hours (Lines 26 through 43 
minus the sum of Lines 28, 33, and 35) to revised hours excluding the 
sum of lines 28, 33, and 35 (Line 1 minus the sum of Lines 2, 3, 4.01, 
5, 6, 7, 7.01, 8, 9, 10, 28, 33, and 35). We note that, for the FY 2008 
and subsequent wage index calculations, we have been excluding the 
overhead contract labor (Lines 28, 33, and 35) from the determination 
of the ratio of overhead hours to revised hours because hospitals 
typically do not provide fringe benefits (wage-related costs) to 
contract personnel. Therefore, it is not necessary for the wage index 
calculation to exclude overhead wage-related costs for contract 
personnel. Further, if a hospital does contribute to wage-related costs 
for contracted personnel, the instructions for Lines 28, 33, and 35 
require that associated wage-related costs be combined with wages on 
the respective contract labor lines. The formula for the Overhead Rate 
(from Worksheet S-3, Part II) is the following: (Lines 26 through 43-
Lines 28, 33 and 35)/((((Line 1 + Lines 28, 33, 35)-(Lines 2, 3, 4.01, 
5, 6, 7, 7.01, 8, and 26 through 43))-(Lines 9 and 10)) + (Lines 26 
through 43-Lines 28, 33, and 35)).
     We compute overhead wage-related costs by multiplying the 
overhead hours ratio by wage-related costs reported on Part II, Lines 
17, 22, 25.50, 25.51, and 25.52.
     We multiply the computed overhead wage-related costs by 
the previously described excluded area hours ratio.
    Finally, we subtract the computed overhead salaries, wage-related 
costs, and hours associated with excluded areas from the total salaries 
(plus wage-

[[Page 58760]]

related costs) and hours derived in Steps 2 and 3.
    Step 5.--For each hospital, we adjust the total salaries plus wage-
related costs to a common period to determine total adjusted salaries 
plus wage-related costs. To make the wage adjustment, we estimate the 
percentage change in the employment cost index (ECI) for compensation 
for each 30-day increment from October 14, 2016 through April 15, 2018, 
for private industry hospital workers from the BLS' Compensation and 
Working Conditions. We use the ECI because it reflects the price 
increase associated with total compensation (salaries plus fringes) 
rather than just the increase in salaries. In addition, the ECI 
includes managers as well as other hospital workers. This methodology 
to compute the monthly update factors uses actual quarterly ECI data 
and assures that the update factors match the actual quarterly and 
annual percent changes. We also note that, since April 2006 with the 
publication of March 2006 data, the BLS' ECI uses a different 
classification system, the North American Industrial Classification 
System (NAICS), instead of the Standard Industrial Codes (SICs), which 
no longer exist. We have consistently used the ECI as the data source 
for our wages and salaries and other price proxies in the IPPS market 
basket, and we did not propose to make any changes to the usage of the 
ECI for FY 2021. The factors used to adjust the hospital's data are 
based on the midpoint of the cost reporting period, as indicated in 
this rule.
    Step 6.--Each hospital is assigned to its appropriate urban or 
rural labor market area before any reclassifications under section 
1886(d)(8)(B), 1886(d)(8)(E), or 1886(d)(10) of the Act. Within each 
urban or rural labor market area, we add the total adjusted salaries 
plus wage-related costs obtained in Step 5 for all hospitals in that 
area to determine the total adjusted salaries plus wage-related costs 
for the labor market area.
    Step 7.--We divide the total adjusted salaries plus wage-related 
costs obtained under Step 6 by the sum of the corresponding total hours 
(from Step 4) for all hospitals in each labor market area to determine 
an average hourly wage for the area.
    Step 8.--We add the total adjusted salaries plus wage-related costs 
obtained in Step 5 for all hospitals in the Nation and then divide the 
sum by the national sum of total hours from Step 4 to arrive at a 
national average hourly wage.
    Step 9.--For each urban or rural labor market area, we calculate 
the hospital wage index value, unadjusted for occupational mix, by 
dividing the area average hourly wage obtained in Step 7 by the 
national average hourly wage computed in Step 8.
    Step 10.--For each urban labor market area for which we do not have 
any hospital wage data (either because there are no IPPS hospitals in 
that labor market area, or there are IPPS hospitals in that area but 
their data are either too new to be reflected in the current year's 
wage index calculation, or their data are aberrant and are deleted from 
the wage index), we finalized in the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42305) that, for FY 2020 and subsequent years' wage index 
calculations, such CBSA's wage index would be equal to total urban 
salaries plus wage-related costs (from Step 5) in the State, divided by 
the total urban hours (from Step 4) in the State, divided by the 
national average hourly wage from Step 8 (see 84 FR 42305 and 42306) 
August 16, 2019). We stated that we believe that, in the absence of 
wage data for an urban labor market area, it is reasonable to use a 
statewide urban average, which is based on actual, acceptable wage data 
of hospitals in that State, rather than impute some other type of value 
using a different methodology. For calculation of the FY 2021 wage 
index, we note there is one urban CBSA for which we do not have IPPS 
hospital wage data. In Table 3 (which is available via the internet on 
the CMS website) which contains the area wage indexes, we include a 
footnote to indicate to which CBSAs this policy applies. These CBSAs' 
wage indexes would be equal to total urban salaries plus wage-related 
costs (from Step 5) in the respective State, divided by the total urban 
hours (from Step 4) in the respective State, divided by the national 
average hourly wage (from Step 8) (see 84 FR 42305 and 42306) August 
16, 2019). Under this step, we also apply our policy with regard to how 
dollar amounts, hours, and other numerical values in the wage index 
calculations are rounded, as discussed in this section of this rule.
    We refer readers to section II. of the Appendix of the final rule 
for the policy regarding rural areas that do not have IPPS hospitals.
    Step 11.--Section 4410 of Public Law 105-33 provides that, for 
discharges on or after October 1, 1997, the area wage index applicable 
to any hospital that is located in an urban area of a State may not be 
less than the area wage index applicable to hospitals located in rural 
areas in that State. The areas affected by this provision are 
identified in Table 2 listed in section VI. of the Addendum to the 
final rule and available via the internet on the CMS website.
    Following is our policy with regard to rounding of the wage data 
(dollar amounts, hours, and other numerical values) in the calculation 
of the unadjusted and adjusted wage index, as finalized in the FY 2020 
IPPS/LTCH final rule (84 FR 42306; August 16, 2019). For data that we 
consider to be ``raw data,'' such as the cost report data on Worksheets 
S-3, Parts II and III, and the occupational mix survey data, we use 
such data ``as is,'' and do not round any of the individual line items 
or fields. However, for any dollar amounts within the wage index 
calculations, including any type of summed wage amount, average hourly 
wages, and the national average hourly wage (both the unadjusted and 
adjusted for occupational mix), we round the dollar amounts to 2 
decimals. For any hour amounts within the wage index calculations, we 
round such hour amounts to the nearest whole number. For any numbers 
not expressed as dollars or hours within the wage index calculations, 
which could include ratios, percentages, or inflation factors, we round 
such numbers to 5 decimals. However, we continue rounding the actual 
unadjusted and adjusted wage indexes to 4 decimals, as we have done 
historically.
    As discussed in the FY 2012 IPPS/LTCH PPS final rule, in ``Step 
5,'' for each hospital, we adjust the total salaries plus wage-related 
costs to a common period to determine total adjusted salaries plus 
wage-related costs. To make the wage adjustment, we estimate the 
percentage change in the employment cost index (ECI) for compensation 
for each 30-day increment from October 14, 2016, through April 15, 
2018, for private industry hospital workers from the BLS' Compensation 
and Working Conditions. We have consistently used the ECI as the data 
source for our wages and salaries and other price proxies in the IPPS 
market basket, and we did not propose any changes to the usage of the 
ECI for FY 2021. The factors used to adjust the hospital's data were 
based on the midpoint of the cost reporting period, as indicated in the 
following table.

[[Page 58761]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.182

    For example, the midpoint of a cost reporting period beginning 
January 1, 2017, and ending December 31, 2017, is June 30, 2017. An 
adjustment factor of 1.01306 was applied to the wages of a hospital 
with such a cost reporting period.
    Previously, we also would provide a Puerto Rico overall average 
hourly wage. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56915), prior to January 1, 2017, Puerto Rico hospitals were paid 
based on 75 percent of the national standardized amount and 25 percent 
of the Puerto Rico-specific standardized amount. As a result, we 
calculated a Puerto Rico specific wage index that was applied to the 
labor-related share of the Puerto Rico-specific standardized amount. 
Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-
113) amended section 1886(d)(9)(E) of the Act to specify that the 
payment calculation with respect to operating costs of inpatient 
hospital services of a subsection (d) Puerto Rico hospital for 
inpatient hospital discharges on or after January 1, 2016, shall use 
100 percent of the national standardized amount. As we stated in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56915 through 56916), because 
Puerto Rico hospitals are no longer paid with a Puerto Rico specific 
standardized amount as of January 1, 2016, under section 1886(d)(9)(E) 
of the Act, as amended by section 601 of the Consolidated 
Appropriations Act, 2016, there is no longer a need to calculate a 
Puerto Rico specific average hourly wage and wage index. Hospitals in 
Puerto Rico are now paid 100 percent of the national standardized 
amount and, therefore, are subject to the national average hourly wage 
(unadjusted for occupational mix) and the national wage index, which is 
applied to the national labor-related share of the national 
standardized amount. Therefore, for FY 2021, there is no Puerto Rico-
specific overall average hourly wage or wage index.
    Based on the previously described methodology, we stated in the 
proposed rule (85 FR 32712) that the proposed FY 2021 unadjusted 
national average hourly wage was the following:
[GRAPHIC] [TIFF OMITTED] TR18SE20.183

    We did not receive any comments regarding the discussion of our 
method for computing the FY 2021 unadjusted wage index. Based on the 
previously described methodology, the final FY 2021 unadjusted national 
average hourly wage is the following:
[GRAPHIC] [TIFF OMITTED] TR18SE20.184

E. Occupational Mix Adjustment to the FY 2021 Wage Index

    As stated earlier, section 1886(d)(3)(E) of the Act provides for 
the collection of data every 3 years on the occupational mix of 
employees for each short-term, acute care hospital participating in the 
Medicare program, in order to construct an occupational mix adjustment 
to the wage index, for application beginning October 1, 2004 (the FY 
2005 wage index). The purpose of the occupational mix adjustment is to 
control for the effect of hospitals' employment choices on the wage 
index. For example, hospitals may choose to employ different 
combinations of registered

[[Page 58762]]

nurses, licensed practical nurses, nursing aides, and medical 
assistants for the purpose of providing nursing care to their patients. 
The varying labor costs associated with these choices reflect hospital 
management decisions rather than geographic differences in the costs of 
labor.
1. Use of 2016 Medicare Wage Index Occupational Mix Survey for the FY 
2019, FY 2020, and FY 2021 Wage Indexes
    Section 304(c) of the Consolidated Appropriations Act, 2001 (Pub. 
L. 106- 554) amended section 1886(d)(3)(E) of the Act to require CMS to 
collect data every 3 years on the occupational mix of employees for 
each short-term, acute care hospital participating in the Medicare 
program. As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19903) and final rule (82 FR 38137), we collected data in 2016 to 
compute the occupational mix adjustment for the FY 2019, FY 2020, and 
FY 2021 wage indexes.
    The FY 2021 occupational mix adjustment is based on the calendar 
year (CY) 2016 survey. Hospitals were required to submit their 
completed 2016 surveys (Form CMS-10079, OMB number 0938-0907, 
expiration date September 31, 2022) to their MACs by July 3, 2017. The 
preliminary, unaudited CY 2016 survey data were posted on the CMS 
website on July 12, 2017. As with the Worksheet S-3, Parts II and III 
cost report wage data, as part of the FY 2021 desk review process, the 
MACs revised or verified data elements in hospitals' occupational mix 
surveys that resulted in certain edit failures.
2. Deadline for Submitting the 2019 Medicare Wage Index Occupational 
Mix Survey for Use Beginning With the FY 2022 Wage Index
    A new measurement of occupational mix is required for FY 2022. The 
FY 2022 occupational mix adjustment will be based on a new calendar 
year (CY) 2019 survey. The CY 2019 survey (CMS Form CMS-10079, OMB 
number 0938-0907, expiration date September 31, 2022) received OMB 
approval on October 18, 2019. The final CY 2019 Occupational Mix Survey 
Hospital Reporting Form is available on the CMS website at: https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/2019-occupational-mix-survey-hospital-reporting-form-cms-10079-wage-index-beginning-fy-2022. Hospitals were required to submit 
their completed 2019 surveys to their MACs (not directly to CMS), on 
the Excel hospital reporting form, by July 1, 2020 via email attachment 
or overnight delivery. CMS granted an extension until August 3, 2020 
for hospitals nationwide that may be unable to meet the July 1, 2020 
deadline amidst the Novel Coronavirus Disease (COVID-19) national 
emergency. Hospitals should please see the CMS website at the 
previously mentioned link for information on this extension. As with 
the Worksheet S-3, Parts II and III cost report wage data, as part of 
the FY 2022 desk review process, the MACs will revise or verify data 
elements in hospitals' occupational mix surveys that result in certain 
edit failures.
    Comments: We received comments concerning the deadline for 
submitting the CY 2019 Occupational Mix Survey. Commenters appreciated 
the extension but requested CMS further extend the deadline for 
submission of CY 2019 Occupational Mix Surveys to assist hospitals 
amidst COVID-19. Commenters suggested various deadlines, including 
September 3rd or after to allow sufficient time for CMS to incorporate 
the 2019 occupational mix data into the FY 2022 IPPS rates while 
supporting accurate responses as hospitals dedicate resources to the 
ongoing public health emergency. Two commenters emphasized that it is 
vital to ensure accuracy since survey results will be used to adjust 
the wage index for three years.
    One commenter noted that the Occupational Mix Survey has 
historically been due one month after cost reports are due for 
hospitals with calendar year (CY) cost reporting year ends, and 
therefore should be extended consistent with the extension of the cost 
report due date until August 31 for hospitals with a December 31 Fiscal 
Year End (FYE). According to this commenter, requiring hospitals to 
complete the occupational mix survey before their cost reports are due 
would increase provider burden because hospitals with CY cost reporting 
periods use the process of completing their Medicare cost reports to 
complete the occupational mix survey.
    Two commenters also asked that if CMS further extends the August 
3rd, 2020 deadline, CMS should publicize the extension prior to the 
publication of the final rule via an update to the Emergency 
Declaration Blanket Waivers and other vehicles such as list-serve 
messages or the Tuesday ``Office Hours'' national teleconference.
    Response: We value the commenters' input. Due to continued COVID-19 
related concerns from hospitals about meeting the August 3 deadline, 
CMS is further extending this deadline to September 3, 2020. Hospitals 
must submit their occupational mix surveys along with complete 
supporting documentation to their MACs by no later than September 3, 
2020. The preliminary CY 2019 unaudited occupational mix survey data 
will be released on the CMS website by September 8, 2020. Hospitals 
should review their occupational mix survey data in the Public Use File 
(PUF) on the CMS website to confirm it is correct and may submit 
revisions to their occupational mix survey data to their MACs, if 
needed, by no later than September 10, 2020. These revised deadlines 
are contained in the updated FY 2022 Hospital Wage Index Development 
Time Table available at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/fy-2022-wage-index-home-page.
    We believe that this deadline, suggested by one commenter, is the 
most appropriate because it grants one additional month to the current 
extension, which will allow hospitals more time to accurately complete 
the survey while still allowing adequate time for CMS to review the 
data in time for inclusion in the FY 2022 wage index. Any further delay 
would jeopardize the FY 2022 wage index timeline and threaten timely 
implementation of the FY 2022 wage index.
    CMS publicized this additional extension prior to the display of 
the final rule by updating the Emergency Declaration Blanket Waivers at 
https://www.cms.gov/files/document/summary-covid-19-emergency-declaration-waivers.pdf and the Hospitals: CMS Flexibilities to Fight 
COVID-19 Fact sheet at https://www.cms.gov/files/document/covid-hospitals.pdf, by updating the final CY 2019 Occupational Mix Survey 
Hospital Reporting Form on the CMS website at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientvppswage-index-files/2019-occupational-mix-survey-hospital-reporting-form-cms-10079-wage-index-beginning-fy-2022, by instructing the MACs to contact their 
hospitals, and by notifying hospitals through a Medicare Learning 
Network (MLN) Connects list-serve message on July 30, 2020.
    In summary, hospitals must submit their occupational mix surveys 
along with complete supporting documentation to their MACs by no later 
than September 3, 2020. Hospitals may then submit revisions to their 
occupational mix survey data as set forth on the CMS website to their 
MACs, if needed, by no later than September 10, 2020.

[[Page 58763]]

3. Calculation of the Occupational Mix Adjustment for FY 2021
    For FY 2021, we proposed to calculate the occupational mix 
adjustment factor using the same methodology that we have used since 
the FY 2012 wage index (76 FR 51582 through 51586) and to apply the 
occupational mix adjustment to 100 percent of the FY 2021 wage index. 
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308), we modified our 
methodology with regard to how dollar amounts, hours, and other 
numerical values in the unadjusted and adjusted wage index calculation 
are rounded, in order to ensure consistency in the calculation. 
According to the policy finalized in the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42308 and 42309), for data that we consider to be ``raw 
data,'' such as the cost report data on Worksheets S-3, Parts II and 
III, and the occupational mix survey data, we continue to use these 
data ``as is'', and not round any of the individual line items or 
fields. However, for any dollar amounts within the wage index 
calculations, including any type of summed wage amount, average hourly 
wages, and the national average hourly wage (both the unadjusted and 
adjusted for occupational mix), we round such dollar amounts to 2 
decimals. We round any hour amounts within the wage index calculations 
to the nearest whole number. We round any numbers not expressed as 
dollars or hours in the wage index calculations, which could include 
ratios, percentages, or inflation factors, to 5 decimals. However, we 
continue rounding the actual unadjusted and adjusted wage indexes to 4 
decimals, as we have done historically.
    Similar to the method we use for the calculation of the wage index 
without occupational mix, salaries and hours for a multicampus hospital 
are allotted among the different labor market areas where its campuses 
are located. Table 2 associated with this final rule (which is 
available via the internet on the CMS website), which contains the 
final FY 2021 occupational mix adjusted wage index, includes separate 
wage data for the campuses of multicampus hospitals. We refer readers 
to section III.C. of the preamble of this final rule for a chart 
listing the multicampus hospitals and the FTE percentages used to allot 
their occupational mix data.
    Because the statute requires that the Secretary measure the 
earnings and paid hours of employment by occupational category not less 
than once every 3 years, all hospitals that are subject to payments 
under the IPPS, or any hospital that would be subject to the IPPS if 
not granted a waiver, must complete the occupational mix survey, unless 
the hospital has no associated cost report wage data that are included 
in the FY 2021 wage index. For the proposed FY 2021 wage index, we used 
the Worksheet S-3, Parts II and III wage data of 3,196 hospitals, and 
we used the occupational mix surveys of 3,113 hospitals for which we 
also had Worksheet S-3 wage data, which represented a ``response'' rate 
of 97 percent (3,113/3,196). For the proposed FY 2021 wage index, we 
applied proxy data for noncompliant hospitals, new hospitals, or 
hospitals that submitted erroneous or aberrant data in the same manner 
that we applied proxy data for such hospitals in the FY 2012 wage index 
occupational mix adjustment (76 FR 51586). As a result of applying this 
methodology, the proposed FY 2021 occupational mix adjusted national 
average hourly wage was the following:
[GRAPHIC] [TIFF OMITTED] TR18SE20.185

    We did not receive any comments on our proposed calculation of the 
occupational mix adjustment to the FY 2021 wage index. Thus, for the 
reasons discussed in this final rule and in the FY 2021 IPPS/LTCH PPS 
proposed rule, we are finalizing our proposal, without modification, to 
calculate the occupational mix adjustment factor using the same 
methodology that we have used since the FY 2012 wage index and to apply 
the occupational mix adjustment to 100 percent of the FY 2021 wage 
index.
    For the final FY 2021 wage index, we are using the Worksheet S-3, 
Parts II and III wage data of 3,223 hospitals, and we are using the 
occupational mix surveys of 3,140 hospitals for which we also have 
Worksheet S-3 wage data, which represented a ``response'' rate of 97 
percent (3,140/3,223). For the final FY 2021 wage index, we are 
applying proxy data for noncompliant hospitals, new hospitals, or 
hospitals that submitted erroneous or aberrant data in the same manner 
that we applied proxy data for such hospitals in the FY 2012 wage index 
occupational mix adjustment (76 FR 51586). As a result of applying this 
methodology, the final FY 2021 occupational mix adjusted national 
average hourly wage is the following:
[GRAPHIC] [TIFF OMITTED] TR18SE20.186

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

    As discussed in section III.E. of the preamble of this final rule, 
for FY 2021, we are applying the occupational mix adjustment to 100 
percent of the FY 2021 wage index. We calculated the occupational mix 
adjustment using data from the 2016 occupational mix survey data, using 
the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51582 through 51586).
    The FY 2021 national average hourly wages for each occupational mix 
nursing subcategory as calculated in Step 2 of the occupational mix 
calculation are as follows.

[[Page 58764]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.187

    The national average hourly wage for the entire nurse category is 
computed in Step 5 of the occupational mix calculation. Hospitals with 
a nurse category average hourly wage (as calculated in Step 4) of 
greater than the national nurse category average hourly wage receive an 
occupational mix adjustment factor (as calculated in Step 6) of less 
than 1.0. Hospitals with a nurse category average hourly wage (as 
calculated in Step 4) of less than the national nurse category average 
hourly wage receive an occupational mix adjustment factor (as 
calculated in Step 6) of greater than 1.0.
    Based on the 2016 occupational mix survey data, we determined (in 
Step 7 of the occupational mix calculation) that the national 
percentage of hospital employees in the nurse category is 42 percent, 
and the national percentage of hospital employees in the all other 
occupations category is 58 percent. At the CBSA level, the percentage 
of hospital employees in the nurse category ranged from a low of 27 
percent in one CBSA to a high of 82 percent in another CBSA.
    We compared the FY 2021 occupational mix adjusted wage indexes for 
each CBSA to the unadjusted wage indexes for each CBSA. Applying the 
occupational mix adjustment to the wage data resulted in the following:
[GRAPHIC] [TIFF OMITTED] TR18SE20.188

[GRAPHIC] [TIFF OMITTED] TR18SE20.189

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

[[Page 58765]]

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

1. Rural Floor
    Section 4410(a) of Public Law 105-33 provides that, for discharges 
on or after October 1, 1997, the area wage index applicable to any 
hospital that is located in an urban area of a State may not be less 
than the area wage index applicable to hospitals located in rural areas 
in that State. This provision is referred to as the ``rural floor''. 
Section 3141 of Public Law 111-148 also requires that a national budget 
neutrality adjustment be applied in implementing the rural floor. Based 
on the FY 2021 wage index associated with this final rule (which is 
available via the internet on the CMS website) and based on the 
calculation of the rural floor without the wage data of hospitals that 
have reclassified as rural under Sec.  412.103, we estimate that 285 
hospitals would receive an increase in their FY 2021 wage index due to 
the application of the rural floor.
    Comments: Some commenters noted that several hospitals redesignated 
as rural under Sec.  412.103 had a wage index in the proposed rule that 
was lower than the rural floor for their state. The commenters inquired 
whether this was the result of a calculation error, as CMS has never 
allowed a hospital within a State to be paid less than the rural floor. 
If this calculation was intentional, the commenters opposed this policy 
because (1) the rural reclassification provisions do not create the 
authority to create a lesser wage index for rural reclassified 
hospitals as opposed to physically rural hospitals, and (2) CMS did not 
subject this policy to notice-and-comment rulemaking as required by 
Azar v. Allina Health Services, 587 US__, 139 S. Ct. 1804, 1811 (2019).
    Response: We thank the commenters for pointing out this inadvertent 
error and acknowledge that some wage indexes in Table 2 associated with 
the IPPS/LTCH PPS Proposed Rule were incorrect. We have fixed this 
error for the final rule so that Table 2 contains the corrected wage 
index values for FY 2021.
    Comment: One commenter recognized the need for a rural floor that 
is calculated separately from a reclassified rural wage index, but 
disagreed with the current method of calculating the rural wage index 
because it could result in a Sec.  412.103 reclassified hospital 
receiving a rural wage index below that of their original CBSA. To 
address this issue, the commenter suggested that CMS should calculate 
each rural reclassified hospital wage index independently by excluding 
all other reclassified hospitals from the calculation instead of CMS 
blending the data of all Sec.  412.103 reclassified hospitals with data 
from geographically rural hospitals.
    Response: We agree with the commenter that there is a need for a 
rural floor that is calculated separately (without the data of 
hospitals with Sec.  412.103 redesignations) from a reclassified rural 
wage index, which is calculated including the data of hospitals with 
Sec.  412.103 redesignations if including that wage data raises the 
state's rural wage index. In response to the commenter's concern that a 
hospital may receive a lower wage index as a result of its Sec.  
412.103 reclassification if the rural wage index is lower than the wage 
index of the hospital's geographic CBSA, we note that obtaining a Sec.  
412.103 redesignation is a completely voluntary process that hospitals 
may undertake for a variety of reasons. It behooves a hospital to 
consider all payment implications, including those on their wage index, 
prior to reclassifying under Sec.  412.103. We further note that a 
hospital may mitigate the wage index impact of a Sec.  412.103 rural 
reclassification by obtaining an MGCRB reclassification, including to 
its geographic area, which it can decide to keep or withdraw depending 
on the proposed rule wage indexes for its reclassified or geographic 
area compared to their state's rural area. Finally, we are aware of 
many hospitals that obtain Sec.  412.103 redesignations in order to 
raise their state's rural wage index. In such cases, it is a reasonable 
assumption that hospitals consider prior to reclassifying under Sec.  
412.103 whether potentially lowering their own wage indexes is 
worthwhile in order to raise the state's rural wage index. For these 
reasons, we do not believe that it is necessary to change the 
calculation of the rural reclassified hospital wage index, as the 
commenter suggests, in an attempt to mitigate possible wage index 
reductions that hospitals may experience as a result of reclassifying 
under Sec.  412.103.
2. State Frontier Floor for FY 2021
    Section 10324 of Public Law 111-148 requires that hospitals in 
frontier States cannot be assigned a wage index of less than 1.0000. 
(We refer readers to the regulations at 42 CFR 412.64(m) and to a 
discussion of the implementation of this provision in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50160 through 50161).) In the FY 2021 IPPS/
LTCH PPS proposed rule (85 FR 32715), we did not propose any changes to 
the frontier floor policy for FY 2021. In the proposed rule, we stated 
that 45 hospitals would receive the frontier floor value of 1.0000 for 
their FY 2021 wage index. These hospitals are located in Montana, North 
Dakota, South Dakota, and Wyoming.
    We did not receive any public comments on the application of the 
State frontier floor for FY 2021. In this final rule, 44 hospitals will 
receive the frontier floor value of 1.0000 for their FY 2021 wage 
index. These hospitals are located in Montana, North Dakota, South 
Dakota, and Wyoming. We note that while Nevada meets the criteria of a 
frontier State, all hospitals within the State currently receive a wage 
index value greater than 1.0000.
    The areas affected by the rural and frontier floor policies for the 
final FY 2021 wage index are identified in Table 2 associated with this 
final rule, which is available via the internet on the CMS website.
3. Continuation of the Low Wage Index Hospital Policy
    To help mitigate wage index disparities, including those resulting 
from the inclusion of hospitals with rural reclassifications under 42 
CFR 412.103 in the rural floor, in the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42325 through 42339), we finalized policies to reduce the 
disparity between high and low wage index hospitals by increasing the 
wage index values for certain hospitals with low wage index values and 
doing so in a budget neutral manner through an adjustment applied to 
the standardized amounts for all hospitals, as well as by changing the 
calculation of the rural floor. We also provided for a transition in FY 
2020 for hospitals experiencing significant decreases in their wage 
index values as compared to their final FY 2019 wage index, and made 
these changes in a budget neutral manner.
    We increase the wage index for hospitals with a wage index value 
below the 25th percentile wage index value for a fiscal year by half 
the difference between the otherwise applicable final wage index value 
for a year for that hospital and the 25th percentile wage index value 
for that year across all hospitals. We stated in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42326 through 42328) that this policy will be 
effective for at least 4 years, beginning in FY 2020, in order to allow 
employee compensation increases implemented by these hospitals 
sufficient time to be reflected in the wage index calculation. 
Therefore, we stated in the proposed rule that this policy will 
continue in FY 2021. Based on data for the proposed rule, we stated 
that, for FY 2021, the 25th percentile wage index value across

[[Page 58766]]

all hospitals would be 0.8420. In order to offset the estimated 
increase in IPPS payments to hospitals with wage index values below the 
25th percentile wage index value, we proposed to apply the budget 
neutrality adjustment in the same manner as we applied it in FY 2020, 
as a uniform budget neutrality factor applied to the standardized 
amount.
    In addition, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332 
through 42336), we removed urban to rural reclassifications from the 
calculation of the rural floor to prevent inappropriate payment 
increases under the rural floor due to rural reclassifications, such 
that, beginning in FY 2020, the rural floor is calculated without 
including the wage data of hospitals that have reclassified as rural 
under section 1886(d)(8)(E) of the Act (as implemented in the 
regulations at Sec.  412.103). Also, for the purposes of applying the 
provisions of section 1886(d)(8)(C)(iii) of the Act, effective 
beginning in FY 2020, we remove the data of hospitals reclassified from 
urban to rural under section 1886(d)(8)(E) of the Act (as implemented 
in the regulations at Sec.  412.103) from the calculation of ``the wage 
index for rural areas in the State in which the county is located'' as 
referred to in section 1886(d)(8)(C)(iii) of the Act. As previously 
mentioned in section III.G.1. of this final rule, the rural floor for 
this FY 2021 final rule is calculated without the wage data of 
hospitals that have reclassified as rural under Sec.  412.103.
    Lastly, for FY 2020, we placed a 5-percent cap on any decrease in a 
hospital's wage index from the hospital's final wage index in FY 2019 
(84 FR 42336 through 42338). We applied a budget neutrality adjustment 
to the standardized amount so that this transition policy was 
implemented in a budget neutral manner. We clarified in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42337 through 42338) that this 5-
percent cap on wage index decreases applied to all hospitals that have 
any decrease in their wage indexes, regardless of the circumstance 
causing the decline, so that a hospital's final wage index for FY 2020 
will not be less than 95 percent of its final wage index for FY 2019. 
In light of the recent OMB updates described in section III.B.2. of 
this final rule, for FY 2021 we proposed to again cap any decreases in 
the wage index at 5 percent so that a hospital's final wage index for 
FY 2021 will not be less than 95 percent of its final wage index for FY 
2020, and to apply a budget neutrality adjustment for this transition 
policy in the same manner as in FY 2020. As previously mentioned, on 
September 14, 2018, OMB issued OMB Bulletin No. 18-04 which established 
revised delineations. Consistent with our past practice of implementing 
transition policies to help mitigate negative impacts on hospitals of 
certain wage index proposals, due to the revised OMB delineations, for 
FY 2021 we proposed to again provide for a transition of a 5-percent 
cap on any decrease in a hospital's wage index from the hospital's 
final wage index from the prior fiscal year which would be FY 2020. We 
refer readers to section III.B.2.c. and d. of the preamble of this 
final rule for a complete discussion of the wage index transition 
policy.
    Comments: We received comments supporting and opposing the 
continuation of the low wage index hospital policy. Many commenters 
thanked CMS for implementing this policy in FY 2020 in response to 
rural and other health care stakeholders' requests that CMS address 
``circularity'' in the wage index (the cyclical effect of hospitals 
with relatively high wages receiving higher reimbursement due to 
relatively high wage indexes, which allows them to afford paying higher 
wages) and halt the ``death spiral'' perpetuating wage index 
disparities where relatively low wage index hospitals are forced to 
keep wages low due to low Medicare reimbursements that lag behind areas 
with higher wage indexes.
    Other commenters opposed continuing the low wage index hospital 
policy in FY 2021. The commenters expressed that the policy fails to 
recognize the legitimate differences in geographic labor markets. 
Commenters also noted that there is no requirement for hospitals to use 
the increased reimbursement to boost employee compensation, and 
suggested CMS begin evaluating the cost report data filed by hospitals 
in the lowest quartile to ascertain whether the increased funds are 
being used to raise employee compensation in deciding whether to 
continue this policy for FY 2022. Some commenters stated that the data 
lag CMS described in its rationale applies equally to all hospitals, 
not only those in the lowest quartile. Commenters questioned CMS's 
statutory authority to promulgate this policy under 42 U.S.C. 
1395ww(d)(3)(E), which requires the agency to adjust payments to 
reflect area difference in wages, because it artificially inflates wage 
index values and creates a wage index system not based on actual data. 
These commenters expressed that CMS is using the wage index as a policy 
vehicle, not as a technical correction, and needs Congressional 
authority to provide additional funding to low[hyphen]wage hospitals.
    Response: We appreciate the many comments received in support of 
our policy to provide an increase in the wage index for hospitals with 
wage index values below the 25th percentile wage index value for a year 
(referred to as the low wage index hospital policy). We note that we 
did not propose any changes to this policy in the FY 2021 IPPS/LTCH PPS 
proposed rule. As we stated in the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42331), the intent of the low wage index hospital policy is to 
increase the accuracy of the wage index as a technical adjustment and 
not to use the wage index as a policy vehicle. As we explained in the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42327 through 42328), we 
believe our low wage index hospital policy increases the accuracy of 
the wage index as a relative measure because it allows low wage index 
hospitals to increase their employee compensation in ways that we would 
expect if there were no lag in reflecting compensation adjustments in 
the wage index.
    In response to the commenters opposing our policy because the 
policy fails to recognize differences in geographic labor markets, we 
continue to believe, for the reasons stated in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42327-42328), that by preserving the rank order 
in wage index values, our policy continues to reflect meaningful 
distinctions between the employee compensation costs faced by hospitals 
in different geographic areas. Furthermore, as stated in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42327 through 42328), and as noted 
above, we believe that the low wage index hospital policy increases the 
accuracy of the wage index as a relative measure of wages across 
different geographic regions because it allows low wage index hospitals 
to increase their employee compensation in ways that we would expect if 
there were no lag in reflecting compensation adjustments in the wage 
index. Thus, under the low wage index hospital policy, we believe the 
wage index for low wage index hospitals appropriately reflects the 
relative hospital wage level in those areas compared to the national 
average hospital wage level. As explained in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42331), because the low wage index hospital policy is 
based on the actual wages that we expect low wage hospitals to pay, it 
falls within the scope of the authority in section 1886(d)(3)(E) of the 
Act. We appreciate the commenters' suggestions that CMS evaluate 
whether hospitals in the lowest

[[Page 58767]]

quartile increased employee compensation as a result of our low wage 
policy. As we stated in the FY 2020 final rule (84 FR 42327), the 
future wage data from those hospitals will help us assess our 
reasonable expectation that low wage hospitals would increase employee 
compensation as a result of our low wage index hospital policy. We 
intend to assess whether the low wage index hospital policy has been 
effective in allowing hospitals to make adjustments in employee 
compensation, as the commenter suggested, based on wage data collected 
on hospitals' cost reports for the years during which this policy is in 
effect. In response to the commenters asserting that the data lag 
applies equally to all hospitals, we agree that the 4 year data lag 
does not apply only to hospitals in the lowest quartile; however, we 
believe that circularity inherent in the data lag poses a particular 
problem for low wage hospitals. As we explained in the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42326 through 42328, 42331), we believe many 
low wage index hospitals have been prevented from increasing 
compensation because of the lag under our cost reporting process 
between the time hospitals increase employee compensation and the time 
these increases are reflected in the wage index.
    We refer readers to our discussion in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42326-42332) for further discussion of the low wage 
index hospital policy and our responses to similar comments.
    Comment: Many commenters supported increasing the wage index values 
of low-wage hospitals, but urged CMS to do so in a non-budget-neutral 
manner. Commenters asserted that this redistribution is 
counterproductive to CMS's larger goals of high quality care and 
healthcare access because it forces high-wage, mostly urban hospitals 
to bear the cost of supporting lower-wage hospitals. Some commenters 
stated that 42 U.S.C. 1395ww(d)(5)(I) does not authorize budget 
neutrality adjustments to the national standardized amount, except for 
transfer cases. Commenters stated that the budget neutrality adjustment 
penalizes many hospitals, including rural hospitals.
    Other commenters asked that CMS ensure that the budget neutrality 
adjustment factor not apply to hospitals falling below the 25th 
percentile or revert to its FY 2020 proposal to decrease the wage index 
for hospitals with values above the 75th percentile. One commenter 
specifically pointed out that hospitals between the 22nd and the 25th 
percentile are receiving an overall reduction because the amount of 
benefit received from the wage index boost is less than the reduction 
to the standardized rate. This commenter suggested CMS explore slightly 
reducing the labor share of those hospitals who have a wage index 
greater than 1.0000, or a graduated reduction to the standardized rate 
based on wage index percentile.
    Response: We disagree with the commenters that the low wage index 
hospital policy should be implemented in a non-budget neutral manner. 
As we stated in response to similar comments in the FY 2020 IPPS/LTCH 
PPS final rule, (84 FR 42331 and 42332), under section 1886(d)(3)(E) of 
the Act, the wage index adjustment is required to be implemented in a 
budget neutral manner. However, even if the wage index were not 
required to be budget neutral under section 1886(d)(3)(E) of the Act, 
we would consider it inappropriate to use the wage index to increase or 
decrease overall IPPS spending. As we stated in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42331), the wage index is not a policy tool but 
rather a technical adjustment designed to be a relative measure of the 
wages and wage-related costs of subsection (d) hospitals. As a result, 
as we explained in the FY 2020 IPPS/LTCH PPS final rule, if it were 
determined that section 1886(d)(3)(E) of the Act does not require the 
wage index to be budget neutral, we invoke our authority at section 
1886(d)(5)(I) of the Act in support of such a budget neutrality 
adjustment. We have considered the commenters' suggestion that we do 
not have authority under section 1886(d)(5)(I) of the Act to implement 
a budget neutrality adjustment to the national standardized amount, 
including the argument that such authority exists only with respect to 
transfer cases. Contrary to the commenters' suggestion, and consistent 
with our response to a similar comment in the FY 2020 IPPS/LTCH PPS 
final rule, we believe that we have broad authority under section 
1886(d)(5)(I) of the Act to promulgate a budget neutrality adjustment 
to the national standardized amount and that this authority is not 
limited to transfer cases. We refer readers to the full discussion of 
budget neutrality for the low wage index hospital policy in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42328-42332). Regarding the commenters' 
suggested alternatives, as we explained in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42331), stakeholders raised reasonable policy 
arguments that we think we should consider further regarding the 
relationship between a budget neutrality adjustment targeting high wage 
index hospitals and the design of the wage index to be a relative 
measure of the wages and wage-related costs of subsection (d) hospitals 
in the United States. For similar reasons, we believe the effects of 
other suggestions made by commenters, including suggestions to apply 
budget neutrality or to revise the labor related share or standardized 
amount in a way that targets certain subsets of hospitals, would need 
to be assessed further. With regard to the commenter's assertion about 
a possible reduction to overall payment if the amount of benefit 
received from the wage index boost is less than the reduction to the 
standardized rate, we believe we have applied both the quartile policy 
and the budget neutrality policy appropriately. The quartile adjustment 
is applied to the wage index, which resulted in an increase to the wage 
index for hospitals below the 25th percentile. The budget neutrality 
adjustment is applied to the standardized amount in order to ensure 
that the low wage index hospital policy is implemented in a budget 
neutral manner. Thus, consistent with our current methodology for 
implementing wage index budget neutrality under section 1886(d)(3)(E) 
of the Act and with how we implemented budget neutrality for the low 
wage index hospital policy in FY 2020, we think it is appropriate to 
continue to apply a budget neutrality adjustment to the national 
standardized amount for all hospitals so that the low wage index 
hospital policy is implemented in a budget neutral manner for FY 2021.
    Comment: Many commenters urged CMS to develop a comprehensive, 
long-term approach to wage index reform in place of the policy 
finalized in the FY 2020 rule. Several commenters suggested alternative 
solutions to address wage index disparities, including: Solutions to 
help hospitals with wages that are not rising at the pace of the 
national average; a national wage index floor for all hospitals; an 
urban wage index floor of 1.0000 for CBSAs located in a metropolitan 
area with a population of at least 5 million (funded by an adjustment 
to wage indexes of other similar metropolitan areas with substantially 
higher wage indexes); wage data audits to verify local labor prices; 
and limiting ``reclassification stacking'' so that hospitals cannot 
reclassify as rural and then use the more relaxed requirements afforded 
to rural hospitals to reclassify to a higher wage index. Other

[[Page 58768]]

commenters recommended that CMS proactively address the effects of 
COVID-19, which the commenters believed would exacerbate wage index 
disparities, by excluding wage data collected during the public health 
emergency from future wage index calculations. Another commenter asked 
that an imputed rural floor be included in any effort to address 
disparities in the wage index, and that CMS reinstate the imputed floor 
immediately to more equitably reimburse hospitals in all-urban states 
considering the extensive time and effort involved in broader wage 
index reform.
    Response: We appreciate the commenters' suggested alternatives. 
Because we consider these comments to be outside the scope of the FY 
2021 IPPS/LTCH PPS proposed rule, we are not addressing them in this 
final rule but may consider them in future rulemaking.
    Comment: Several commenters specifically supported CMS's 
continuation of the policy from FY 2020 to exclude the wage data of 
urban hospitals that reclassify to rural when calculating each state's 
rural floor. Commenters expressed that the change to the calculation of 
the rural floor limits the ability of hospitals to game the system and 
supports the overall goal of making the wage index reflective of 
variances in labor markets. One commenter stated that excluding 
hospitals reclassified under Sec.  412.103 from the rural floor 
calculation narrows a loophole used by hospitals in some states to 
artificially increase the rural floor, which is paid for by hospitals 
in all states, and urged CMS to find more ways to use regulations to 
curtail the adverse effects of section 3141 of the Affordable Care Act. 
This commenter also requested that CMS publish an assessment of the 
state-specific effects of the rural floor on the IPPS wage index and on 
all prospective payment systems that are affected by the rural floor.
    Response: We appreciate the commenters' support of our policy to 
exclude the wage data of hospitals reclassified under Sec.  412.103 
from the rural floor calculation. As stated in the FY 2020 IPPS/LTCH 
PPS final rule, we believe this policy is necessary and appropriate to 
address the unanticipated effects of rural reclassifications on the 
rural floor and the resulting wage index disparities, including the 
effects of the manipulation of the rural floor by certain hospitals (84 
FR 42333 through 42334). Regarding the commenter's suggestion that CMS 
find ways to use regulations to curtail the adverse effects of 
nationwide budget neutrality, we believe this would be difficult to 
achieve without legislative action, as section 3141 of Public Law 111-
148 requires a national budget neutrality adjustment in implementing 
the rural floor. Finally, in response to the commenter's request that 
CMS publish an assessment of the state-specific effects of the rural 
floor on the IPPS wage index and on all prospective payment systems 
that are affected by the rural floor, we refer the commenter to the 
impact analysis in Appendix A to this FY 2021 IPPS/LTCH PPS final rule. 
CMS specifically provides the impacts of the rural floor in section 
I.G.2 of Appendix A of this final rule, in Table 1 ``Impact Analysis of 
Final Changes to the IPPS for Operating Costs for FY 2021'' in Column 
(5) ``Rural Floor with Application of National Rural Floor Budget 
Neutrality'', including the impact by geographic region separately for 
rural and urban hospitals. In addition, CMS provides the rural floor 
wage index value for each state in Table 3 of the proposed and final 
rules, as well as the national rural floor budget neutrality factor so 
that hospitals and public are aware of the impact of the rural floor on 
individual hospitals. CMS also provides public use data files in 
conjunction with the proposed and final rules that allow for additional 
analyses by different hospital characteristics, including at the state 
level. Analysis of the effects of the rural floor for all other payment 
systems besides IPPS and LTCH that are affected by the rural floor is 
outside the scope of the IPPS/LTCH PPS final rule. After consideration 
of the public comments received, for the reasons discussed in this 
final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are 
finalizing our proposal, without modification, to apply a budget 
neutrality adjustment for our low wage index hospital policy in the 
same manner as we applied it in FY 2020, as a uniform budget neutrality 
factor applied to the standardized amount.
    As we stated in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32715), we will continue to apply the policies we finalized in the FY 
2020 IPPS/LTCH PPS final rule (84 FR 32715) to address wage index 
disparities--that is, the low wage index hospital policy, and the 
exclusion of the wage data of hospitals reclassified under section 
1886(d)(8)(E) of the Act (as implemented in Sec.  412.103) from the 
rural floor and from the calculation of ``the wage index for rural 
areas in the State in which the county is located'' as referred to in 
section 1886(d)(8)(C)(iii) of the Act. For purposes of the low wage 
index hospital policy, based on the data for this final rule, for FY 
2021, the 25th percentile wage index value across all hospitals is 
0.8465.

H. FY 2021 Wage Index Tables

    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49498 and 49807 
through 49808), we finalized a proposal to streamline and consolidate 
the wage index tables associated with the IPPS proposed and final rules 
for FY 2016 and subsequent fiscal years. Prior to FY 2016, the wage 
index tables had consisted of 12 tables (Tables 2, 3A, 3B, 4A, 4B, 4C, 
4D, 4E, 4F, 4J, 9A, and 9C) that were made available via the internet 
on the CMS website. Effective beginning FY 2016, with the exception of 
Table 4E, we streamlined and consolidated 11 tables (Tables 2, 3A, 3B, 
4A, 4B, 4C, 4D, 4F, 4J, 9A, and 9C) into 2 tables (Tables 2 and 3). As 
discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41380), 
beginning with FY 2019, we added Table 4 which was titled and included 
a ``List of Counties Eligible for the Out-Migration Adjustment under 
Section 1886(d)(13) of the Act'' for the relevant fiscal year. In this 
FY 2021 IPPS/LTCH PPS final rule, we have included Table 4A which is 
titled ``List of Counties Eligible for the Out-Migration Adjustment 
under Section 1886(d)(13) of the Act'' and Table 4B titled ``Counties 
redesignated under section 1886(d)(8)(B) of the Act (Lugar Counties).'' 
We refer readers to section VI. of the Addendum to this final rule for 
a discussion of the wage index tables for FY 2021.

I. Revisions to the Wage Index Based on Hospital Redesignations and 
Reclassifications

1. General Policies and Effects of Reclassification and Redesignation
    Under section 1886(d)(10) of the Act, the Medicare Geographic 
Classification Review Board (MGCRB) considers applications by hospitals 
for geographic reclassification for purposes of payment under the IPPS. 
Hospitals must apply to the MGCRB to reclassify not later than 13 
months prior to the start of the fiscal year for which reclassification 
is sought (usually by September 1). However, we note that this deadline 
has been extended for applications for FY 2022 reclassifications to 15 
days after the public display date of the FY 2021 IPPS/LTCH final rule 
at the Office of the Federal Register, using our authority under 
Section 1135(b)(5) the Act due to the COVID-19 Public Health Emergency. 
Generally, hospitals must be proximate to the labor market area to 
which they are seeking reclassification and must demonstrate 
characteristics

[[Page 58769]]

similar to hospitals located in that area. The MGCRB issues its 
decisions by the end of February for reclassifications that become 
effective for the following fiscal year (beginning October 1). The 
regulations applicable to reclassifications by the MGCRB are located in 
42 CFR 412.230 through 412.280. (We refer readers to a discussion in 
the FY 2002 IPPS final rule (66 FR 39874 and 39875) regarding how the 
MGCRB defines mileage for purposes of the proximity requirements.) The 
general policies for reclassifications and redesignations and the 
policies for the effects of hospitals' reclassifications and 
redesignations on the wage index are discussed in the FY 2012 IPPS/LTCH 
PPS final rule for the FY 2012 final wage index (76 FR 51595 and 
51596). We note that rural hospitals reclassifying under the MGCRB to 
another state's rural area are not eligible for the rural floor, 
because the rural floor may apply to urban, not rural, hospitals.
    In addition, in the FY 2012 IPPS/LTCH PPS final rule, we discussed 
the effects on the wage index of urban hospitals reclassifying to rural 
areas under 42 CFR 412.103. In the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42332 through 42336), we finalized a policy to exclude the wage data 
of urban hospitals reclassifying to rural areas under 42 CFR 412.103 
from the calculation of the rural floor. Hospitals that are 
geographically located in States without any rural areas are ineligible 
to apply for rural reclassification in accordance with the provisions 
of 42 CFR 412.103.
    On April 21, 2016, we published an interim final rule with comment 
period (IFC) in the Federal Register (81 FR 23428 through 23438) that 
included provisions amending our regulations to allow hospitals 
nationwide to have simultaneous Sec.  412.103 and MGCRB 
reclassifications. For reclassifications effective beginning FY 2018, a 
hospital may acquire rural status under Sec.  412.103 and subsequently 
apply for a reclassification under the MGCRB using distance and average 
hourly wage criteria designated for rural hospitals. In addition, we 
provided that a hospital that has an active MGCRB reclassification and 
is then approved for redesignation under Sec.  412.103 will not lose 
its MGCRB reclassification; such a hospital receives a reclassified 
urban wage index during the years of its active MGCRB reclassification 
and is still considered rural under section 1886(d) of the Act and for 
other purposes.
    We discussed that when there is both a Sec.  412.103 redesignation 
and an MGCRB reclassification, the MGCRB reclassification controls for 
wage index calculation and payment purposes. We exclude hospitals with 
Sec.  412.103 redesignations from the calculation of the reclassified 
rural wage index if they also have an active MGCRB reclassification to 
another area. That is, if an application for urban reclassification 
through the MGCRB is approved, and is not withdrawn or terminated by 
the hospital within the established timelines, we consider the 
hospital's geographic CBSA and the urban CBSA to which the hospital is 
reclassified under the MGCRB for the wage index calculation. We refer 
readers to the April 21, 2016 IFC (81 FR 23428 through 23438) and the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through 56930) for a full 
discussion of the effect of simultaneous reclassifications under both 
the Sec.  412.103 and the MGCRB processes on wage index calculations. 
For a discussion on the effects of reclassifications under Sec.  
412.103 on the rural area wage index and the calculation of the rural 
floor, we refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42332 through 42336).
2. MGCRB Reclassification and Redesignation Issues for FY 2021
a. FY 2021 Reclassification Application Requirements and Approvals
    As previously stated, under section 1886(d)(10) of the Act, the 
MGCRB considers applications by hospitals for geographic 
reclassification for purposes of payment under the IPPS. The specific 
procedures and rules that apply to the geographic reclassification 
process are outlined in regulations under 42 CFR 412.230 through 
412.280. At the time this final rule was constructed, the MGCRB had 
completed its review of FY 2021 reclassification requests. Based on 
such reviews, there are 392 hospitals approved for wage index 
reclassifications by the MGCRB starting in FY 2021. Because MGCRB wage 
index reclassifications are effective for 3 years, for FY 2021, 
hospitals reclassified beginning in FY 2019 or FY 2020 are eligible to 
continue to be reclassified to a particular labor market area based on 
such prior reclassifications for the remainder of their 3-year period. 
There were 245 hospitals approved for wage index reclassifications in 
FY 2019 that will continue for FY 2021, and 269 hospitals approved for 
wage index reclassifications in FY 2020 that will continue for FY 2021. 
Of all the hospitals approved for reclassification for FY 2019, FY 
2020, and FY 2021, based upon the review at the time of this final 
rule, 895 hospitals are in a MGCRB reclassification status for FY 2021 
(with 90 of these hospitals reclassified back to their geographic 
location).
    Under the regulations at 42 CFR 412.273, hospitals that have been 
reclassified by the MGCRB are permitted to withdraw their applications 
if the request for withdrawal is received by the MGCRB any time before 
the MGCRB issues a decision on the application, or after the MGCRB 
issues a decision, provided the request for withdrawal is received by 
the MGCRB within 45 days of the date that CMS' annual notice of 
rulemaking is issued in the Federal Register concerning changes to the 
inpatient hospital prospective payment system and payment rates for the 
fiscal year for which the application has been filed. For information 
about withdrawing, terminating, or canceling a previous withdrawal or 
termination of a 3-year reclassification for wage index purposes, we 
refer readers to Sec.  412.273, as well as the FY 2002 IPPS final rule 
(66 FR 39887 through 39888) and the FY 2003 IPPS final rule (67 FR 
50065 through 50066). Additional discussion on withdrawals and 
terminations, and clarifications regarding reinstating 
reclassifications and ``fallback'' reclassifications were included in 
the FY 2008 IPPS final rule (72 FR 47333) and the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38148 through 38150).
    Comment: Several commenters requested additional time or an 
additional opportunity for hospitals to revise decisions to withdraw an 
approved MGCRB reclassification. The commenters explained that if the 
proposed labor market changes are not finalized, the provider may have 
inadvertently reduced the wage index that they would receive for FY 
2021. One commenter acknowledged that this is a challenge every year as 
providers may or may not know the actions of other providers, however, 
the commenter asked for more time for hospitals to make MGCRB elections 
after the final rule given the challenges that many providers are 
currently facing financially and the potential for CMS to not finalize 
the revised labor markets.
    Response: We maintain that information provided in the proposed 
rule constitutes the best available data to assist hospitals in making 
reclassification decisions. In addition, section 1886(d)(8)(D) of the 
Act requires the Secretary to adjust the standardized amounts to ensure 
that aggregate payments under the IPPS after implementation of the 
provisions of certain sections of the Act, including section 
1886(d)(10) of the Act for

[[Page 58770]]

geographic reclassifications by the MGCRB, are equal to the aggregate 
prospective payments that would have been made absent these provisions. 
If hospitals were to withdraw or terminate reclassification statuses 
after the publication of the final rule, as the commenter suggested CMS 
permit, any resulting changes in the wage index would not have been 
taken into account when calculating the IPPS standardized amounts in 
the final rule in accordance with the statutory budget neutrality 
requirement. Therefore, it is necessary that the values published in 
the final rule represent the final wage index values reflective of 
reclassification decisions.
    Comment: Commenters pointed out that if CMS does not publish the 
IPPS final rule until September 1, 2020, the 3-year average hourly wage 
information that hospitals will need to submit an FY 2022 MGCRB 
application will be unavailable by the statutory deadline of September 
1, 2020 for applications to be submitted for FY 2022 to the MGCRB. The 
commenters urged CMS to make the final rule data available by August 1 
or provide guidance by that date, use its authority under section 1135 
of the Act to extend the deadline for hospitals to submit geographic 
reclassification applications, or allow hospitals to submit incomplete 
applications to the MGCRB by September 1 that could be supplemented 
later when the final 3-year average hourly wage data is available.
    Response: The commenters are correct that under section 
1886(d)(10)(C)(ii) of the Act, geographic reclassification applications 
for FY 2022 are due to the Medicare Geographic Classification Review 
Board (MGCRB) by September 1, 2020. Under 42 CFR 412.230(d)(2), the 3-
year average hourly wage provided in the FY 2021 IPPS final rule is 
used for FY 2022 geographic reclassification applications. We 
understand that hospitals need the 3-year average hourly wage data to 
complete their MGCRB reclassification applications. Therefore, we made 
the 3-year average hourly wage file available on August 5, 2020, in 
advance of the final rule at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files and notified 
hospitals that this file is available via a Medicare Learning Network 
(MLN) Connects list-serve message on August 13, 2020 as well as by 
contacting national hospital associations.
    Additionally, we used our authority under section 1135 of the Act 
to extend the deadline for hospitals to submit geographic 
reclassification applications for reclassifications beginning in FY 
2022, as the commenters suggested. Due to the COVID-19 Public Health 
Emergency (PHE), under the authority of section 1135(b)(5) the Act, CMS 
modified the September 1 deadline to be 15 days after the public 
display date of the FY 2021 IPPS/LTCH final rule at the Office of the 
Federal Register. We notified hospitals about this extension via the 
CMS MGCRB Application website, https://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB, and by updating the Emergency Declaration 
Blanket Waivers at https://www.cms.gov/files/document/summary-covid-19-emergency-declaration-waivers.pdf.
    Comment: We received a comment requesting CMS to revise its 
interpretation of section 1886(d)(8)(C)(ii) of the Act. Section 
1886(d)(8)(C)(ii) of the Act requires CMS to evaluate the effects of 
wage index reclassification on a State's rural wage index, and to not 
exclude the data of hospitals reclassified under section 1886(d)(8)(B) 
or (d)(10) of the Act from the calculation of the rural wage index if 
excluding such data would reduce the rural wage index. The commenter 
pointed to the FY 2010 IPPS/LTCH PPS final rule (74 FR 43838) in which 
CMS states that its longstanding policy is to consider reclassified 
hospitals as a group in deciding whether to include or exclude their 
data from the rural wage index calculation pursuant to section 
1886(d)(8)(C)(ii) of the Act. The commenter claimed that CMS's 
interpretation of section 1886(d)(8)(C)(ii) of the Act is inconsistent 
with the plain reading of the statute, and results in the reduction of 
wage index values for rural hospitals in the State of New Hampshire. 
The commenter contended that the statute's use of ``or'' in listing the 
types of reclassification considered under the statute requires CMS to 
evaluate the effects of MGCRB reclassifications under section 
1886(d)(10) of the Act separately and independently from the effects of 
reclassifications under section 1886(d)(8)(B) of the Act before 
determining whether any hospital's data should or should not be 
excluded from the rural wage index. The commenter stated that excluding 
rural hospitals with MGCRB reclassifications and not excluding 
``Lugar'' hospitals (including hospitals deemed urban under section 
601(g) of Pub. L. 98-21) from the rural wage index would result in a 
greater wage index value than would be calculated by excluding all 
reclassified rural hospitals. Therefore, the commenter contended that 
the rural wage index should be based on average hourly wage data for 
three hospitals (two rural hospitals with no form of reclassification, 
and one deemed urban hospital) while excluding the data for a fourth 
geographically rural hospital with an active MGCRB reclassification. 
The commenter also questioned CMS' wage index calculation methodologies 
in response to an email exchange with CMS earlier in the year.
    Response: We do not agree that our interpretation of section 
1886(d)(8)(C)(ii) of the Act is inconsistent with the plain reading of 
the statute. As we stated in the FY 2010 IPPS/LTCH PPS final rule (74 
FR 43838), given the statutory language referring to ``hospitals'' in 
the plural under section 1886(d)(8)(C)(i) and 1886(d)(8)(C)(ii) of the 
Act, our longstanding policy is to consider reclassified hospitals as a 
group in deciding whether to include or exclude their data from both 
the urban and rural wage index calculations. For the FY 2021 New 
Hampshire rural wage index calculation, we excluded the wage index for 
the two reclassified hospitals located in rural counties, since doing 
so would not reduce the rural wage index. We believe that CMS's 
longstanding policy in applying this statute is both a permissible and 
reasonable interpretation of the statute. Both reclassification under 
sections 1886(d)(10) and 1886(d)(8)(B) of the Act serve the same 
essential wage index functions, that is, assigning a hospital a wage 
index value for a nearby labor market area, and thus we think our 
current application of section 1886(d)(8)(C)(ii) of the Act is 
reasonable. We do not believe section 1886(d)(8)(C)(ii) of the Act 
requires that such reclassifications be considered separately and 
independently for purposes of applying the rural wage index ``hold 
harmless'' policy in that section. Therefore, we are not altering our 
current application of that statute. Finally, in regards to the 
commenter's questions in response to an email exchange with CMS earlier 
in the year, CMS previously clarified an error included in that initial 
email exchange, which we believe resolved the commenter's question 
regarding the rural wage index calculation methodology.
b. Hospitals With One or Two Years of Wage Data Seeking MGCRB 
Reclassification
    We proposed to modify the regulation at Sec.  412.230(d)(2)(ii)(A) 
to clarify that a hospital may qualify for an individual wage index 
reclassification by the MGCRB under Sec.  412.230 to another

[[Page 58771]]

labor market area if the hospital only has 1 or 2 years of wage data. 
Section 412.230(d)(2)(ii)(A) provides that, for hospital-specific wage 
data, a hospital must provide a weighted 3-year average of its average 
hourly wages using data from the CMS hospital wage survey used to 
construct the wage index. In the proposed rule (85 FR 32717), we noted 
that in certain circumstances, such as that of a new hospital, a 
hospital may not have 3 years of published wage data within the 
applicable 3-year average hourly wage period used by the MGCRB. In such 
cases, it has been CMS's longstanding policy that a hospital must 
accumulate at least 1 year of wage data within the applicable 3-year 
average hourly wage period used by the MGCRB, in order to apply for 
individual reclassification. In the proposed rule, we stated that we 
were concerned that this policy may not be clear in the current 
regulation text at Sec.  412.230(d)(2)(ii)(A), and we proposed to 
revise Sec.  412.230(d)(2)(ii)(A) to clarify this. For hospitals that 
have accumulated fewer than 3 years of wage data within the applicable 
3-year average hourly wage period used by the MGCRB, the appropriate 
hospital-specific wage data to be used by an applicant under Sec.  
412.230(d) is either the single year of published wage data (if the 
hospital has accumulated just 1 year of wage data), or, if applicable, 
the weighted average of its 2 years of wage data within the 3-year 
period reviewed by the MGCRB. Although Sec.  412.230(d)(2)(iv) reflects 
this longstanding policy as it pertains to new providers, we noted that 
this policy has not been limited to new providers. Section 
412.230(d)(2)(iv) specifies that if a new owner does not accept 
assignment of the hospital's provider agreement, the hospital is 
considered a new provider with a new provider number, and the wage data 
associated with the previous hospital's provider number cannot be used 
to calculate the new hospital's 3-year average hourly wage. Section 
412.230(d)(2)(iv) further states that, in this case, the new hospital 
would be eligible to apply for an individual MGCRB reclassification 
after accumulating at least 1 year of wage data (we refer readers to 
the FY 2003 IPPS/LTCH final rule (67 FR 50066) for further discussion 
of this policy). As previously noted, however, we have not limited this 
wage data policy to new providers, and thus we proposed to revise Sec.  
412.230(d)(2)(ii)(A) to clarify this. Specifically, we proposed to 
reformat Sec.  412.230(d)(2)(ii)(A) so that it consists of two 
paragraphs (paragraphs (d)(2)(ii)(A)(1) and (2)), and to include new 
language in new Sec.  412.230(d)(2)(ii)(A)(2) stating that once a 
hospital has accumulated at least 1 year of wage data in the applicable 
3-year average hourly wage period used by the MGCRB, the hospital is 
eligible to apply for reclassification based on those data. We further 
stated in the proposed rule that, consistent with our current policy, 
hospitals without wage data or that have accumulated less than 1 year 
of wage data would not be eligible for individual wage index 
reclassification.
    Comment: We received multiple comments in support of this proposal.
    Response: We appreciate commenters' support of our proposed 
revisions to Sec.  412.230(d)(2)(ii)(A).
    After consideration of comments received, for the reasons discussed 
in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we 
are finalizing our proposed revisions to Sec.  412.230(d)(2)(ii)(A) 
without modification. Specifically, we are reformatting Sec.  
412.230(d)(2)(ii)(A) so that it consists of two paragraphs (paragraphs 
(d)(2)(ii)(A)(1) and (2)), and including new language in new Sec.  
412.230(d)(2)(ii)(A)(2) stating that once a hospital has accumulated at 
least 1 year of wage data in the applicable 3-year average hourly wage 
period used by the MGCRB, the hospital is eligible to apply for 
reclassification based on those data.
c. Effects of Implementation of Revised OMB Labor Market Area 
Delineations on Reclassified Hospitals
(1) Assignment Policy for Hospitals Reclassified to CBSAs Where One or 
More Counties Move to a New or Different Urban CBSA
    We stated in the proposed rule (85 FR 32717) that because hospitals 
that have been reclassified beginning in FY 2019, 2020, or 2021 were 
reclassified based on the current labor market delineations, if we 
adopt the revised OMB delineations based on the OMB Bulletin No. 18-04 
beginning in FY 2021, the areas to which they have been reclassified, 
or the areas where they are located, may change. We stated that under 
the revised OMB delineations, some existing CBSAs would be 
reconfigured. Hospitals with current reclassifications were encouraged 
to verify area wage indexes on Table 2 in the appendix of proposed 
rule, and confirm that the areas to which they have been reclassified 
for FY 2021 would continue to provide a higher wage index than their 
geographic area wage index. We stated that hospitals could withdraw or 
terminate their FY 2021 reclassifications by contacting the MGCRB 
within 45 days from the date the proposed rule was issued in the 
Federal Register (Sec.  412.273(c)).
    As we stated in the proposed rule, in some cases, adopting the 
revised OMB delineations would result in counties splitting apart from 
CBSAs to form new CBSAs, or counties shifting from one CBSA designation 
to another CBSA. We noted that reclassifications granted under section 
1886(d)(10) of the Act are effective for 3 fiscal years so that a 
hospital or county group of hospitals would be assigned a wage index 
based upon the wage data of hospitals in a nearby labor market area for 
a 3-year period. We explained that if CBSAs are split apart, or if 
counties shift from one CBSA to another under the revised OMB 
delineations, we must determine which reclassified area to assign to 
the hospital for the remainder of a hospital's 3-year reclassification 
period if the area to which the hospital reclassified split or had 
counties shift to another new or modified urban CBSA.
    Consistent with the policy CMS implemented in the FY 2005 IPPS 
final rule (69 FR 49054 through 49056) and in the FY 2015 IPPS final 
rule (79 FR 49973 through 49977), for FY 2021, we stated in the 
proposed rule (85 FR 32717) that if a CBSA would be reconfigured due to 
adoption of the revised OMB delineations and it would not be possible 
for the reclassification to continue seamlessly to the reconfigured 
CBSA, we believe it would be appropriate for us to determine the best 
alternative location to reassign current reclassifications for the 
remaining 3 years. Therefore, to maintain the integrity of a hospital's 
3-year reclassification period, we proposed that current geographic 
reclassifications (applications approved effective for FY 2019, FY 
2020, or FY 2021) that would be affected by CBSAs that are split apart 
or counties that shift to another CBSA under the revised OMB 
delineations, would ultimately be assigned to a CBSA under the revised 
OMB delineations that contains at least one county from the 
reclassified CBSA under the current FY 2020 definitions, and would be 
generally consistent with rules that govern geographic 
reclassification. That is, consistent with the policy finalized in FY 
2015 (79 FR 49973), we proposed a policy that affected reclassified 
hospitals be assigned to a CBSA that would contain the most proximate 
county that--(1) is located outside of the hospital's FY 2021 
geographic labor market area, and (2) is part of the original CBSA (as 
of FY 2020) to which the hospital is reclassified. (We also noted that 
we made a minor

[[Page 58772]]

modification to this proposed assignment policy for certain hospitals 
currently reclassified to their current geographic CBSA (that is, we 
stated that we would not require these reclassifications to be assigned 
to a CBSA outside the hospital's FY 2021 geographic labor market 
area)). As we explained in the proposed rule, we believe that assigning 
reclassifications to the CBSA that contains the nearest county that 
meets the aforementioned criteria satisfies the statutory requirement 
at section 1886(d)(10)(v) of the Act by maintaining reclassification 
status for a period of 3 fiscal years, while generally respecting the 
longstanding principle of geographic proximity in the labor market 
reclassification process. For county group reclassifications, we stated 
that we would follow our proposed policy, as previously discussed, 
except that, for county group reclassifications, we proposed to 
reassign hospitals in a county group reclassification to the CBSA under 
the revised OMB delineations that contains the county to which the 
majority of hospitals in the group reclassification are geographically 
closest. We also proposed to allow such hospitals, or county groups of 
hospitals, to submit a request to the [email protected] mailbox for 
reassignment to another CBSA that would contain a county that is part 
of the current FY 2020 CBSA to which it is reclassified if the hospital 
or county group of hospitals can demonstrate compliance with applicable 
reclassification proximity rules, as described later in this section.
    In the proposed rule (85 FR 32718), we recognized that the proposed 
reclassification reassignment policy, as previously described, for 
hospitals that are reclassified to CBSAs that would split apart or to 
counties that would shift to another CBSA under the revised OMB 
delineations may result in the reassignment of the hospital for the 
remainder of its 3-year reclassification period to a CBSA having a 
lower wage index than the wage index that would have been assigned for 
the reclassified hospital in the absence of the adoption of the revised 
OMB delineations. Therefore, as discussed in section III.B.2.e. of the 
preamble of the proposed rule, as a transition, we proposed to continue 
to apply for FY 2021 a 5-percent cap on any decrease in a hospital's 
wage index from the hospital's final wage index for the prior fiscal 
year. In other words, we stated we would apply a 5 percent cap in FY 
2021 on any decrease in a hospital's wage index compared to its final 
wage index for FY 2020. We explained that we believe that this 
transitional wage index would mitigate significant negative payment 
impacts for FY 2021, and would afford hospitals adequate time to fully 
assess any additional reclassification options available to them.
    We noted that if the CBSA to which a hospital is reclassified 
experiences only a change in name and/or number, (in other words, a 
county (or county equivalent) did not move to a new or different CBSA), 
we considered the CBSA, and associated reclassifications, to remain 
unchanged. For example, we noted that any hospital reclassified to 
current CBSA 19380 (Dayton, OH), 39140 (Prescott, AZ) or 43524 (Silver 
Spring-Frederick-Rockville, MD) would have its reclassification 
transferred to the equivalent CBSA 19430 (Dayton-Kettering, OH), 39150 
(Prescott Valley-Prescott, AZ), and 23224 (Frederick-Gaithersburg-
Rockville, MD), respectively.
    In the proposed rule (85 FR 32718), we provided the following Table 
1 which sets forth a list of current FY 2020 CBSAs (column 1) where one 
or more counties would be relocated to a new or different urban CBSA. 
We stated that hospitals with MGCRB reclassifications into the CBSAs in 
column 1 would be subject to the proposed reclassification assignment 
policy. The third column of ``eligible'' CBSAs lists all revised CBSAs 
that contain at least one county that is part of the current FY 2020 
CBSA (in column 1).
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    In the proposed rule, we provided the following Table 2 which lists 
all hospitals subject to our proposed reclassification assignment 
policy and where their reclassifications would be assigned for FY 2021 
under this policy. We stated in the proposed rule that the table lists 
reclassifications that would be in effect for FY 2021 under our 
proposed policy, and included in Table 2 in the addendum of the 
proposed rule. We stated that the table also includes reclassifications 
(noted by an asterisk on the ``MGCRB Case Number'') that were approved 
in FY 2019 or FY 2020 and are superseded by a new FY 2021 
reclassification. We explained that these prior year reclassifications, 
frequently referred to as ``fallback'' reclassifications, may become 
active if the subsequent FY 2021 reclassification is withdrawn. (We 
noted that the table did not include hospitals currently reclassified 
to their ``home'' geographic area, which were discussed in a separate 
section of the proposed rule).
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    We stated in the proposed rule (85 FR 32720) that if a hospital 
that is subject to the proposed reclassification assignment policy 
discussed earlier in this section wished to be reassigned to another 
eligible CBSA (that is, to a CBSA other than the CBSA to which their 
reclassification would be assigned under the proposed reclassification 
assignment policy and that contains at least one county from the CBSA 
to which they are reclassified for FY 2020) for which they meet the 
applicable proximity criteria, they could request reassignment within 
45 days from the date the proposed rule is placed on display at the 
Federal Register. We stated that hospitals must send a request to 
[email protected] and provide documentation establishing that they 
meet the requisite proximity criteria for reassignment to an another 
eligible CBSA that contains one or more counties from the CBSA to which 
they are currently reclassified for FY 2020. For purposes of 
clarification, we note that the phrase ``CBSA to which they are 
currently reclassified for FY 2020'' refers to the CBSA to which the 
hospital currently has an approved reclassification as that CBSA was 
configured in FY 2020. We explained that we believe this option of 
allowing these hospitals to submit a request to CMS would provide 
hospitals with greater flexibility with respect to their 
reclassification reassignment, while ensuring that the proximity 
requirements are met. We further explained that we believe that where 
the proximity requirements are met, the reclassified wage index would 
be consistent with the labor market area to which the hospitals were 
originally approved for reclassification. Thus, we stated that a 
hospital that is subject to our proposed reclassification assignment 
policy may request to reassign an individual reclassification to any 
CBSA that contains a county from the CBSA to which it is currently 
reclassified. However, we noted that to be reassigned to an area that 
is not the most proximate to the hospital, we believe it is necessary 
that the hospital demonstrates that it complies with the applicable 
proximity criteria. We stated that if a hospital cannot demonstrate 
proximity to a different eligible CBSA, the hospital would not be 
considered for reclassification to that labor market area, and the 
reclassification would remain with the CBSA assigned under the proposed 
reclassification assignment policy described earlier in this section. 
We stated that in the case of a county group reclassification, all 
requests for reassignment must include all active hospitals (that is, 
excluding any hospital that has since closed or converted to a 
different provider type) included on the original MGCRB 
reclassification application. We further explained that county groups 
must also demonstrate that they meet the appropriate proximity 
requirements, including, for rural county groups, being adjacent to the 
MSA to which they seek redesignation (Sec.  412.232(a)(1)(ii)), and for 
urban county groups, being in the same Combined Statistical Area or 
Core-Based Statistical Area as the urban area to which they seek 
redesignation (Sec.  412.234(a)(3)(iv)).
    We stated that all hospital requests for reassignment should 
contain the hospital's name, address, CCN, and point of contact 
information, and all requests must be sent to [email protected]. We 
stated that changes to a hospital's CBSA assignment on the basis of a 
hospital's disagreement with our determination of closest county, or on 
the basis of being granted a reassignment due to meeting applicable 
proximity criteria to an alternate eligible CBSA would be announced in 
the FY 2021 IPPS/LTCH PPS final rule.
    We received three timely requests for reassignment to the 
[email protected] mailbox. CCN 310051 requested reassignment of 
MGCRB case 19C0135 from CBSA 35154 to 35614. CCN 390162 requested 
reassignment of MGCRB case 21C0350 from CBSA 35084 to 35154. Both these 
requests included adequate documentation to determine that the 
hospitals met the applicable proximity requirements for reassignment to 
an eligible CBSA. These requests are approved, and are listed in final 
Table 2 provided later in this

[[Page 58775]]

section and reflected in Table 2 of the addendum to the this final 
rule. We note these reassignments will be in effect for FY 2021 and any 
remaining years the reclassification. A third request was received from 
CCN 390027 (MGCRB case number 21C0393) to be reassigned to either CBSA 
35614 or to CBSA 12100. The request did not provide adequate 
documentation to determine that the hospital met applicable proximity 
requirements to CBSA 35614, and as described in final Table 1 provided 
later in this section, CBSA 12100 is not an eligible CBSA for a 
reclassification approved to CBSA 35614. Therefore, this request is 
denied.
    Comment: Multiple commenters noted that hospitals that were 
approved for reclassification to the current CBSA 35614 (New York City-
Jersey City-White Plains, NY-NJ) were assigned to a different CBSA 
under CMS's proposed reclassification assignment policy. These 
commenters contended that if the revised delineations are finalized, 
the approved reclassifications to CBSA 35614 would be inappropriately 
modified by CMS. The commenters further contended that hospitals that 
have been approved for reclassification to that CBSA must be 
reclassified to that specific CBSA. The commenters stated that section 
1886(d)(10)(D)(v) of the Act, requires that a reclassification ``shall 
be effective for a period of 3 fiscal years.'' A commenter stated that 
through this provision, Congress specifically removed CMS' discretion 
to terminate or modify the approved reclassification. Another commenter 
stated that by assigning an approved reclassification from CBSA 35614 
to the CBSA 35154 (New Brunswick-Lakewood, NJ), CMS is violating its 
own regulations since Sec.  412.230(a)(5)(i) prohibits hospitals from 
reclassifying to a CBSA with a lower 3-year hourly wage. Citing the 
severe financial implications for these hospitals, commenters requested 
CMS to reinstate the reclassifications to CBSA 35614 or provide 
hospitals with the opportunity to reapply to a different CBSA, 
effective for FY 2021.
    Response: As we discussed in the proposed rule, under the revised 
OMB delineations, some existing CBSAs would be reconfigured by counties 
splitting apart from CBSAs to form new CBSAs, or counties shifting from 
one CBSA designation to another CBSA. As we further explained in the 
proposed rule, if a hospital is reclassified to a CBSA that would be 
reconfigured in this manner under the revised delineations, such that 
the CBSA, as configured in FY 2020, no longer exists, we must determine 
which reclassified area to assign to the hospital for the remainder of 
the hospital's 3 year reclassification period. We believe that our 
proposal to assign affected reclassified hospitals to the CBSA that 
would contain the most proximate county that (1) is located outside the 
hospital's proposed FY 2021 geographic labor market area, and (2) is 
part of the CBSA to which the hospital currently has an approved 
reclassification (as configured in FY 2020) satisfies the requirement 
of section 1886(d)(10)(D)(v) of the Act by allowing the hospital to 
retain reclassification status for a period of three fiscal years, 
while generally respecting the longstanding principle of geographic 
proximity in the geographic reclassification process. The New York-
Jersey City-White Plains, NY-NJ metropolitan division of the New York-
Newark-Jersey City, NY-NJ MSA is listed as CBSA 35614 in both the 
current and the revised labor market delineations. However, CMS has 
determined that the configuration of the CBSA would be fundamentally 
altered between FY 2020 and FY 2021 under the revised OMB delineations. 
As discussed in section III.A.2.b of this final rule, under the revised 
OMB delineations, three counties in New Jersey (Ocean, Monmouth, and 
Middlesex Counties) and one county in NY (Orange County, NY) were split 
off from CBSA 35614 into a different urban CBSA. While the 
modifications to CBSA 35614 did not result in a name or number change, 
as discussed previously in this section, CBSA names and identification 
numbers are not the basis for determining whether the proposed 
reclassification assignment policy applies. Because the configuration 
of CBSA 35614 would be altered under the revised OMB delineations, we 
believe current reclassifications to this CBSA are appropriately 
subject to our proposed reclassification assignment policy as discussed 
above. We agree with commenters that CMS is obligated by the statute to 
maintain reclassification status for a period of 3 years after 
approval. However, since the CBSA to which the hospitals were approved 
has been reconfigured, we believe the FY 2020 CBSA 35614 is not the 
same entity as the revised FY 2021 CBSA. Consistent with the policy CMS 
implemented in the FY 2005 IPPS final rule (69 FR 49054 through 49056) 
and in the FY 2015 IPPS final rule (79 FR 49973 through 49977), for FY 
2021, we believe our proposed reclassification assignment policy 
appropriately satisfies the requirement of section 1886(d)(10)(D)(v) of 
the Act by allowing the hospital to retain reclassification status for 
a period of three fiscal years, while generally respecting the 
longstanding principle of geographic proximity in the geographic 
reclassification process. This proposed reclassification assignment 
policy allows the hospital to continue its three year reclassification 
where, under the revised OMB delineations, the reclassified CBSA 
originally approved by the MGCRB no longer exists. Of the hospitals 
with a current approved reclassification to CBSA 35614 that were 
assigned to a CBSA other than CBSA 35614 (excluding CCN 310051 that was 
reassigned to CBSA 35614, as discussed previously), none meet the 
applicable proximity criteria under the revised OMB delineations to be 
approved to CBSA 35614. For example, one hospital that was originally 
approved for reclassification to CBSA 35614 by being located 14.8 miles 
from the border of CBSA 35614, is now located over 80 miles from the 
revised CBSA. If such a reclassification was assigned to CBSA 35614, we 
believe this outcome would be inconsistent with the proximity rules 
that govern reclassifications.
    Regarding the comment that our policy violates the regulations at 
Sec.  412.230(a)(5)(i) that prohibit hospitals from reclassifying to a 
CBSA with a lower pre-reclassified average hourly wage, we do not agree 
that this regulation would be violated through application of our 
proposed reclassification assignment policy. The regulations at Sec.  
412.230 apply at the time individual hospitals initially seek 
reclassification to another area via application to the MGCRB. The 
reclassification assignment policy, as described in this section, is 
not an initial reclassification based on an application. Rather, we are 
assigning already existing approved reclassifications to other 
appropriate areas in a consistent manner in response to adopting 
revised OMB delineations. We acknowledge that the new OMB delineations 
may, in some cases, result in a hospital being assigned a wage index in 
its reclassified CBSA that is lower than its geographic area wage 
index. However, this result (a hospital receiving a wage index in its 
reclassified area that is lower than the wage index in its home area) 
is not a unique situation and often occurs due to the effects of hold 
harmless policies at section 1886(d)(8)(C) of the Act. We believe that 
the most appropriate remedy in these situations would be for hospitals 
to evaluate their reclassification wage index and, if necessary, 
withdraw or terminate their reclassifications per regulations at

[[Page 58776]]

Sec.  412.273. In fact, in the proposed rule, we encouraged hospitals 
with current reclassifications to verify area wage indexes as set forth 
in Table 2 of the proposed rule and confirm that the areas to which 
they have been reclassified for FY 2021 would continue to provide a 
higher wage index than their geographic area wage index. We stated that 
hospitals could withdraw or terminate their FY 2021 reclassifications, 
if necessary, in accordance with Sec.  412.273(c). We note, one 
commenter did withdraw their reclassification to CBSA 35614.
    Finally, in response to comments requesting CMS allow affected 
hospitals to submit expedited applications effective for FY 2021 to 
obtain a different wage index reclassification, we believe this action 
is unnecessary and would not be permitted under the statute. Under 
section 1886(d)(10)(C)(ii) of the Act, a hospital must submit a 
reclassification application to the MGCRB not later than 13 months 
before the fiscal year in which the reclassification is to take effect. 
Thus, applications for reclassifications effective in FY 2021 were due 
to the MGCRB on September 1, 2019. We note that in the proposed rule, 
hospitals were offered an opportunity to request assignment to an 
another eligible CBSA (other than the one to which they were assigned 
under our proposed reassignment policy) for which they met the 
applicable proximity criteria within 45 days from the date the proposed 
rule was placed on display at the Federal Register. In addition, as 
stated in section III.A.2.c of this final rule, we have finalized a 
transition policy that will help mitigate significant negative payment 
impacts for FY 2021 and provide hospitals additional time to evaluate 
other potential reclassification options.
    After consideration of the public comments received, for the 
reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS 
proposed rule, we are finalizing the reclassification assignment policy 
as proposed, without modification.
    The following final Table 1 sets forth a list of current FY 2020 
CBSAs (column 1) where one or more counties will be relocated to a new 
or different urban CBSA beginning in FY 2021. Hospitals that are 
currently approved for MGCRB reclassification into the CBSAs in column 
1 are subject to our final reclassification assignment policy. The 
third column of ``eligible'' CBSAs lists all revised CBSAs that contain 
at least one county that is part of the current FY 2020 CBSA (in column 
1). Reclassifications to one of the seven CBSAs identified in Table 1 
will be assigned, effective October 1, 2020, to the revised CBSA listed 
in Table 2. We note that these assignments will remain in effect for 
the remaining years of the reclassification.
[GRAPHIC] [TIFF OMITTED] TR18SE20.193

    The following Table 2 lists all hospitals subject to our final 
reclassification assignment policy and where their reclassifications 
will be assigned beginning FY 2021 under this policy. This table lists 
reclassifications that will be in effect beginning FY 2021 under our 
final policy, and are included in Table 2 in the addendum of this final 
rule. This table also lists reclassifications (marked with an 
asterisk), that have been withdrawn or terminated for FY 2021, but 
could be reinstated for future years. Reclassifications in the proposed 
Table 2 set forth earlier that were withdrawn or terminated effective 
for FY 2021 and cannot be reinstated in FY 2022 have been removed from 
this final table. We note that two hospitals (marked with **) were 
approved for reassignment to a different eligible CBSA than the CBSA 
they would be assigned to under our reclassification assignment policy, 
as discussed earlier in this section.
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BILLING CODE 4120-01-C
(2) Treatment for Hospitals Reclassified to Their Geographic CBSA
    Under the previous assignment policy implemented in FY 2015 IPPS/
LTCH PPS final rule, a hospital reclassified to a CBSA that had one or 
more counties moved to a new of different urban CBSA was required to be 
assigned a new or revised CBSA that is different than its geographic 
CBSA (79 FR 49974 and 49975). We adopted the policy that the assigned 
CBSA must be different than the hospital's geographic area to ensure 
that a hospital that qualified for reclassification to a different area 
continued to be eligible to receive a different wage index than its 
home area. We stated in the proposed rule (85 FR 32720) that we 
continue to believe this is the appropriate policy for hospitals that 
originally reclassified to a different area. However, as noted in the 
prior section, for hospitals currently reclassified to their current 
geographic CBSA, we proposed to implement a reclassification assignment 
policy consistent with the policy implemented in FY 2015, with a minor 
modification in that we would not require these reclassifications to be 
assigned to a CBSA outside the hospital's FY 2021 geographic labor 
market area. In the proposed rule (85 FR 32721), we explained that 
since the FY 2015 IPPS/LTCH final rule was issued, CMS has allowed, 
under certain circumstances, a hospital to seek an MGCRB wage index 
reclassification to its own geographic CBSA. We referred readers to a 
comment response in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56925) 
discussing such a scenario. We further explained that in these cases, 
the hospitals are assigned the same wage index value as other hospitals 
located in its geographic labor market area, not the wage index 
assigned to hospitals reclassified to that area. We proposed to assign 
``home area'' reclassifications to the hospital's proposed geographic 
CBSA. We noted that the assigned ``home area'' reclassification CBSA 
may be different from previous years if the hospital is located in a 
county that was relocated to a new or different urban CBSA. In the 
proposed rule, we provided the following table listing hospitals with 
current ``home area'' reclassifications to one of the seven CBSAs 
(identified in Table 1 of the proposed rule) where one or more counties 
would move to a new or different urban CBSA, and each hospital's 
assigned CBSA (column 4).

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    We also noted that in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
49977), CMS terminated reclassifications when, as a result of adopting 
the revised OMB delineations, a hospital's geographic county was 
reassigned to the CBSA for which it was approved for MGCRB 
reclassification. At that time, ``home area'' reclassifications were 
not possible. However, we stated in the proposed rule that since CMS 
now allows ``home area'' reclassifications, as discussed previously, we 
would consider this scenario to be a ``home area'' reclassification and 
we do not believe it is necessary to terminate these reclassifications 
as we did in FY 2015. We noted that hospitals with a ``home area'' 
reclassification (or any other form of reclassification) are not 
eligible to receive an outmigration adjustment determined under section 
1886(d)(13) of the Act. We stated in the proposed rule that if such an 
adjustment is available, a hospital could consider withdrawing or 
terminating its reclassification by contacting the MGCRB within 45 days 
of the date the proposed rule was issued in the Federal Register (Sec.  
412.273(c)).
    We did not receive any comment specific to these proposals. 
Therefore, for the reasons set forth in this final rule and in the FY 
2021 IPPS/LTCH PPS proposed rule, we are finalizing these policies as 
proposed, without modification. The ``home area'' reclassifications 
listed in Table 3 of this section will be assigned to the revised CBSA 
listed in column 4 of that table for the remainder of the three year 
reclassification period.
3. Redesignations Under Section 1886(d)(8)(B) of the Act
a. Lugar Status Determinations
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 
51600), we adopted the policy that, beginning with FY 2012, an eligible 
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status 
and, thus, is rural for all purposes under the IPPS effective for the 
fiscal year in which the hospital receives the outmigration adjustment. 
In addition, in that rule, we adopted a minor procedural change that 
would allow a Lugar hospital that qualifies for and accepts the out-
migration adjustment (through written notification to CMS within 45 
days from the publication of the proposed rule) to waive its urban 
status for the full 3-year period for which its out-migration 
adjustment is effective. By doing so, such a Lugar hospital would no 
longer be required during the second and third years of eligibility for 
the out-migration adjustment to advise us annually that it prefers to 
continue being treated as rural and receive the out-migration 
adjustment. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56930), we 
further clarified that if a hospital wishes to reinstate its urban 
status for any fiscal

[[Page 58780]]

year within this 3-year period, it must send a request to CMS within 45 
days of publication of the proposed rule for that particular fiscal 
year. We indicated that such reinstatement requests may be sent 
electronically to [email protected]. In the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38147 through 38148), we finalized a policy revision 
to require a Lugar hospital that qualifies for and accepts the out-
migration adjustment, or that no longer wishes to accept the out-
migration adjustment and instead elects to return to its deemed urban 
status, to notify CMS within 45 days from the date of public display of 
the proposed rule at the Office of the Federal Register. These revised 
notification timeframes were effective beginning October 1, 2017. In 
addition, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148), we 
clarified that both requests to waive and to reinstate ``Lugar'' status 
may be sent to [email protected]. To ensure proper accounting, we 
request hospitals to include their CCN, and either ``waive Lugar'' or 
``reinstate Lugar'', in the subject line of these requests.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42314 and 42315), we 
clarified that in circumstances where an eligible hospital elects to 
receive the outmigration adjustment within 45 days of the public 
display date of the proposed rule at the Office of the Federal Register 
in lieu of its Lugar wage index reclassification, and the county in 
which the hospital is located would no longer qualify for an out-
migration adjustment when the final rule (or a subsequent correction 
notice) wage index calculations are completed, the hospital's request 
to accept the outmigration adjustment would be denied, and the hospital 
would be automatically assigned to its deemed urban status under 
section 1886(d)(8)(B) of the Act. We stated that final rule wage index 
values would be recalculated to reflect this reclassification, and in 
some instances, after taking into account this reclassification, the 
out-migration adjustment for the county in question could be restored 
in the final rule. However, as the hospital is assigned a Lugar 
reclassification under section 1886(d)(8)(B) of the Act, it would be 
ineligible to receive the county outmigration adjustment under section 
1886(d)(13)(G) of the Act. Because the out-migration adjustment, once 
finalized, is locked for a 3-year period under section 1886(d)(13)(F) 
of the Act, the hospital would be eligible to accept its out-migration 
adjustment in either the second or third year.
b. Effects of Implementation of Revised OMB Labor Market Area 
Delineations on Redesignations Under Section 1886(d)(8)(B) of the Act
    As discussed in section III.A.2. of the preamble of the proposed 
rule, CMS proposed to update the CBSA labor market delineations to 
reflect the changes made in the September 14, 2018 OMB Bulletin 18-04. 
In that section, consistent with the revised OMB delineations, we 
proposed that 47 currently rural counties be added to new or existing 
urban CBSAs. We stated in the proposed rule (85 FR 32722) that, of 
those 47 counties, 23 are currently deemed urban under section 
1886(d)(8)(B) of the Act. Hospitals located in such a ``Lugar'' county, 
barring another form of wage index reclassification, are assigned the 
reclassified wage index of a designated urban CBSA. Section 
1886(d)(8)(B) of the Act defines a deemed urban county as a ``rural 
county adjacent to one or more urban areas'' that meets certain 
commuting thresholds. We explained in the proposed rule that since we 
proposed to modify the status of these 23 counties from rural to urban, 
they would no longer qualify as ``Lugar'' counties. We further stated 
that hospitals located within these counties would be considered 
geographically urban under the revised OMB delineations. In the 
proposed rule, we provided the following table listing the counties 
that would no longer be deemed urban under section 1886(d)(8)(B) of the 
Act if we adopt the revised OMB delineations.

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    We discuss in section III.A.2.b.ii of this final rule the comments 
we received related to counties that would no longer be deemed urban 
under section 1886(d)(8)(B) of the Act. After consideration of the 
public comments received, for the reasons set forth in this final rule 
and in the FY 2021 IPPS/LTCH PPS proposed rule, we are finalizing, 
without modification, the proposed list of counties no longer deemed 
urban under section 1886(d)(8)(B) of the Act.
    We noted that in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49973 
through 49977), when we adopted large scale changes to the CBSA labor 
market delineations based on the new decennial census, we also re-
evaluated the commuting data thresholds for all eligible rural counties 
in accordance with the methodology set forth in section 1886(d)(8)(B) 
of the Act. In FY 2015, the OMB bulletin we used to update the CBSA 
delineations was based on the results of the 2010 decennial census, and 
had broad ranging nationwide impacts. We stated in the proposed rule 
(85 FR 32724) that with some exceptions, notably the FY 2020 IPPS/LTCH 
final rule where we modified the CBSA assignment for some ``Lugar'' 
counties based on a revised interpretation of the statute (84 FR 42315 
through 42318), it has been CMS's long-standing policy to only revise 
the list of qualifying counties in conjunction with the adoption of the 
large scale OMB delineation changes following the results of a 
decennial census. Typically, interim OMB bulletins (those issued 
between decennial censuses) have only contained minor modifications to 
labor market delineations. However, as we stated in the proposed rule, 
the April 10, 2018 OMB Bulletin No. 18-03 and the September 14, 2018 
OMB Bulletin No. 18-04 included more modifications to the labor market 
areas than are typical for OMB bulletins issued between decennial 
censuses. We stated in the proposed rule that although we believe the 
transition wage index described in section III.B.2.e. of the preamble 
of this final rule would mitigate significant negative impacts on 
affected hospitals, and provide hospitals with adequate time to 
evaluate alternative wage index reclassification options, we were aware 
that several hospitals in counties that would be considered rural under 
the revised OMB delineations would qualify for ``Lugar'' status, were 
CMS to reevaluate the commuting data and new labor market delineations. 
We stated in the proposed rule that we believe providing Lugar status 
to these hospitals, as appropriate, would further mitigate any 
significant negative impacts on affected hospitals. We therefore 
proposed to reevaluate the ``Lugar'' status for all counties in FY 2021 
using the same commuting data table used to evaluate the list of 
``Lugar''

[[Page 58782]]

counties when CMS adopted new OMB delineations in FY 2015 rulemaking. 
The data table is the ``2006-2010 5-Year American Community Survey 
Commuting Flows and Employment'' (available on OMB's website: https://www.census.gov/data/tables/2010/demo/metro-micro/commuting-employment-2010.html). As we explained in the proposed rule, since we are using 
the same data tables, any difference in the list of qualifying counties 
would be solely due to the effects of the updated OMB delineations. We 
stated in the proposed rule that we believe making the revisions to the 
qualifying counties using the updated OMB delineations but the same 
2006-2010 commuting data tables used in the FY 2015 IPPS/LTCH PPS final 
rule strikes an appropriate balance between reserving comprehensive 
revisions to the list of qualifying counties to instances where we 
adopt large scale OMB delineation changes following a decennial census, 
and the desire to mitigate any significant negative impacts on 
hospitals of the updated OMB delineations (which do contain a number of 
material changes). We also proposed to use the same methodology 
discussed in the FY 2020 IPPS/LTCH final rule (84 FR 42315 through 
42318) to assign the appropriate reclassified CBSA for hospitals in 
``Lugar'' counties. That is, when assessing which CBSA to assign, we 
stated we would sum the total number of workers that commute from the 
``Lugar'' county to both ``central'' and ``outlying'' urban counties 
(rather than just ``central'' county commuters).
    By applying the 2010 ACS commuting data to the updated OMB labor 
market delineations, we proposed the following changes to the current 
``Lugar'' county list. Most notably, we stated in the proposed rule (85 
FR 32724) that, based on this commuting data and the revised OMB 
delineations, all 34 urban counties that became rural under the revised 
OMB delineations would qualify as ``Lugar'' counties and all hospitals 
located within them would be designated as ``Lugar.'' We noted that 
this would affect 10 current hospitals located in those counties. 
Additionally, due to the change in designation of some urban counties 
from ``outlying'' to ``central'' status by OMB, we proposed to add two 
current rural counties in NY as ``Lugar'' counties. Specifically, we 
stated that hospitals located in Columbia county, NY (FIPSCD 36021) 
would be deemed ``Lugar'' hospitals and reclassified to urban CBSA 
10580 (Albany-Schenectady-Troy, NY) and hospitals located in Sullivan 
county, NY (FIPSCD 36105) would be deemed ``Lugar'' hospitals and 
reclassified to urban CBSA 39100 (Poughkeepsie-Newburgh-Middletown, 
NY). However, we noted that all hospitals in these New York counties 
currently have MGCRB reclassifications in place for FY 2021, which 
would supersede these ``Lugar'' reclassifications. Finally, we stated 
that Calhoun County, TX (FIPSCD 48057) would no longer qualify as a 
``Lugar'' county due to the fact it is no longer adjacent to CBSA 18580 
(Corpus Christi, TX). We proposed to remove Calhoun County from the 
list of ``Lugar'' counties. We noted that there are no IPPS hospitals 
located in Calhoun County.
    In the proposed rule, we provided a table listing the proposed 
revised list of rural counties containing hospitals that would be 
redesignated as urban under section 1886(d)(8)(B) of the Act (based on 
the revised OMB delineations and 2010 census data) (see 85 FR 32725 
through 32728). We note that this table of ``Lugar'' counties set forth 
in the proposed rule contained several alignment errors between 
columns. In some cases, counties were listed as being assigned to an 
incorrect CBSA number or name. However, the reclassification 
assignments were correct in the proposed rule wage index tables and 
those were used for wage index calculations. The final table included 
in this rule has been corrected.
    We did not receive any comments related to the proposed revisions 
to the list of ``Lugar'' counties. Therefore, for the reasons set forth 
in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we 
are finalizing the proposed list of rural counties containing hospitals 
redesignated as urban under section 1886(d)(8)(B) of the Act with 
modifications to correct the errors discussed previously. The final 
table is set forth below.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C

J. Out-Migration Adjustment Based on Commuting Patterns of Hospital 
Employees

    In accordance with section 1886(d)(13) of the Act, as added by 
section 505 of Public Law 108-173, beginning with FY 2005, we 
established a process to make adjustments to the hospital wage index 
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment). The process, outlined in the FY 2005 IPPS 
final rule (69 FR 49061), provides for an increase in the wage index 
for hospitals located in certain counties that have a relatively high 
percentage of hospital employees who reside in the county but work in a 
different county (or counties) with a higher wage index.
    Section 1886(d)(13)(B) of the Act requires the Secretary to use 
data the Secretary determines to be appropriate to establish the 
qualifying counties. When the provision of section 1886(d)(13) of the 
Act was implemented for the FY 2005 wage index, we analyzed commuting 
data compiled by the U.S. Census Bureau that were derived from a 
special tabulation of the 2000 Census journey-to-work data for all 
industries (CMS extracted data applicable to hospitals). These data 
were compiled from responses to the

[[Page 58787]]

``long-form'' survey, which the Census Bureau used at that time and 
which contained questions on where residents in each county worked (69 
FR 49062). However, the 2010 Census was ``short form'' only; 
information on where residents in each county worked was not collected 
as part of the 2010 Census. The Census Bureau worked with CMS to 
provide an alternative dataset based on the latest available data on 
where residents in each county worked in 2010, for use in developing a 
new outmigration adjustment based on new commuting patterns developed 
from the 2010 Census data beginning with FY 2016.
    To determine the out-migration adjustments and applicable counties 
for FY 2016, we analyzed commuting data compiled by the Census Bureau 
that were derived from a custom tabulation of the American Community 
Survey (ACS), an official Census Bureau survey, utilizing 2008 through 
2012 (5-year) Microdata. The data were compiled from responses to the 
ACS questions regarding the county where workers reside and the county 
to which workers commute. As we discussed in the FYs 2016 through 2020 
IPPS/LTCH PPS final rules (80 FR 49501, 81 FR 56930, 82 FR 38150, 83 FR 
41384, and 84 FR 42318 respectively), the same policies, procedures, 
and computation that were used for the FY 2012 out-migration adjustment 
were applicable for FYs 2016 through 2020, and we proposed to use them 
again for FY 2021. We have applied the same policies, procedures, and 
computations since FY 2012, and we believe they continue to be 
appropriate for FY 2021. We refer readers to the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49500 through 49502) for a full explanation of the 
revised data source.
    For FY 2021, the out-migration adjustment will continue to be based 
on the data derived from the custom tabulation of the ACS utilizing 
2008 through 2012 (5-year) Microdata. For future fiscal years, we may 
consider determining out-migration adjustments based on data from the 
next Census or other available data, as appropriate. For FY 2021, we 
did not propose any changes to the methodology or data source that we 
used for FY 2016 (81 FR 25071). (We refer readers to a full discussion 
of the out-migration adjustment, including rules on deeming hospitals 
reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act 
to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51601 through 51602).) We did not receive any 
public comments on this proposed policy for FY 2021. Therefore, for the 
reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS 
proposed rule, for FY 2021, we are finalizing our proposal, without 
modification, to continue using the same policies, procedures, and 
computations that were used for the FY 2012 outmigration adjustment and 
that were applicable for FYs 2016 through 2020.
    Table 2 associated with this final rule (which is available via the 
internet on the CMS website) includes the out-migration adjustments for 
the FY 2021 wage index. In addition, Table 4A associated with this 
final rule, ``List of Counties Eligible for the Out-Migration 
Adjustment under Section 1886(d)(13) of the Act'' (also available via 
the internet on the CMS website) consists of the following: A list of 
counties that are eligible for the out-migration adjustment for FY 2021 
identified by FIPS county code, the final FY 2021 out-migration 
adjustment, and the number of years the adjustment will be in effect. 
We believe this table makes this information more transparent and 
provides the public with easier access to this information.

K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of 
the Act Implemented at 42 CFR 412.103

1. Application for Rural Status and Lock-in Date
    Under section 1886(d)(8)(E) of the Act, a qualifying prospective 
payment hospital located in an urban area may apply for rural status 
for payment purposes separate from reclassification through the MGCRB. 
Specifically, section 1886(d)(8)(E) of the Act provides that, not later 
than 60 days after the receipt of an application (in a form and manner 
determined by the Secretary) from a subsection (d) hospital that 
satisfies certain criteria, the Secretary shall treat the hospital as 
being located in the rural area (as defined in paragraph (2)(D)) of the 
State in which the hospital is located. We refer readers to the 
regulations at 42 CFR 412.103 for the general criteria and application 
requirements for a subsection (d) hospital to reclassify from urban to 
rural status in accordance with section 1886(d)(8)(E) of the Act. The 
FY 2012 IPPS/LTCH PPS final rule (76 FR 51595 through 51596) includes 
our policies regarding the effect of wage data from reclassified or 
redesignated hospitals. We refer readers to the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42332 through 42336) for a discussion on our current 
policy to calculate the rural floor without the wage data of urban 
hospitals reclassifying to rural areas under 42 CFR 412.103.
    Because the wage index is part of the methodology for determining 
the prospective payments to hospitals for each fiscal year, we stated 
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931) that we believed 
there should be a definitive timeframe within which a hospital should 
apply for rural status in order for the reclassification to be 
reflected in the next Federal fiscal year's wage data used for setting 
payment rates. Therefore, in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56931 through 56932), we revised Sec.  412.103(b) by adding 
paragraph (6) to add a lock-in date by which a hospital's application 
for rural status must be filed in order to be treated as rural in the 
wage index and budget neutrality calculations for payment rates for the 
next Federal fiscal year. In the FY 2019 IPPS/LTCH PPS final rule (83 
FR 41384 through 41386), we changed the lock-in date to provide for 
additional time in the ratesetting process and to match the lock-in 
date with another existing deadline, the usual public comment deadline 
for the IPPS proposed rule. We revised Sec.  412.103(b)(6) to specify 
that, in order for a hospital to be treated as rural in the wage index 
and budget neutrality calculations under Sec.  412.64(e)(1)(ii), (e)(2) 
and (4), and (h) for payment rates for the next Federal fiscal year, 
the hospital's application must be approved by the CMS Regional Office 
in accordance with the requirements of Sec.  412.103 no later than 60 
days after the public display date at the Office of the Federal 
Register of the IPPS proposed rule for the next Federal fiscal year.
    The lock-in date does not affect the timing of payment changes 
occurring at the hospital-specific level as a result of 
reclassification from urban to rural under Sec.  412.103. As we 
discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931) and the 
FY 2019 IPPS/LTCH PPS final rule (83 FR 41385 through 41386), this 
lock-in date also does not change the current regulation that allows 
hospitals that qualify under Sec.  412.103(a) to request, at any time 
during a cost reporting period, to reclassify from urban to rural. A 
hospital's rural status and claims payment reflecting its rural status 
continue to be effective on the filing date of its reclassification 
application, which is the date the CMS Regional Office receives the 
application, in accordance with Sec.  412.103(d). The hospital's IPPS 
claims will be paid reflecting its rural status beginning on the filing 
date (the effective date) of the reclassification, regardless of when 
the hospital applies.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42322), we noted 
that if an

[[Page 58788]]

application is approved by the CMS Regional Office after our 
ratesetting ``lock-in date'', the final rule rural wage index value 
would most likely not include the data for this hospital in the 
ratesetting calculation. Therefore, we noted that this may incentivize 
relatively low wage index hospitals to time their applications to avoid 
reducing the State's rural wage index. These hospitals could then 
conceivably cancel their rural reclassifications (effective for next 
FY), and then reapply again after the ``lock date.'' We stated in the 
FY 2020 IPPS/LTCH PPS final rule that we plan to monitor this situation 
over the course of FY 2020, and determine if it is necessary to take 
action to prevent this type of gaming in future rulemaking.
    It has come to our attention that hospitals in certain states are 
indeed timing their rural reclassifications and applications to exploit 
the rural reclassification process in order to obtain higher wage index 
values. For example, at least twenty-one hospitals in one state 
obtained Sec.  412.103 rural reclassifications after the FY 2020 lock-
in date, effectively receiving their state's rural wage index without 
having their wage data included, which would have lowered their State's 
rural wage index. These hospitals then requested to cancel their Sec.  
412.103 rural reclassifications for FY 2021, in accordance with Sec.  
412.103(g)(3). Similarly, five hospitals in another state, hospitals 
with wage data that would have lowered their state's FY 2021 rural wage 
index, requested to cancel their Sec.  412.103 rural reclassifications 
for FY 2021, so that the rural wage index would be set using the data 
of one geographically rural hospital and two hospitals reclassified 
under Sec.  412.103 that withdrew their MGCRB reclassifications for FY 
2021. We will continue to monitor this situation over the course of FY 
2021 and may consider proposing in future rulemaking a policy similar 
to the minimum waiting period at Sec.  412.103(g)(2)(ii) or other 
necessary actions to prevent this type of gaming.
2. Change to the Regulations To Allow Electronic Submission of Appeals 
to the Administrator and Copy to CMS
    The regulation at Sec.  412.278(b)(1) addresses a hospital's 
request for the Administrator's review of an MGCRB decision. This 
regulation currently states that a request for Administrator review 
filed by facsimile (FAX) or other electronic means will not be 
accepted. In addition, Sec.  412.278(b)(1) requires a hospital to mail 
a copy of its request for review to CMS's Hospital and Ambulatory 
Policy Group.
    In the proposed rule (85 FR 32730), we stated that we believe these 
policies of prohibiting electronic submission of requests for 
Administrator review and requiring paper copies to be mailed to CMS are 
outdated and overly restrictive. In the interest of burden reduction 
and to promote ease of requests, we proposed to eliminate the 
prohibition on submitting a request by facsimile or other electronic 
means so that hospitals may also submit requests for Administrator 
review of MGCRB decisions electronically. In addition, we proposed to 
require the hospital to submit an electronic copy of its request for 
review to CMS's Hospital and Ambulatory Policy Group. We specified that 
copies to CMS' Hospital and Ambulatory Policy Group should be submitted 
via email to [email protected].
    Accordingly, we proposed to revise the regulation at Sec.  
412.278(b)(1) to read: The hospital's request for review must be in 
writing and sent to the Administrator, in care of the Office of the 
Attorney Advisor. The request must be received by the Administrator 
within 15 days after the date the MGCRB issues its decision. The 
hospital must also submit an electronic copy of its request for review 
to CMS's Hospital and Ambulatory Policy Group.
    Comment: Several commenters supported our proposed revisions to the 
regulation at Sec.  412.278(b)(1).
    Response: We appreciate commenters' support of our proposed 
revisions to Sec.  412.278(b)(1).
    After consideration of the public comments received, for the 
reasons discussed in this final rule and in the FY 2021 IPPS/LTCH PPS 
proposed rule, we are finalizing, without modification, our proposed 
revisions to the regulation at Sec.  412.278(b)(1) so that hospitals 
may also submit requests for Administrator review of MGCRB decisions 
electronically, and must send an electronic copy of the request to 
CMS's Hospital and Ambulatory Policy Group.
3. Clarification of Applicable Rural Referral Center (RRC) Criteria for 
Purposes of Meeting Urban to Rural Reclassification at Sec.  
412.103(a)(3)
    As discussed in section IV.D. of the preamble of this final rule, 
for purposes of qualifying for RRC classification, a rural hospital 
that does not meet the bed size requirement at Sec.  412.96(b)(1)(ii) 
can qualify as an RRC if the hospital meets two mandatory prerequisites 
(a minimum case-mix index (CMI) and a minimum number of discharges), 
and at least one of three optional criteria (relating to specialty 
composition of medical staff, source of inpatients, or referral 
volume). Specifically, a hospital may demonstrate that its case-mix 
index is at least equal to the national case-mix index value as 
established by CMS or the median case-mix index value for urban 
hospitals located in each region, in accordance with Sec.  
412.96(c)(1), and that it has a number of discharges at least equal to 
5,000 discharges or, if less, the median number of discharges for urban 
hospitals located in each region, in accordance with Sec.  
412.96(c)(2). CMS publishes the national and regional case-mix index 
values and the national and regional number of discharges for the 
purpose of these criteria in the annual notice of prospective payment 
rates published in the Federal Register.
    For purposes of qualifying for urban to rural reclassification 
under Sec.  412.103, a hospital can demonstrate that it would qualify 
as a rural referral center as set forth in Sec.  412.96, if the 
hospital were located in a rural area. This condition is set forth at 
Sec.  412.103(a)(3).
    It has come to our attention that there is some confusion regarding 
which fiscal year's published case mix index (CMI) or numbers of 
discharges criteria would be used in the situation where a hospital is 
seeking to meet the urban to rural reclassification criterion at Sec.  
412.103(a)(3) by meeting the alternative criteria at Sec.  412.96(c): 
(1) The criteria published in the final rule in effect on the filing 
date of the hospital's Sec.  412.103 application, or (2) the criteria 
that would be in effect during the fiscal year that any RRC 
classification would become effective (that is, the beginning of the 
hospital's cost reporting period).
    Therefore, we are clarifying that for purposes of meeting the urban 
to rural reclassification criterion at Sec.  412.103(a)(3), the 
appropriate CMI values and numbers of discharges to demonstrate RRC 
eligibility are those published in the IPPS/LTCH PPS final rule in 
effect as of the filing date (that is, the effective date) of the 
hospital's application for reclassification under Sec.  412.103. For 
purposes of RRC classification under Sec.  412.96(c), the appropriate 
CMI values and numbers of discharges are those published in the IPPS/
LTCH PPS final rule in effect when the RRC classification will be 
effective at the start of the hospital's next cost reporting period, 
consistent with Sec.  412.96(h)(3) and (i)(3).
    For example, Hospital A has a cost reporting period beginning 
October 1. It applies on September 1, 2020 for urban to rural 
reclassification under Sec.  412.103(a)(3) and for RRC status, by 
meeting the alternative criteria at Sec.  412.96(c). For Hospital A's 
urban to rural reclassification request, the appropriate national or 
regional CMI

[[Page 58789]]

value and number of discharges that the hospital must meet or exceed 
are the values published in the FY 2020 IPPS/LTCH PPS Final Rule since 
that is the rule in effect as of the filing date (that is, effective 
date) of Hospital A's urban to rural reclassification application. For 
the RRC classification request, the appropriate national or regional 
CMI value and number of discharges that the hospital must meet or 
exceed are the values published in the FY 2021 IPPS/LTCH PPS final rule 
since that is the rule that will be in effect when the RRC 
classification will become effective at the start of the hospital's 
next cost reporting period. We note that this policy applies regardless 
of whether a hospital seeks only Sec.  412.103 rural reclassification, 
or Sec.  412.103 rural reclassification along with RRC classification.
    We believe our policy is appropriate considering that a hospital 
may apply for rural reclassification under Sec.  412.103 at any time, 
as previously discussed in section III.K.1. of the preamble of this 
final rule. We clarified in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38151) that while applications for RRC status must be submitted during 
the last quarter of a hospital's cost reporting period in accordance 
with section 1886(d)(5)(C)(i) of the Act, applications for rural 
reclassification may be submitted at any time, including applications 
of hospitals seeking rural reclassification under Sec.  412.103(a)(3). 
A hospital is permitted at any time to submit an urban to rural 
reclassification request on the basis of qualifying for RRC status 
under Sec.  412.103(a)(3), even before the publication of the CMI and 
discharge criteria in the IPPS/LTCH PPS final rule for the period in 
which any RRC classification would be effective (that is, the start of 
the hospital's next cost reporting period). We did not receive any 
comments on this clarification.

L. Process for Requests for Wage Index Data Corrections

1. Process for Hospitals To Request Wage Index Data Corrections
    The preliminary, unaudited Worksheet S-3 wage data files and the 
preliminary CY 2016 occupational mix data files for the proposed FY 
2021 wage index were made available on May 17, 2019 through the 
internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/
FY2021-Wage-Index-Home-Page.
    On January 31, 2020, we posted a public use file (PUF) at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2021-Wage-Index-Home-Page 
containing FY 2021 wage index data available as of January 30, 2020. 
This PUF contains a tab with the Worksheet S-3 wage data (which 
includes Worksheet S-3, Parts II and III wage data from cost reporting 
periods beginning on or after October 1, 2016 through September 30, 
2017; that is, FY 2017 wage data), a tab with the occupational mix data 
(which includes data from the CY 2016 occupational mix survey, Form 
CMS-10079), a tab containing the Worksheet S-3 wage data of hospitals 
deleted from the January 31, 2020 wage data PUF, and a tab containing 
the CY 2016 occupational mix data of the hospitals deleted from the 
January 31, 2020 occupational mix PUF. In a memorandum dated January 
29, 2020, we instructed all MACs to inform the IPPS hospitals that they 
service of the availability of the January 31, 2020 wage index data 
PUFs, and the process and timeframe for requesting revisions in 
accordance with the FY 2021 Wage Index Timetable.
    In the interest of meeting the data needs of the public, beginning 
with the proposed FY 2009 wage index, we post an additional PUF on the 
CMS website that reflects the actual data that are used in computing 
the proposed wage index. The release of this file does not alter the 
current wage index process or schedule. We notify the hospital 
community of the availability of these data as we do with the current 
public use wage data files through our Hospital Open Door Forum. We 
encourage hospitals to sign up for automatic notifications of 
information about hospital issues and about the dates of the Hospital 
Open Door Forums at the CMS website at: http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html.
    In a memorandum dated April 29, 2019, we instructed all MACs to 
inform the IPPS hospitals that they service of the availability of the 
preliminary wage index data files and the CY 2016 occupational mix 
survey data files posted on May 17, 2019, and the process and timeframe 
for requesting revisions.
    If a hospital wished to request a change to its data as shown in 
the May 17, 2019 preliminary wage and occupational mix data files, the 
hospital had to submit corrections along with complete, detailed 
supporting documentation to its MAC so that the MAC received them by 
September 3, 2019. Hospitals were notified of this deadline and of all 
other deadlines and requirements, including the requirement to review 
and verify their data as posted in the preliminary wage index data 
files on the internet, through the letters sent to them by their MACs. 
November 15, 2019 was the deadline for MACs to complete all desk 
reviews for hospital wage and occupational mix data and transmit 
revised Worksheet S-3 wage data and occupational mix data to CMS.
    November 5, 2019 was the date by when MACs notified State hospital 
associations regarding hospitals that failed to respond to issues 
raised during the desk reviews. Additional revisions made by the MACs 
were transmitted to CMS throughout January 2020. CMS published the wage 
index PUFs that included hospitals' revised wage index data on January 
31, 2020. Hospitals had until February 14, 2020, to submit requests to 
the MACs to correct errors in the January 31, 2020 PUF due to CMS or 
MAC mishandling of the wage index data, or to revise desk review 
adjustments to their wage index data as included in the January 31, 
2020 PUF. Hospitals also were required to submit sufficient 
documentation to support their requests. Hospitals' requests and 
supporting documentation must be received by the MAC by the February 
deadline (that is, by February 14, 2020 for the FY 2021 wage index).
    After reviewing requested changes submitted by hospitals, MACs were 
required to transmit to CMS any additional revisions resulting from the 
hospitals' reconsideration requests by March 19, 2020. Under our 
current policy as adopted in the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38153), the deadline for a hospital to request CMS intervention in 
cases where a hospital disagreed with a MAC's handling of wage data on 
any basis (including a policy, factual, or other dispute) was April 2, 
2020. Data that were incorrect in the preliminary or January 31, 2020 
wage index data PUFs, but for which no correction request was received 
by the February 14, 2020 deadline, are not considered for correction at 
this stage. In addition, April 2, 2020 was the deadline for hospitals 
to dispute data corrections made by CMS of which the hospital was 
notified after the January 31, 2020 PUF and at least 14 calendar days 
prior to April 2, 2020 (that is, March 19, 2020), that do not arise 
from a hospital's request for revisions. The hospital's request and 
supporting documentation must be received by CMS (and a copy received 
by the MAC) by the April deadline (that is, by April 2, 2020 for the FY 
2021 wage index). We refer readers to the wage index timeline for 
complete details.
    Hospitals were given the opportunity to examine Table 2 associated 
with the proposed rule, which was listed in

[[Page 58790]]

section VI. of the Addendum to the proposed rule and available via the 
internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2021-IPPS-Proposed-Rule-Home-Page.html. Table 2 associated with the proposed rule contained 
each hospital's proposed adjusted average hourly wage used to construct 
the wage index values for the past 3 years, including the FY 2017 data 
used to construct the proposed FY 2021 wage index. We noted in the 
proposed rule (85 FR 32731) that the proposed hospital average hourly 
wages shown in Table 2 only reflected changes made to a hospital's data 
that were transmitted to CMS by early February 2020.
    We posted the final wage index data PUFs on April 30, 2020 via the 
internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/
FY2021-Wage-Index-Home-Page. The April 2020 PUFs were made available 
solely for the limited purpose of identifying any potential errors made 
by CMS or the MAC in the entry of the final wage index data that 
resulted from the correction process previously described (the process 
for disputing revisions submitted to CMS by the MACs by March 19, 2020, 
and the process for disputing data corrections made by CMS that did not 
arise from a hospital's request for wage data revisions as discussed 
earlier).
    After the release of the April 2020 wage index data PUFs, changes 
to the wage and occupational mix data could only be made in those very 
limited situations involving an error by the MAC or CMS that the 
hospital could not have known about before its review of the final wage 
index data files. Specifically, neither the MAC nor CMS will approve 
the following types of requests:
     Requests for wage index data corrections that were 
submitted too late to be included in the data transmitted to CMS by the 
MACs on or before March 19, 2020.
     Requests for correction of errors that were not, but could 
have been, identified during the hospital's review of the January 31, 
2020 wage index PUFs.
     Requests to revisit factual determinations or policy 
interpretations made by the MAC or CMS during the wage index data 
correction process.
    If, after reviewing the April 2020 final wage index data PUFs, a 
hospital believed that its wage or occupational mix data were incorrect 
due to a MAC or CMS error in the entry or tabulation of the final data, 
the hospital was given the opportunity to notify both its MAC and CMS 
regarding why the hospital believed an error exists and provide all 
supporting information, including relevant dates (for example, when it 
first became aware of the error). The hospital was required to send its 
request to CMS and to the MAC so that it was received no later than May 
29, 2020. May 29, 2020 was also the deadline for hospitals to dispute 
data corrections made by CMS of which the hospital was notified on or 
after 13 calendar days prior to April 2, 2019 (that is, March 20, 
2020), and at least 14 calendar days prior to May 29, 2020 (that is, 
May 15, 2020), that did not arise from a hospital's request for 
revisions. (Data corrections made by CMS of which a hospital was 
notified on or after 13 calendar days prior to May 29, 2020 (that is, 
May 16, 2020) may be appealed to the Provider Reimbursement Review 
Board (PRRB)). In accordance with the FY 2021 wage index timeline 
posted on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY-2021-Hospital-Wage-Index-Development-Time-Table.pdf, the May appeals were required to 
be sent via mail and email to CMS and the MACs. We refer readers to the 
wage index timeline for complete details.
    Verified corrections to the wage index data received timely (that 
is, by May 29, 2020) by CMS and the MACs were incorporated into the 
final FY 2021 wage index, which will be effective October 1, 2020.
    We created the processes previously described to resolve all 
substantive wage index data correction disputes before we finalize the 
wage and occupational mix data for the FY 2021 payment rates. 
Accordingly, hospitals that did not meet the procedural deadlines set 
forth earlier will not be afforded a later opportunity to submit wage 
index data corrections or to dispute the MAC's decision with respect to 
requested changes. Specifically, our policy is that hospitals that do 
not meet the procedural deadlines as previously set forth (requiring 
requests to MACs by the specified date in February and, where such 
requests are unsuccessful, requests for intervention by CMS by the 
specified date in April) will not be permitted to challenge later, 
before the PRRB, the failure of CMS to make a requested data revision. 
We refer readers also to the FY 2000 IPPS final rule (64 FR 41513) for 
a discussion of the parameters for appeals to the PRRB for wage index 
data corrections. As finalized in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38154 through 38156), this policy also applies to a hospital 
disputing corrections made by CMS that do not arise from a hospital's 
request for a wage index data revision. That is, a hospital disputing 
an adjustment made by CMS that did not arise from a hospital's request 
for a wage index data revision is required to request a correction by 
the first applicable deadline. Hospitals that do not meet the 
procedural deadlines set forth earlier will not be afforded a later 
opportunity to submit wage index data corrections or to dispute CMS' 
decision with respect to changes.
    Again, we believe the wage index data correction process described 
earlier provides hospitals with sufficient opportunity to bring errors 
in their wage and occupational mix data to the MAC's attention. 
Moreover, because hospitals had access to the final wage index data 
PUFs by late April 2020, they had the opportunity to detect any data 
entry or tabulation errors made by the MAC or CMS before the 
development and publication of the final FY 2021 wage index by 
September 2020, and the implementation of the FY 2021 wage index on 
October 1, 2020. Given these processes, the wage index implemented on 
October 1 should be accurate. Nevertheless, in the event that errors 
are identified by hospitals and brought to our attention after May 29, 
2020, we retain the right to make midyear changes to the wage index 
under very limited circumstances.
    Specifically, in accordance with 42 CFR 412.64(k)(1) of our 
regulations, we make midyear corrections to the wage index for an area 
only if a hospital can show that: (1) The MAC or CMS made an error in 
tabulating its data; and (2) the requesting hospital could not have 
known about the error or did not have an opportunity to correct the 
error, before the beginning of the fiscal year. For purposes of this 
provision, ``before the beginning of the fiscal year'' means by the May 
deadline for making corrections to the wage data for the following 
fiscal year's wage index (for example, May 29, 2020 for the FY 2021 
wage index). This provision is not available to a hospital seeking to 
revise another hospital's data that may be affecting the requesting 
hospital's wage index for the labor market area. As indicated earlier, 
because CMS makes the wage index data available to hospitals on the CMS 
website prior to publishing both the proposed and final IPPS rules, and 
the MACs notify hospitals directly of any wage index data changes after 
completing their desk reviews, we do not expect that midyear 
corrections will be necessary. However, under our current policy, if 
the

[[Page 58791]]

correction of a data error changes the wage index value for an area, 
the revised wage index value will be effective prospectively from the 
date the correction is made.
    In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 
47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on 
October 1, 2005, that is, beginning with the FY 2006 wage index, a 
change to the wage index can be made retroactive to the beginning of 
the Federal fiscal year only when CMS determines all of the following: 
(1) The MAC or CMS made an error in tabulating data used for the wage 
index calculation; (2) the hospital knew about the error and requested 
that the MAC and CMS correct the error using the established process 
and within the established schedule for requesting corrections to the 
wage index data, before the beginning of the fiscal year for the 
applicable IPPS update (that is, by the May 29, 2020 deadline for the 
FY 2021 wage index); and (3) CMS agreed before October 1 that the MAC 
or CMS made an error in tabulating the hospital's wage index data and 
the wage index should be corrected.
    In those circumstances where a hospital requested a correction to 
its wage index data before CMS calculated the final wage index (that 
is, by the May 29, 2020 deadline for the FY 2021 wage index), and CMS 
acknowledges that the error in the hospital's wage index data was 
caused by CMS' or the MAC's mishandling of the data, we believe that 
the hospital should not be penalized by our delay in publishing or 
implementing the correction. As with our current policy, we indicated 
that the provision is not available to a hospital seeking to revise 
another hospital's data. In addition, the provision cannot be used to 
correct prior years' wage index data; and it can only be used for the 
current Federal fiscal year. In situations where our policies would 
allow midyear corrections other than those specified in 42 CFR 
412.64(k)(2)(ii), we continue to believe that it is appropriate to make 
prospective-only corrections to the wage index.
    We note that, as with prospective changes to the wage index, the 
final retroactive correction will be made irrespective of whether the 
change increases or decreases a hospital's payment rate. In addition, 
we note that the policy of retroactive adjustment will still apply in 
those instances where a final judicial decision reverses a CMS denial 
of a hospital's wage index data revision request.
2. Process for Data Corrections by CMS After the January 31 Public Use 
File (PUF)
    The process set forth with the wage index timeline discussed in 
section III.L.1. of the preamble of this final rule allows hospitals to 
request corrections to their wage index data within prescribed 
timeframes. In addition to hospitals' opportunity to request 
corrections of wage index data errors or MACs' mishandling of data, CMS 
has the authority under section 1886(d)(3)(E) of the Act to make 
corrections to hospital wage index and occupational mix data in order 
to ensure the accuracy of the wage index. As we explained in the FY 
2016 IPPS/LTCH PPS final rule (80 FR 49490 through 49491) and the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56914), section 1886(d)(3)(E) of 
the Act requires the Secretary to adjust the proportion of hospitals' 
costs attributable to wages and wage-related costs for area differences 
reflecting the relative hospital wage level in the geographic areas of 
the hospital compared to the national average hospital wage level. We 
believe that, under section 1886(d)(3)(E) of the Act, we have 
discretion to make corrections to hospitals' data to help ensure that 
the costs attributable to wages and wage-related costs in fact 
accurately reflect the relative hospital wage level in the hospitals' 
geographic areas.
    We have an established multistep, 15-month process for the review 
and correction of the hospital wage data that is used to create the 
IPPS wage index for the upcoming fiscal year. Since the origin of the 
IPPS, the wage index has been subject to its own annual review process, 
first by the MACs, and then by CMS. As a standard practice, after each 
annual desk review, CMS reviews the results of the MACs' desk reviews 
and focuses on items flagged during the desk review, requiring that, if 
necessary, hospitals provide additional documentation, adjustments, or 
corrections to the data. This ongoing communication with hospitals 
about their wage data may result in the discovery by CMS of additional 
items that were reported incorrectly or other data errors, even after 
the posting of the January 31 PUF, and throughout the remainder of the 
wage index development process. In addition, the fact that CMS analyzes 
the data from a regional and even national level, unlike the review 
performed by the MACs that review a limited subset of hospitals, can 
facilitate additional editing of the data that may not be readily 
apparent to the MACs. In these occasional instances, an error may be of 
sufficient magnitude that the wage index of an entire CBSA is affected. 
Accordingly, CMS uses its authority to ensure that the wage index 
accurately reflects the relative hospital wage level in the geographic 
area of the hospital compared to the national average hospital wage 
level, by continuing to make corrections to hospital wage data upon 
discovering incorrect wage data, distinct from instances in which 
hospitals request data revisions.
    We note that CMS corrects errors to hospital wage data as 
appropriate, regardless of whether that correction will raise or lower 
a hospital's average hourly wage. For example, as discussed in section 
III.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41364), in situations where a hospital did not have documentable 
salaries, wages, and hours for housekeeping and dietary services, we 
imputed estimates, in accordance with policies established in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). Furthermore, 
if CMS discovers after conclusion of the desk review, for example, that 
a MAC inadvertently failed to incorporate positive adjustments 
resulting from a prior year's wage index appeal of a hospital's wage-
related costs such as pension, CMS will correct that data error and the 
hospital's average hourly wage will likely increase as a result.
    While we maintain CMS' authority to conduct additional review and 
make resulting corrections at any time during the wage index 
development process, in accordance with the policy finalized in the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156) and as first 
implemented with the FY 2019 wage index (83 FR 41389), hospitals are 
able to request further review of a correction made by CMS that did not 
arise from a hospital's request for a wage index data correction. 
Instances where CMS makes a correction to a hospital's data after the 
January 31 PUF based on a different understanding than the hospital 
about certain reported costs, for example, could potentially be 
resolved using this process before the final wage index is calculated. 
We believe this process and the timeline for requesting such 
corrections (as described earlier and in the FY 2018 IPPS/LTCH PPS 
final rule) promote additional transparency to instances where CMS 
makes data corrections after the January 31 PUF, and provide 
opportunities for hospitals to request further review of CMS changes in 
time for the most accurate data to be reflected in the final wage index 
calculations. These additional appeals opportunities are described

[[Page 58792]]

earlier and in the FY 2021 Wage Index Development Time Table, as well 
as in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156).
3. Update to Wage Index Development Timetable To Include Time Zone for 
Deadlines
    During the FY 2021 wage index development process, we received 
inquiries regarding the time zone for deadlines in the Wage Index 
Development Timetable. Specifically, hospitals asked if revision 
requests submitted after 11:59 p.m. Eastern Standard Time (EST) could 
be accepted if the deadline had not yet passed in the time zone where 
the hospitals are located. The current timetable does not specify time 
zones. To eliminate confusion and promote clear deadlines, we proposed 
to use Eastern Standard Time (EST) as the time zone for wage index 
deadlines after October 1, 2020 on the FY 2022 Wage Index Development 
Timetable. We stated in the proposed rule (85 FR 32733) that we believe 
using one time zone is important for a clear and consistent deadline 
for all hospitals. We further stated that we also believe that EST is 
an appropriate time zone for the deadline because CMS's central office 
headquarters are located in the EST time zone and because it is 
consistent with the time zone used for other CMS deadlines, such as the 
deadline to register to report certain quality data via the CMS Web 
Interface (see the Registration Guide available for download at https://qpp.cms.gov/mips/how-to-register-for-CMS-WI-and-CAHPS) and 
applications for ACOs to participate in the Shared Savings Program (see 
deadlines outlined at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/for-acos/application-types-and-timeline, in accordance with Sec.  425.202). We welcomed commenters' 
input on which time zone is most reasonable for all hospitals and 
appropriate for supporting consistent, clear deadlines.
    We did not receive any comments on our proposal. Therefore, for the 
reasons set forth in this final rule and in the FY 2021 IPPS/LTCH PPS 
proposed rule, we are finalizing, without modification, our proposal to 
use Eastern Standard Time (EST) as the time zone for wage index 
deadlines after October 1, 2020 on the FY 2022 Wage Index Development 
Timetable.

M. Labor-Related Share for the FY 2021 Wage Index

    Section 1886(d)(3)(E) of the Act directs the Secretary to adjust 
the proportion of the national prospective payment system base payment 
rates that are attributable to wages and wage-related costs by a factor 
that reflects the relative differences in labor costs among geographic 
areas. It also directs the Secretary to estimate from time to time the 
proportion of hospital costs that are labor-related and to adjust the 
proportion (as estimated by the Secretary from time to time) of 
hospitals' costs that are attributable to wages and wage-related costs 
of the DRG prospective payment rates. We refer to the portion of 
hospital costs attributable to wages and wage-related costs as the 
labor-related share. The labor-related share of the prospective payment 
rate is adjusted by an index of relative labor costs, which is referred 
to as the wage index.
    Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of 
the Act to provide that the Secretary must employ 62 percent as the 
labor-related share unless this would result in lower payments to a 
hospital than would otherwise be made. However, this provision of 
Public Law 108-173 did not change the legal requirement that the 
Secretary estimate from time to time the proportion of hospitals' costs 
that are attributable to wages and wage-related costs. Thus, hospitals 
receive payment based on either a 62-percent labor-related share, or 
the labor-related share estimated from time to time by the Secretary, 
depending on which labor-related share resulted in a higher payment.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38158 through 
38175), we rebased and revised the hospital market basket. We 
established a 2014-based IPPS hospital market basket to replace the FY 
2010-based IPPS hospital market basket, effective October 1, 2017. 
Using the 2014-based IPPS market basket, we finalized a labor-related 
share of 68.3 percent for discharges occurring on or after October 1, 
2017. In addition, in FY 2018, we implemented this revised and rebased 
labor-related share in a budget neutral manner (82 FR 38522). However, 
consistent with section 1886(d)(3)(E) of the Act, we did not take into 
account the additional payments that would be made as a result of 
hospitals with a wage index less than or equal to 1.0000 being paid 
using a labor-related share lower than the labor-related share of 
hospitals with a wage index greater than 1.0000. In the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42325), for FY 2020, we continued to use a 
labor-related share of 68.3 percent for discharges occurring on or 
after October 1, 2019.
    The labor-related share is used to determine the proportion of the 
national IPPS base payment rate to which the area wage index is 
applied. We include a cost category in the labor-related share if the 
costs are labor intensive and vary with the local labor market. In the 
FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32734), for FY 2021, we did 
not propose to make any further changes to the national average 
proportion of operating costs that are attributable to wages and 
salaries, employee benefits, professional fees: Labor-related, 
administrative and facilities support services, installation, 
maintenance, and repair services, and all other labor-related services. 
Therefore, for FY 2021, we proposed to continue to use a labor-related 
share of 68.3 percent for discharges occurring on or after October 1, 
2020.
    As discussed in section IV.B. of the preamble of this final rule, 
prior to January 1, 2016, Puerto Rico hospitals were paid based on 75 
percent of the national standardized amount and 25 percent of the 
Puerto Rico-specific standardized amount. As a result, we applied the 
Puerto Rico-specific labor-related share percentage and nonlabor-
related share percentage to the Puerto Rico-specific standardized 
amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. 
L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that 
the payment calculation with respect to operating costs of inpatient 
hospital services of a subsection (d) Puerto Rico hospital for 
inpatient hospital discharges on or after January 1, 2016, shall use 
100 percent of the national standardized amount. Because Puerto Rico 
hospitals are no longer paid with a Puerto Rico-specific standardized 
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as 
amended by section 601 of the Consolidated Appropriations Act, 2016, 
there is no longer a need for us to calculate a Puerto Rico-specific 
labor-related share percentage and nonlabor-related share percentage 
for application to the Puerto Rico-specific standardized amount. 
Hospitals in Puerto Rico are now paid 100 percent of the national 
standardized amount and, therefore, are subject to the national labor-
related share and nonlabor-related share percentages that are applied 
to the national standardized amount. Accordingly, for FY 2021, we did 
not propose a Puerto Rico-specific labor-related share percentage or a 
nonlabor-related share percentage.
    We did not receive any public comments on our proposals related to 
the labor-related share percentage. Therefore, for the reasons set 
forth in this final rule and in the FY 2021 IPPS/LTCH PPS proposed 
rule, we are finalizing our proposals, without

[[Page 58793]]

modification, to continue to use a labor-related share of 68.3 percent 
for discharges occurring on or after October 1, 2020 for all hospitals 
(including Puerto Rico hospitals) whose wage indexes are greater than 
1.0000.
    Tables 1A and 1B, which are published in section VI. of the 
Addendum to this FY 2021 IPPS/LTCH PPS final rule and available via the 
internet on the CMS website, reflect the national labor-related share, 
which is also applicable to Puerto Rico hospitals. For FY 2021, for all 
IPPS hospitals (including Puerto Rico hospitals) whose wage indexes are 
less than or equal to 1.0000, we are applying the wage index to a 
labor-related share of 62 percent of the national standardized amount. 
For all IPPS hospitals (including Puerto Rico hospitals) whose wage 
indexes are greater than 1.000, for FY 2021, we are applying the wage 
index to a labor-related share of 68.3 percent of the national 
standardized amount.

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

A. Changes to MS-DRGs Subject to Postacute Care Transfer Policy and MS-
DRG Special Payments Policies (Sec.  412.4)

1. Background
    Existing regulations at 42 CFR 412.4(a) define discharges under the 
IPPS as situations in which a patient is formally released from an 
acute care hospital or dies in the hospital. Section 412.4(b) defines 
acute care transfers, and Sec.  412.4(c) defines postacute care 
transfers. Our policy set forth in Sec.  412.4(f) provides that when a 
patient is transferred and his or her length of stay is less than the 
geometric mean length of stay for the MS-DRG to which the case is 
assigned, the transferring hospital is generally paid based on a 
graduated per diem rate for each day of stay, not to exceed the full 
MS-DRG payment that would have been made if the patient had been 
discharged without being transferred.
    The per diem rate paid to a transferring hospital is calculated by 
dividing the full MS-DRG payment by the geometric mean length of stay 
for the MS-DRG. Based on an analysis that showed that the first day of 
hospitalization is the most expensive (60 FR 45804), our policy 
generally provides for payment that is twice the per diem amount for 
the first day, with each subsequent day paid at the per diem amount up 
to the full MS-DRG payment (Sec.  412.4(f)(1)). Transfer cases also are 
eligible for outlier payments. In general, the outlier threshold for 
transfer cases, as described in Sec.  412.80(b), is equal to the fixed-
loss outlier threshold for nontransfer cases (adjusted for geographic 
variations in costs), divided by the geometric mean length of stay for 
the MS-DRG, and multiplied by the length of stay for the case, plus 1 
day.
    We established the criteria set forth in Sec.  412.4(d) for 
determining which DRGs qualify for postacute care transfer payments in 
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The 
determination of whether a DRG is subject to the postacute care 
transfer policy was initially based on the Medicare Version 23.0 
GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a 
DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is 
revised, we use the current version of the Medicare GROUPER and the 
most recent complete year of MedPAR data to determine if the DRG is 
subject to the postacute care transfer policy. Specifically, if the MS-
DRG's total number of discharges to postacute care equals or exceeds 
the 55th percentile for all MS-DRGs and the proportion of short-stay 
discharges to postacute care to total discharges in the MS-DRG exceeds 
the 55th percentile for all MS-DRGs, CMS will apply the postacute care 
transfer policy to that MS-DRG and to any other MS-DRG that shares the 
same base MS-DRG. The statute directs us to identify MS-DRGs based on a 
high volume of discharges to postacute care facilities and a 
disproportionate use of postacute care services. As discussed in the FY 
2006 IPPS final rule (70 FR 47416), we determined that the 55th 
percentile is an appropriate level at which to establish these 
thresholds. In that same final rule (70 FR 47419), we stated that we 
will not revise the list of DRGs subject to the postacute care transfer 
policy annually unless we are making a change to a specific MS-DRG.
    To account for MS-DRGs subject to the postacute care policy that 
exhibit exceptionally higher shares of costs very early in the hospital 
stay, Sec.  412.4(f) also includes a special payment methodology. For 
these MS-DRGs, hospitals receive 50 percent of the full MS-DRG payment, 
plus the single per diem payment, for the first day of the stay, as 
well as a per diem payment for subsequent days (up to the full MS-DRG 
payment (Sec.  412.4(f)(6)). For an MS-DRG to qualify for the special 
payment methodology, the geometric mean length of stay must be greater 
than 4 days, and the average charges of 1-day discharge cases in the 
MS-DRG must be at least 50 percent of the average charges for all cases 
within the MS-DRG. MS-DRGs that are part of an MS-DRG severity level 
group will qualify under the MS-DRG special payment methodology policy 
if any one of the MS-DRGs that share that same base MS-DRG qualifies 
(Sec.  412.4(f)(6)).
    Prior to the enactment of the Bipartisan Budget Act of 2018 (Pub. 
L. 115-123), under section 1886(d)(5)(J) of the Act, a discharge was 
deemed a ``qualified discharge'' if the individual was discharged to 
one of the following postacute care settings:
     A hospital or hospital unit that is not a subsection (d) 
hospital.
     A skilled nursing facility.
     Related home health services provided by a home health 
agency provided within a timeframe established by the Secretary 
(beginning within 3 days after the date of discharge).
    Section 53109 of the Bipartisan Budget Act of 2018 amended section 
1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care 
provided by a hospice program as a qualified discharge, effective for 
discharges occurring on or after October 1, 2018. Accordingly, 
effective for discharges occurring on or after October 1, 2018, if a 
discharge is assigned to one of the MS-DRGs subject to the postacute 
care transfer policy and the individual is transferred to hospice care 
by a hospice program, the discharge is subject to payment as a transfer 
case. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41394), we made 
conforming amendments to Sec.  412.4(c) of the regulation to include 
discharges to hospice care occurring on or after October 1, 2018 as 
qualified discharges. We specified that hospital bills with a Patient 
Discharge Status code of 50 (Discharged/Transferred to Hospice--Routine 
or Continuous Home Care) or 51 (Discharged/Transferred to Hospice, 
General Inpatient Care or Inpatient Respite) are subject to the 
postacute care transfer policy in accordance with this statutory 
amendment. Consistent with our policy for other qualified discharges, 
CMS claims processing software has been revised to identify cases in 
which hospice benefits were billed on the date of hospital discharge 
without the appropriate discharge status code. Such claims will be 
returned as unpayable to the hospital and may be rebilled with a 
corrected discharge code.
2. Changes for FY 2021
    As discussed in section II.F. of the preamble of the FY 2021 IPPS/
LTCH PPS final rule, based on our analysis of FY 2019 MedPAR claims 
data, we proposed to make changes to a number of MS-DRGs, effective for 
FY 2021. Specifically, we proposed to do the following:
     Reassign procedure codes from MS-DRG 16 (Autologous Bone 
Marrow

[[Page 58794]]

Transplant with CC/MCC or T-Cell Immunotherapy) to create new MS-DRG 18 
(Chimeric Antigen Receptor [CAR] T-cell Immunotherapy) for cases 
reporting the administration of CAR T-cell therapy.
     Create new MS-DRG 019 (Simultaneous Pancreas and Kidney 
Transplant with Hemodialysis).
     Reassign procedures involving head, face, neck, ear, nose, 
mouth, or throat by creating six new MS-DRGs 140-142 (Major Head and 
Neck Procedures with MCC, with CC, and without CC/MCC, respectively) 
and 143-145 (Other Ear, Nose, Mouth and Throat O.R. Procedures with 
MCC, with CC, and without CC/MCC, respectively) and deleting MS-DRGs 
129-130 (Major Head and Neck Procedures with CC/MCC or Major Device, 
and without CC/MCC, respectively, MS-DRGs 131-132 (Cranial and Facial 
Procedures with CC/MCC and without CC/MCC, respectively) and MS-DRGs 
133-134 (Other Ear, Nose, Mouth and Throat O.R. Procedures with CC/MCC 
and without CC/MCC, respectively).
     Reassign procedure codes from MS-DRGs 469-470 (Major Hip 
and Knee Joint Replacement or Reattachment of Lower Extremity with MCC 
or Total Ankle Replacement, and without MCC, respectively) and create 
two new MS-DRGs, 521 and 522 (Hip Replacement with Principal Diagnosis 
of Hip Fracture with MCC and without MCC, respectively) for cases 
reporting a hip replacement procedure with a principal diagnosis of a 
hip fracture.
     Reassign procedure codes from MS-DRG 652 (Kidney 
Transplant) into two new MS-DRGs, 650 and 651 (Kidney Transplant with 
Hemodialysis with MCC and without MCC, respectively) for cases 
reporting hemodialysis with a kidney transplant during the same 
admission.
    As discussed in the proposed rule, in light of the proposed changes 
to these MS-DRGs for FY 2021, according to the regulations under Sec.  
412.4(d), we evaluated these MS-DRGs using the general postacute care 
transfer policy criteria and data from the FY 2019 MedPAR file. If an 
MS-DRG qualified for the postacute care transfer policy, we also 
evaluated that MS-DRG under the special payment methodology criteria 
according to regulations at Sec.  412.4(f)(6). We continue to believe 
it is appropriate to assess new MS-DRGs and reassess revised MS-DRGs 
when proposing reassignment of procedure codes or diagnosis codes that 
would result in material changes to an MS-DRG. We noted that MS-DRGs 
469 and 470 (Major Hip and Knee Joint Replacement or Reattachment of 
Lower Extremity with MCC or Total Ankle Replacement, and without MCC, 
respectively) are currently subject to the postacute care transfer 
policy, and as proposed to be revised, would continue to qualify to be 
included on the list of MS-DRGs that are subject to the postacute care 
transfer policy. Proposed new MS-DRGs 521 and 522 (Hip Replacement with 
Principal Diagnosis of Hip Fracture with MCC and without MCC, 
respectively) would also qualify to be included on the list of MS-DRGs 
that are subject to the postacute care transfer policy. We therefore 
proposed to add MS-DRGs 521 and 522 to the list of MS-DRGs that are 
subject to the postacute care transfer policy. We noted that MS-DRGs 
that are subject to the postacute transfer policy for FY 2020 and are 
not revised will continue to be subject to the policy in FY 2021. We 
note that, as discussed in section II. of this final rule, we are 
finalizing these proposed changes to the MS-DRGs.
    Using the March 2020 update of the FY 2019 MedPAR file, we 
developed the following updated chart which sets forth the analysis of 
the postacute care transfer policy criteria completed for this final 
rule with respect to each of these new or revised MS-DRGs. We note that 
this chart is updated from the MedPAR file used in the proposed rule 
(the December 2019 update of the FY 2019 MedPAR file).
BILLING CODE 4120-01-P

[[Page 58795]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.203

BILLING CODE 4120-01-C

[[Page 58796]]

    Based on our annual review of proposed new or revised MS-DRGs and 
analysis of the December 2019 update of the FY 2019 MedPAR file, we 
identified MS-DRGs that we proposed to include on the list of MS-DRGs 
subject to the special payment policy methodology. Based on our 
analysis of proposed changes to MS-DRGs included in the proposed rule, 
we determined that MS-DRGs 521 and 522 (Hip Replacement with Principal 
Diagnosis of Hip Fracture with MCC and without MCC, respectively) would 
meet the criteria for the MS-DRG special payment methodology. 
Therefore, we proposed that MS-DRGs 521 and 522 would be subject to the 
MS-DRG special payment methodology, effective FY 2021. The following 
table include updates from the March 2020 update of the FY 2019 MedPAR 
file.
[GRAPHIC] [TIFF OMITTED] TR18SE20.204

    Comments: A commenter urged CMS not include MS-DRGs 521 and 522 on 
the list of MS-DRGs that are subject to the postacute care transfer 
policy. The commenter asserted that adding these new MS-DRGs to the 
postacute care transfer policy will incentivize short-term acute care 
hospitals to keep hip replacement patients longer so that the patient 
does not receive care from a postacute care provider, potentially 
leading to adverse health impacts to vulnerable beneficiaries.
    Response: We disagree that the postacute care transfer policy 
creates an incentive to keep patients in the hospital longer than 
necessary. Our longstanding view is the policy addresses the 
appropriate level of payment once clinical decisions about the most 
appropriate care in the most appropriate setting have been made. We 
also note that the procedure codes proposed to be assigned to MS-DRGs 
521 and 522 are currently assigned to MS-DRGs 496 and 470, which 
currently are subject to the postacute care transfer policy.
    After consideration of the comments we received, we are finalizing 
our proposal to add MS-DRGs 521 and 522 to the list of MS-DRGs that are 
subject to the postacute care transfer policy and the MS DRG special 
payment methodology for FY 2021.
    The postacute care transfer and special payment policy status of 
these MS-DRGs is reflected in Table 5 associated with this final rule, 
which is listed in section VI. of the Addendum to this final rule and 
available via the internet on the CMS website.

B. Changes in the Inpatient Hospital Update for FY 2021 (Sec.  
412.64(d))

1. FY 2021 Inpatient Hospital Update
    In accordance with section 1886(b)(3)(B)(i) of the Act, each year 
we update the national standardized amount for inpatient hospital 
operating costs by a factor called the ``applicable percentage 
increase.'' For FY 2021, we are setting the applicable percentage 
increase by applying the adjustments listed in this section in the same 
sequence as we did for FY 2020. (We note that section 
1886(b)(3)(B)(xii) of the Act required an additional reduction each 
year only for FYs 2010 through 2019.) Specifically, consistent with 
section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 
10319(a) of the Affordable Care Act, we are setting the applicable 
percentage increase by applying the following adjustments in the 
following sequence. The applicable percentage increase under the IPPS 
for FY 2021 is equal to the rate-of-increase in the hospital market 
basket for IPPS hospitals in all areas, subject to all of the 
following:
     A reduction of one-quarter of the applicable percentage 
increase (prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals that fail to submit quality information 
under rules established by the Secretary in accordance with section 
1886(b)(3)(B)(viii) of the Act.
     A reduction of three-quarters of the applicable percentage 
increase (prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals not considered to be meaningful EHR users 
in accordance with section 1886(b)(3)(B)(ix) of the Act.
     An adjustment based on changes in economy-wide 
productivity (the multifactor productivity (MFP) adjustment).
    Section 1886(b)(3)(B)(xi) of the Act, as added by section 3401(a) 
of the Affordable Care Act, states that application of the MFP 
adjustment may result in the applicable percentage increase being less 
than zero.
    In compliance with section 404 of the MMA, in the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38158 through 38175), we replaced the FY 2010-
based IPPS operating market basket with the rebased and revised 2014-
based IPPS operating market basket, effective with FY 2018.
    We proposed to base the proposed FY 2021 market basket update used 
to determine the applicable percentage increase for the IPPS on IHS 
Global Inc.'s (IGI's) fourth quarter 2019 forecast of the 2014-based 
IPPS market basket rate-of-increase with historical data through third 
quarter 2019, which was estimated to be 3.0 percent. We also proposed 
that if more recent data

[[Page 58797]]

subsequently become available (for example, a more recent estimate of 
the market basket and 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 FY 2021 
growth rate of the 2014-based IPPS market basket is estimated to be 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 than 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.
    For FY 2021, depending on whether a hospital submits quality data 
under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under section 
1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that 
is a meaningful EHR user), there are four possible applicable 
percentage increases that can be applied to the standardized amount, as 
specified in the table that appears later in this section.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 
51692), we finalized our methodology for calculating and applying the 
MFP adjustment. As we explained in that rule, section 
1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the 
Affordable Care Act, defines this productivity adjustment as equal to 
the 10-year moving average of changes in annual economy-wide, private 
nonfarm business MFP (as projected by the Secretary for the 10-year 
period ending with the applicable fiscal year, calendar year, cost 
reporting period, or other annual period). The Bureau of Labor 
Statistics (BLS) publishes the official measure of private nonfarm 
business MFP. We refer readers to the BLS website at http://www.bls.gov/mfp for the BLS historical published MFP data.
    MFP is derived by subtracting the contribution of labor and capital 
input growth from output growth. The projections of the components of 
MFP are currently produced by IGI, a nationally recognized economic 
forecasting firm with which CMS contracts to forecast the components of 
the market baskets and MFP. As we discussed in the FY 2016 IPPS/LTCH 
PPS final rule (80 FR 49509), beginning with the FY 2016 rulemaking 
cycle, the MFP adjustment is calculated using the revised series 
developed by IGI to proxy the aggregate capital inputs. Specifically, 
in order to generate a forecast of MFP, IGI forecasts BLS aggregate 
capital inputs using a regression model. A complete description of the 
MFP projection methodology is available on the CMS website at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed an MFP 
adjustment of 0.4 percentage point. Similar to the market basket 
update, for the proposed rule, we used IGI's fourth quarter 2019 
forecast of the MFP adjustment to compute the proposed FY 2021 MFP 
adjustment. As noted previously, we proposed that if more recent data 
subsequently become available, we would use such data, if appropriate, 
to determine the FY 2021 market basket update and the MFP for the final 
rule.
    Based on the more recent data available for this final rule, the 
current estimate of the 10-year moving average growth of MFP for FY 
2021 is -0.1 percentage point. This MFP 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 2014-
based IPPS market basket on a quarterly basis. Therefore, IGI's second 
quarter 2020 forecast is the most recent forecast of the 2014-based 
IPPS market basket increase.
    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 final rule, we are using 
the IGI June 2020 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 IGI second quarter 2020 forecast and the IGI 
June 2020 macroeconomic forecast are significant. Therefore, we believe 
it is 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 the 10-year moving average growth of MFP for FY 2021 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 hospital 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 market basket update. 
However, under section 1886(b)(3)(B)(xi)(I) of the Act, the Secretary 
is required to reduce (not increase) the hospital market basket 
percentage increase by changes in economy-wide productivity. 
Accordingly, we are applying a 0.0 MFP adjustment to the FY 2021 market 
basket percentage increase.
    Comment: A commenter appreciated the proposed inpatient hospital 
update. We also received a comment recommending that CMS not use market 
basket data that had been updated through March 2020, given the 
significant economic disruption and effects of the pandemic-driven 
shutdown, to ensure that the market basket update accurately reflects 
the higher costs incurred by hospitals during the pandemic. This same 
commenter urged CMS to ensure the underlying data, for market basket 
and other policies, is most appropriately selected to hold hospitals 
harmless against the unprecedented impacts of COVID-19.
    Response: We appreciate the commenters' support and input on the 
proposal. As previously discussed, for this final rule we are using a 
more recent forecast available, because 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. For this final rule, we are finalizing a market 
basket update of 2.4 percent based on

[[Page 58798]]

IHS Global Inc.'s second-quarter 2020 forecast (with historical data 
through the first-quarter 2020) and an MFP adjustment of 0.0 percentage 
point, as discussed earlier.
    Based on these most recent data available, we have determined four 
applicable percentage increases to the standardized amount for FY 2021, 
as specified in the following table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.205

    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42344), we revised 
our regulations at 42 CFR 412.64(d) to reflect the current law for the 
update for FY 2020 and subsequent fiscal years. Specifically, in 
accordance with section 1886(b)(3)(B) of the Act, we added paragraph 
(d)(1)(viii) to Sec.  412.64 to set forth the applicable percentage 
increase to the operating standardized amount for FY 2020 and 
subsequent fiscal years as the percentage increase in the market basket 
index, subject to the reductions specified under Sec.  412.64(d)(2) for 
a hospital that does not submit quality data and Sec.  412.64(d)(3) for 
a hospital that is not a meaningful EHR user, less an MFP adjustment. 
(As previously noted, section 1886(b)(3)(B)(xii) of the Act required an 
additional reduction each year only for FYs 2010 through 2019.)
    Section 1886(b)(3)(B)(iv) of the Act provides that the applicable 
percentage increase to the hospital-specific rates for SCHs and MDHs 
equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all 
other hospitals subject to the IPPS). Therefore, the update to the 
hospital-specific rates for SCHs and MDHs also is subject to section 
1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 
10319(a) of the Affordable Care Act. (Under current law, the MDH 
program is effective for discharges on or before September 30, 2022, as 
discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41429 through 
41430).)
    For FY 2021, we proposed the following updates to the hospital-
specific rates applicable to SCHs and MDHs: A proposed update of 2.6 
percent for a hospital that submits quality data and is a meaningful 
EHR user; a proposed update of 1.85 percent for a hospital that fails 
to submit quality data and is a meaningful EHR user; a proposed update 
of 0.35 percent for a hospital that submits quality data and is not a 
meaningful EHR user; and a proposed update of -0.4 percent for a 
hospital that fails to submit quality data and is not an meaningful EHR 
user. As noted previously, for the FY 2021 IPPS/LTCH PPS proposed rule, 
we used IGI's fourth quarter 2019 forecast of the 2014-based IPPS 
market basket update with historical data through third quarter 2019. 
Similarly, we used IGI's fourth quarter 2019 forecast of the MFP 
adjustment. We proposed that if more recent data subsequently became 
available (for example, a more recent estimate of the market basket 
increase and the MFP), we would use such data, if appropriate, to 
determine the update in the final rule.
    We did not receive any public comments on our proposal. Therefore, 
we are finalizing the proposal to determine the update to the hospital-
specific rates for SCHs and MDHs in this final rule using the most 
recent available data, as previously discussed.
    For this final rule, based on the most recent available data, we 
are finalizing the following updates to the hospital specific rates 
applicable to SCHs and MDHs: An update of 2.4 percent for a hospital 
that submits quality data and is a meaningful EHR user; an update of 
1.8 percent for a hospital that fails to submit quality data and is a 
meaningful EHR user; an update of 0.6 percent for a hospital that 
submits quality data and is not a meaningful EHR user; and an update of 
0.0 percent for a hospital that fails to submit quality data and is not 
a meaningful EHR user.
2. FY 2021 Puerto Rico Hospital Update
    As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56937 
through 56938), prior to January 1, 2016, Puerto Rico hospitals were 
paid based on 75 percent of the national standardized amount and 25 
percent of the Puerto Rico-specific standardized amount. Section 601 of 
Public Law 114-113 amended section 1886(d)(9)(E) of the Act to specify 
that the payment calculation with respect to operating costs of 
inpatient hospital services of a subsection (d) Puerto Rico hospital 
for inpatient hospital discharges on or after January 1, 2016, shall 
use 100 percent of the national standardized amount. Because Puerto 
Rico hospitals are no longer paid with a Puerto Rico-specific 
standardized amount under the amendments to section 1886(d)(9)(E) of 
the Act, there is no longer a need for us to determine an update to the 
Puerto Rico standardized amount. Hospitals in Puerto Rico are now paid 
100 percent of the national standardized amount and, therefore, are 
subject to the same update to the national standardized amount 
discussed under section IV.B.1. of the preamble of this final rule. 
Accordingly, in the FY 2021 IPPS/LTCH PPS proposed rule, for FY 2021, 
we proposed an applicable percentage increase of 2.6 percent to the 
standardized amount for hospitals located in Puerto Rico.
    We did not receive any public comment on our proposal with respect 
to the Puerto Rico hospital update.

[[Page 58799]]

    Based on the most recent data available for this final rule (as 
discussed previously in section IV.B.1. of the preamble of this final 
rule), we are finalizing an applicable percentage increase of 2.4 
percent to the standardized amount for hospitals located in Puerto 
Rico. We note that section 1886(b)(3)(B)(viii) of the Act, which 
specifies the adjustment to the applicable percentage increase for 
``subsection (d)'' hospitals that do not submit quality data under the 
rules established by the Secretary, is not applicable to hospitals 
located in Puerto Rico. In addition, section 602 of Public Law 114-113 
amended section 1886(n)(6)(B) of the Act to specify that Puerto Rico 
hospitals are eligible for incentive payments for the meaningful use of 
certified EHR technology, effective beginning FY 2016, and also to 
apply the adjustments to the applicable percentage increase under 
section 1886(b)(3)(B)(ix) of the Act to Puerto Rico hospitals that are 
not meaningful EHR users, effective FY 2022. Accordingly, because the 
provisions of section 1886(b)(3)(B)(ix) of the Act are not applicable 
to hospitals located in Puerto Rico until FY 2022, the adjustments 
under this provision are not applicable for FY 2021.

C. Amendment To Address Short Cost Reporting Periods During Applicable 
Timeframe for Establishment of Service Area for Sole Community 
Hospitals Under Sec.  412.92(c)(3)

    Sections 1886(d)(5)(D) and (d)(5)(G) of the Act provide special 
payment protections under the IPPS to sole community hospitals (SCHs) 
and Medicare-dependent, small rural hospitals (MDHs), respectively. 
Section 1886(d)(5)(D)(iii) of the Act defines an SCH in part as a 
hospital that the Secretary determines is located more than 35 road 
miles from another hospital or that, by reason of factors such as 
isolated location, weather conditions, travel conditions, or absence of 
other like hospitals (as determined by the Secretary), is the sole 
source of inpatient hospital services reasonably available to Medicare 
beneficiaries. The regulations at 42 CFR 412.92 set forth the criteria 
that a hospital must meet to be classified as a SCH. For more 
information on SCHs, we refer readers to the FY 2009 IPPS/LTCH PPS 
final rule (74 FR 43894 through 43897).
    The criteria to be classified as an SCH are set forth at 42 CFR 
412.92(a). Under the criteria at 42 CFR 412.92(a)(1)(i) and (ii), CMS 
classifies a hospital as a sole community hospital if it is located: 
(1) In a rural area; and (2) between 25 and 35 miles from other like 
hospitals and meets one of the following criteria:
     No more than 25 percent of residents who become hospital 
inpatients or no more than 25 percent of the Medicare beneficiaries who 
become hospital inpatients in the hospital's service area are admitted 
to other like hospitals located within a 35-mile radius of the 
hospital, or, if larger, within its service area.
     The hospital has fewer than 50 beds and the MAC certifies 
that the hospital would have met the previously discussed criteria were 
it not for the fact that some beneficiaries or residents were forced to 
seek care outside the service area due to the unavailability of 
necessary specialty services at the community hospital.
    The term ``service area'' is defined under the regulations at 42 
CFR 412.92(c)(3) as the area from which a hospital draws at least 75 
percent of its inpatients during the most recent 12-month cost 
reporting period ending before it applies for classification as a sole 
community hospital. For more information on service areas, we refer 
readers to the FY 2002 IPPS final rule (66 FR 39875).
    We have become aware of some situations where a hospital's most 
recent cost reporting period prior to seeking SCH classification is a 
short cost reporting period (that is, less than a 12-month cost 
reporting period). Therefore, in the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32740), we proposed to amend Sec.  412.92(c)(3) to clarify 
our policy in this situation. Specifically, we proposed to amend Sec.  
412.92(c)(3) to reflect that where the hospital's cost reporting period 
ending before it applies for classification as a sole community 
hospital is for less than 12 months, the hospital's most recent 12-
month or longer cost reporting period before the short period is used. 
We noted that this policy is consistent with our policy for determining 
Medicare utilization for purposes of MDH classification, as reflected 
in the regulations at 42 CFR 412.108(a)(1)(v). We invited public 
comment on our proposed amendment to Sec.  412.92(c)(3).
    We did not receive any public comments on our proposed amendment to 
Sec.  412.92(c)(3). Therefore, we are finalizing our proposal as 
previously described, without modification.

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

    Under the authority of section 1886(d)(5)(C)(i) of the Act, the 
regulations at Sec.  412.96 set forth the criteria that a hospital must 
meet in order to qualify under the IPPS as a rural referral center 
(RRC). RRCs receive special treatment under both the DSH payment 
adjustment and the criteria for geographic reclassification.
    Section 402 of Public Law 108-173 raised the DSH payment adjustment 
for RRCs such that they are not subject to the 12-percent cap on DSH 
payments that is applicable to other rural hospitals. RRCs also are not 
subject to the proximity criteria when applying for geographic 
reclassification. In addition, they do not have to meet the requirement 
that a hospital's average hourly wage must exceed, by a certain 
percentage, the average hourly wage of the labor market area in which 
the hospital is located.
    Section 4202(b) of Public Law 105-33 states, in part, that any 
hospital classified as an RRC by the Secretary for FY 1991 shall be 
classified as such an RRC for FY 1998 and each subsequent fiscal year. 
In the August 29, 1997 IPPS final rule with comment period (62 FR 
45999), we reinstated RRC status for all hospitals that lost that 
status due to triennial review or MGCRB reclassification. However, we 
did not reinstate the status of hospitals that lost RRC status because 
they were now urban for all purposes because of the OMB designation of 
their geographic area as urban. Subsequently, in the August 1, 2000 
IPPS final rule (65 FR 47089), we indicated that we were revisiting 
that decision. Specifically, we stated that we would permit hospitals 
that previously qualified as an RRC and lost their status due to OMB 
redesignation of the county in which they are located from rural to 
urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC 
status must satisfy all of the other applicable criteria. We use the 
definitions of ``urban'' and ``rural'' specified in subpart D of 42 CFR 
part 412. One of the criteria under which a hospital may qualify as an 
RRC is to have 275 or more beds available for use (Sec.  
412.96(b)(1)(ii)). A rural hospital that does not meet the bed size 
requirement can qualify as an RRC if the hospital meets two mandatory 
prerequisites (a minimum case-mix index (CMI) and a minimum number of 
discharges), and at least one of three optional criteria (relating to 
specialty composition of medical staff, source of inpatients, or 
referral volume). (We refer readers to Sec.  412.96(c)(1) through (5) 
and the September 30, 1988 Federal Register (53 FR 38513) for 
additional discussion.) With respect to the two mandatory 
prerequisites, a hospital may be classified as an RRC if--
     The hospital's CMI is at least equal to the lower of the 
median CMI for

[[Page 58800]]

urban hospitals in its census region, excluding hospitals with approved 
teaching programs, or the median CMI for all urban hospitals 
nationally; and
     The hospital's number of discharges is at least 5,000 per 
year, or, if fewer, the median number of discharges for urban hospitals 
in the census region in which the hospital is located. The number of 
discharges criterion for an osteopathic hospital is at least 3,000 
discharges per year, as specified in section 1886(d)(5)(C)(i) of the 
Act.
1. Case-Mix Index (CMI)
    Section 412.96(c)(1) provides that CMS establish updated national 
and regional CMI values in each year's annual notice of prospective 
payment rates for purposes of determining RRC status. The methodology 
we used to determine the national and regional CMI values is set forth 
in the regulations at Sec.  412.96(c)(1)(ii). The national median CMI 
value for FY 2021 is based on the CMI values of all urban hospitals 
nationwide, and the regional median CMI values for FY 2021 are based on 
the CMI values of all urban hospitals within each census region, 
excluding those hospitals with approved teaching programs (that is, 
those hospitals that train residents in an approved GME program as 
provided in Sec.  413.75). These values are based on discharges 
occurring during FY 2019 (October 1, 2018 through September 30, 2019), 
and include bills posted to CMS' records through March 2020.
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32741), we 
proposed that, in addition to meeting other criteria, if rural 
hospitals with fewer than 275 beds are to qualify for initial RRC 
status for cost reporting periods beginning on or after October 1, 
2020, they must have a CMI value for FY 2019 that is at least--
     1.70435 (national--all urban); or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located.
    The proposed median CMI values by region were set forth in a table 
in the proposed rule (85 FR 32741). We stated in the proposed rule that 
we intended to update the proposed CMI values in the FY 2021 final rule 
to reflect the updated FY 2019 MedPAR file, which will contain data 
from additional bills received through March 2020.
    We did not receive any public comments on our proposals.
    Based on the latest available data (FY 2019 bills received through 
March 2020), in addition to meeting other criteria, if rural hospitals 
with fewer than 275 beds are to qualify for initial RRC status for cost 
reporting periods beginning on or after October 1, 2020, they must have 
a CMI value for FY 2019 that is at least:
     1.7049 (national--all urban); or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located.
    The final CMI values by region are set forth in the following 
table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.206

    A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its MAC. Data are 
available on the Provider Statistical and Reimbursement (PS&R) System. 
In keeping with our policy on discharges, the CMI values are computed 
based on all Medicare patient discharges subject to the IPPS MS-DRG-
based payment.
2. Discharges
    Section 412.96(c)(2)(i) provides that CMS set forth the national 
and regional numbers of discharges criteria in each year's annual 
notice of prospective payment rates for purposes of determining RRC 
status. As specified in section 1886(d)(5)(C)(ii) of the Act, the 
national standard is set at 5,000 discharges. In the FY 2021 IPPS/LTCH 
PPS proposed rule (85 FR 32741), for FY 2021, we proposed to update the 
regional standards based on discharges for urban hospitals' cost 
reporting periods that began during FY 2018 (that is, October 1, 2017 
through September 30, 2018), which were the latest cost report data 
available at the time the proposed rule was developed. Therefore, we 
proposed that, in addition to meeting other criteria, a hospital, if it 
is to qualify for initial RRC status for cost reporting periods 
beginning on or after October 1, 2020, must have, as the number of 
discharges for its cost reporting period that began during FY 2018, at 
least--
     5,000 (3,000 for an osteopathic hospital); or
     If less, the median number of discharges for urban 
hospitals in the census region in which the hospital is located. (We 
refer readers to the table set forth in the FY 2021 IPPS/LTCH PPS 
proposed rule at 85 FR 32742). In the proposed rule, we stated that we 
intended to update these numbers in the FY 2021 final rule based on the 
latest available cost report data.
    We did not receive any public comments on our proposals.
    Based on the latest discharge data available at this time, that is, 
for cost reporting periods that began during FY 2018, the final median 
number of discharges for urban hospitals by census

[[Page 58801]]

region are set forth in the following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.207

    We note that because the median number of discharges for hospitals 
in each census region is greater than the national standard of 5,000 
discharges, under this final rule, 5,000 discharges is the minimum 
criterion for all hospitals, except for osteopathic hospitals for which 
the minimum criterion is 3,000 discharges.
a. Amendment to Sec.  412.96(c)(2) for Hospital Cost Reporting Periods 
That Are Longer or Shorter Than 12 Months
    As previously noted, in addition to meeting other criteria, to 
qualify for initial RRC status for cost reporting periods beginning on 
or after October 1 of a given fiscal year, under Sec.  412.96(c)(2), a 
hospital must meet the minimum number of discharges during its cost 
reporting period that began during the same fiscal year as the cost 
reporting periods used to compute the regional median discharges. We 
typically use the cost reporting periods that are 3 years prior to the 
fiscal year for which a hospital is seeking RRC status to compute the 
regional median discharges, as these are generally the latest cost 
report data available at the time of the development of the proposed 
and final rules. For example, and as discussed previously, for FY 2021, 
we are updating the regional standards based on discharges for urban 
hospitals' cost reporting periods that began during FY 2018.
    We have become aware of situations where a hospital's cost 
reporting period that began during the fiscal year used to compute the 
regional median discharge values for a given fiscal year is a short 
cost reporting period (that is, less than 12 months) and as a result, 
the provider may not meet the minimum discharges requirement. 
Conversely, there may also be situations where a hospital's cost 
reporting period that began during the fiscal year used to compute the 
regional median discharge values for a given fiscal year is a long cost 
reporting period (that is, greater than 12 months). In the FY 2021 
IPPS/LTCH PPS proposed rule (85 FR 32742), we proposed to amend the RRC 
regulations to add a new paragraph (c)(2)(iii) to Sec.  412.96 stating 
that if the hospital's cost reporting period that began during the same 
fiscal year as the cost reporting periods used to compute the regional 
median discharges is for less than 12 months or longer than 12 months, 
the hospital's number of discharges for that cost reporting period will 
be annualized to estimate the total number of discharges for a 12 month 
cost reporting period. We stated that we believe this policy, which is 
generally consistent with how we have addressed short cost reporting 
periods for purposes of determining discharges for RRC status in the 
past, provides a more uniform treatment among hospitals for purposes of 
determining the number of discharges for those hospitals for which the 
applicable cost reporting period is shorter or longer than 12 months. 
We proposed that to annualize the discharges, the MAC would divide the 
discharges by the number of days in the hospital's cost reporting 
period and then multiply by the length of a full year (365 or 366 
calendar days, as applicable) to estimate the total number of 
discharges for a 12-month cost reporting period. For example, a short 
cost reporting period beginning on January 1 and ending on October 31 
that is 10 months (or 304 days) with 4,200 discharges would be 
annualized in a non-leap year as follows: (4,200 / 304) x 365 = 5,043 
discharges annualized. Under this proposal, if the hospital has 
multiple cost reports beginning in the same fiscal year and none of 
those cost reports are for 12 months, the hospital's number of 
discharges in the hospital's longest cost report beginning in that 
fiscal year would be annualized to estimate the total number of 
discharges for a 12 month cost reporting period. We invited public 
comment on our proposed annualization methodology and our proposed 
amendment to Sec.  412.96(c)(2).
    Comments: A few commenters supported the annualization of 
discharges in a long or short cost reporting period for purposes of 
determining a hospital's eligibility for RRC classification.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal as previously described, without modification.

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

1. Background
    Section 1886(d)(12) of the Act provides for an additional payment 
to each qualifying low-volume hospital under the IPPS beginning in FY 
2005. The additional payment adjustment to a low-volume hospital 
provided for under section 1886(d)(12) of the Act is in addition to any 
payment calculated under section 1886 of the Act. Therefore, the 
additional payment adjustment is based on the per discharge amount paid 
to the qualifying hospital under section 1886 of the Act. In other 
words, the low-volume hospital payment adjustment is based on total

[[Page 58802]]

per discharge payments made under section 1886 of the Act, including 
capital, DSH, IME, and outlier payments. For SCHs and MDHs, the low-
volume hospital payment adjustment is based in part on either the 
Federal rate or the hospital-specific rate, whichever results in a 
greater operating IPPS payment.
    As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41398 
through 41399), section 50204 of the Bipartisan Budget Act of 2018 
(Pub. L. 115-123) modified the definition of a low-volume hospital and 
the methodology for calculating the payment adjustment for low-volume 
hospitals for FYs 2019 through 2022. (Section 50204 also extended prior 
changes to the definition of a low-volume hospital and the methodology 
for calculating the payment adjustment for low-volume hospitals through 
FY 2018.) Currently, the low-volume hospital qualifying criteria 
provide that a hospital must have fewer 3,800 total discharges during 
the fiscal year, and the hospital must be located more than 15 road 
miles from the nearest ``subsection (d)'' hospital. These criteria will 
remain in effect through FY 2022. Beginning with FY 2023, the low-
volume hospital qualifying criteria and payment adjustment will revert 
to the statutory requirements that were in effect prior to FY 2011. 
Therefore, in order for a hospital to continue to qualify as a low-
volume hospital on or after October 1, 2022, it must have fewer than 
200 total discharges during the fiscal year and be located more than 25 
road miles from the nearest ``subsection (d)'' hospital (see Sec.  
412.101(b)(2)(i)). (For additional information on the low-volume 
hospital payment adjustment prior to FY 2018, we refer readers to the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 56941 through 56943). For 
additional information on the low-volume hospital payment adjustment 
for FY 2018, we refer readers to the FY 2018 IPPS notice (CMS-1677-N) 
that appeared in the Federal Register on April 26, 2018 (83 FR 18301 
through 18308).)
2. Temporary Changes to the Low-Volume Hospital Definition and Payment 
Adjustment Methodology for FYs 2019 Through 2022
    As discussed earlier, section 50204 of the Bipartisan Budget Act of 
2018 further modified the definition of a low-volume hospital and the 
methodology for calculating the payment adjustment for low-volume 
hospitals for FYs 2019 through 2022. Specifically, the qualifying 
criteria for low-volume hospitals under section 1886(d)(12)(C)(i) of 
the Act were amended to specify that, for FYs 2019 through 2022, a 
subsection (d) hospital qualifies as a low-volume hospital if it is 
more than 15 road miles from another subsection (d) hospital and has 
less than 3,800 total discharges during the fiscal year. Section 
1886(d)(12)(D) of the Act was also amended to provide that, for 
discharges occurring in FYs 2019 through 2022, the Secretary shall 
determine the applicable percentage increase using a continuous, linear 
sliding scale ranging from an additional 25 percent payment adjustment 
for low-volume hospitals with 500 or fewer discharges to a zero percent 
additional payment for low-volume hospitals with more than 3,800 
discharges in the fiscal year. Consistent with the requirements of 
section 1886(d)(12)(C)(ii) of the Act, the term ``discharge'' for 
purposes of these provisions refers to total discharges, regardless of 
payer (that is, Medicare and non-Medicare discharges).
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399), to implement 
this requirement, we specified a continuous, linear sliding scale 
formula to determine the low-volume hospital payment adjustment for FYs 
2019 through 2022 that is similar to the continuous, linear sliding 
scale formula used to determine the low-volume hospital payment 
adjustment originally established by the Affordable Care Act and 
implemented in the regulations at Sec.  412.101(c)(2)(ii) in the FY 
2011 IPPS/LTCH PPS final rule (75 FR 50240 through 50241). Consistent 
with the statute, we provided that qualifying hospitals with 500 or 
fewer total discharges will receive a low-volume hospital payment 
adjustment of 25 percent. For qualifying hospitals with fewer than 
3,800 discharges but more than 500 discharges, the low-volume payment 
adjustment is calculated by subtracting from 25 percent the proportion 
of payments associated with the discharges in excess of 500. As such, 
for qualifying hospitals with fewer than 3,800 total discharges but 
more than 500 total discharges, the low-volume hospital payment 
adjustment for FYs 2019 through 2022 is calculated using the following 
formula:
    Low-Volume Hospital Payment Adjustment = 0.25-[0.25/3300] x (number 
of total discharges-500) = (95/330)-(number of total discharges/
13,200).
    For this purpose, we specified that the ``number of total 
discharges'' is determined as total discharges, which includes Medicare 
and non-Medicare discharges during the fiscal year, based on the 
hospital's most recently submitted cost report. The low-volume hospital 
payment adjustment for FYs 2019 through 2022 is set forth in the 
regulations at 42 CFR 412.101(c)(3).
3. Process for Requesting and Obtaining the Low-Volume Hospital Payment 
Adjustment
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 
and 50414) and subsequent rulemaking (for example, the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41399 through 41401), we discussed the 
process for requesting and obtaining the low-volume hospital payment 
adjustment. Under this previously established process, a hospital makes 
a written request for the low-volume payment adjustment under Sec.  
412.101 to its MAC. This request must contain sufficient documentation 
to establish that the hospital meets the applicable mileage and 
discharge criteria. The MAC will determine if the hospital qualifies as 
a low-volume hospital by reviewing the data the hospital submits with 
its request for low-volume hospital status in addition to other 
available data. Under this approach, a hospital will know in advance 
whether or not it will receive a payment adjustment under the low-
volume hospital policy. The MAC and CMS may review available data such 
as the number of discharges, in addition to the data the hospital 
submits with its request for low-volume hospital status, in order to 
determine whether or not the hospital meets the qualifying criteria. 
(For additional information on our existing process for requesting the 
low-volume hospital payment adjustment, we refer readers to the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41399 through 41401).)
    As explained earlier, for FY 2019 and subsequent fiscal years, the 
discharge determination is made based on the hospital's number of total 
discharges, that is, Medicare and non-Medicare discharges, as was the 
case for FYs 2005 through 2010. Under Sec.  412.101(b)(2)(i) and Sec.  
412.101(b)(2)(iii), a hospital's most recently submitted cost report is 
used to determine if the hospital meets the discharge criterion to 
receive the low-volume payment adjustment in the current year. As 
discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399 and 
41400), we use cost report data to determine if a hospital meets the 
discharge criterion because this is the best available data source that 
includes information on both Medicare and non-Medicare discharges. (For 
FYs 2011 through 2018, the most recently available MedPAR data were 
used to determine the hospital's Medicare discharges because non-
Medicare discharges were not used to determine

[[Page 58803]]

if a hospital met the discharge criterion for those years.) Therefore, 
a hospital should refer to its most recently submitted cost report for 
total discharges (Medicare and non-Medicare) in order to decide whether 
or not to apply for low-volume hospital status for a particular fiscal 
year.
    As also discussed in the FY 2019 IPPS/LTCH PPS final rule, in 
addition to the discharge criterion, for FY 2019 and for subsequent 
fiscal years, eligibility for the low-volume hospital payment 
adjustment is also dependent upon the hospital meeting the applicable 
mileage criterion specified in Sec.  412.101(b)(2)(i) or (iii) for the 
fiscal year. Specifically, to meet the mileage criterion to qualify for 
the low-volume hospital payment adjustment for FY 2021, as was the case 
for FYs 2019 and 2020, a hospital must be located more than 15 road 
miles from the nearest subsection (d) hospital. (We define in Sec.  
412.101(a) the term ``road miles'' to mean ``miles'' as defined in 
Sec.  412.92(c)(1) (75 FR 50238 through 50275 and 50414).) For 
establishing that the hospital meets the mileage criterion, the use of 
a web-based mapping tool as part of the documentation is acceptable. 
The MAC will determine if the information submitted by the hospital, 
such as the name and street address of the nearest hospitals, location 
on a map, and distance from the hospital requesting low-volume hospital 
status, is sufficient to document that it meets the mileage criterion. 
If not, the MAC will follow up with the hospital to obtain additional 
necessary information to determine whether or not the hospital meets 
the applicable mileage criterion.
    We discussed in the proposed rule that in accordance with our 
previously established process, a hospital must make a written request 
for low-volume hospital status that is received by its MAC by September 
1 immediately preceding the start of the Federal fiscal year for which 
the hospital is applying for low-volume hospital status in order for 
the applicable low-volume hospital payment adjustment to be applied to 
payments for its discharges for the fiscal year beginning on or after 
October 1 immediately following the request (that is, the start of the 
Federal fiscal year). We stated that for a hospital whose request for 
low-volume hospital status is received after September 1, if the MAC 
determines the hospital meets the criteria to qualify as a low-volume 
hospital, the MAC will apply the applicable low-volume hospital payment 
adjustment to determine payment for the hospital's discharges for the 
fiscal year, effective prospectively within 30 days of the date of the 
MAC's low-volume status determination.
    Consistent with this previously established process, for FY 2021, 
we proposed that a hospital must submit a written request for low-
volume hospital status to its MAC that includes sufficient 
documentation to establish that the hospital meets the applicable 
mileage and discharge criteria (as described earlier). Consistent with 
historical practice, for FY 2021, we proposed that a hospital's written 
request must be received by its MAC no later than September 1, 2020 in 
order for the low-volume hospital payment adjustment to be applied to 
payments for its discharges beginning on or after October 1, 2020. If a 
hospital's written request for low-volume hospital status for FY 2021 
is received after September 1, 2020, and if the MAC determines the 
hospital meets the criteria to qualify as a low-volume hospital, we 
stated that the MAC would apply the low-volume hospital payment 
adjustment to determine the payment for the hospital's FY 2021 
discharges, effective prospectively within 30 days of the date of the 
MAC's low-volume hospital status determination. We noted in the 
proposed rule that this proposal was consistent with the process for 
requesting and obtaining the low-volume hospital payment adjustment for 
FY 2020 (84 FR 42348 through 42349).
    Under this process, a hospital receiving the low-volume hospital 
payment adjustment for FY 2020 may continue to receive a low-volume 
hospital payment adjustment for FY 2021 without reapplying if it 
continues to meet the applicable mileage and discharge criteria (which, 
as discussed previously, are the same qualifying criteria that apply 
for FY 2020). In this case, a hospital's request can include a 
verification statement that it continues to meet the mileage criterion 
applicable for FY 2021. (Determination of meeting the discharge 
criterion is discussed earlier in this section.) We noted in the 
proposed rule that a hospital must continue to meet the applicable 
qualifying criteria as a low-volume hospital (that is, the hospital 
must meet the applicable discharge criterion and mileage criterion for 
the fiscal year) in order to receive the payment adjustment in that 
fiscal year; that is, low-volume hospital status is not based on a 
``one-time'' qualification (75 FR 50238 through 50275). Consistent with 
historical policy, a hospital must submit its request, including this 
written verification, for each fiscal year for which it seeks to 
receive the low-volume hospital payment adjustment, and in accordance 
with the timeline described earlier.
    Comments: We received comments expressing continued support of the 
low-volume hospital adjustment changes included in the Bipartisan 
Budget Act of 2018.
    Response: While these changes are statutory, we appreciate 
commenters' support.
    As discussed in section I.A.2 of this FY 2021 IPPS/LTCH PPS final 
rule, we are waiving the delayed effective date for this final rule. 
The proposed deadline of September 1, 2020 for receipt of a hospital's 
written request by its MAC in order for the low-volume hospital payment 
adjustment to be applied to payments for its discharges beginning on or 
after October 1, 2020, may occur very near or on the date of issuance 
of this final rule. Due to this unique circumstance, in this final rule 
we are modifying the proposed deadline to September 15, 2020. 
Accordingly, for FY 2021, we are establishing that a hospital's written 
request must be received by its MAC no later than September 15, 2020 in 
order for the low-volume hospital payment adjustment to be applied to 
payments for its discharges beginning on or after October 1, 2020. If a 
hospital's written request for low-volume hospital status for FY 2021 
is received after September 15, 2020, and if the MAC determines the 
hospital meets the criteria to qualify as a low-volume hospital, the 
MAC will apply the low-volume hospital payment adjustment to determine 
the payment for the hospital's FY 2021 discharges, effective 
prospectively within 30 days of the date of the MAC's low-volume 
hospital status determination.

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

    Under the IPPS, an additional payment amount is made to hospitals 
with residents in an approved graduate medical education (GME) program 
in order to reflect the higher indirect patient care costs of teaching 
hospitals relative to nonteaching hospitals. The payment amount is 
determined by use of a statutorily specified adjustment factor. The 
regulations regarding the calculation of this additional payment, known 
as the IME adjustment, are located at Sec.  412.105. We refer readers 
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full 
discussion of the IME adjustment and IME adjustment factor. Section 
1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges 
occurring during FY 2008 and fiscal years thereafter, the IME formula 
multiplier is 1.35. Accordingly, for discharges occurring during FY 
2021,

[[Page 58804]]

the formula multiplier is 1.35. We estimate that application of this 
formula multiplier for the FY 2021 IME adjustment will result in an 
increase in IPPS payment of 5.5 percent for every approximately 10 
percent increase in the hospital's resident-to-bed ratio.
    We did not receive any comments regarding the IME adjustment 
factor, which, as noted earlier, is statutorily required. Accordingly, 
for discharges occurring during FY 2021, the IME formula multiplier is 
1.35.

G. Payment Adjustment for Medicare Disproportionate Share Hospitals 
(DSHs) for FY 2021 (Sec.  412.106)

1. General Discussion
    Section 1886(d)(5)(F) of the Act provides for additional Medicare 
payments to subsection (d) hospitals that serve a significantly 
disproportionate number of low-income patients. The Act specifies two 
methods by which a hospital may qualify for the Medicare 
disproportionate share hospital (DSH) adjustment. Under the first 
method, hospitals that are located in an urban area and have 100 or 
more beds may receive a Medicare DSH payment adjustment if the hospital 
can demonstrate that, during its cost reporting period, more than 30 
percent of its net inpatient care revenues are derived from State and 
local government payments for care furnished to needy patients with low 
incomes. This method is commonly referred to as the ``Pickle method.'' 
The second method for qualifying for the DSH payment adjustment, which 
is the most common, is based on a complex statutory formula under which 
the DSH payment adjustment is based on the hospital's geographic 
designation, the number of beds in the hospital, and the level of the 
hospital's disproportionate patient percentage (DPP). A hospital's DPP 
is the sum of two fractions: The ``Medicare fraction'' and the 
``Medicaid fraction.'' The Medicare fraction (also known as the ``SSI 
fraction'' or ``SSI ratio'') is computed by dividing the number of the 
hospital's inpatient days that are furnished to patients who were 
entitled to both Medicare Part A and Supplemental Security Income (SSI) 
benefits by the hospital's total number of patient days furnished to 
patients entitled to benefits under Medicare Part A. The Medicaid 
fraction is computed by dividing the hospital's number of inpatient 
days furnished to patients who, for such days, were eligible for 
Medicaid, but were not entitled to benefits under Medicare Part A, by 
the hospital's total number of inpatient days in the same period.
    Because the DSH payment adjustment is part of the IPPS, the 
statutory references to ``days'' in section 1886(d)(5)(F) of the Act 
have been interpreted to apply only to hospital acute care inpatient 
days. Regulations located at 42 CFR 412.106 govern the Medicare DSH 
payment adjustment and specify how the DPP is calculated as well as how 
beds and patient days are counted in determining the Medicare DSH 
payment adjustment. Under Sec.  412.106(a)(1)(i), the number of beds 
for the Medicare DSH payment adjustment is determined in accordance 
with bed counting rules for the IME adjustment under Sec.  412.105(b).
    Section 3133 of the Patient Protection and Affordable Care Act, as 
amended by section 10316 of the same Act and section 1104 of the Health 
Care and Education Reconciliation Act (Pub. L. 111-152), added a 
section 1886(r) to the Act that modifies the methodology for computing 
the Medicare DSH payment adjustment. (For purposes of this final rule, 
we refer to these provisions collectively as section 3133 of the 
Affordable Care Act.) Beginning with discharges in FY 2014, hospitals 
that qualify for Medicare DSH payments under section 1886(d)(5)(F) of 
the Act receive 25 percent of the amount they previously would have 
received under the statutory formula for Medicare DSH payments. This 
provision applies equally to hospitals that qualify for DSH payments 
under section 1886(d)(5)(F)(i)(I) of the Act and those hospitals that 
qualify under the Pickle method under section 1886(d)(5)(F)(i)(II) of 
the Act.
    The remaining amount, equal to an estimate of 75 percent of what 
otherwise would have been paid as Medicare DSH payments, reduced to 
reflect changes in the percentage of individuals who are uninsured, is 
available to make additional payments to each hospital that qualifies 
for Medicare DSH payments and that has uncompensated care. The payments 
to each hospital for a fiscal year are based on the hospital's amount 
of uncompensated care for a given time period relative to the total 
amount of uncompensated care for that same time period reported by all 
hospitals that receive Medicare DSH payments for that fiscal year.
    As provided by section 3133 of the Affordable Care Act, section 
1886(r) of the Act requires that, for FY 2014 and each subsequent 
fiscal year, a subsection (d) hospital that would otherwise receive DSH 
payments made under section 1886(d)(5)(F) of the Act receives two 
separately calculated payments. Specifically, section 1886(r)(1) of the 
Act provides that the Secretary shall pay to such subsection (d) 
hospital (including a Pickle hospital) 25 percent of the amount the 
hospital would have received under section 1886(d)(5)(F) of the Act for 
DSH payments, which represents the empirically justified amount for 
such payment, as determined by the MedPAC in its March 2007 Report to 
Congress. We refer to this payment as the ``empirically justified 
Medicare DSH payment.''
    In addition to this empirically justified Medicare DSH payment, 
section 1886(r)(2) of the Act provides that, for FY 2014 and each 
subsequent fiscal year, the Secretary shall pay to such subsection (d) 
hospital an additional amount equal to the product of three factors. 
The first factor is the difference between the aggregate amount of 
payments that would be made to subsection (d) hospitals under section 
1886(d)(5)(F) of the Act if subsection (r) did not apply and the 
aggregate amount of payments that are made to subsection (d) hospitals 
under section 1886(r)(1) of the Act for such fiscal year. Therefore, 
this factor amounts to 75 percent of the payments that would otherwise 
be made under section 1886(d)(5)(F) of the Act.
    The second factor is, for FY 2018 and subsequent fiscal years, 1 
minus the percent change in the percent of individuals who are 
uninsured, as determined by comparing the percent of individuals who 
were uninsured in 2013 (as estimated by the Secretary, based on data 
from the Census Bureau or other sources the Secretary determines 
appropriate, and certified by the Chief Actuary of CMS), and the 
percent of individuals who were uninsured in the most recent period for 
which data are available (as so estimated and certified), minus 
statutory adjustment of 0.2 percentage point for FYs 2018 and 2019.
    The third factor is a percent that, for each subsection (d) 
hospital, represents the quotient of the amount of uncompensated care 
for such hospital for a period selected by the Secretary (as estimated 
by the Secretary, based on appropriate data), including the use of 
alternative data where the Secretary determines that alternative data 
are available which are a better proxy for the costs of subsection (d) 
hospitals for treating the uninsured, and the aggregate amount of 
uncompensated care for all subsection (d) hospitals that receive a 
payment under section 1886(r) of the Act. Therefore, this third factor 
represents a hospital's uncompensated care amount for a given time 
period relative to the uncompensated care amount for that same time 
period for all

[[Page 58805]]

hospitals that receive Medicare DSH payments in the applicable fiscal 
year, expressed as a percent.
    For each hospital, the product of these three factors represents 
its additional payment for uncompensated care for the applicable fiscal 
year. We refer to the additional payment determined by these factors as 
the ``uncompensated care payment.''
    Section 1886(r) of the Act applies to FY 2014 and each subsequent 
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 
through 50647) and the FY 2014 IPPS interim final rule with comment 
period (78 FR 61191 through 61197), we set forth our policies for 
implementing the required changes to the Medicare DSH payment 
methodology made by section 3133 of the Affordable Care Act for FY 
2014. In those rules, we noted that, because section 1886(r) of the Act 
modifies the payment required under section 1886(d)(5)(F) of the Act, 
it affects only the DSH payment under the operating IPPS. It does not 
revise or replace the capital IPPS DSH payment provided under the 
regulations at 42 CFR part 412, subpart M, which were established 
through the exercise of the Secretary's discretion in implementing the 
capital IPPS under section 1886(g)(1)(A) of the Act.
    Finally, section 1886(r)(3) of the Act provides that there shall be 
no administrative or judicial review under section 1869, section 1878, 
or otherwise of any estimate of the Secretary for purposes of 
determining the factors described in section 1886(r)(2) of the Act or 
of any period selected by the Secretary for the purpose of determining 
those factors. Therefore, there is no administrative or judicial review 
of the estimates developed for purposes of applying the three factors 
used to determine uncompensated care payments, or the periods selected 
in order to develop such estimates.
2. Eligibility for Empirically Justified Medicare DSH Payments and 
Uncompensated Care Payments
    As explained earlier, the payment methodology under section 3133 of 
the Affordable Care Act applies to ``subsection (d) hospitals'' that 
would otherwise receive a DSH payment made under section 1886(d)(5)(F) 
of the Act. Therefore, hospitals must receive empirically justified 
Medicare DSH payments in a fiscal year in order to receive an 
additional Medicare uncompensated care payment for that year. 
Specifically, section 1886(r)(2) of the Act states that, in addition to 
the payment made to a subsection (d) hospital under section 1886(r)(1) 
of the Act, the Secretary shall pay to such subsection (d) hospitals an 
additional amount. Because section 1886(r)(1) of the Act refers to 
empirically justified Medicare DSH payments, the additional payment 
under section 1886(r)(2) of the Act is limited to hospitals that 
receive empirically justified Medicare DSH payments in accordance with 
section 1886(r)(1) of the Act for the applicable fiscal year.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 
2014 IPPS interim final rule with comment period (78 FR 61193), we 
provided that hospitals that are not eligible to receive empirically 
justified Medicare DSH payments in a fiscal year will not receive 
uncompensated care payments for that year. We also specified that we 
would make a determination concerning eligibility for interim 
uncompensated care payments based on each hospital's estimated DSH 
status for the applicable fiscal year (using the most recent data that 
are available). We indicated that our final determination on the 
hospital's eligibility for uncompensated care payments will be based on 
the hospital's actual DSH status at cost report settlement for that 
payment year.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and in the 
rulemaking for subsequent fiscal years, we have specified our policies 
for several specific classes of hospitals within the scope of section 
1886(r) of the Act. In this FY 2021 IPPS/LTCH PPS final rule, we 
discuss our specific policies regarding eligibility to receive 
empirically justified Medicare DSH payments and uncompensated care 
payments for FY 2021 with respect to the following hospitals:
     Subsection (d) Puerto Rico hospitals that are eligible for 
DSH payments also are eligible to receive empirically justified 
Medicare DSH payments and uncompensated care payments under the payment 
methodology at section 1886(r) (78 FR 50623 and 79 FR 50006).
     Maryland hospitals are not eligible to receive empirically 
justified Medicare DSH payments and uncompensated care payments under 
the payment methodology of section 1886(r) of the Act because they are 
not paid under the IPPS. As discussed in the FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41402 through 41403), CMS and the State have entered 
into an agreement to govern payments to Maryland hospitals under a new 
payment model, the Maryland Total Cost of Care (TCOC) Model, which 
began on January 1, 2019. Under the Maryland TCOC Model, Maryland 
hospitals will not be paid under the IPPS in FY 2021, and will be 
ineligible to receive empirically justified Medicare DSH payments and 
uncompensated care payments under section 1886(r) of the Act.
     Sole community hospitals (SCHs) that are paid under their 
hospital-specific rate are not eligible for Medicare DSH payments. SCHs 
that are paid under the IPPS Federal rate receive interim payments 
based on what we estimate and project their DSH status to be prior to 
the beginning of the Federal fiscal year (based on the best available 
data at that time) subject to settlement through the cost report, and 
if they receive interim empirically justified Medicare DSH payments in 
a fiscal year, they also will receive interim uncompensated care 
payments for that fiscal year on a per discharge basis, subject as well 
to settlement through the cost report. Final eligibility determinations 
will be made at the end of the cost reporting period at settlement, and 
both interim empirically justified Medicare DSH payments and 
uncompensated care payments will be adjusted accordingly (78 FR 50624 
and 79 FR 50007).
     Medicare-dependent, small rural hospitals (MDHs) are paid 
based on the IPPS Federal rate or, if higher, the IPPS Federal rate 
plus 75 percent of the amount by which the Federal rate is exceeded by 
the updated hospital-specific rate from certain specified base years 
(76 FR 51684). The IPPS Federal rate that is used in the MDH payment 
methodology is the same IPPS Federal rate that is used in the SCH 
payment methodology. Section 50205 of the Bipartisan Budget Act of 2018 
(Pub. L. 115-123), enacted on February 9, 2018, extended the MDH 
program for discharges on or after October 1, 2017, through September 
30, 2022. Because MDHs are paid based on the IPPS Federal rate, they 
continue to be eligible to receive empirically justified Medicare DSH 
payments and uncompensated care payments if their DPP is at least 15 
percent, and we apply the same process to determine MDHs' eligibility 
for empirically justified Medicare DSH and uncompensated care payments 
as we do for all other IPPS hospitals. Due to the extension of the MDH 
program, MDHs will continue to be paid based on the IPPS Federal rate 
or, if higher, the IPPS Federal rate plus 75 percent of the amount by 
which the Federal rate is exceeded by the updated hospital-specific 
rate from certain specified base years. Accordingly, we will continue 
to make a determination concerning eligibility for interim 
uncompensated care payments based on each hospital's estimated DSH 
status for the applicable fiscal year (using the most recent data that 
are available). Our final

[[Page 58806]]

determination on the hospital's eligibility for uncompensated care 
payments will be based on the hospital's actual DSH status at cost 
report settlement for that payment year. In addition, as we do for all 
IPPS hospitals, we will calculate a Factor 3 and an uncompensated care 
payment amount for all MDHs, regardless of whether they are projected 
to be eligible for Medicare DSH payments during the fiscal year, but 
the denominator of Factor 3 of the uncompensated care payment 
methodology will be based only on the uncompensated care data from the 
hospitals that we have projected to be eligible for Medicare DSH 
payments during the fiscal year.
     IPPS hospitals that elect to participate in the Bundled 
Payments for Care Improvement Advanced Initiative (BPCI Advanced) model 
starting October 1, 2018, will continue to be paid under the IPPS and, 
therefore, are eligible to receive empirically justified Medicare DSH 
payments and uncompensated care payments. For further information 
regarding the BPCI Advanced model, we refer readers to the CMS website 
at: https://innovation.cms.gov/initiatives/bpci-advanced/.
     IPPS hospitals that are participating in the Comprehensive 
Care for Joint Replacement Model (80 FR 73300) continue to be paid 
under the IPPS and, therefore, are eligible to receive empirically 
justified Medicare DSH payments and uncompensated care payments.
     Hospitals participating in the Rural Community Hospital 
Demonstration Program are not eligible to receive empirically justified 
Medicare DSH payments and uncompensated care payments under section 
1886(r) of the Act because they are not paid under the IPPS (78 FR 
50625 and 79 FR 50008). The Rural Community Hospital Demonstration 
Program was originally authorized for a 5-year period by section 410A 
of the Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) (Pub. L. 108-173), and extended for another 5-year period 
by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 114-
255). The period of performance for this 5-year extension period ended 
December 31, 2016. Section 15003 of the 21st Century Cures Act (Pub. L. 
114-255), enacted December 13, 2016, again amended section 410A of 
Public Law 108-173 to require a 10-year extension period (in place of 
the 5-year extension required by the Affordable Care Act), therefore 
requiring an additional 5-year participation period for the 
demonstration program. Section 15003 of Public Law 114-255 also 
required a solicitation for applications for additional hospitals to 
participate in the demonstration program. At the time of issuance of 
this final rule, there are 22 hospitals that will be participating in 
the demonstration program in FY 2021. Under the payment methodology 
that applies during the second 5 years of the extension period under 
the demonstration program, participating hospitals do not receive 
empirically justified Medicare DSH payments, and they are also excluded 
from receiving interim and final uncompensated care payments.
    Comment: A commenter stated that their hospital has recently 
submitted its fiscal year end 12/31/2019 cost report and that due to 
the Medicaid Expansion in their respective state, the hospital believed 
it would qualify for DSH and uncompensated care payments in FY 2021 
based on the information reflected in this submission. However, the 
commenter noted that the FY 2021 NPRM DSH Public Use File lists the 
hospital as a ``No'' in the column for projected DSH eligibility 
because the data used in the proposed rule was based on a cost report 
year pre-Medicaid expansion. The commenter asks CMS to consider 
updating their hospital's DSH eligibility status and using its recently 
submitted as-filed cost report in the final rule's FY 2021 DSH PUF File 
for purposes of projected DSH eligibility.
    Response: The regulation located at 42 CFR 412.106 governs 
eligibility for the Medicare DSH payment adjustment and specifies how 
the disproportionate patient percentage is calculated. The DSH public 
use file does not determine DSH eligibility. A hospital's eligibility 
to receive empirically justified DSH payments, can change throughout 
the year as the MACs receive and review updated data.
3. Empirically Justified Medicare DSH Payments
    As we have discussed earlier, section 1886(r)(1) of the Act 
requires the Secretary to pay 25 percent of the amount of the Medicare 
DSH payment that would otherwise be made under section 1886(d)(5)(F) of 
the Act to a subsection (d) hospital. Because section 1886(r)(1) of the 
Act merely requires the program to pay a designated percentage of these 
payments, without revising the criteria governing eligibility for DSH 
payments or the underlying payment methodology, we stated in the FY 
2014 IPPS/LTCH PPS final rule that we did not believe that it was 
necessary to develop any new operational mechanisms for making such 
payments. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50626), we implemented this provision by advising MACs to simply adjust 
the interim claim payments to the requisite 25 percent of what would 
have otherwise been paid. We also made corresponding changes to the 
hospital cost report so that these empirically justified Medicare DSH 
payments can be settled at the appropriate level at the time of cost 
report settlement. We provided more detailed operational instructions 
and cost report instructions following issuance of the FY 2014 IPPS/
LTCH PPS final rule that are available on the CMS website at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.
4. Uncompensated Care Payments
    As we discussed earlier, section 1886(r)(2) of the Act provides 
that, for each eligible hospital in FY 2014 and subsequent years, the 
uncompensated care payment is the product of three factors. These three 
factors represent our estimate of 75 percent of the amount of Medicare 
DSH payments that would otherwise have been paid, an adjustment to this 
amount for the percent change in the national rate of uninsurance 
compared to the rate of uninsurance in 2013, and each eligible 
hospital's estimated uncompensated care amount relative to the 
estimated uncompensated care amount for all eligible hospitals. In this 
section of this final rule, we discuss the data sources and 
methodologies for computing each of these factors, our final policies 
for FYs 2014 through 2020, and the policies we are finalizing for FY 
2021.
a. Calculation of Factor 1 for FY 2021
    Section 1886(r)(2)(A) of the Act establishes Factor 1 in the 
calculation of the uncompensated care payment. Section 1886(r)(2)(A) of 
the Act states that this factor is equal to the difference between: (1) 
The aggregate amount of payments that would be made to subsection (d) 
hospitals under section 1886(d)(5)(F) of the Act if section 1886(r) of 
the Act did not apply for such fiscal year (as estimated by the 
Secretary); and (2) the aggregate amount of payments that are made to 
subsection (d) hospitals under section 1886(r)(1) of the Act for such 
fiscal year (as so estimated). Therefore, section 1886(r)(2)(A)(i) of 
the Act represents the estimated Medicare DSH payments that would have 
been made under section 1886(d)(5)(F) of the Act if section 1886(r) of 
the Act did not apply for such fiscal year. Under a prospective payment 
system, we would not know the precise aggregate Medicare DSH payment 
amount that would be paid for

[[Page 58807]]

a Federal fiscal year until cost report settlement for all IPPS 
hospitals is completed, which occurs several years after the end of the 
Federal fiscal year. Therefore, section 1886(r)(2)(A)(i) of the Act 
provides authority to estimate this amount, by specifying that, for 
each fiscal year to which the provision applies, such amount is to be 
estimated by the Secretary. Similarly, section 1886(r)(2)(A)(ii) of the 
Act represents the estimated empirically justified Medicare DSH 
payments to be made in a fiscal year, as prescribed under section 
1886(r)(1) of the Act. Again, section 1886(r)(2)(A)(ii) of the Act 
provides authority to estimate this amount.
    Therefore, Factor 1 is the difference between our estimates of: (1) 
The amount that would have been paid in Medicare DSH payments for the 
fiscal year, in the absence of the new payment provision; and (2) the 
amount of empirically justified Medicare DSH payments that are made for 
the fiscal year, which takes into account the requirement to pay 25 
percent of what would have otherwise been paid under section 
1886(d)(5)(F) of the Act. In other words, this factor represents our 
estimate of 75 percent (100 percent minus 25 percent) of our estimate 
of Medicare DSH payments that would otherwise be made, in the absence 
of section 1886(r) of the Act, for the fiscal year.
    As we did for FY 2020, in this FY 2021 IPPS/LTCH PPS final rule, in 
order to determine Factor 1 in the uncompensated care payment formula 
for FY 2021, we proposed to continue the policy established in the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50628 through 50630) and in the FY 
2014 IPPS interim final rule with comment period (78 FR 61194) of 
determining Factor 1 by developing estimates of both the aggregate 
amount of Medicare DSH payments that would be made in the absence of 
section 1886(r)(1) of the Act and the aggregate amount of empirically 
justified Medicare DSH payments to hospitals under 1886(r)(1) of the 
Act. Consistent with the policy that has applied in previous years, 
these estimates will not be revised or updated subsequent to the 
publication of our final projections in this FY 2021 IPPS/LTCH PPS 
final rule.
    Therefore, in order to determine the two elements of Factor 1 for 
FY 2021 (Medicare DSH payments prior to the application of section 
1886(r)(1) of the Act, and empirically justified Medicare DSH payments 
after application of section 1886(r)(1) of the Act), for this final 
rule, we used the most recently available projections of Medicare DSH 
payments for the fiscal year, as calculated by CMS' Office of the 
Actuary using the most recently filed Medicare hospital cost reports 
with Medicare DSH payment information and the most recent Medicare DSH 
patient percentages and Medicare DSH payment adjustments provided in 
the IPPS Impact File. The determination of the amount of DSH payments 
is partially based on the Office of the Actuary's Part A benefits 
projection model. One of the results of this model is inpatient 
hospital spending. Projections of DSH payments require projections for 
expected increases in utilization and case-mix. The assumptions that 
were used in making these projections and the resulting estimates of 
DSH payments for FY 2018 through FY 2021 are discussed in the table 
titled ``Factors Applied for FY 2018 through FY 2021 to Estimate 
Medicare DSH Expenditures Using FY 2017 Baseline.''
    For purposes of calculating our proposal for Factor 1 and modeling 
the impact of the FY 2021 IPPS/LTCH PPS proposed rule, we used the 
Office of the Actuary's December 2019 Medicare DSH estimates, which 
were based on data from the September 2019 update of the Medicare 
Hospital Cost Report Information System (HCRIS) and the FY 2020 IPPS/
LTCH PPS final rule IPPS Impact File, published in conjunction with the 
publication of the FY 2020 IPPS/LTCH PPS final rule. Because SCHs that 
are projected to be paid under their hospital-specific rate are 
excluded from the application of section 1886(r) of the Act, these 
hospitals also were excluded from the December 2019 Medicare DSH 
estimates. Furthermore, because section 1886(r) of the Act specifies 
that the uncompensated care payment is in addition to the empirically 
justified Medicare DSH payment (25 percent of DSH payments that would 
be made without regard to section 1886(r) of the Act), Maryland 
hospitals, which are not eligible to receive DSH payments, were also 
excluded from the Office of the Actuary's December 2019 Medicare DSH 
estimates. The 27 hospitals that were then participating in the Rural 
Community Hospital Demonstration Program were also excluded from these 
estimates because, under the payment methodology that applies during 
the second 5 years of the extension period, these hospitals are not 
eligible to receive empirically justified Medicare DSH payments or 
interim and final uncompensated care payments.
    For the proposed rule, using the data sources as previously 
discussed, the Office of the Actuary's December 2019 estimate for 
Medicare DSH payments for FY 2021 without regard to the application of 
section 1886(r)(1) of the Act, was approximately $14.004 billion. 
Therefore, also based on the December 2019 estimate, the estimate of 
empirically justified Medicare DSH payments for FY 2021, with the 
application of section 1886(r)(1) of the Act, was approximately $3.840 
billion (or 25 percent of the total amount of estimated Medicare DSH 
payments for FY 2021). Under Sec.  412.106(g)(1)(i) of the regulations, 
Factor 1 is the difference between these two estimates of the Office of 
the Actuary. Therefore, in the proposed rule, we proposed that Factor 1 
for FY 2021 would be $ 11,518,901,035.84, which was equal to 75 percent 
of the total amount of estimated Medicare DSH payments for FY 2021 
($15,358,534,714.46 minus $3,839,633,678.61). In the FY 20201 IPPS/LTCH 
PPS proposed rule (85 FR 32748), we noted that consistent with our 
approach in previous rulemakings, OACT intended to use more recent data 
that may become available for purposes of projecting the final Factor 1 
estimates for the FY 2021 IPPS/LTCH PPS final rule.
    We noted in the FY 2021 IPPS/LTCH PPS proposed rule, that the 
Factor 1 estimates for final rules are generally consistent with the 
economic assumptions and actuarial analysis used to develop the 
President's Budget estimates under current law, and the Factor 1 
estimates for the final rule are generally consistent with those used 
for the Midsession Review of the President's Budget. As we have in the 
past, for additional information on the development of the President's 
Budget, we refer readers to the OMB website at: https://www.whitehouse.gov/omb/budget. We recognized that our reliance on the 
economic assumptions and actuarial analysis used to develop the 
President's Budget in estimating Factor 1 has an impact on stakeholders 
who wish to replicate the Factor 1 calculation, such as modelling the 
relevant Medicare Part A portion of the budget, but indicated that we 
believe commenters are able to meaningfully comment on our estimate of 
Factor 1 without replicating the President's Budget.
    For a general overview of the principal steps involved in 
projecting future inpatient costs and utilization, we referred readers 
to the ``2019 Annual Report of the Boards of Trustees of the Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds'' available on the CMS website at: https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
ReportsTrustFunds/

[[Page 58808]]

index.html?redirect=/reportstrustfunds/ under ``Downloads.'' We noted 
that the annual reports of the Medicare Boards of Trustees to Congress 
represent the Federal Government's official evaluation of the financial 
status of the Medicare Program. The actuarial projections contained in 
these reports are based on numerous assumptions regarding future trends 
in program enrollment, utilization and costs of health care services 
covered by Medicare, as well as other factors affecting program 
expenditures. In addition, although the methods used to estimate future 
costs based on these assumptions are complex, they are subject to 
periodic review by independent experts to ensure their validity and 
reasonableness.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we referred readers to 
the 2017 Actuarial Report on the Financial Outlook for Medicaid for a 
discussion of general issues regarding Medicaid projections. (available 
at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport).
    Comment: As in previous years, a common concern and/or request 
expressed by some commenters was the need for greater transparency in 
the methodology used by CMS and OACT to calculate Factor 1; several 
commenters specifically requested that a detailed description of the 
methodology be made public. In relation to this, a commenter asserted 
that the lack of opportunity afforded to hospitals to review the data 
used in rulemaking is in violation of the Administrative Procedure Act 
and expressed concerns about the lack of transparency in how Factor 1 
is calculated, arguing that hospitals cannot meaningfully comment on 
the methodology given the lack of details. In particular, this 
commenter asserted that the proposed rule neither explained the 
assumption that Medicaid expansion would draw enrollees who are 
healthier than the average Medicaid beneficiary and, by extension, 
would have fewer hospital visits, nor described the data CMS used in 
making this assumption.
    Response: We thank the commenters for their input. We disagree with 
commenters' assertion regarding the lack of transparency with respect 
to the methodology and assumptions used in the calculation of Factor 1. 
As explained in the FY 2021 IPPS/LTCH PPS proposed rule, and in this 
section of this final rule, we have been and continue to be transparent 
about the methodology and data used to estimate Factor 1. Regarding the 
commenters who reference the Administrative Procedure Act, we note that 
under the Administrative Procedure Act, a proposed rule is required to 
include either the terms or substance of the proposed rule or a 
description of the subjects and issues involved. In this case, the FY 
2021 IPPS/LTCH PPS proposed rule did include a detailed discussion of 
our proposed Factor 1 methodology and the data sources that would be 
used in making our final estimate.
    To provide context, we note that Factor 1 is not estimated in 
isolation from other projections made by OACT. The Factor 1 estimates 
for proposed rules are generally consistent with the economic 
assumptions and actuarial analysis used to develop the President's 
Budget estimates under current law, and the Factor 1 estimates in this 
final rule are generally consistent with those used for the ``2020 
Annual Report of the Boards of Trustees of the Federal Hospital 
Insurance and Federal Supplementary Medical Insurance Trust Funds'' 
available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html under ``Downloads.'' For additional 
information on the development of the President's Budget, we refer 
readers to the OMB website at: https://www.whitehouse.gov/omb/budget. 
We recognize that our reliance on the economic assumptions and 
actuarial analysis used to develop the President's Budget and the 
Medicare Trustees Report in estimating Factor 1 has an impact on 
stakeholders who wish to replicate the Factor 1 calculation, such as 
modelling the relevant Medicare Part A portion of the budget, but we 
believe commenters are able to meaningfully comment on our proposed 
estimate of Factor 1 without replicating the budget.
    For a general overview of the principal steps involved in 
projecting future inpatient costs and utilization, we refer readers to 
the 2020 Medicare Trustees Report. We note that the annual reports of 
the Medicare Boards of Trustees to Congress represent the Federal 
Government's official evaluation of the financial status of the 
Medicare Program. The actuarial projections contained in these reports 
are based on numerous assumptions regarding future trends in program 
enrollment, utilization and costs of health care services covered by 
Medicare, as well as other factors affecting program expenditures. In 
addition, although the methods used to estimate future costs based on 
these assumptions are complex, they are subject to periodic review by 
independent experts to ensure their validity and reasonableness.
    We also refer readers to the 2018 Actuarial Report on the Financial 
Outlook for Medicaid which is available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2018.pdf for a discussion of 
general issues regarding Medicaid projections. Additionally, as 
described in more detail later in this section, in the FY 2021 IPPS/
LTCH PPS proposed rule, we included information regarding the data 
sources, methods, and assumptions employed by the actuaries in 
determining the OACT's estimate of Factor 1. In summary, we indicated 
the historical HCRIS data update OACT used to identify Medicare DSH 
payments, we explained that the most recent Medicare DSH payment 
adjustments provided in the IPPS Impact File were used, and we provided 
the components of all update factors that were applied to the 
historical data to estimate the Medicare DSH payments for the upcoming 
fiscal year, along with the associated rationale and assumptions. This 
discussion also included a description of the ``Other'' and 
``Discharges'' assumptions, as well as additional information regarding 
how we address the Medicaid and CHIP expansion.
    Regarding the commenters' requests for further information on our 
assumptions regarding Medicaid expansion on the Medicaid population, we 
provide a discussion of more recent estimates and assumptions regarding 
Medicaid expansion as part of the discussion of the final Factor 1 for 
FY 2021, which also incorporates the estimated impact of the COVID-19 
pandemic.
    Comment: The majority of comments on Factor 1 raised concerns 
regarding the adverse economic effects resulting from the COVID-19 
Public Health Emergency (PHE) and the impact on the estimate of Factor 
1. A common concern raised by commenters was the discrepancy between 
the current macroeconomic conditions and the actual inputs used to 
estimate Factor 1 in the FY 2021 IPPS/LTCH PPS proposed rule. A 
commenter pointed out that the Factor 1 estimate used in the FY 2021 
Final Rule would normally be generally consistent with the assumptions 
and projections in the Midsession Review of the President's Budget; 
however, the commenter noted that the Midsession Review for FY 2021 did 
not report updated economic assumptions and hence would not account for 
the impact that the COVID-

[[Page 58809]]

19 PHE has had and will continue to have on empirically justified DSH 
payments. This commenter stated that even in the absence of updated 
Midsession Review projections, OACT remains obligated to account for 
COVID-19 in projecting the amount of empirically justified Medicare DSH 
payments by using the latest economic forecasts from reliable sources. 
As in years past, this commenter, as well as many others, also 
emphasized the importance of the ``Other'' factor used in the 
calculation of Factor 1 and highlighted the impact that the increase in 
Medicaid enrollment associated with the adverse economic effects of the 
COVID-19 PHE would have on this factor. A handful of commenters also 
requested that CMS clarify why the ``Other'' factor, as well as the 
case-mix and discharge factors, have decreased as compared to previous 
years. A commenter believed that there would be increasing Medicaid 
utilization due to the pandemic and referred to the funding for COVID-
19 testing and treatment for uninsured individuals made available under 
the Families First Coronavirus Response Act and CARES Act. This same 
commenter also believed staggering levels of unemployment would 
contribute to increased Medicaid utilization until the pandemic passes 
and the economy stabilizes.
    Commenters highlighted the proposed decrease in Factor 1 of $919 
million from FY 2020 to FY 2021 and cited several data sources that 
they believe would indicate that such a decrease in estimated DSH 
payments would be inconsistent with the current economic situation. For 
example, several commenters pointed out that, according to the 
Congressional Budget Office (CBO), the unemployment rate is projected 
to be 9.5 percent by the end of FY 2021, which in turn would indicate 
an increase in Medicaid enrollment. Many commenters also cited 
estimates by the Urban Institute, which estimated that 12 to 21 million 
people would become eligible for Medicaid as a result of losing 
Employer-Sponsored Insurance (ESI) due to the COVID-19 PHE. Commenters 
also referenced a Kaiser Family Foundation estimate that 27 million 
would lose ESI as of May 2, 2020, with nearly half being eligible for 
Medicaid. A few commenters also referenced estimates generated by 
independent consulting firms, one of which predicted Medicaid 
enrollment would increase by 30 million as a result of the adverse 
economic effects from the COVID-19 PHE. To this end, many stakeholders 
urged CMS to use more recent, or alternative data sources, to account 
for the projected increase in Medicaid beneficiaries in the calculation 
of Factor 1.
    A commenter also observed that due to the COVID-19 PHE, 
disproportionate patient percentages (DPPs) would be expected to 
increase nationwide in FY 2021, increasing the projected amount of 
traditional DSH payments above the levels originally projected based on 
the economic assumptions and actuarial analysis used in the President's 
Budget. Finally, a handful of commenters raised the issue of deferral 
of inpatient non-emergency services due to the COVID-19 PHE, suggesting 
that these services would likely be shifted to next year, and 
expressing concern about the impact that this shift might have on the 
calculation of Factor 1 for FY 2021. Some commenters suggested that the 
agency take into account the shift in hospital payer mix resulting from 
the COVID-19 PHE, as well as hospital case volume degradation, when 
updating its estimates of DSH payments.
    Response: We have taken into consideration the concerns commenters 
have raised as a result of the COVID-19 PHE in making our projection of 
Factor 1 for this FY 2021 IPPS/LTCH PPS final rule. We thank the 
commenters for their input on impact projections, such as the impact on 
Medicaid enrollment from the COVID-19 PHE. In updating our estimate of 
Factor 1, we considered, as appropriate, the same set of factors that 
we used in the proposed rule, as updated to account for the unique 
economic situation presented by the COVID-19 PHE. We note that the 
estimated increases in new Medicaid enrollees used for Factor 1 are 
generally consistent with the updated Factor 2 calculation described in 
the next section. The updated factors for ``Discharges'' and ''Case 
Mix'' incorporate the latest estimates from OACT of the impact of 
COVID-19 on the Medicare program. We discuss further details on the 
updated Factor 1 estimate and data sources in this section of the rule 
as part of the discussion of the final Factor 1 estimate for FY 2021.
    After consideration of the public comments we received, we are 
finalizing, as proposed, the methodology for calculating Factor 1 for 
FY 2021. We discuss the resulting Factor 1 amount for FY 2021 in this 
section. For this final rule, the OACT used the most recently submitted 
Medicare cost report data from the March 31, 2020 update of HCRIS to 
identify Medicare DSH payments and the most recent Medicare DSH payment 
adjustments provided in the Impact File published in conjunction with 
the publication of the FY 2020 IPPS/LTCH PPS final rule and applied 
update factors and assumptions for future changes in utilization and 
case-mix to estimate Medicare DSH payments for the upcoming fiscal 
year. The July 2020 OACT estimate for Medicare DSH payments for FY 
2021, without regard to the application of section 1886(r)(1) of the 
Act, was approximately $15.171 billion. This estimate excluded Maryland 
hospitals participating in the Maryland All-Payer Model, hospitals 
participating in the Rural Community Hospital Demonstration, and SCHs 
paid under their hospital-specific payment rate. Therefore, based on 
the July 2020 estimate, the estimate of empirically justified Medicare 
DSH payments for FY 2021, with the application of section 1886(r)(1) of 
the Act, was approximately $3.793 billion (or 25 percent of the total 
amount of estimated Medicare DSH payments for FY 2021). Under Sec.  
412.106(g)(1)(i) of the regulations, Factor 1 is the difference between 
these two estimates of the OACT. Therefore, in this final rule, Factor 
1 for FY 2021 is $11,378,005,107.01, which is equal to 75 percent of 
the total amount of estimated Medicare DSH payments for FY 2021 
($15,170,673,476.01 minus $ 3,792,668,369.00). The Office of the 
Actuary's final estimates for FY 2021 began with a baseline of $14.004 
billion in Medicare DSH expenditures for FY 2017. The following table 
shows the factors applied to update this baseline through the current 
estimate for FY 2021:

[[Page 58810]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.208

    In this table, the discharges column shows the changes in the 
number of Medicare fee-for-service (FFS) inpatient hospital discharges. 
The figures for FY 2018 and FY 2019 are based on Medicare claims data 
that have been adjusted by a completion factor to account for 
incomplete claims data. The discharge figure for FY 2020 is based on 
preliminary data for 2020. The discharge figure for FY 2021 is an 
assumption based on recent trends recovering back to the long-term 
trend and assumptions related to how many beneficiaries will be 
enrolled in Medicare Advantage (MA) plans. The discharge figures for 
2020 and 2021 include the estimated impact of the COVID-19 pandemic. 
The case-mix column shows the estimated changes in case-mix for IPPS 
hospitals. The case-mix figures for FY 2018 and FY 2019 are based on 
actual data adjusted by a completion factor. The FY 2020 increase is 
based on preliminary data. The FY 2021 figure is an estimate based on 
the recommendation of the 2010-2011 Medicare Technical Review Panel. 
The case-mix factor figures for 2020 and 2021 have also been adjusted 
for the estimated impact of the COVID-19 pandemic. The ``Other'' column 
shows the increase in other factors that contribute to the Medicare DSH 
estimates. These factors include the difference between the total 
inpatient hospital discharges and the IPPS discharges, and various 
adjustments to the payment rates that have been included over the years 
but are not reflected in the other columns (such as the change in rates 
for the 2-midnight stay policy and the 20 percent add on for COVID-19 
discharges). In addition, the ``Other'' column includes a factor for 
the Medicaid expansion due to the Affordable Care Act. The factor for 
Medicaid expansion was developed using public information and 
statements for each State regarding its intent to implement the 
expansion. Based on this information, it is assumed that 55 percent of 
all individuals who were potentially newly eligible Medicaid enrollees 
in 2018 and 2019 resided in States that had elected to expand Medicaid 
eligibility, and 60 percent of all individuals who were potentially 
newly eligible Medicaid enrollees in 2020 and thereafter, resided in 
States that had elected to expand Medicaid eligibility. In the future, 
these assumptions may change based on actual participation by States. 
The ``Other'' column also includes the estimated impacts on Medicaid 
enrollment from the pandemic. We note that it is estimated that 
Medicaid enrollment increased by 4.0 percent in FY 2020 and will 
increase by an additional 0.3 percent in FY 2021. For a discussion of 
general issues regarding Medicaid projections, we refer readers to the 
2018 Actuarial Report on the Financial Outlook for Medicaid, which is 
available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2018.pdf. We note that, in developing their estimates of 
the effect of Medicaid expansion on Medicare DSH expenditures, our 
actuaries have assumed that the new Medicaid enrollees are healthier 
than the average Medicaid recipient and, therefore, use fewer hospital 
services. Specifically, based on data from the President's Budget, the 
OACT assumed per capita spending for Medicaid beneficiaries who 
enrolled due to the expansion to be 81 percent of the average per 
capita expenditures for a pre-expansion Medicaid beneficiary due to the 
better health of these beneficiaries. We note that this is an updated 
assumption based on more recent data compared to the data available at 
the time of the proposed rule. This same assumption was used for the 
new Medicaid beneficiaries who enrolled in 2020 and 2021 due to the 
COVID-19 pandemic. This assumption is consistent with recent internal 
estimates of Medicaid per capita spending pre-expansion and post-
expansion.
    The following table shows the factors that are included in the 
``Update'' column of the previous table:

[[Page 58811]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.209

b. Calculation of Factor 2 for FY 2021
(1) Background
    Section 1886(r)(2)(B) of the Act establishes Factor 2 in the 
calculation of the uncompensated care payment. Section 
1886(r)(2)(B)(ii) of the Act provides that, for FY 2018 and subsequent 
fiscal years, the second factor is 1 minus the percent change in the 
percent of individuals who are uninsured, as determined by comparing 
the percent of individuals who were uninsured in 2013 (as estimated by 
the Secretary, based on data from the Census Bureau or other sources 
the Secretary determines appropriate, and certified by the Chief 
Actuary of CMS) and the percent of individuals who were uninsured in 
the most recent period for which data are available (as so estimated 
and certified), minus a statutory adjustment of 0.2 percentage point 
for FYs 2018 and 2019. In FY 2020 and subsequent fiscal years, there is 
no longer a reduction. We note that, unlike section 1886(r)(2)(B)(i) of 
the Act, which governed the calculation of Factor 2 for FYs 2014, 2015, 
2016, and 2017, section 1886(r)(2)(B)(ii) of the Act permits the use of 
a data source other than the CBO estimates to determine the percent 
change in the rate of uninsurance beginning in FY 2018. In addition, 
for FY 2018 and subsequent years, the statute does not require that the 
estimate of the percent of individuals who are uninsured be limited to 
individuals who are under 65 years of age.
    As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38197), in our analysis of a potential data source for the rate of 
uninsurance for purposes of computing Factor 2 in FY 2018, we 
considered the following: (a) The extent to which the source accounted 
for the full U.S. population; (b) the extent to which the source 
comprehensively accounted for both public and private health insurance 
coverage in deriving its estimates of the number of uninsured; (c) the 
extent to which the source utilized data from the Census Bureau; (d) 
the timeliness of the estimates; (e) the continuity of the estimates 
over time; (f) the accuracy of the estimates; and (g) the availability 
of projections (including the availability of projections using an 
established estimation methodology that would allow for calculation of 
the rate of uninsurance for the applicable Federal fiscal year). As we 
explained in the FY 2018 IPPS/LTCH PPS final rule, these considerations 
are consistent with the statutory requirement that this estimate be 
based on data from the Census Bureau or other sources the Secretary 
determines appropriate and help to ensure the data source will provide 
reasonable estimates for the rate of uninsurance that are available in 
conjunction with the IPPS rulemaking cycle. In the FY 2021 IPPS/LTCH 
PPS proposed rule (85 FR 32750), we proposed to use the same 
methodology as was used in FY 2018 through FY 2020 to determine Factor 
2 for FY 2021.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198), we 
explained that we had determined that the source that, on balance, best 
meets all of these considerations is the uninsured estimates produced 
by CMS' Office of the Actuary (OACT) as part of the development of the 
National Health Expenditure Accounts (NHEA). The NHEA represents the 
government's official estimates of economic activity (spending) within 
the health sector. The information contained in the NHEA has been used 
to study numerous topics related to the health care sector, including, 
but not limited to, changes in the amount and cost of health services 
purchased and the payers or programs that provide or purchase these 
services; the economic causal factors at work in the health sector; the 
impact of policy changes, including major health reform; and 
comparisons to other countries' health spending. Of relevance to the 
determination of Factor 2 is that the comprehensive and integrated 
structure of the NHEA creates an ideal tool for evaluating changes to 
the health care system, such as the mix of the insured and uninsured, 
because this information is integral to the well-established NHEA 
methodology. In the FY 2021 IPPS/LTCH PPS proposed rule, we described 
some aspects of the methodology used to develop the NHEA that were 
particularly relevant in estimating the percent change in the rate of 
uninsurance for FY 2018 through FY 2020 that we believe continue to be 
relevant in developing the estimate for FY 2021. A full description of 
the methodology used to develop the NHEA is available on the CMS 
website at: https://www.cms.gov/files/document/definitions-sources-and-methods.pdf.
    The NHEA estimates of U.S. population reflect the Census Bureau's 
definition of the resident-based population, which includes all people 
who usually reside in the 50 States or the District of Columbia, but 
excludes residents living in Puerto Rico and areas under U.S. 
sovereignty, members of the U.S. Armed Forces overseas, and U.S. 
citizens whose usual place of residence is outside of the United 
States, plus a small (typically less than 0.2 percent of population) 
adjustment to reflect Census undercounts. In past years, the estimates 
for Factor 2 were made using the CBO's uninsured population estimates 
for the under 65 population. For FY 2018 and subsequent years, the 
statute does not restrict the estimate to the measurement of the 
percent of individuals under the age of 65 who are uninsured. 
Accordingly, as we explained in the FY 2018 IPPS/LTCH PPS proposed and 
final rules, we believe it is appropriate to use an estimate that 
reflects the rate of uninsurance in the United States across all age 
groups. In addition, we

[[Page 58812]]

continue to believe that a resident-based population estimate more 
fully reflects the levels of uninsurance in the United States that 
influence uncompensated care for hospitals than an estimate that 
reflects only legal residents. The NHEA estimates of uninsurance are 
for the total U.S. population (all ages) and not by specific age 
cohort, such as the population under the age of 65.
    The NHEA includes comprehensive enrollment estimates for total 
private health insurance (PHI) (including direct and employer-sponsored 
plans), Medicare, Medicaid, the Children's Health Insurance Program 
(CHIP), and other public programs, and estimates of the number of 
individuals who are uninsured. Estimates of total PHI enrollment are 
available for 1960 through 2018, estimates of Medicaid, Medicare, and 
CHIP enrollment are available for the length of the respective 
programs, and all other estimates (including the more detailed 
estimates of direct-purchased and employer-sponsored insurance) are 
available for 1987 through 2018. The NHEA data are publicly available 
on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html.
    In order to compute Factor 2, the first metric that is needed is 
the proportion of the total U.S. population that was uninsured in 2013. 
In developing the estimates for the NHEA, OACT's methodology included 
using the number of uninsured individuals for 1987 through 2009 based 
on the enhanced Current Population Survey (CPS) from the State Health 
Access Data Assistance Center (SHADAC). The CPS, sponsored jointly by 
the U.S. Census Bureau and the U.S. Bureau of Labor Statistics (BLS), 
is the primary source of labor force statistics for the population of 
the United States. (We refer readers to the website at: http://www.census.gov/programs-surveys/cps.html.) The enhanced CPS, available 
from SHADAC (available at: http://datacenter.shadac.org) accounts for 
changes in the CPS methodology over time. OACT further adjusts the 
enhanced CPS for an estimated undercount of Medicaid enrollees (a 
population that is often not fully captured in surveys that include 
Medicaid enrollees due to a perceived stigma associated with being 
enrolled in the Medicaid program or confusion about the source of their 
health insurance).
    To estimate the number of uninsured individuals for 2010 through 
2018, the OACT extrapolates from the 2009 CPS data using data from the 
National Health Interview Survey (NHIS). The NHIS is one of the major 
data collection programs of the National Center for Health Statistics 
(NCHS), which is part of the CDC. The U.S. Census Bureau is the data 
collection agent for the NHIS. The NHIS results have been instrumental 
over the years in providing data to track health status, health care 
access, and progress toward achieving national health objectives. For 
further information regarding the NHIS, we refer readers to the CDC 
website at: https://www.cdc.gov/nchs/nhis/index.htm.
    The next metrics needed to compute Factor 2 are projections of the 
rate of uninsurance in both CY 2020 and CY 2021. On an annual basis, 
OACT projects enrollment and spending trends for the coming 10-year 
period. Those projections (currently for years 2019 through 2028) use 
the latest NHEA historical data, which presently run through 2018. The 
NHEA projection methodology accounts for expected changes in enrollment 
across all of the categories of insurance coverage previously listed. 
The sources for projected growth rates in enrollment for Medicare, 
Medicaid, and CHIP include the latest Medicare Trustees Report, the 
Medicaid Actuarial Report, or other updated estimates as produced by 
OACT. Projected rates of growth in enrollment for private health 
insurance and the uninsured are based largely on OACT's econometric 
models, which rely on the set of macroeconomic assumptions underlying 
the latest Medicare Trustees Report. Greater detail can be found in 
OACT's report titled ``Projections of National Health Expenditure: 
Methodology and Model Specification,'' which is available on the CMS 
website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
    The use of data from the NHEA to estimate the rate of uninsurance 
is consistent with the statute and meets the criteria we have 
identified for determining the appropriate data source. Section 
1886(r)(2)(B)(ii) of the Act instructs the Secretary to estimate the 
rate of uninsurance for purposes of Factor 2 based on data from the 
Census Bureau or other sources the Secretary determines appropriate. 
The NHEA utilizes data from the Census Bureau; the estimates are 
available in time for the IPPS rulemaking cycle; the estimates are 
produced by OACT on an annual basis and are expected to continue to be 
produced for the foreseeable future; and projections are available for 
calendar year time periods that span the upcoming fiscal year. 
Timeliness and continuity are important considerations because of our 
need to be able to update this estimate annually. Accuracy is also a 
very important consideration and, all things being equal, we would 
choose the most accurate data source that sufficiently meets our other 
criteria.
(2) Factor 2 for FY 2021
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32751), using these data sources and the previously described 
methodologies, the OACT estimated that the uninsured rate for the 
historical, baseline year of 2013 was 14 percent and for CYs 2020 and 
2021 is 9.5 percent and 9.5 percent, respectively.\433\ As required by 
section 1886(r)(2)(B)(ii) of the Act, the Chief Actuary of CMS has 
certified those estimates. However, for purposes of this final rule, we 
note that the OACT has added an addendum to the memo to reflect an 
updated methodology for uninsured rate projection, as discussed in our 
responses to comments.
---------------------------------------------------------------------------

    \433\ Certification of Rates of Uninsured. July 31, 2020. 
Available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInPatientPPS/dsh.html.
---------------------------------------------------------------------------

    As with the CBO estimates on which we based Factor 2 in prior 
fiscal years, the NHEA estimates are for a calendar year. In the 
rulemaking for FY 2014, many commenters noted that the uncompensated 
care payments are made for the fiscal year and not on a calendar year 
basis and requested that CMS normalize the CBO estimate to reflect a 
fiscal year basis. Specifically, commenters requested that CMS 
calculate a weighted average of the CBO estimate for October through 
December 2013 and the CBO estimate for January through September 2014 
when determining Factor 2 for FY 2014. We agreed with the commenters 
that normalizing the estimate to cover FY 2014 rather than CY 2014 
would more accurately reflect the rate of uninsurance that hospitals 
would experience during the FY 2014 payment year. Accordingly, we 
estimated the rate of uninsurance for FY 2014 by calculating a weighted 
average of the CBO estimates for CY 2013 and CY 2014 (78 FR 50633). We 
have continued this weighted average approach to rate of uninsurance 
projections for each Federal fiscal year since the FY 2014 IPPS/LTCH 
PPS final rule.
    We continue to believe that, in order to estimate the rate of 
uninsurance during a fiscal year more accurately, Factor 2 should 
reflect the estimated rate of uninsurance that hospitals will 
experience during the fiscal year, rather

[[Page 58813]]

than the rate of uninsurance during only one of the calendar years that 
the fiscal year spans. Accordingly, we proposed to continue to apply 
the weighted average approach used in past fiscal years in order to 
estimate the rate of uninsurance for FY 2021. As part of the 
development of the proposed Factor 2 for FY 2021, the OACT certified 
this estimate of the fiscal year rate of uninsurance to be reasonable 
and appropriate for purposes of section 1886(r)(2)(B)(ii) of the Act. 
However, in the proposed rule, we noted that we might also consider the 
use of more recent data that may become available for purposes of 
estimating the rates of uninsurance used in the calculation of the 
final Factor 2 for FY 2021.
    The calculation of the proposed Factor 2 for FY 2021 using a 
weighted average of the OACT's projections for CY 2020 and CY 2021 was 
as follows:
     Percent of individuals without insurance for CY 2013: 14 
percent.
     Percent of individuals without insurance for CY 2020: 9.5 
percent.
     Percent of individuals without insurance for CY 2021: 9.5 
percent.
     Percent of individuals without insurance for FY 2021 (0.25 
times 0.095) + (0.75 times 0.095): 9.5 percent.
    1-[bond]((0.095-0.14)/0.14)[bond] = 1-0.3214 = 0.6786 (67.86 
percent).
    For FY 2020 and subsequent fiscal years, section 1886(r)(2)(B)(ii) 
of the Act no longer includes any reduction to the previous 
calculation. Therefore, we proposed that Factor 2 for FY 2021 would be 
67.86 percent.
    The proposed FY 2021 uncompensated care amount was 
$11,518,901,035.84 * 0.6786 = $7,816,726,242.92. (We note that this 
calculation is Factor 1 * Factor 2. In the proposed rule, this sentence 
inadvertently referenced the total amount of estimated Medicare DSH 
payments before the application of Sec.  1886(r)(1), rather than 75% of 
that amount, as required by Sec.  412.106(g)(1)(i). However, the 
proposed total uncompensated care amount was accurately included in the 
FY 2021 proposed rule and is shown again below).
[GRAPHIC] [TIFF OMITTED] TR18SE20.210

    We invited public comments on our methodology for calculating 
Factor 2 for FY 2021.
    Comment: As with the comments received on proposed Factor 1, a 
majority of commenters discussed the proposed Factor 2 in the context 
of the adverse economic effects resulting for the COVID-19 PHE. 
Stakeholders urged OACT to update its projections of the rates of 
uninsurance for CY 2020 and CY 2021 to reflect changes in the rate of 
uninsurance due to the COVID-19 PHE, and in particular, the marked 
increase in the number of unemployed workers. Several commentators also 
pointed out that, based on the OACT projections, the uninsured rate is 
expected to remain fairly flat (9.5% in FY 2021 as compared to 9.4% in 
FY 2020); however, given the proposed decrease of $534 million in the 
estimate of the amount available to make uncompensated care payments 
from the FY 2020 level, many commenters urged CMS to use more recent or 
alternative data sources to account for the increase in the rate of 
uninsurance due to the COVID-19 PHE. Several commenters highlighted 
CMS' statement in the proposed rule that it could consider more recent 
data that may become available for the calculation of the final Factor 
2 for FY 2021.
    Many commenters cited the substantial increase in the unemployment 
rate, and the likely loss of employer-sponsored health insurance, as 
the main factor influencing the uninsured rate since the outset of the 
COVID-19 PHE. Commenters referenced various sources for the 
unemployment rate, including estimates from the Bureau of Labor 
Statistics as well as from independent research groups. Several 
commenters also proposed updated estimates of the uninsured rate and 
alternative approaches on how to adjust Factor 2 and the estimated 
uncompensated care amount to reflect the impact of the COVID-19 PHE. A 
commenter raised the idea of using the correlation between the 
unemployment rate and the uninsured rate, which they projected to be 
21.86%, by arguing that the uninsured rate is approximately 2.86 times 
the unemployment rate. Considering this relationship, the commenter 
estimated the uncompensated care amount for FY 2021 should be $18 
billion. The commenter further suggested that the increase in 
uncompensated care payments from the proposed amount could be funded by 
the CARES Act.
    Several different estimates of the uninsured percentage were 
suggested by other stakeholders. Those who cited the Kaiser Family 
Foundation estimated that 3.8 million of the newly unemployed would 
remain uninsured in January 2021. A commenter stated that this would 
increase the number of uninsured to 35.3 million and, therefore, would 
increase Factor 2. Another stakeholder, also citing the Kaiser Family 
Foundation estimate, added that it would be unrealistic to assume that 
only 3.8 million people would remain uninsured in 2021 because not 
everyone eligible for coverage in the Affordable Care Act (ACA) 
exchanges or Medicaid would actually enroll in such coverage. The 
commenter suggested that an optimistic estimate of those actually 
enrolling would be closer to 75% of the newly uninsured; given this 
assumption, the commenter indicated that the uninsured number would 
actually increase by 9.6 million or 2.6 percentage points, which would 
increase the uncompensated care amount by 2.3 billion dollars. Several 
other commenters echoed this concern, stating that there is no 
guarantee that individuals losing ESI would actually enroll in 
alternative forms of coverage, primarily Medicaid and plans available 
through the ACA exchanges. For example, a commenter stated that 
previous estimates have shown that only 43% of ACA exchange eligible 
enroll, adding that increased Medicaid eligibility is limited to 
expansion states, further limiting potential enrollment.
    Other commenters provided estimates developed by consulting groups 
of both the uninsured rate and the uncompensated care amount. For 
example, a commenter referenced an estimate that the total uninsured 
population could increase to 40 million due to the COVID-19 PHE and 
indicated that inputting this number into the estimate based on the 
National Health Expenditure Accounts (NHEA) would result in an 
uninsured rate of 11% to 12%. The resulting increase in Factor 2 would 
translate to more than one billion dollars in additional funds for 
uncompensated care payments. Another commenter simulated the 
uncompensated care amount based on the uninsured and Medicaid 
enrollment estimates from the Urban Institute and the Kaiser Family 
Foundation and found that the uncompensated care amount would be closer 
to $10 billion. A handful of commenters also suggested that CMS 
maintain the same level of

[[Page 58814]]

uncompensated care funding as in FY 2020.
    Several commenters urged that CMS revise its methodology for 
estimating Factor 2 to incorporate the effects of COVID-19 on the 
uninsured rate in FY 2021 and the impact of any future public health 
emergency.
    Lastly, commenters urged CMS to be transparent in the calculation 
of Factor 2 and stated that agency assumptions and data sources should 
be accurate and publicly available.
    Response: We thank the commenters for their input and their 
recommendations regarding the estimate of Factor 2 included in the 
proposed rule. Considering the unprecedented impact of the COVID-19 PHE 
and that more recent available data regarding levels of uninsurance 
have become available since the proposed rule, OACT has updated the 
projection of the rate of uninsurance for purposes of calculating the 
final Factor 2 for FY 2021. We refer readers to the addendum to the 
OACT memo for further details on the methodology and updated 
assumptions used in the calculation of the projection of the 
uninsurance rate. In brief, using the past estimates from NHEA from 
earlier this year as a baseline, OACT estimated the impacts of 
employment changes on insurance coverage to update the estimate of 
rates of uninsurance. We note that this approach takes into account 
more recent historical data on the rate of unemployment as published by 
BLS, as well as updated economic projections of those data, as 
published in the monthly Blue Chip Economic Indicators report, to 
better reflect the estimated impacts of the PHE. Regarding the 
commenters' suggestion for revising the Factor 2 methodology more 
generally to reflect the impact of public health emergencies, such as 
the COVID-19 PHE, we may take this recommendation into consideration 
for future rulemaking, as appropriate.
    In response to the comments concerning transparency, we reiterate 
that we have been and continue to be transparent with respect to the 
methodology and data used to estimate Factor 2. The FY 2021 IPPS/LTCH 
PPS proposed rule included a detailed discussion of our proposed Factor 
2 methodology as well as the data sources that would be used in making 
our final estimate. For purposes of this final rule, we are using an 
updated projected rate of uninsurance to reflect the impact of the PHE 
for the COVID-19 pandemic. A detailed description of the methodology 
used to update our estimates can be found in the accompanying memo 
(available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh). Section 1886(r)(2)(B)(ii) of the Act 
permits us to use a data source other than the CBO estimates to 
determine the percent change in the rate of uninsurance beginning in FY 
2018. We continue to believe that the NHEA data and methodology that 
were used to estimate Factor 2 for this final rule are transparent and 
best meet all of our considerations for ensuring reasonable estimates 
for the rate of uninsurance that are available in conjunction with the 
IPPS rulemaking cycle. We further believe, given the unprecedented 
effects on health insurance enrollment as a result of COVID-19, that it 
is appropriate to update the NHEA-based projection of the FY 2021 rate 
of uninsurance that appeared in the proposed rule using recent relevant 
unemployment data from BLS, and associated projections of that metric 
as published in the Blue Chip Economic Indicators report, to account 
for these expected impacts.
    After consideration of the public comments we received, we are 
updating the calculation of Factor 2 for FY 2021 to incorporate more 
recent data. The final estimates of the percent of uninsured 
individuals have been certified by the Chief Actuary of CMS. The 
calculation of the final Factor 2 for FY 2021 using a weighted average 
of OACT's updated projections for CY 2020 and CY 2021 is as follows:
     Percentof individuals without insurance for CY 2013: 14 
percent.
     Percentof individuals without insurance for CY 2020: 10.3 
percent.
     Percentof individuals without insurance for CY 2021: 10.2 
percent.
     Percentof individuals without insurance for FY 2021 (0.25 
times 0.103) + (0.75 times 0.102): 10.2 percent.
    1-[bond]((0.0102-0.14)/0.14)[bond] = 1-0.2714 = 0.7286 (72.86 
percent). Therefore, the final Factor 2 for FY 2021 is 72.86 percent. 
The final FY 2021 uncompensated care amount is $11,378,005,107.01 * 
0.7286 = $8,290,014,520.96.
c. Calculation of Factor 3 for FY 2021
(1) General Background
    Section 1886(r)(2)(C) of the Act defines Factor 3 in the 
calculation of the uncompensated care payment. As we have discussed 
earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal 
to the percent, for each subsection (d) hospital, that represents the 
quotient of: (1) The amount of uncompensated care for such hospital for 
a period selected by the Secretary (as estimated by the Secretary, 
based on appropriate data (including, in the case where the Secretary 
determines alternative data are available that are a better proxy for 
the costs of subsection (d) hospitals for treating the uninsured, the 
use of such alternative data)); and (2) the aggregate amount of 
uncompensated care for all subsection (d) hospitals that receive a 
payment under section 1886(r) of the Act for such period (as so 
estimated, based on such data).
    Therefore, Factor 3 is a hospital-specific value that expresses the 
proportion of the estimated uncompensated care amount for each 
subsection (d) hospital and each subsection (d) Puerto Rico hospital 
with the potential to receive Medicare DSH payments relative to the 
estimated uncompensated care amount for all hospitals estimated to 
receive Medicare DSH payments in the fiscal year for which the 
uncompensated care payment is to be made. Factor 3 is applied to the 
product of Factor 1 and Factor 2 to determine the amount of the 
uncompensated care payment that each eligible hospital will receive for 
FY 2014 and subsequent fiscal years. In order to implement the 
statutory requirements for this factor of the uncompensated care 
payment formula, it was necessary to determine: (1) The definition of 
uncompensated care or, in other words, the specific items that are to 
be included in the numerator (that is, the estimated uncompensated care 
amount for an individual hospital) and the denominator (that is, the 
estimated uncompensated care amount for all hospitals estimated to 
receive Medicare DSH payments in the applicable fiscal year); (2) the 
data source(s) for the estimated uncompensated care amount; and (3) the 
timing and manner of computing the quotient for each hospital estimated 
to receive Medicare DSH payments. The statute instructs the Secretary 
to estimate the amounts of uncompensated care for a period based on 
appropriate data. In addition, we note that the statute permits the 
Secretary to use alternative data in the case where the Secretary 
determines that such alternative data are available that are a better 
proxy for the costs of subsection (d) hospitals for treating 
individuals who are uninsured.
    In the course of considering how to determine Factor 3 during the 
rulemaking process for FY 2014, the first year this provision was in 
effect, we considered defining the amount of uncompensated care for a 
hospital as the uncompensated care costs of that hospital and 
determined that Worksheet S-10 of the Medicare cost report potentially 
provides the most complete data regarding uncompensated care

[[Page 58815]]

costs for Medicare hospitals. However, because of concerns regarding 
variations in the data reported on Worksheet S-10 and the completeness 
of these data, we did not use Worksheet S-10 data to determine Factor 3 
for FY 2014, or for FYs 2015, 2016, or 2017. Instead, we believed that 
the utilization of insured low-income patients, as measured by patient 
days, would be a better proxy for the costs of hospitals in treating 
the uninsured and therefore appropriate to use in calculating Factor 3 
for these years. Of particular importance in our decision making was 
the relative newness of Worksheet S-10, which went into effect on May 
1, 2010. At the time of the rulemaking for FY 2014, the most recent 
available cost reports would have been from FYs 2010 and 2011, which 
were submitted on or after May 1, 2010, when the new Worksheet S-10 
went into effect. We believed that concerns about the standardization 
and completeness of the Worksheet S-10 data could be more acute for 
data collected in the first year of the Worksheet's use (78 FR 50635). 
In addition, we believed that it would be most appropriate to use data 
elements that have been historically publicly available, subject to 
audit, and used for payment purposes (or that the public understands 
will be used for payment purposes) to determine the amount of 
uncompensated care for purposes of Factor 3 (78 FR 50635). At the time 
we issued the FY 2014 IPPS/LTCH PPS final rule, we did not believe that 
the available data regarding uncompensated care from Worksheet S-10 met 
these criteria and, therefore, we believed they were not reliable 
enough to use for determining FY 2014 uncompensated care payments. For 
FYs 2015, 2016, and 2017, the cost reports used for calculating 
uncompensated care payments (that is, FYs 2011, 2012, and 2013) were 
also submitted prior to the time that hospitals were on notice that 
Worksheet S-10 could be the data source for calculating uncompensated 
care payments. Therefore, we believed it was also appropriate to use 
proxy data to calculate Factor 3 for these years. We indicated our 
belief that Worksheet S-10 could ultimately serve as an appropriate 
source of more direct data regarding uncompensated care costs for 
purposes of determining Factor 3 once hospitals were submitting more 
accurate and consistent data through this reporting mechanism.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38202), we stated 
that we could no longer conclude that alternative data to the Worksheet 
S-10 are available for FY 2014 that are a better proxy for the costs of 
subsection (d) hospitals for treating individuals who are uninsured. 
Hospitals were on notice as of FY 2014 that Worksheet S-10 could 
eventually become the data source for CMS to calculate uncompensated 
care payments. Furthermore, hospitals' cost reports from FY 2014 had 
been publicly available for some time, and CMS had analyses of 
Worksheet S-10, conducted both internally and by stakeholders, 
demonstrating that Worksheet S-10 accuracy had improved over time. 
Analyses performed by MedPAC had already shown that the correlation 
between audited uncompensated care data from 2009 and the data from the 
FY 2011 Worksheet S-10 was over 0.80, as compared to a correlation of 
approximately 0.50 between the audited uncompensated care data and 2011 
Medicare SSI and Medicaid days. Based on this analysis, MedPAC 
concluded that use of Worksheet S-10 data was already better than using 
Medicare SSI and Medicaid days as a proxy for uncompensated care costs, 
and that the data on Worksheet S-10 would improve over time as the data 
are actually used to make payments (81 FR 25090). In addition, a 2007 
MedPAC analysis of data from the Government Accountability Office (GAO) 
and the American Hospital Association (AHA) had suggested that Medicaid 
days and low-income Medicare days are not an accurate proxy for 
uncompensated care costs (80 FR 49525).
    Subsequent analyses from Dobson/DaVanzo, originally commissioned by 
CMS for the FY 2014 rulemaking and updated in later years, compared 
Worksheet S-10 and IRS Form 990 data and assessed the correlation in 
Factor 3s derived from each of the data sources. Our analyses on 
balance led us to believe that we had reached a tipping point in FY 
2018 with respect to the use of the Worksheet S-10 data. We refer 
readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38201 through 
38203) for a complete discussion of these analyses.
    We found further evidence for this tipping point when we examined 
changes to the FY 2014 Worksheet S-10 data submitted by hospitals 
following the publication of the FY 2017 IPPS/LTCH PPS final rule. In 
the FY 2017 IPPS/LTCH PPS final rule, as part of our ongoing quality 
control and data improvement measures for the Worksheet S-10, we 
referred readers to Change Request 9648, Transmittal 1681, titled ``The 
Supplemental Security Income (SSI)/Medicare Beneficiary Data for Fiscal 
Year 2014 for Inpatient Prospective Payment System (IPPS) Hospitals, 
Inpatient Rehabilitation Facilities (IRFs), and Long Term Care 
Hospitals (LTCHs),'' issued on July 15, 2016 (available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R1681OTN.pdf). In this transmittal, as part of the process for ensuring 
complete submission of Worksheet S-10 by all eligible DSH hospitals, we 
instructed MACs to accept amended Worksheets S-10 for FY 2014 cost 
reports submitted by hospitals (or initial submissions of Worksheet S-
10 if none had been submitted previously) and to upload them to the 
Health Care Provider Cost Report Information System (HCRIS) in a timely 
manner. The transmittal stated that, for revisions to be considered, 
hospitals were required to submit their amended FY 2014 cost report 
containing the revised Worksheet S-10 (or a completed Worksheet S-10 if 
no data were included on the previously submitted cost report) to the 
MAC no later than September 30, 2016. For the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19949 through 19950), we examined hospitals' FY 
2014 cost reports to see if the Worksheet S-10 data on those cost 
reports had changed as a result of the opportunity for hospitals to 
submit revised Worksheet S-10 data for FY 2014. Specifically, we 
compared hospitals' FY 2014 Worksheet S-10 data as they existed in the 
first quarter of CY 2016 with data from the fourth quarter of CY 2016. 
We found that the FY 2014 Worksheet S-10 data had changed over that 
time period for approximately one quarter of hospitals that receive 
uncompensated care payments. The fact that the Worksheet S-10 data 
changed for such a significant number of hospitals following a review 
of the cost report data they originally submitted and that the revised 
Worksheet S-10 information was available to be used in determining 
uncompensated care costs contributed to our belief that we could no 
longer conclude that alternative data are available that are a better 
proxy than the Worksheet S-10 data for the costs of subsection (d) 
hospitals for treating individuals who are uninsured.
    We also recognized commenters' concerns that, in using Medicaid 
days as part of the proxy for uncompensated care, it would be possible 
for hospitals in States that choose to expand Medicaid to receive 
higher uncompensated care payments because they may have more Medicaid 
patient days than hospitals in a State that does not choose to expand 
Medicaid. Because the earliest Medicaid expansions under the Affordable 
Care Act began in 2014,

[[Page 58816]]

the 2011, 2012, and 2013 Medicaid days used to calculate uncompensated 
care payments in FYs 2015, 2016, and 2017 are the latest available data 
on Medicaid utilization that do not reflect the effects of these 
Medicaid expansions. Accordingly, if we had used only low-income 
insured days to estimate uncompensated care for FY 2018, we would have 
needed to hold the time period of these data constant and use data on 
Medicaid days from 2011, 2012, and 2013 in order to avoid the risk of 
any redistributive effects arising from the decision to expand Medicaid 
in certain States. As a result, we would have been using older data 
that may provide a less accurate proxy for the level of uncompensated 
care being furnished by hospitals, contributing to our growing concerns 
regarding the continued use of low-income insured days as a proxy for 
uncompensated care costs in FY 2018.
    To address concerns raised by commenters regarding a lack of clear 
and concise line level instructions, CMS issued Transmittal 10, which 
clarified and revised the instructions for reporting charity care on 
Worksheet S-10. For a discussion of the revisions and clarifications 
included in Transmittal 10, we refer the reader to the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42360). On September 29, 2017, we issued 
Transmittal 11, which clarified the definitions and instructions for 
uncompensated care, non-Medicare bad debt, non-reimbursed Medicare bad 
debt, and charity care, as well as modifying the calculations relative 
to uncompensated care costs and adding edits to ensure the integrity of 
the data reported on Worksheet S-10. Transmittal 11 is available for 
download on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R11p240.pdf. We further 
clarified that full or partial discounts given to uninsured patients 
who meet the hospital's charity care policy or financial assistance 
policy/uninsured discount policy (hereinafter referred to as Financial 
Assistance Policy or FAP) may be included on Line 20, Column 1 of 
Worksheet S-10. These clarifications applied to cost reporting periods 
beginning on or after October 1, 2013. We also modified the application 
of the CCR. We specified that the CCR will not be applied to the 
deductible and coinsurance amounts for insured patients approved for 
charity care and non-reimbursed Medicare bad debt. The CCR will be 
applied to the charges for uninsured patients approved for charity care 
or an uninsured discount, non-Medicare bad debt, and charges for 
noncovered days exceeding a length of stay limit imposed on patients 
covered by Medicaid or other indigent care programs. As discussed in 
more detail in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42360 and 
42361), we have also provided opportunities for hospitals to submit 
revisions to their Worksheet S-10 data for FY 2014 and FY 2015 cost 
reports.
    As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41424), 
due to the overwhelming feedback from commenters emphasizing the 
importance of audits in ensuring the accuracy and consistency of data 
reported on the Worksheet S-10, we expected to begin audits of the 
Worksheet S-10 in the Fall of 2018. The audit protocol instructions 
were still under development at the time of the FY 2019 IPPS/LTCH PPS 
final rule; yet, we noted the audit protocols would be provided to the 
MACs in advance of the audit. Once the audit protocol instructions were 
complete, we began auditing the Worksheet S-10 data for selected 
hospitals in the Fall of 2018 so that the audited uncompensated care 
data from these hospitals would be available in time for use in the FY 
2020 IPPS/LTCH PPS proposed rule. The audits began with 1 year of data 
(that is, FY 2015 cost reports) in order to maximize the available 
audit resources and not spread those audit resources over multiple 
years, potentially diluting their effectiveness. We chose to begin the 
audits with the FY 2015 cost reports primarily because this was the 
most recent year of data that we had broadly allowed to be resubmitted 
by hospitals, and many hospitals had already made considerable efforts 
to amend their FY 2015 reports in preparation for the FY 2019 
rulemaking. We also considered that we had used the FY 2015 data as 
part of the calculation of the FY 2019 uncompensated care payments; 
therefore, the data had been subject to public comment and scrutiny.
(2) Background on the Methodology Used To Calculate Factor 3 for FY 
2020
    Section 1886(r)(2)(C) of the Act governs both the selection of the 
data to be used in calculating Factor 3, and also allows the Secretary 
the discretion to determine the time periods from which we will derive 
the data to estimate the numerator and the denominator of the Factor 3 
quotient. Specifically, section 1886(r)(2)(C)(i) of the Act defines the 
numerator of the quotient as the amount of uncompensated care for such 
hospital for a period selected by the Secretary. Section 
1886(r)(2)(C)(ii) of the Act defines the denominator as the aggregate 
amount of uncompensated care for all subsection (d) hospitals that 
receive a payment under section 1886(r) of the Act for such period. In 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), we adopted a 
process of making interim payments with final cost report settlement 
for both the empirically justified Medicare DSH payments and the 
uncompensated care payments required by section 3133 of the Affordable 
Care Act. Consistent with that process, we also determined the time 
period from which to calculate the numerator and denominator of the 
Factor 3 quotient in a way that would be consistent with making interim 
and final payments. Specifically, we must have Factor 3 values 
available for hospitals that we estimate will qualify for Medicare DSH 
payments and for those hospitals that we do not estimate will qualify 
for Medicare DSH payments but that may ultimately qualify for Medicare 
DSH payments at the time of cost report settlement.
    In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19418 and 19419), 
we proposed to use audited FY 2015 data to calculate Factor 3 for FY 
2020. Given that we had conducted audits of the FY 2015 Worksheet S-10 
data and had previously used the FY 2015 data to determine 
uncompensated care payments, and the fact that the FY 2015 data were 
the most recent data that we had allowed to be resubmitted to date, we 
believed, on balance, that the FY 2015 Worksheet S-10 data were the 
best available data to use for calculating Factor 3 for FY 2020.
    In the FY 2020 IPPS/LTCH PPS proposed rule, we recognized that, for 
FY 2019, we used 3 years of data in the calculation of Factor 3 in 
order to smooth over anomalies between cost reporting periods and to 
mitigate undue fluctuations in the amount of uncompensated care 
payments from year to year. However, we stated that, for FY 2020, we 
believed mixing audited and unaudited data for individual hospitals by 
averaging multiple years of data could potentially lead to a less 
smooth result, which would be counter to our original goal in using 3 
years of data. As we stated in the FY 2020 IPPS/LTCH PPS proposed rule, 
to the extent that the audited FY 2015 data for a hospital are 
relatively different from its unaudited FY 2014 data and/or its 
unaudited FY 2016 data, we potentially would be diluting the effect of 
our considerable auditing efforts and introducing unnecessary 
variability into the calculation if we continued to use 3 years of data 
to calculate Factor 3. As an example, we noted that approximately 10 
percent of

[[Page 58817]]

audited hospitals had more than a $20 million difference between their 
audited FY 2015 data and their unaudited FY 2016 data.
    Although we proposed to use the Worksheet S-10 data from the FY 
2015 cost reports to calculate Factor 3 for FY 2020, we acknowledged 
that some hospitals had raised concerns regarding some of the 
adjustments made to the FY 2015 cost reports following the audits of 
those cost reports (for example adjustments made to Line 22 of 
Worksheet S-10). In particular, hospitals had raised concerns regarding 
the instructions in effect for FY 2015, especially compared to the 
reporting instructions that were effective for cost reporting periods 
beginning on or after October 1, 2016, contending that some adjustments 
would not have been made if CMS had chosen as an alternative to audit 
the FY 2017 reports. Accordingly, we sought public comments on whether 
the changes in the reporting instructions between the FY 2015 cost 
reports and the FY 2017 cost reports had resulted in a better common 
understanding among hospitals of how to report uncompensated care costs 
and improved relative consistency and accuracy across hospitals in 
reporting these costs. We also sought public comments on whether, due 
to the changes in the reporting instructions, we should use a single 
year of uncompensated care cost data from the FY 2017 reports, instead 
of the FY 2015 reports, to calculate Factor 3 for FY 2020.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42368), we finalized 
our proposal to use the FY 2015 Worksheet S-10 cost report data in the 
methodology for determining Factor 3 for FY 2020. Although some 
commenters expressed support for the alternative policy of using the FY 
2017 Worksheet S-10 data to determine each hospital's share of 
uncompensated care costs in FY 2020, given the feedback from commenters 
in response to both the FY 2019 and FY 2020 IPPS/LTCH PPS proposed 
rules, emphasizing the importance of audits in ensuring the accuracy 
and consistency of data reported on the Worksheet S-10, we concluded 
that the FY 2015 Worksheet S-10 data were the best available audited 
data to be used in determining Factor 3 for FY 2020. We also noted that 
we had begun auditing the FY 2017 data in July 2019, with the goal of 
having the FY 2017 audited data available for future rulemaking.
    With respect to the Worksheet S-10 data, we indicated our belief 
that the definition of uncompensated care adopted in FY 2018 was still 
appropriate because it incorporates the most commonly used factors 
within uncompensated care as reported by stakeholders, including 
charity care costs and non-Medicare bad debt costs. Therefore, for 
purposes of calculating Factor 3 and uncompensated care costs for FY 
2020, we again defined ``uncompensated care'' as the amount on Line 30 
of Worksheet S-10, which is the cost of charity care (Line 23) and the 
cost of non-Medicare bad debt and non-reimbursable Medicare bad debt 
(Line 29).
    In the FY 2020 IPPS/LTCH PPS final rule, we continued to apply the 
following policies as part of the Factor 3 methodology: (1) The merger 
policies that were initially adopted in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50020); (2) the policy for providers with multiple cost 
reports, beginning in the same fiscal year, of using the longest cost 
report and annualizing Medicaid data and uncompensated care data if a 
hospital's cost report does not equal 12 months of data; (3) the policy 
for the rare cases where a provider has multiple cost reports, 
beginning in the same fiscal year, but one report also spans the 
entirety of the following fiscal year, such that the hospital has no 
cost report for that fiscal year, of using the cost report that spans 
both fiscal years for the latter fiscal year; and (4) the policies 
regarding the application of statistical trim methodologies to 
potentially aberrant CCRs and potentially aberrant uncompensated care 
costs reported on the Worksheet S-10.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 19419), we finalized 
a modified new hospital policy for new hospitals that did not have data 
for the cost reporting period(s) used in the Factor 3 calculation for 
FY 2020. Generally, new hospitals do not yet have available data to 
project their eligibility for DSH payments because there is a lag until 
the SSI ratio and Medicaid ratio become available. However, we noted 
that there are some hospitals (that is, hospitals with CCNs established 
after October 1, 2015) that have a preliminary projection of being 
eligible for DSH payments based on their most recent available 
disproportionate patient percentages. Under the modified policy adopted 
for FY 2020, new hospitals that are eligible for Medicare DSH may 
receive interim empirically justified DSH payments. However, because 
these hospitals do not have a FY 2015 cost report to use in the Factor 
3 calculation and the projection of eligibility for DSH payments is 
still preliminary, the MAC will make a final determination concerning 
whether the hospital is eligible to receive Medicare DSH payments at 
cost report settlement based on its FY 2020 cost report. If the 
hospital is ultimately determined to be eligible for Medicare DSH 
payments for FY 2020, the hospital will receive an uncompensated care 
payment calculated using a Factor 3, where the numerator is the 
uncompensated care costs reported on Worksheet S-10 of the hospital's 
FY 2020 cost report, and the denominator is the sum of the 
uncompensated care costs reported on Worksheet S-10 of the FY 2015 cost 
reports for all DSH-eligible hospitals. In the FY 2020 IPPS/LTCH PPS 
final rule, we noted that, given the time period of the data used to 
calculate Factor 3, any hospitals with a CCN established after October 
1, 2015, would be considered new and subject to this policy in FY 2020.
    For a discussion of the policy that we finalized for FY 2020 for 
new Puerto Rico hospitals, we refer readers to the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42370 and 42371). In brief, Puerto Rico hospitals 
that do not have a FY 2013 cost report are considered new hospitals and 
subject to the new hospital policy, as previously discussed. 
Specifically, the numerator of the Factor 3 calculation will be the 
uncompensated care costs reported on Worksheet S-10 of the hospital's 
FY 2020 cost report and the denominator is the same denominator that is 
determined prospectively for purposes of determining Factor 3 for all 
DSH-eligible hospitals. We stated that we believed the discussion in 
the FY 2020 IPPS/LTCH PPS proposed rule of our intent to determine 
Factor 3 for these hospitals using their uncompensated care costs gave 
new Puerto Rico hospitals sufficient time to take the steps necessary 
to ensure that their uncompensated care costs for FY 2020 are 
accurately reported on their FY 2020 Worksheet S-10. In addition, we 
indicated that we expect MACs to review FY 2020 reports from new 
hospitals, as necessary, which will address past commenters' concerns 
regarding the need for further review of Puerto Rico hospitals' 
uncompensated care data before these data are used to determine Factor 
3.
    In the FY 2020 IPPS/LTCH PPS final rule (83 FR 42371), for Indian 
Health Service and Tribal hospitals, and subsection (d) Puerto Rico 
hospitals that have a FY 2013 cost report, we continued the policy we 
first adopted for FY 2018 of substituting data regarding FY 2013 low-
income insured days for the Worksheet S-10 data when determining Factor 
3. As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38209), the use of data from

[[Page 58818]]

Worksheet S-10 to calculate the uncompensated care amount for Indian 
Health Service and Tribal hospitals may jeopardize these hospitals' 
uncompensated care payments due to their unique funding structure. With 
respect to Puerto Rico hospitals that would not be subject to the new 
hospital policy, we indicated that we continued to agree with concerns 
raised by commenters that the uncompensated care data reported by these 
hospitals need to be further examined before the data are used to 
determine Factor 3. Accordingly, for these hospitals, we determined 
Factor 3 based on Medicaid days from FY 2013 and the most recent update 
of SSI days. The aggregated amount of uncompensated care that is used 
in the Factor 3 denominator for these hospitals continued to be based 
on the low-income patient proxy; that is, the aggregate amount of 
uncompensated care determined for all DSH-eligible hospitals using the 
low-income insured days proxy. We stated our belief that this approach 
was appropriate as the FY 2013 data reflect the most recent available 
information regarding these hospitals' low-income insured days before 
any expansion of Medicaid. In addition, because we continued to use 1 
year of insured low-income patient days as a proxy for uncompensated 
care for Puerto Rico hospitals and residents of Puerto Rico are not 
eligible for SSI benefits, we continued to use a proxy for SSI days for 
Puerto Rico hospitals consisting of 14 percent of the hospital's 
Medicaid days, as finalized in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56953 through 56956).
    Therefore, for FY 2020, we computed Factor 3 for each hospital by--
    Step 1: Selecting the provider's longest cost report from its 
Federal fiscal year (FFY) 2015 cost reports. (Alternatively, in the 
rare case when the provider has no FFY 2015 cost report because the 
cost report for the previous Federal fiscal year spanned the FFY 2015 
time period, the previous Federal fiscal year cost report would be used 
in this step.)
    Step 2: Annualizing the uncompensated care costs (UCC) from 
Worksheet S-10 Line 30, if the cost report is more than or less than 12 
months. (If applicable, use the statewide average CCR (urban or rural) 
to calculate uncompensated care costs.)
    Step 3: Combining annualized uncompensated care costs for hospitals 
that merged.
    Step 4: Calculating Factor 3 for Indian Health Service and Tribal 
hospitals and Puerto Rico hospitals that have a FY 2013 cost report 
using the low-income insured days proxy based on FY 2013 cost report 
data and the most recent available SSI ratio (or, for Puerto Rico 
hospitals, 14 percent of the hospital's FY 2013 Medicaid days). 
(Alternatively, in the rare case when the provider has no FFY 
applicable cost report because the cost report for the previous Federal 
fiscal year spanned the time period, the previous Federal fiscal year 
cost report would be used in this step.) The denominator is calculated 
using the low-income insured days proxy data from all DSH eligible 
hospitals. Consistent with the policy adopted in the FY 2019 IPPS/LTCH 
PPS final rule, if a hospital did not have both Medicaid days for FY 
2013 and SSI days for FY 2017 available for use in the calculation of 
Factor 3 in Step 4, we considered the hospital not to have data 
available for Step 4.
    Step 5: Calculating Factor 3 for the remaining DSH eligible 
hospitals using annualized uncompensated care costs (Worksheet S-10 
Line 30) based on FY 2015 cost report data (from Step 3). The hospitals 
for which Factor 3 was calculated in Step 4 were excluded from this 
calculation.
    We amended the regulations at Sec.  412.106 by adding a new 
paragraph (g)(1)(iii)(C)(6) to reflect the methodology for computing 
Factor 3 for FY 2020.
(3) Methodology for Calculating Factor 3 for FY 2021 and Subsequent 
Fiscal Years
(a) Use of Audited FY 2017 Data To Calculate Factor 3 for FY 2021
    Since the publication of the FY 2020 IPPS/LTCH PPS final rule, we 
have continued to monitor the reporting of Worksheet S-10 data in order 
to determine the most appropriate data to use in the calculation of 
Factor 3 for FY 2021. Audits of FY 2017 cost reports began in June 2019 
and those audited reports were available in time for the development of 
the proposed rule. Feedback from the audits of the FY 2015 reports and 
lessons learned were incorporated into the audit process for the FY 
2017 reports. We again chose to audit 1 year of data (that is, FY 2017) 
in order to maximize the available audit resources and not spread those 
audit resources over multiple years, potentially diluting their 
effectiveness.
    Given that the FY 2017 Worksheet S-10 data were submitted under the 
revised cost reporting instructions that were effective on October 1, 
2017, and we have also undertaken provider outreach regarding 
potentially aberrant data in FY 2017 reports and conducted audits of 
these data (84 FR 42371), in the FY 2021 IPPS/LTCH PPS proposed rule 
(85 FR 32755), we stated that we believe, on balance, that the FY 2017 
Worksheet S-10 data are the best available data to use for calculating 
Factor 3 for FY 2021. For a detailed discussion of the cost reporting 
instruction changes between the FY 2015 and FY 2017 reports, we refer 
the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42368 and 
42369). For the reasons discussed in the FY 2020 IPPS/LTCH PPS proposed 
and final rules (84 FR 19419 and 84 FR 42364), we continue to believe 
that mixing audited and unaudited data for individual hospitals by 
averaging multiple years of data could potentially lead to a less 
smooth result. To the extent that the audited FY 2017 data for a 
hospital are relatively different from its FY 2015 data (whether 
audited or unaudited) and/or its unaudited FY 2016 data, we potentially 
would be diluting the effect of the revisions to the cost reporting 
instructions and our considerable auditing efforts, while introducing 
unnecessary variability into the calculation if we were to use multiple 
years of data to calculate Factor 3 for FY 2021. As explained in the FY 
2021 IPPS/LTCH proposed rule, we recognize that the FY 2015 reports 
include audited data for some hospitals, however, the FY 2017 cost 
reports are the most recent year of audited data and, as previously 
discussed, reflect the revisions to the Worksheet S-10 cost report 
instructions that were effective on October 1, 2017.
    Accordingly, we proposed to use a single year of Worksheet S-10 
data from FY 2017 cost reports to calculate Factor 3 in the FY 2021 
methodology for all eligible hospitals with the exception of Indian 
Health Service (IHS) and Tribal hospitals and Puerto Rico hospitals. As 
discussed in a later section, we proposed to continue to use the low-
income insured days proxy to calculate Factor 3 for these hospitals for 
one more year. We noted that the uncompensated care payments to 
hospitals whose FY 2017 Worksheet S-10 data had been audited 
represented approximately 65 percent of the total uncompensated care 
payments for FY 2021. For purposes of the FY 2021 proposed rule, we 
used a HCRIS extract updated through February 19, 2020. We noted that 
we intended to use the March 2020 update of HCRIS for the FY 2021 final 
rule and the respective March updates for all future final rules. 
However, we invited the public to submit comments on this intention 
regarding the use of the March update of HCRIS, and indicated that we 
might also consider the use of more recent data that may become 
available

[[Page 58819]]

after March 2020, but prior to the development of the final rule, if 
appropriate, for purposes of calculating the final Factor 3 for 
purposes of the FY 2021 IPPS/LTCH PPS final rule.
    Comment: Several commenters expressed concern about the 
redistribution of uncompensated care payments in the context of CMS not 
using the most recent and accurate HCRIS data. To this end, several 
commenters urged CMS to use the latest HCRIS extract available for the 
calculation of Factor 3. Among these commenters, the majority preferred 
the use of a June 30 HCRIS extract, pointing out that CMS has used a 
June quarterly extract in both the FY 2018 and FY 2019 IPPS/LTCH PPS 
final rules. Commenters reasoned that using a later HCRIS extract would 
allow providers more flexibility to amend materials that may have been 
overlooked in the proposed rule, and according to commenters, this is 
especially important due to the effect of the COVID-19 PHE. A commenter 
suggested CMS use a HCRIS extract as close as possible to the close of 
the comment period for the FY 2021 rulemaking cycle. Another commenter 
suggested the agency use the February or March HCRIS data extract for 
future proposed rules and the June HCRIS extract for FY 2021 and future 
final rules, mentioning that this would allow for more time to complete 
the audits, to contest results, and to handle unforeseen circumstances 
or delays. Additionally, a commenter expressed concern that if CMS did 
not use the June 30 HCRIS extract in the FY 2021 final rule, then their 
most recent CCR would not be accounted for, placing their hospital 
above the proposed CCR trim ceiling.
    Response: We thank commenters for sharing their concerns regarding 
the HCRIS extract used in the FY 2021 IPPS/LTCH final rule. We agree 
with commenters that recommended using the June 2020 HCRIS data for 
calculating Factor 3 for FY 2021, due to this year's public health 
emergency, which, for some hospitals, delayed the filing of amended 
cost report information and/or correction of report version 
discrepancies in time for the March HCRIS extract; therefore we are 
finalizing the use of the June 30 HCRIS extract to calculate Factor 3 
for this FY 2021 IPPS/LTCH PPS final rule. We believe on balance this 
is the best available data for purposes of calculating Factor 3 for FY 
2021. In the rare situations where a MAC mishandled a report in the 
upload process, such as by accepting an amended report, reopening a 
report, and/or adjusting uncompensated care cost data on a report 
before the June 30 cut off, but the corrected uncompensated care cost 
data were inadvertently omitted from the June 30, 2020 extract of the 
HCRIS, we used the corrected version of the report after confirming the 
appropriate report version with the applicable MAC.
    Regarding commenters' suggestions that we use the February or March 
HCRIS for all future proposed rules, we note that at this time, we 
intend to use the most recent data available for the applicable 
rulemaking, which generally means the respective December HCRIS extract 
for purposes of Factor 3 calculations in future proposed rules. We 
expect that the December HCRIS extract would reflect the completed 
Worksheet S-10 audit results available in time for development of the 
respective proposed rules and the respective HCRIS extract public use 
files, which are posted on the CMS website quarterly, would also 
include the most recent audited cost report information for the 
applicable fiscal year, and be available for public scrutiny. 
Furthermore, as noted in the FY 2021 IPPS/LTCH PPS proposed rule, we 
continue to intend to use the respective March HCRIS for future final 
rules. We expect the COVID-19 PHE will not have the same impact on 
future rulemaking as it did for the FY 2021 rulemaking. However, we may 
revisit this topic of the appropriate HCRIS extract, if necessary, in 
future rulemaking.
    Comment: A large majority of comments expressed general support for 
the use of Worksheet S-10 to estimate each hospital's share of 
uncompensated care costs in FY 2021, FY 2022, and/or in future years. 
Some commenters argued that audited Worksheet S-10 data are more 
accurate as compared to the proxy method previously used, and others 
commended CMS for its efforts to improve the data through revised 
instructions and audits. A few commenters expressed opposition to using 
Worksheet S-10 data and recommended that CMS reconsider using it for 
the calculation of uncompensated care costs, especially in the absence 
of auditing all DSH-eligible hospitals. A commenter expressed concern 
about the accuracy of Worksheet S-10 data and noted that even with the 
audits, hospitals are reporting charity care and defining write-offs 
inconsistently and suggested CMS consider alternative methods to the 
Worksheet S-10 in consultation with hospitals.
    Another commenter asserted that using Worksheet S-10 data to 
calculate Factor 3 could result in an inequitable distribution because 
Worksheet S-10 does not ``offset hospital UC [uncompensated care] 
losses with non-Medicare sources of subsidies such as Medicaid DSH and 
related Medicaid waiver [uncompensated care] pool funds.'' Other 
commenters requested additional standardization in the reporting of 
uncompensated care. A commenter expressed concern that the data 
reported by hospitals may not be comparable across all hospitals 
noting, for example, a difference of opinion among hospitals about 
characterizing ``denied claims as charity care if the hospital's 
financial assistance policy says the patient is not responsible for 
payment, even though that is a contractual or government payment 
requirement.'' Another commenter noted a case where discounts for 
uninsured and underinsured patients required by state mandates were 
disallowed by a MAC because such mandates were not covered by their 
charity care policy.
    Response: We appreciate the support for our proposal to use 
Worksheet S-10 data for the computation of Factor 3. We also appreciate 
the input from those commenters who are opposed to the use of data from 
Worksheet S-10 in the calculation of Factor 3. Regarding those comments 
which note that the Worksheet S-10 data are not accurate, and that the 
use of the Worksheet S-10 data should be reconsidered on that basis, we 
note that as described in the FY 2021 IPPS/LTCH PPS proposed rule, we 
proposed to continue to use Worksheet S-10 cost report data in FY 2021 
based upon the results of analyses of Worksheet S-10 data, conducted 
both internally and by stakeholders, which demonstrate that Worksheet 
S-10 accuracy has improved over time. As part of our ongoing quality 
control and data improvement measures, we have revised the cost report 
instructions (Transmittal 11). We have conducted audits of the FY 2017 
Worksheet S-10 data, and have now begun auditing the FY 2018 Worksheet 
S-10 data for an expanded number of hospitals to further improve 
provider reporting and overall accuracy. Moreover, as hospitals gain 
more experience with completing the Worksheet S-10 and build upon 
lessons learned from the audits, we believe the data obtained from 
these cost reports will continue to improve and become more consistent. 
Therefore, we have concluded that the Worksheet S-10 data is the best 
available source for the uncompensated care costs of subsection (d) 
hospitals.
    Comment: Many commenters supported the use of a single year of FY 
2017 Worksheet S-10 data for the

[[Page 58820]]

calculation of Factor 3 for FY 2021. Commenters noted that the FY 2017 
cost reports are the most recent reports which have been subject to 
audit and that these audits have continued to improve the accuracy and 
reliability of Worksheet S-10 data over time. Supporters of this 
proposal also argued that FY 2017 Worksheet S-10 data have been audited 
and stated that audited hospitals are expected to receive 65 percent of 
the proposed total uncompensated care payments for FY 2021. A handful 
of commenters also pointed out that it would be inappropriate to blend 
audited data with unaudited data, which could lead to inaccurate and 
non-representative uncompensated care payments for some hospitals if 
the unaudited cost reports contained reporting errors. In addition, 
several commenters indicated that the FY 2017 cost reports reflect the 
first year of reported data under the most recent revised Worksheet S-
10 instructions, which were effective for cost reporting periods 
beginning on or after October 1, 2016.
    Many commenters expressed opposition to using a single year of 
Worksheet S-10 data for the calculation of FY 2021 uncompensated care 
payments and for future years. The primary concern expressed by these 
stakeholders was the possibility that such an approach would lead to 
significant variation in year-to-year payments, especially in light of 
outside factors that may affect a hospital's finances. These commenters 
pointed to CMS's historical practice of using data from multiple years 
to determine uncompensated care payments and argued that such an 
approach would mitigate year-to-year fluctuations and avoid a skewed 
distribution of uncompensated care payments. To this end, a commenter 
noted that some hospitals reported extreme changes in uncompensated 
care costs from FY 2017 to FY 2018 and according to the commenter, in 
one example, the change was over 500 percent. The commenter added that 
less than one-third of hospitals reported changes in uncompensated care 
that were less than ten percent.
    The most common alternative proposal among commenters who opposed 
the use of a single year of FY 2017 data for the calculation of Factor 
3 in FY 2021 was the use of three years of historical Worksheet S-10 
data. A commenter specifically suggested the use of FY 2015, FY 2016, 
and FY 2017 Worksheet S-10 data. Another commenter recommended that CMS 
use FY 2014, FY 2015, and FY 2016 data as a transition policy. Other 
commenters recommended a blend of FY 2015 and FY 2017 data since both 
years were subject to audits. Similar to this alternative, another 
commenter proposed that for the allocation of FY 2021 uncompensated 
care payments, CMS use a 50/50 blend, derived from the FY 2020 Factor 3 
and a Factor 3 calculated using FY 2017 Worksheet S-10 data. There was 
also a commenter that requested that we maintain total national 
uncompensated care payments at the same level as in FY 2020.
    Some stakeholders offered suggestions regarding the uncompensated 
care payment calculation that appear outside of the scope of the 
proposed methodology. Such recommendations included that CMS change the 
distribution of uncompensated care payments so that the allocation is 
based not on only uncompensated care costs but also on the 
disproportionate share percentage (DPP); set a cap on per discharge 
uncompensated care payments not to exceed 100 percent of DRG amounts; 
establish a transition period for hospitals facing a significant (5 
percent) decrease in uncompensated care payments for a given year; and 
reevaluate the uncompensated care payment formula to achieve parity 
between rural and urban payments. In addition, some commenters 
requested that we consider adjusting uncompensated care costs in this 
FY 2021 rulemaking to reflect the impact of the COVID-19 PHE, rather 
than waiting until FY 2024 or FY 2025 when the current year's data (FY 
2020) may be used for uncompensated care payment calculations. In 
relation to this recommendation, a commenter noted that, while the 
effect of the COVID-19 PHE would vary based upon geographic areas, they 
would expect a redistributional impact on future uncompensated care 
payments, and suggested that CMS begin to consider ways to dampen 
potential downward fluctuations in uncompensated care costs at the 
hospital level.
    Response: We are grateful to those commenters who expressed their 
support for our proposed policy of using the FY 2017 Worksheet S-10 
data to determine each hospital's share of uncompensated care costs in 
FY 2021. As noted in the FY 2021 IPPS/LTCH PPS proposed rule, we 
believe, that, on balance, mixing audited and unaudited data for 
individual hospitals by averaging multiple years of data could 
potentially lead to a less smooth result. To the extent that the 
audited FY 2017 data for a hospital are relatively different from its 
unaudited FY 2016 and/or (audited or unaudited) FY 2015 data, we 
potentially would be diluting the effect of our considerable auditing 
efforts and introducing unnecessary variability into the calculation if 
we were to use multiple years of data to calculate Factor 3.
    We also note that if, for example, a blend of FY 2015, FY 2016, 
and/or FY 2017 cost report data were to be used, some hospitals in 
states that expanded Medicaid eligibility during this time period may 
have experienced significant reductions in uncompensated care costs 
following the expansion due to increased Medicaid coverage covering 
many previously uninsured individuals. In this situation, if an average 
that included pre-expansion uncompensated care cost data were used, the 
Factor 3 calculated for the hospital may be a less accurate reflection 
of the relative uncompensated care burden of the hospital. Thus, we 
believe using only the FY 2017 cost report data will result in a more 
accurate and more updated reflection of each hospital's proportion of 
uncompensated care costs. We also agree with those commenters that 
noted FY 2017 cost reports reflect the first year of data reported 
under the revised to Worksheet S-10 instructions through Transmittal 
11, which further improved the data quality. Accordingly, we are 
finalizing without modification our proposal to use FY 2017 cost report 
data, which we believe is the best available data, to calculate Factor 
3 for FY 2021.
    For the same reasons, we also continue to have confidence that the 
best available data in future years will be the Worksheet S-10 data for 
cost reporting years for which audits have been conducted. In addition, 
we continue to believe that establishing a policy that would apply not 
only for FY 2021, but also for all subsequent fiscal years would 
provide greater predictability regarding the basis for determining 
future uncompensated care payments.
    Regarding the commenters' suggestion to adjust uncompensated care 
costs in this rulemaking to reflect the impact of the COVID-19 PHE, 
even if such a policy change were appropriate for FY 2021 it is not 
clear what the methodology would be for determining such an adjustment 
and what data source could be used. Because the cost reporting data 
from the COVID-19 PHE time period is not yet available to be analyzed, 
we believe it would be premature to attempt in this rulemaking to 
modify the methodology for determining uncompensated care payments for 
a future year specifically to address the impact of the COVID-19 PHE. 
We will consider this issue further in future rulemaking, if 
appropriate.

[[Page 58821]]

    Regarding commenters' concerns and suggestions that were outside of 
the scope of the proposed rule's methodology, separate from the cost 
report years from historical Worksheet S-10 data, we appreciate 
commenters' input and note that we may consider these and other 
considerations in future rulemaking.
    The following comments relate to the Worksheet S-10 audit process:
    Comment: As in previous years, the auditing process for the FY 2017 
Worksheet S-10 was a common topic among many commenters. Several 
commenters agreed that the data from audited FY 2017 Worksheet S-10s 
have improved in accuracy when compared to previous years of data, 
including the data used to calculate Factor 3 under the proxy 
methodology in previous years. Other commenters also commended CMS's 
efforts to improve the Worksheet S-10 data through the audit process 
and revised instructions.
    Still, many commenters expressed concerns with the Worksheet S-10 
audits. Some commenters recommended that CMS implement a comprehensive 
audit process, similar to the audit process used for the wage index 
noting that Worksheet S-10 audits should include the same level of 
scrutiny. Many commenters requested that CMS establish a standardized, 
streamlined process across auditors, which would include uniform 
templates for cost report submissions, acceptable documentation 
regarding audit requirements, and consistent timelines for information 
submissions. A commenter noted that their hospitals faced significant 
reporting burden providing auditors with the necessary audit 
documentation and communicating between MAC auditors, which delayed 
their Worksheet S-10 audits.
    Stakeholders also urged CMS to conduct consistent and equitable 
audits across providers. Others suggested that CMS set a clear 
timeframe for communication and revisit the scope of the audits to 
target specific data elements, which would decrease provider burden. 
Related to this, another commenter requested that CMS work with the 
MACs to streamline the audit process and avoid situations where 
hospitals would have to resubmit data in a different template, which 
would only add administrative burden on hospitals.
    To this end, a commenter proposed that CMS clarify that MACs can 
only request documentation referenced in hospitals' Financial 
Assistance Policies (FAP), as well as confirm that the purpose of the 
Worksheet S-10 audits is to check if hospitals are following their FAP. 
Additionally, commenters advised CMS to minimize the administrative 
burden of excessive reporting requirements imposed by the MACs, such as 
requests for overly detailed information like patients' social security 
numbers and birth dates, and the solicitation of information not yet 
generally available in hospitals' financial recordkeeping systems.
    Additionally, several commenters suggested that CMS ensure 
transparency in the audit process by making the audit materials and 
protocols publicly available. They also urged CMS to develop a 
transparent timeframe for the audit process, with adequate lead time 
and communication to providers about expectations. Commenters also 
requested that CMS disclose the criteria used to identify hospitals 
subject to audits, and prepare communications regarding expectations 
for the audit and any audit guidance before the rulemaking cycle. A 
commenter noted that CMS's ``policy of opacity'' only results in 
inconsistent interpretations of audit guidance by the MACs. Other 
commenters made recommendations regarding the timeliness of the audits, 
such as following a set annual timeframe similar to the approach used 
in the wage index audits.
    Commenters also expressed discontent regarding the limited time 
allowed for providers to respond to adverse adjustments, resolve 
differences, and submit supporting documentation. These commenters 
urged CMS to begin the audits in a timely manner to avoid situations 
with short response times. Regarding the audit timeline, a commenter 
proposed that CMS begin the audit process on an annual basis in 
February or March, with the end date remaining December 31 of the 
applicable year. According to this commenter, the proposed timeline 
would provide MACs sufficient time to work with providers and to 
schedule Worksheet S-10 audits.
    Additionally, commenters urged CMS to consider working with MACs in 
developing the Worksheet S-10 audit process to further promote clarity 
and consistency. To this end, a commenter requested that in developing 
Worksheet S-10 audit protocols, CMS consider using one MAC either to do 
all of the audits or to develop the audit rules to be employed by all 
MACs. A different commenter noted that there are hospital systems 
subject to audits conducted by multiple MACs, and these providers have 
observed inconsistent audit adjustments to uncompensated care amounts. 
This commenter noted that these inconsistencies are indicative of MACs 
not interpreting and following CMS's audit instructions in a 
standardized way.
    Commenters noted the need for a timely review and timely appeals 
process for any Worksheet S-10 errors or inconsistent audit 
disallowances. As part of raising their concern regarding the lack of 
an appeals process for Worksheet S-10 audits, a commenter proposed that 
disallowed uncompensated care costs be appealed to the Provider 
Reimbursement Review Board (PRRB), which the commenter asserted would 
be consistent with the process used to appeal other items from the 
Medicare cost report. Another commenter asserted that there would not 
be sufficient time to appeal audit disallowances or adjustments under a 
normal PRRB process before the data are used by CMS. Some commenters 
recommended that CMS establish an expedited process for appeal to an 
appropriate oversight body, which would allow hospitals to obtain 
reversals of errors by MACs and address any inconsistencies and/or 
improper disallowances. A commenter suggested the use of an abbreviated 
appeals process, similar to the process used in the wage index 
development process.
    Commenters also provided additional recommendations for future 
audits specifically to improve data consistency. They suggested that 
CMS audit all hospitals and utilize a single auditor, or at least 
establish and enforce a formal and uniform audit process. Several 
commenters recommended using a similar approach to the desk review 
process conducted for the purposes of the wage index. Many commenters 
expressed concerns that not all providers have had their Worksheet S-10 
data audited. For example, a commenter noted that while some hospitals 
have been audited more than once, other DSH hospitals have not been 
audited at all. Some commenters urged CMS to complete audits for the 
remaining hospitals that did not have the Worksheet S-10 from their FY 
2017 cost report audited before the FY 2021 rulemaking and others 
strongly felt that CMS should audit all DSH-eligible hospitals on an 
ongoing basis. A commenter stated that if CMS cannot audit 100 percent 
of hospitals, the agency should focus on the biggest recipients of DSH 
payments.
    A commenter requested clarification of whether Sole Community 
Hospitals (SCHs) that are paid under their hospital-specific rates are 
subject to the Worksheet S-10 audits. Similarly, a few commenters 
suggested that SCHs should be excluded from the Worksheet S-10 audits 
to improve efficiency and reduce

[[Page 58822]]

burden, as they are not eligible for DSH payments and their data are 
not included in the totals used for allocation of uncompensated care 
payments. A commenter asserted that there is a lack of justification 
for a requirement to audit data that is of no use for Medicare payment 
purposes. A commenter suggested that non-DSH eligible SCHs zero out 
uncompensated care on the Worksheet S-10, but also recognized that this 
approach may not be beneficial as it would appear as if the hospitals 
are not providing any uncompensated care.
    Finally, a few commenters suggested new approaches to auditing and/
or reviewing Worksheet S-10 data. A commenter recommended that CMS 
establish a program of periodic timely data review for the 
identification of discrepancies and troublesome data. This commenter 
also proposed that CMS start the process of reviewing FY 2019 cost data 
as it is reported, and that CMS to engage in FY 2018 data audits during 
FY 2021 for hospitals that are projected to receive DSH payments, but 
have not yet been audited. Another commenter recommended that in order 
to utilize resources more efficiently, CMS could work with the Internal 
Revenue Service (IRS) as it also audits hospital uncompensated care 
costs reported on the Form 990 and both agencies have similarly aligned 
goals. They also suggested that CMS continue Worksheet S-10 audits, but 
explore ways in which it can more efficiently utilize audit resources, 
such as, by relying on hospitals' audited financial statements. In 
addition, this commenter requested that CMS apply the same audit 
criteria that are used for retrospective audits of empirically 
justified DSH payments, which use SSI/Medicare and Medicaid eligible 
days/indigent care days. The commenter also stated that hospitals 
should have the same protections afforded by the appeal rights for 
empirically justified DSH payments.
    Response: We thank commenters for their feedback on the audits of 
the FY 2017 Worksheet S-10 data and their recommendations for future 
audits. As we have stated previously in response to comments regarding 
audit protocols, these are provided to the MACs in advance of the audit 
so as to assure consistency and timeliness in the audit process. We 
began auditing the FY 2017 Worksheet S-10 data for selected hospitals 
last year so that the audited uncompensated care data for these 
hospitals would be available in time for use in the FY 2021 IPPS/LTCH 
PPS proposed rule. We chose to focus the audit on the FY 2017 cost 
reports in order to maximize the available audit resources. We note 
that FY 2017 is the first year of data under the revised cost report 
instructions included in Transmittal 11. In response to the consistent 
feedback from commenters emphasizing the importance of audits in 
ensuring the accuracy and consistency of data reported on the Worksheet 
S-10, we have also started the process of auditing FY 2018 Worksheet S-
10 data.
    Regarding commenters' recommendations to establish an audit and 
appeals process for the Worksheet S-10 similar to the process used for 
the wage index audits, at this point we do not plan on introducing such 
a process in order to maximize limited audit resources. Attempting to 
replicate the wage index audit process would exceed our current audit 
resources and require shifting resources from other audit work, for 
example potentially negatively impacting the wage index audit itself in 
the attempt to replicate it. The wage index impacts a far greater 
proportion of national hospital payments than the proportion impacted 
by Medicare uncompensated care payments. We appreciate all commenters' 
input and recommendations on how to improve our audit process and 
reiterate our commitment to work with the MACs and providers on audit 
improvements, including changes to increase the efficiency of the audit 
process, building on the lessons learned in previous audit years.
    We also appreciate the different suggestions for a potential audit 
timeline. We thank the commenters for their suggestions, but at this 
time, we do not intend to establish fixed start date for audits across 
MACs so that we can retain the flexibility to use our limited audit 
resources to address and prioritize audit needs across all CMS programs 
each year. We note that MACs work closely with providers regarding 
scheduling dates during the Worksheet S-10 audit process.
    Regarding commenters' requests to make public the audit 
instructions and criteria, as we previously stated in the FY 2020 IPPS/
LTCH final rule (84 FR 42368) and prior rules, we do not make review 
protocols public as CMS desk review and audit protocols are 
confidential and are for CMS and MAC use only. Additionally, we 
recognize that a number of commenters suggested we audit all hospitals. 
We note that limited resources do not allow us to audit all providers. 
However, as discussed in the FY 2021 IPPS LTCH PPS proposed rule (85 FR 
32756), the proposed uncompensated care payments to hospitals whose FY 
2017 Worksheet S-10 data have been audited represented approximately 65 
percent of the proposed total uncompensated care payments for FY 2021, 
which is an increase from the FY 2015 audits. Also, we are in the 
process of auditing FY 2018 Worksheet S-10 data and expect that the 
number of audits conducted will continue to increase over time, 
resulting in improved Worksheet S-10 data over the years as more cost 
report years are audited.
    Concerning the suggestions to exclude Sole Community Hospitals 
(SCHs) from audits of Worksheet S-10 when the hospitals are paid under 
their hospital-specific rate, we note that all hospitals are required 
to maintain documentation for cost reporting, including Worksheet S-10. 
We also note that there may be some uncertainty whether a hospital will 
ultimately be paid based on its hospital specific rate, since that 
review occurs during settlement process through the cost report. For 
example, there may be timing considerations with projecting which SCHs 
will be paid under the IPPS Federal rate, in addition SCH status may 
change over time.
    Regarding the recommendation that we review FY 2019 data as they 
are reported, we note that time and audit resources are limited, and as 
discussed previously, we are currently in the process of reviewing FY 
2018 Worksheet S-10 data, which is the most recent year of broadly 
available cost report data. With respect to the comment recommending 
that we work with the IRS to utilize audit resources more efficiently, 
we note that the instructions for the IRS' Form 990 are not the same as 
for the Worksheet S-10. In addition, we note that the requirement to 
report on the IRS Form 990 is limited to non-profit hospitals.
    Concerning the request to apply the same audit criteria that are 
used for empirically justified DSH payments, those audit protocols are 
also confidential and are for CMS and MAC use only, and we continue to 
believe that audit protocols (e.g. critieria) should be confidential, 
so we disagree with commenter to make public any audit protocols. To 
the extent that the commenter is implying that the confidentiality of 
the audit protocols causes inconsistency in auditing across the MACs, 
we also disagree and will continue to work with the MACs each year to 
ensure a consistent audit process across providers and MACs.
    As noted in earlier discussion, after consideration of the comments 
received we are finalizing without modification our proposal to use 
Worksheet S-10 data from FY 2017 cost reports to calculate Factor 3 for 
FY 2021 for all hospitals, with the exception of IHS and

[[Page 58823]]

Tribal hospitals and Puerto Rico hospitals.
(b) Use of the Most Recent Available Single Year of Audited Worksheet 
S-10 Data To Calculate Factor 3 for All Subsequent Fiscal Years
    While the number of audited hospitals may change from year to year 
depending on audit experience and the availability of audit resources, 
we expect the Worksheet S-10 data for an increasing number of hospitals 
will be audited in future cost reporting years. As a result, we have 
confidence that the best available data in future years will be the 
Worksheet S-10 data for cost reporting years for which audits have been 
conducted. In addition, we believe that establishing a policy that 
would apply not only for FY 2021, but also for all subsequent fiscal 
years would help providers have greater predictability for planning 
purposes. Therefore, we proposed that for FY 2022 and all subsequent 
fiscal years, we would use the most recent single year of cost report 
data that have been audited for a significant number of hospitals 
receiving substantial Medicare uncompensated care payments to calculate 
Factor 3 for all eligible hospitals, with the exception of Indian 
Health Service and Tribal hospitals. In the FY 2021 IPPS/LTCH PPS 
proposed rule (85 FR 32756), we noted that we intended to consider the 
comments received on this proposal for FY 2022 and subsequent fiscal 
years, and might revisit it either in the final rule or through future 
rulemaking.
    Comments: A few commenters supported the use of a single year of 
audited Worksheet S-10 data for FY 2022 and subsequent years. In 
contrast, while the majority of commenters supported the use of one 
year of FY 2017 Worksheet S-10 data for FY 2021 uncompensated care 
payments, most commenters argued for a transitional period where 
ultimately multiple years of audited Worksheet S-10 data would be used 
to determine Factor 3 for future years, especially when sufficient 
years of audited data reported under the revised reporting instructions 
are available. According to these commenters, such an approach would 
mitigate year-to-year fluctuations in uncompensated care payments. A 
commenter stated that it is impossible to foresee what potential 
shortcomings in the data or concerns with the audit process could 
arise. Many commenters urged CMS not to finalize the policy of using 
the most recent year of audited Worksheet S-10 data beyond FY 2021. 
These commenters believed that finalizing the proposal would prevent 
opportunities to assess and comment on peculiarities in the data to be 
used in determining Factor 3 for future years.
    Consistent with these recommendations, a commenter proposed that 
for FY 2022 equally weighted blocks of audited FY 2017, FY 2018, and 
``preliminarily-reviewed'' FY 2019 Worksheet S-10 data be used to 
determine Factor 3 with a rolling three-year average applied moving 
forward. There was also a handful of commenters that requested a three-
year average as a phased approach. For example, a commenter suggested 
that FY 2017 and FY 2018 Worksheet S-10 data be used for the FY 2022 
payments and then a rolling three-year average beginning with FY 2023. 
Additionally, commenters recommended that CMS monitor payments over 
time to assure data anomalies are addressed. To this end, a commenter 
urged CMS to allow for monitoring and review of uncompensated care 
payment volatility and audits of all hospitals' Worksheet S-10 data, 
before implementing the use of a single year of Worksheet S-10 data for 
FY 2022 and subsequent years.
    Some commenters acknowledged the efforts CMS has taken to improve 
the accuracy of Worksheet S-10 data through the FY 2015 and FY 2017 
audit process. A commenter provided an analysis that indicated the 
audits have improved the reliability and accuracy of Worksheet S-10 
data. Another commenter indicated their support for the processes 
implemented by CMS and the MACs to ensure the integrity of Worksheet S-
10 data.
    Still, several commenters expressed concerns about the accuracy of 
Worksheet S-10 data. Some commenters recommended CMS implement a fatal 
cost report edit on Worksheet S-10 to guarantee completeness and 
consistency in reporting. Another commenter requested that CMS provide 
a 14-day period for hospitals to submit corrections arising from the 
mishandling of data by MAC and/or CMS. While this commenter recognized 
that these situations are uncommon, they urged that a 14-day time 
period would be sufficient to improve the uncompensated care cost 
allocation and would be consistent with the 15-day period we proposed 
to allow for review and correction of merger listings following the 
publication of this final rule.
    Response: We thank commenters for their continued concern regarding 
the accuracy of Worksheet S-10 data and for their constructive 
feedback. As noted by some commenters, our continued efforts have 
improved the accuracy for Worksheet S-10 data. We believe that 
continued use of Worksheet S-10 for the calculation of Factor 3 along 
with the revisions made to the instructions through Transmittal 10 
(November 2016) and Transmittal 11 (September 2017), as well as the FY 
2015 and FY 2017 audits, will improve the accuracy, consistency, and 
quality of the reported data.
    We believe using the most recent audited data available before the 
applicable Federal fiscal year will more accurately reflect a 
hospital's uncompensated care costs, as opposed to averaging multiple 
years of data. Consistent with the discussion in the previous section, 
if a hospital has relatively different data between cost report years, 
we potentially would be diluting the effect of our considerable 
auditing efforts and introducing unnecessary variability into the 
calculation if we were to use multiple years of data to calculate 
Factor 3. Therefore, we believe using a single year of audited cost 
report data is an appropriate methodology for FY 2022 and subsequent 
years.
    Concerning the suggestion that implement a fatal edit on Worksheet 
S-10, we note that we did not propose any additional edits in the FY 
2021 IPPS/LTCH PPS proposed rule. Furthermore, we continue to believe 
that the ongoing MAC reviews of hospitals' Worksheet S-10 data coupled 
with our efforts to improve reporting through revised instructions, as 
well as providers' growing experience with reporting uncompensated care 
costs outweigh the value of any additional edits to the Worksheet S-10 
data. Regarding the suggestion that we allow a 14-day time period for 
hospitals to submit corrections due to data mishandling, we will 
revisit the issue in future rulemaking as necessary, and further note 
that providers will have the opportunity to submit comments on the 
accuracy of the supplemental data files within 15 business days from 
the public display of this FY 2021 IPPS/LTCH PPS final rule.
    Additionally, we recognize that a number of commenters suggested we 
audit all hospitals. In response to this, we note that the proposed 
uncompensated care payments to hospitals whose FY 2017 Worksheet S-10 
data were audited represented approximately 65 percent of the proposed 
total uncompensated care payments for FY 2021, which is an increase 
from FY 2020 rulemaking in which about approximately half of total 
uncompensated care payments wereexpected to be made to hospitals whose 
FY 2015 Worksheet S-10 data had been audited. Further, while our

[[Page 58824]]

limited resources mean that it is not feasible to commit to auditing 
all hospitals every year, we note that we expect the number of audits 
will continue to increase from previous years. We are in the process of 
auditing FY 2018 data on an expanded number of hospitals.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we noted that given the 
unique nature of IHS and Tribal Hospitals and of the patient 
populations they serve, we believe it may be appropriate to restructure 
Medicare DSH payments and uncompensated care payments to these 
hospitals beginning in FY 2022. As discussed in prior rulemaking (for 
example, 82 FR 38188), the principal mission of the IHS is the 
provision of health care to American Indians and Alaska Natives 
throughout the United States. In carrying out that mission, IHS 
operates under two primary authorizing statutes. The first statute, the 
Snyder Act, authorizes IHS to expend such moneys as Congress may 
determine from time to time appropriate for the conservation of the 
health of American Indians or Alaska Natives. We refer readers to 25 
U.S.C. 13 (providing that the Bureau of Indian Affairs (BIA) will 
expend funds as appropriated for, among other things, the conservation 
of health of American Indians and Alaska Natives); and 42 U.S.C. 
2001(a) (transferring the responsibility for American Indian and Alaska 
Native health care from BIA to HHS). The second statute, the Indian 
Health Care Improvement Act (IHCIA), established IHS as an agency 
within the Public Health Service of HHS and provides authority for 
numerous programs to address particular health initiatives for American 
Indians and Alaska Natives, such as alcohol and substance abuse and 
diabetes (25 U.S.C. 1601 et seq.). IHS and Tribal hospitals are charged 
with addressing the health of American Indians and Alaska Natives and 
are uniquely situated to provide services to this population.
    When Congress was considering reductions to the Medicare DSH 
payments and the creation of the Medicare uncompensated care payments 
under section 3133 the Affordable Care Act, one significant source of 
available information was the analysis done by the Medicare Payment 
Advisory Commission (MedPAC) in its March 2007 Report to the Congress. 
As discussed in the proposed rule, section 1886(r)(1) of the Act 
explicitly refers to this March 2007 Report to Congress as the basis 
for reducing DSH payments to 25 percent of the amount that would 
otherwise be paid under section 1886(d)(5)(F) of the Act. We have 
reviewed MedPAC's analysis in the March 2007 Report to Congress and it 
is not apparent that MedPAC was focused on the unique aspects of IHS 
and Tribal hospitals described previously when developing its 
recommendations for possible changes to DSH payments. Rather, it 
appears that MedPAC's analysis was focused on broader underlying issues 
and hospitals more generally.
    Given the unique nature of IHS and Tribal hospitals, and the fact 
that we do not believe that the DSH analysis available to Congress at 
the time section 3133 of the Affordable Care Act was being developed 
was focused on the specific circumstances of these hospitals, in the FY 
2021 IPPS/LTCH PPS proposed rule, we explained our belief that it may 
be appropriate, beginning in FY 2022, to use our authority under 
section 1886(d)(5)(I)(i) of the Act to create an exception for IHS and 
Tribal hospitals from Medicare DSH payments under 1886(d)(5)(F), as 
amended by section 3133 of the Affordable Care Act. This exception 
would also have the consequence that IHS and Tribal hospitals would be 
excluded from the calculation of Medicare uncompensated care payments 
under 1886(r). Concurrently, we believe it may be appropriate to use 
our authority under section 1886(d)(5)(I)(i) to adjust payments to IHS 
and Tribal hospitals through the creation of a new IHS and Tribal 
hospital Medicare DSH payment. The methodology for determining this IHS 
and Tribal hospital Medicare DSH payment would mirror the calculation 
of the Medicare DSH payment under 1886(d)(5)(F) except that the payment 
would be determined at 100 percent of the calculated amount rather than 
25 percent of the calculated amount as required under section 3133 of 
the Affordable Care Act. We sought comment on this potential 
restructuring of the Medicare DSH and uncompensated care payments to 
IHS and Tribal hospitals beginning in FY 2022. We also noted that we 
intended to consider input received on this issue through consultation 
with IHS and Tribal hospitals.
    Comment: In response to the discussion in the proposed rule of the 
unique circumstances of IHS and Tribal hospitals, commenters expressed 
support for the use of the low-income days proxy in the calculation of 
Factor 3 for FY 2021. In response to the request for comment on the 
potential restructuring of Medicare DSH and uncompensated care payments 
to these hospitals beginning in FY 2022, there were a few commenters 
that supported the creation of a new payment for IHS and Tribal 
hospitals consisting of 100 percent of the Medicare DSH amount. 
However, there were other commenters that requested that CMS provide 
more time so that the agency can consult with stakeholders on the 
proposed methodology. Specifically, a commenter requested that at a 
minimum, an additional year be given so that stakeholders can provide 
comments on the proposed policy and an additional three years as an 
implementation phase for the newly developed methodology, adding that 
an extension of the current proxy methodology would be needed.
    Commenters also noted that only two IHS and Tribal hospitals, both 
of which, have more than 100 beds, would not be subject to the 12 
percent cap on DSH payments. The commenters indicated that, in the 
event uncompensated care payments were to be determined using Worksheet 
S-10 data, instead of the low income days proxy, these two hospitals 
would see an increase in their uncompensated care payments, while the 
remaining 26 facilities would lose $7.5 million. These commenters 
recommended that CMS mitigate the effect of the cap under the statutory 
DSH calculation on IHS and Tribal facilities and if this is not 
possible, a commenter suggested that CMS should work with hospitals on 
a tailored methodology for the calculation of uncompensated care 
payments that fits their unique circumstances.
    Further a commenter noted that IHS and Tribal Hospitals also face a 
unique legal standing such that they do not ``fit well into the 
framework that CMS is proposing to adjust for uncompensated care 
payments.'' The commenter also added that their inability to charge any 
Indian for services, even copays, and the provisions contained within 
treaties with the Federal Government and judicial rulings, means these 
hospitals face a very unique way of calculating uncompensated care 
costs and that the calculation of uncompensated care payments should be 
done in such a way as to maximize their access to federal resources. 
The commenter suggested that CMS should work with IHS and Tribal 
facilities as well as the consortium in providing guidance on how these 
facilities should report uncompensated care on Worksheet S-10. In this 
regard, another commenter pointed out that ``many tribal health 
programs invest non-Federal resources in their health care programs to 
furnish care that could easily be classified as uncompensated care 
because IHCPs [Indian Healthcare Providers] may not charge 
beneficiaries to receive care and, thus, typically do not have the

[[Page 58825]]

accounting methods to track these costs.'' This situation, according to 
the commenter, makes IHS and Tribal hospitals unable to report charity 
care and non-Medicare bad debt in a way that is consistent with the 
current definition of uncompensated care in the current regulation. 
Additionally, a commenter stated that the information technology 
systems used by the IHS and Tribal hospitals are not equipped to 
collect the necessary data for the Worksheet S-10 and that, while these 
systems have been upgraded, it will take some time, potentially years, 
before they are fully functional.
    A few commenters also requested the continued use of the low-income 
days proxy in the calculation of Factor 3 for hospitals located in 
Puerto Rico. In particular, a commenter noted that they are working 
through challenges in implementing Worksheet S-10 and requested that 
CMS continue the use of low-income insured days to determine 
uncompensated care payments for Puerto Rico hospitals for at least 
another three years. Another commenter also requested that CMS treat 
Puerto Rico as it treats other states asserting that ``CMS does not 
include a proper count of low income Medicare beneficiaries that 
receive services in our hospitals'' [Puerto Rico hospitals]. The 
commenter asserts that CMS only accounts for low income Medicare 
beneficiaries in the SSI fraction for low income Medicare beneficiaries 
patients that live on the mainland but travel to Puerto Rico and 
require hospitalization.
    Response: We appreciate the concerns raised by commenters regarding 
the calculation of Factor 3 for IHS and Tribal hospitals and hospitals 
located in Puerto Rico. We are not finalizing any policies for FY 2022 
for these hospitals and will consider the issues raised by stakeholders 
in future rulemaking. For FY 2021, we are finalizing our proposal to 
continue to use the low-income insured days proxy to calculate Factor 3 
for these hospitals. In regard to the comment concerning the data used 
in the SSI fraction for Puerto Rico hospitals, because we are 
continuing to use insured low-income patient days for uncompensated 
care in determining Factor 3 for FY 2021, and residents of Puerto Rico 
are not eligible for SSI benefits, we believe the SSI proxy consisting 
of 14 percent of a hospital's Medicaid days, as finalized in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56953 through 56956) is still 
appropriate. In regard to the recommendation that we provide Puerto 
Rico hospitals a three-year continuation of the current policy before 
the transition to the use of Worksheet S-10, we invite commenters to 
provide further input as we revisit the use of Worksheet S-10 data from 
Puerto Rico hospitals in future rulemaking and assess the FY 2018 audit 
results from hospitals in Puerto Rico. We are not finalizing the 
proposal for Puerto Rico hospitals for FY 2022 and subsequent years, 
because we believe further consideration is necessary. However, we 
continue to believe Worksheet-S-10 data is the appropriate long term 
data source for hospitals located in Puerto Rico.
    We also appreciate the concerns and input raised by commenters 
regarding alternative methodologies for the calculation of 
uncompensated care payments for IHS and Tribal hospitals. We recognize 
the unique nature of these hospitals and the special circumstances they 
face, and we reiterate our commitment to continue working with 
stakeholders, including through tribal consultation, as we revisit the 
issue of Medicare uncompensated care payments to these hospitals in the 
FY 2022 rulemaking. As discussed previously, we are not making any 
changes to the current policy for calculating uncompensated care 
payments for IHS and Tribal hospitals at this time, and we look forward 
to continuing to collaborate on methodological approaches in the 
future.
    After consideration of the comments received, we are finalizing the 
use of low-income insured days proxy to determine Factor 3 for IHS and 
Tribal hospitals and Puerto Rico hospitals for FY 2021. We are not 
finalizing a methodology to determine Factor 3 for IHS and Tribal 
hospitals and Puerto Rico hospitals for FY 2022 and subsequent years at 
this time because we believe further consideration and review of these 
hospitals' Worksheet S-10 data is necessary.
(c) Definition of ``Uncompensated Care''
    We continue to believe that the definition of ``uncompensated 
care'' first adopted in FY 2018 when we started to incorporate data 
from Worksheet S-10 into the determination of Factor 3 and that was 
used again in both FY 2019 and FY 2020 is appropriate, as it 
incorporates the most commonly used factors within uncompensated care 
as reported by stakeholders, namely, charity care costs and bad debt 
costs, and correlates to Line 30 of Worksheet S-10. Therefore, we 
proposed that, for purposes of determining uncompensated care costs and 
calculating Factor 3 for FY 2021 and subsequent fiscal years, 
``uncompensated care'' would continue to be defined as the amount on 
Line 30 of Worksheet S-10, which is the cost of charity care (Line 23) 
and the cost of non-Medicare bad debt and non-reimbursable Medicare bad 
debt (Line 29). We refer readers to the FY 2020 IPPS/LTCH PPS rule (84 
FR 42369 and 42370), for a detailed discussion of additional topics 
related to the definition of uncompensated care.
    In the FY 2020 IPPS/LTCH PPS final rule, we stated that, we would 
attempt to address commenters' concerns regarding the Worksheet S-10 
through future cost report clarifications to further improve and refine 
the information that is reported on Worksheet S-10 in order to support 
collection of the information necessary to implement section 1886(r)(2) 
of the Act. (84 FR 42370). In the FY 2021 IPPS/LTCH PPS proposed rule 
(85 FR 32757), we noted that the Paper Reduction Act (PRA) package for 
Form CMS-2552-10 (OMB Control Number 0938-0050, expiration date March 
31, 2022) would offer an additional opportunity to comment on the cost 
reporting instructions. For further information regarding PRA, we refer 
the reader to the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995.
    Comment: In regard to the definition of uncompensated care, several 
commenters urged CMS to include shortfalls from Medicaid, CHIP, and 
State and local indigent care programs, which, according to commenters, 
represent substantial losses as they do not fully cover the cost of 
providing care. A commenter noted that it is inconsistent that Medicaid 
patient data is used for DSH eligibility but not for the definition of 
uncompensated care and provided CMS with methodologies on how to 
account for Medicaid shortfalls, including specific modifications to 
Worksheet S-10, such as reporting Medicaid DSH payments on a separate 
line, separating stand-alone CHIP from the Medicaid line items, and 
reporting non-DSH supplemental payments separately from Medicaid 
revenue and Medicaid DSH. The stakeholder notes these suggestions were 
made in earlier rulemaking years, but not acted upon by CMS. A 
commenter also argued that including Medicaid shortfalls in Worksheet 
S-10 is especially important for hospitals in states that underwent 
Medicaid expansion, as compared to those that did not, which tend to do 
better with the current policy.
    In contrast, a commenter noted that the unreimbursed portion of the 
costs of care furnished under state and local indigent care programs 
should be

[[Page 58826]]

specifically counted as charity care, while pointing out that Medicaid 
expansion has helped reduce hospital charity care. Some commenters 
believed Worksheet S-10 should be revised to better reflect the actual 
cost of caring for Medicaid patients incurred by hospitals (that is, 
net of Medicaid DSH payments and other supplemental funding).
    Response: We appreciate commenters' suggestions for revisions and/
or modifications to Worksheet S-10. We will consider the concerns 
raised by commenters as part of future cost report clarifications, and 
will make modifications as necessary, to further improve and refine the 
information that is reported on Worksheet S-10 to support collection of 
the information necessary to implement section 1886(r)(2) of the Act. 
With regard to the comments requesting that payment shortfalls from 
Medicaid and state and local indigent care programs be included in 
uncompensated care cost calculations, we recognize commenters' concerns 
but continue to believe there are compelling arguments for excluding 
such shortfalls from the definition of uncompensated care. For example, 
and as noted in past rulemaking, several key stakeholders, including 
MedPAC, do not consider Medicaid shortfalls in their definition of 
uncompensated care. Furthermore, we continue to believe that it is most 
consistent with section 1886(r)(2) of the Act for Medicare 
uncompensated care payments to target hospitals that incur a 
disproportionate share of uncompensated care for patients with no 
insurance coverage. In more practical terms, we also note that even if 
we agreed that it would be appropriate to adjust the definition of 
uncompensated care to include Medicaid shortfalls, this would not be a 
feasible option at this time due to computational limitations. 
Specifically, computing such shortfalls is operationally problematic 
because Medicaid pays hospitals a single DSH payment that in part 
covers the hospital's costs in providing care to the uninsured and in 
part covers estimates of the Medicaid ``shortfalls.'' Therefore, it is 
not clear how CMS would determine how much of the ``shortfall'' is left 
after the Medicaid DSH payment is made. In addition, in some States, 
hospitals return a portion of their Medicaid revenues to the State via 
provider taxes and receive supplemental payments in return (along with 
the federal match), making the computation of ``shortfalls'' even more 
complex. Accordingly, after consideration of the comments received, and 
for the reasons discussed in the proposed rule and previously in this 
final rule, we are finalizing our proposal to continue to define 
uncompensated care costs as the amount on Line 30 of Worksheet S-10, 
which is the cost of charity care (Line 23) and the cost of non-
Medicare bad debt and non-reimbursable Medicare bad debt (Line 29).
    Comment: Commenters also suggested that CMS include all patient 
care costs when calculating the cost to charge ratio used in Worksheet 
S-10 including costs associated with training medical residents, 
supporting physician and professional services and paying provider 
taxes, so as to more accurately determine uncompensated care costs for 
purposes of the Worksheet S-10. Specifically, a commenter stated that 
the cost-to-charge ratio in line 1 does not include medical education 
costs and recommended that CMS include these costs, which they maintain 
can be derived from Worksheet B, column 24, line 118.
    Response: As we have consistently stated in past final rules (84 FR 
42378) in response to similar comments, we believe that the purpose of 
uncompensated care payments is to provide additional payment to 
hospitals for treating the uninsured, not for other costs incurred, 
including costs associated with supporting and training physicians and 
other professionals or paying provider taxes associated with Medicaid, 
as commenters have suggested. In addition, because the CCR on Line 1 of 
Worksheet S-10 is obtained from Worksheet C, Part I, and is also used 
in other IPPS rate setting contexts (such as high-cost outliers and the 
calculation of the MS-DRG relative weights) from which it is 
appropriate to exclude the costs associated with supporting physician 
and professional services and GME, we remain hesitant to adjust CCRs in 
the narrower context of calculating uncompensated care costs. 
Therefore, we continue to believe that it is not appropriate to modify 
the calculation of the CCR on Line 1 of Worksheet S-10 to include any 
additional costs in the numerator of the CCR calculation.
    Comment: A few commenters requested that implicit price concessions 
be included in the definition of uncompensated care. Specifically, 
commenters expressed concern that without clear reporting instructions, 
implicit price concessions may no longer be included in Worksheet S-10 
as bad debt and requested that CMS clarify that they should be 
considered as bad debt and must be included on the Medicare cost 
report. A commenter also expressed concern that CMS's requirement that 
hospitals write off Medicare beneficiary accounts that meet a 
hospital's financial assistance policy to bad debt, rather than charity 
care, causes their uncompensated care payments to be reduced because 
these implicit price concessions are multiplied by the hospital's cost 
to charge ratio (CCR), which is inconsistent with general accounting 
practices and could cause distortion in the distribution of 
uncompensated care payments.
    Response: We appreciate commenters' input in regard to CMS's 
proposed policy on implicit price concessions and bad debt and the 
implications for Worksheet S-10 reporting. For further discussion and 
clarification on this topic, we refer readers to the bad debt section 
in this final rule. We note that the final bad debt policy related to 
implicit price concessions that we are adopting this final rule will be 
prospectively effective for cost reporting periods beginning on or 
after October 1, 2020.
    Comment: Some commenters raised the use of presumptive eligibility 
tools in the determination of patient charity care, arguing that such 
tools offer an efficient and accurate way to determine uncompensated 
care costs. Specifically, commenters stated that the issue is that the 
MACs disallow charity care granted using such tools, adding that CMS 
should clarify that providers may indeed utilize presumptive 
eligibility as indicator of charity care and encouraged the agency to 
expedite updating the Provider Reimbursement Manual to clarify this 
issue.
    Response: We appreciate commenters' input on this issue. With 
regard to the comments regarding the use of presumptive eligibility 
tools to determine charity care, we note that CMS does not set charity 
care criteria policy for hospitals, and within reason, hospitals can 
establish their own criteria for what constitutes charity care in their 
charity care and/or financial assistance policies. We refer the reader 
to the section IX.C (Revisions of Medicare Bad Debt Policy) of this 
preamble for related discussion of presumptive eligibility tools. We 
note that the forthcoming Paper Reduction Act (PRA) package for Form 
CMS-2552-10 (OMB Control Number 0938-0050, expiration date March 31, 
2022) offers an additional opportunity for hospitals and other 
stakeholders to comment on the cost reporting instructions.
    Comment: A few commenters requested additional information from CMS 
on how payments furnished by Congress, as well as payments made by the 
Health Resources and Services Administration (HRSA) for uninsured

[[Page 58827]]

COVID-19 patients will be treated, pointing out that such payments may 
not necessarily offset uncompensated care, but, rather, were intended 
to cover the costs of responding to the COVID-19 PHE. To this end, 
another commenter noted funding provided by the Department of Health 
and Human Services (HHS) ``in the general distribution, high-impact 
distribution, safety net distribution, and other allocations funded via 
the CARES Act would not be an offset specifically to uncompensated 
care.''
    Response: We recognize commenters' concerns regarding the unique 
situation posed by the COVID-19 PHE in the reporting of uncompensated 
care costs. We will consider these concerns as appropriate in 
developing future reporting guidance. General information on the CARES 
Act Provider Relief Fund is available at: https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/general-information/index.html. Information regarding HRSA COVID-19 and information on the 
HRSA Uninsured Program is available at: https://coviduninsuredclaim.linkhealth.com/. We note that a term and condition 
of the HRSA Uninsured Program is the following ``The Recipient will not 
include costs for which Payment was received in cost reports or 
otherwise seek uncompensated care reimbursement through federal or 
state programs for items or services for which Payment was received.''
    The following comments relate to the Worksheet S-10 instructions:
    Comment: In regard to Worksheet S-10 instructions and guidance, 
several commenters commended CMS for its refinements to Worksheet S-10 
in November 2016 (Transmittal 10) and for its continued efforts to 
improve the accuracy of the reported data, indicating that the 
instructions have improved. However, many commenters still requested 
that CMS clarify instructions to the Worksheet S-10 in areas where the 
treatment of uncompensated care costs (charity care and bad debt) is 
not immediately clear based on the revised instructions. A commenter 
suggested that CMS should engage MACs and hospitals prior to the 
release of substantial revisions to cost report instructions, which, 
according to the commenter, would promote dialogue on best reporting 
practices; similarly, another commenter suggested that CMS conduct 
additional outreach for stakeholder feedback and education before 
making revisions to Worksheet S-10 instructions.
    One common issue raised by commenters was a request that CMS 
improve the instructions so that non-Medicare bad debt is not 
multiplied by the cost-to-charge ratio. According to a commenter, 
applying the cost to charge ratio to non-Medicare bad debt is not 
mathematically sound nor does it represent a hospital's true cost. 
Another commenter indicated that such practice is also inconsistent 
with the way non-reimbursable Medicare bad debt is treated. To address 
this, commenters suggested that CMS establish separate columns in 
Worksheet S-10 for insured and uninsured bad debt, where the column for 
insured bad debt is not multiplied by the CCR and the column for 
uninsured bad debt is multiplied by the CCR, as is currently done with 
charity care.
    Another suggestion was that CMS insert two new columns before 
column 2 in the Worksheet S-10 to enable hospitals to separately report 
charges subject the CCR. According to the commenter, such a structure 
would be needed for lines 20 and 21 but not for lines 22 and 23; per 
the commenter's recommendation, CMS would be able to discontinue lines 
24 and 25, given that those amounts would be obsolete under the 
commenter's recommended restructuring of the worksheet. Further, the 
commenter requested that CMS clarify whether the wording ``total 
facility except physician and other professional services,'' in 
relation to charity care and bad debt write-offs is inclusive of acute 
inpatient, exempt inpatient, outpatient, and long-term care services. 
The commenter also sought clarification of the definition of ``non-
covered'' charges related to days exceeding the length of stay limit 
and with respect to Medicare, Medicaid, Workers' Compensation/No Fault, 
and commercial plans with which the hospital has a contractual 
relationship, but is not allowed to pursue patient collections for 
losses (for example, unpaid claims). In addition, the commenter sought 
clarification on whether a hospital is permitted to include such losses 
on Line 20, if it includes them in its financial assistance policy.
    Finally, a commenter inquired if there were any templates under 
review for reporting charity care, uninsured discounts, and/or bad debt 
listings and, if so, the status of any such templates. The commenter 
also recommended that CMS should require the total bad debt listing to 
be submitted and reconciled with Worksheet S-10 line 26.
    Response: We appreciate commenters' concerns regarding the need for 
clarification of the Worksheet S-10 instructions, as well as their 
suggestions for form revisions to improve provider reporting. We 
reiterate our commitment to continuing to work with stakeholders to 
address their concerns regarding Worksheet S-10 instructions and 
reporting through provider education and further refinement of the 
instructions as appropriate. As noted by some commenters, such 
continued efforts to refine the instructions and guidance have improved 
provider understanding of the Worksheet S-10. We also recognize that 
there are continuing opportunities to further improve the accuracy and 
consistency of the information that is reported on the Worksheet S-10, 
and to the extent that commenters have raised new questions and 
concerns regarding the reporting requirements, we will attempt to 
address them through future rulemaking and/or sub-regulatory guidance. 
However, we also continue to believe that the Worksheet S-10 
instructions are sufficiently clear to allow hospitals to accurately 
complete Worksheet S-10. Regarding the comments requesting specific 
structural changes to Worksheet S-10 and/or further clarification of 
the reporting instructions, we note that these comments fall outside 
the scope of this final rule. We therefore refer commenters to the 
forthcoming Paper Reduction Act (PRA) package for the Worksheet S-10, 
which will include a public comment period and will be the appropriate 
forum to raise specific questions about or suggestions for 
modifications to Worksheet S-10, including the reporting instructions.
    Additionally, we refer commenters to the updated instructions for 
Worksheet S-10 that were issued in November 2016 through Transmittal 
10, as well as those issued in September 2017 through Transmittal 11, 
in which we specifically clarified the definitions of and the 
instructions for reporting uncompensated care, non-Medicare bad debt, 
non-reimbursed Medicare bad debt, charity care, and modified the 
calculations relative to uncompensated care costs as well as added 
edits to improve the integrity of the data reported on Worksheet S-10.
    For commenters' reference, additional materials regarding 
clarifications to the Worksheet S-10 instructions are contained in the 
MLN article titled ``Updates to Medicare's Cost Report Worksheet S-10 
to Capture Uncompensated Care Data'', available at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE17031.pdf as well as the Worksheet S-10 
Q&As on the CMS DSH website in the download section, available at: 
https://www.cms.gov/Medicare/

[[Page 58828]]

Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/Worksheet-
S-10-UCC-QandAs.pdf.
(d) Changes to the Methodology for Calculating Factor 3 for FY 2021 and 
Subsequent Fiscal Years
    The proposed changes to the methodology for calculating Factor 3 
that were discussed in the IPPS/LTCH PPS proposed rule include the 
following:

 Merger Multiplier for Acquired Hospital Data

    In the FY 2015 IPPS/LTCH PPS final rule, we defined a merger as an 
acquisition where the Medicare provider agreement of one hospital is 
subsumed into the provider agreement of the surviving provider (79 FR 
50020). In that final rule, we adopted a policy for calculating Factor 
3 for hospitals that undergo a merger during or after the time period 
of the data that is used in the Factor 3 calculations, as well as a 
separate policy for a merger that occurs after the development of the 
final rule for the applicable fiscal year. Our proposed policy for 
newly merged hospitals is discussed in the next section. In the FY 2019 
IPPS/LTCH PPS final rule, we finalized a policy for determining the 
uncompensated care costs of hospitals that have multiple cost reporting 
periods starting in the same fiscal year of using the longest cost 
report beginning in the applicable fiscal year and annualizing the 
uncompensated care data if a hospital's cost report does not equal 12 
months of data (83 FR 41427). This policy applied for all hospitals, 
including those involved in a merger. However, taking into 
consideration past comments regarding mergers, including comments on 
the FY 2019 IPPS/LTCH PPS proposed rule which suggested that we not 
annualize the uncompensated care costs data provided in short cost 
reporting periods for acquired hospitals because their uncompensated 
care costs for the remaining part of the year are included in the new 
combined hospital's cost report (83 FR 41427), we proposed to modify 
the annualization policy that was finalized in FY 2019 with respect to 
merged hospitals.
    We noted that for most mergers, the effective date of the merger 
coincides with the cost reporting end date for the hospital that is 
being acquired. In effect, this means that the FY 2015 merger policy of 
combining uncompensated care costs (UCC) across CCNs results in adding 
together data reported on the cost report for two different CCNs (the 
acquired hospital and the surviving hospital) to estimate the merged 
hospital's post-merger total UCC. For mergers with a recent merger 
effective date, such as a merger in Federal fiscal year 2019 (that is, 
a merger after the period of the FY 2017 cost reports we proposed to 
use for the Factor 3 calculation), we stated that we continue to 
believe the current policy of annualizing and combining across 
historical cost reports produces the best available estimate for post-
merger total UCC. For example, if the acquired hospital's FY 2017 cost 
report includes less than 12 months of data, we would annualize the 
data to reflect a full 12 months of data. Similarly, in this example, 
if the surviving hospital's cost report includes less than 12 months of 
data, we would annualize its uncompensated care data. However, as 
discussed later in this section, we proposed a modification to this 
policy when the merger effective date occurs partway through the 
surviving hospital's cost reporting period.
    In some mergers, the merger effective date does not coincide with 
the start date for the surviving hospital's cost reporting period. When 
the merger effective date does not coincide with the start date of the 
surviving hospital's cost reporting period, the policy of annualizing 
the acquired hospital's data before combining data across hospital cost 
reports could substantially overestimate the acquired hospital's UCC, 
given that the surviving hospital's cost report reflects the UCC 
incurred by the acquired hospital during the portion of the year after 
the merger effective date. In other words, when the merger effective 
date is partway through the surviving hospital's cost reporting period, 
annualizing the acquired hospital's data may double-count UCC for the 
portion of the year that overlaps with the remainder of the surviving 
hospital's cost reporting period.
    Accordingly, to more accurately estimate UCC for the hospitals 
involved in a merger when the merger effective date occurs partway 
through the surviving hospital's cost reporting period, we proposed not 
to annualize the acquired hospital's data. Further, we proposed to use 
only the portion of the acquired hospital's unannualized UCC data that 
reflects the UCC incurred prior to the merger effective date, but after 
the start of the surviving hospital's current cost reporting period. 
Specifically, we proposed to calculate a multiplier to be applied to an 
acquired hospital's UCC when the merger effective date occurs partway 
through the surviving hospital's cost reporting period. This multiplier 
would represent the portion of the UCC data from the acquired hospital 
that should be incorporated with the surviving hospital's data to 
determine UCC for purposes of determining Factor 3 for the surviving 
hospital. This multiplier is obtained by calculating the number of days 
between the start of the applicable cost reporting period for the 
surviving hospital and the merger effective date, and then dividing 
this result by the total number of days in the reporting period of the 
acquired hospital. Applying this multiplier to the acquired hospital's 
unannualized UCC data would determine the final portion of the acquired 
hospital's UCC that should be added to that of the surviving hospital 
for purposes of determining Factor 3.
    As an example, if the cost reporting period start dates of the 
acquired and surviving hospitals align and a merger occurs halfway 
through the surviving hospital's cost reporting period (for example, 
the hospital's fiscal year), then ultimately, the cost report for the 
surviving hospital for that fiscal year would already reflect half a 
year of the acquired hospital's UCC (because the merger occurred 
halfway through the surviving hospital's cost reporting period and the 
UCC data reported by the surviving hospital incorporate any UCC 
incurred by the acquired hospital during the second half of the fiscal 
year). For illustrative purposes, consider that the cost reporting 
period start dates of the acquired and surviving hospitals are 10/01/
2016; the cost reporting period end date of the acquired hospital is 
06/30/2017; and the merger acquisition date is 07/01/2017. Thus, there 
are 273 days between the start of the cost reporting period of the 
surviving hospital and the merger effective date, and the cost 
reporting period of the acquired hospital is 273 days. The multiplier, 
as previously defined, would be 1 (273 days divided by 273 days) and 
all of the acquired hospital's unannualized UCC data for the period 10/
01/2016 to 06/30/2017 would be added to that of the surviving hospital 
for purposes of calculating Factor 3 for FY 2021. It is not necessary 
to annualize the acquired hospital's data from its short cost report, 
because the UCC incurred by the acquired hospital for the remainder of 
the surviving hospital's fiscal year post-merger (07/01/2017 to 09/30/
2017) are already included in the UCC data reported by the surviving 
hospital for the cost reporting period ending on 09/30/2017.
    As another example, we assumed the merger effective date was the 
same as the start date for the surviving hospital's cost reporting 
period and the surviving hospital's cost reporting period is 12 months 
long. In this example, we explained our belief that it would not be

[[Page 58829]]

necessary to combine uncompensated care costs across multiple cost 
reports, because the surviving hospital's cost report already reflects 
12 months of uncompensated care costs for the merged hospital. In this 
example, the multiplier would be 0 because there are 0 days between the 
start of the surviving hospital's cost reporting period and the merger 
effective date, and there would be no need to combine data from the 
acquired hospital given that the surviving hospital's cost report 
reflects all post-merger UCC data for the acquired hospital.

 Newly Merged Hospitals

    We proposed to continue to treat hospitals that merge after the 
development of the final rule for the applicable fiscal year similar to 
new hospitals. As explained in the FY 2015 IPPS/LTCH PPS final rule, 
for these newly merged hospitals, we do not have data currently 
available to calculate a Factor 3 amount that accounts for the merged 
hospital's uncompensated care burden (79 FR 50021). In the FY 2015 
IPPS/LTCH PPS final rule, we finalized a policy under which Factor 3 
for hospitals that we do not identify as undergoing a merger until 
after the public comment period and additional review period following 
the publication of the final rule or that undergo a merger during the 
fiscal year would be recalculated similar to new hospitals (79 FR 50021 
and 50022).
    Consistent with the policy adopted in the FY 2015 IPPS/LTCH PPS 
final rule, we proposed to treat newly merged hospitals in a similar 
manner to new hospitals, such that the newly merged hospital's final 
uncompensated care payment would be determined at cost report 
settlement where the numerator of the newly merged hospital's Factor 3 
would be based on the cost report of only the surviving hospital (that 
is, the newly merged hospital's cost report) for the current fiscal 
year. However, if the hospital's cost reporting period includes less 
than 12 months of data, we proposed that the data from the newly merged 
hospital's cost report would be annualized for purposes of the Factor 3 
calculation. We noted that we were not proposing that the multiplier 
calculation discussed previously would be used, as that would only be 
necessary for estimating post-merger data using historical reports. The 
acquired hospital's uncompensated care payment for the fiscal year 
during which the merger occurs would be determined using the 
prospectively determined Factor 3 amount for the acquired hospital and 
then prorated, if applicable. We referred readers to the detailed 
discussion in the FY 2015 IPPS/LTCH PPS rule regarding the calculation 
of pro rata uncompensated care payments (79 FR 50151 through 50153).
    Consistent with past policy, we also proposed that the interim 
uncompensated care payments for the newly merged hospital would be 
based only on the data for the surviving hospital's CCN available the 
time of the development of the final rule. In other words, for FY 2021, 
the eligibility of a newly merged hospital to receive interim 
uncompensated care payments and the amount of any interim uncompensated 
care payments, would be based only on the FY 2017 cost report available 
for the surviving CCN at the time the final rule is developed. However, 
at cost report settlement, we would determine the newly merged 
hospital's final uncompensated care payment based on the uncompensated 
care costs reported on its FY 2021 cost report. That is, we would 
revise the numerator of Factor 3 for the newly merged hospital to 
reflect the uncompensated care costs reported on the newly merged 
hospital's FY 2021 cost report.
    Comment: A few commenters supported CMS's policy proposal for 
combining uncompensated care costs data in the case of mergers by using 
a multiplier to adjust the acquired hospital's data. A commenter also 
supported the proposed policy regarding the treatment of mergers that 
happen after the final rule is issued. Another commenter, who expressed 
support for the annualization of uncompensated care costs from cost 
reports containing less than 12 months of data for the purpose of 
calculating Factor 3, also supported CMS's proposal to annualize the 
surviving newly merged hospital's cost report data for purposes of 
determining that hospital's proportion of uncompensated care.
    Response: We appreciate the support for our proposal to apply a 
multiplier to the acquired hospital's unannualized uncompensated care 
cost data to determine the final portion of the acquired hospital's 
uncompensated care costs that should be added to the uncompensated care 
costs of the surviving hospital for purposes of determining Factor 3. 
We also appreciate support for the proposal to treat hospitals that 
merge after the final rule has been issued as new hospitals. 
Additionally, we appreciate the support for our policy of annualizing 
the data from cost reports that do not include 12 months of data, 
including our proposal to annualize the data for surviving newly merged 
hospitals if their cost reporting period does not equal 12 months.

 Annualization and Long Cost Reports

    We proposed to continue the policy that was finalized in the FY 
2018 IPPS/LTCH PPS final rule of annualizing uncompensated care cost 
data reported on the Worksheet S-10 if a hospital's cost report does 
not equal 12 months of data, except in the case of mergers, which would 
be subject to the modified merger policy previously discussed. In 
addition, we proposed to continue the policies that were finalized in 
the FY 2019 IPPS/LTCH final rule (83 FR 41415) regarding the use of the 
longest cost report available within the Federal fiscal year. However, 
we proposed to modify our current policy for those rare situations 
where a hospital has a cost report that starts in one fiscal year but 
spans the entirety of the following fiscal year such that the hospital 
has no cost report starting in that subsequent fiscal year. Under this 
proposal, we would use the cost report that spans both fiscal years for 
purposes of calculating Factor 3 when data for the latter fiscal year 
is used in the Factor 3 methodology. The current policy for this rare 
situation includes the criterion that the hospital have multiple cost 
reports beginning in the same fiscal year. However, we explained that 
we no longer believe this is a necessary condition, given that we have 
identified some hospitals that have no FY 2017 cost report, but that 
only have one FY 2016 cost report, which spans the entire FY 2017 
period.
    Comment: Some commenters supported the continuation of 
annualization and the proposed modification to the long cost report 
policy.
    Response: We appreciate the support for our proposals. We are 
finalizing as proposed.

 New Hospital for Purposes of Factor 3

    We proposed to continue the new hospital policy that was finalized 
in the FY 2020 IPPS/LTCH PPS final rule. Specifically, for new 
hospitals that do not have an FY 2017 cost report to use in the Factor 
3 calculation (that is, hospitals with CCNs established on or after 
October 1, 2017) that may have a preliminary projection of being 
eligible for DSH payments based on their most recent available 
disproportionate patient percentage, we proposed that the MAC would 
make a final determination concerning whether the hospital is eligible 
to receive Medicare DSH payments at cost report settlement based on its 
FY 2021 cost report. If the hospital is ultimately determined to be 
eligible for Medicare DSH payments for

[[Page 58830]]

FY 2021, the hospital would receive an uncompensated care payment 
calculated using a Factor 3, where the numerator is the uncompensated 
care costs reported on Worksheet S-10 of the hospital's FY 2021 cost 
report, and the denominator is the sum of the uncompensated care costs 
reported on Worksheet S-10 of the FY 2017 cost reports for all DSH-
eligible hospitals. This denominator would be the same denominator that 
is determined prospectively for purposes of determining Factor 3 for 
all DSH-eligible hospitals, with the exception of Puerto Rico hospitals 
and IHS and Tribal hospitals. The new hospital would not receive 
interim uncompensated care payments before cost report settlement 
because we would have no FY 2017 uncompensated care data on which to 
determine what those interim payments should be.
    Comment: Commenters supported this proposal for continuing the new 
hospital policy.
    Response: We thank the commenters for their support. We are 
finalizing as proposed, without modification.

 IHS and Tribal Hospitals

    For the reasons discussed in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38209), we continue to recognize that the use of data from 
Worksheet S-10 to calculate the uncompensated care amount for IHS and 
Tribal hospitals for FY 2021 may jeopardize these hospitals' payments 
due to their unique funding structure. Prior to the proposed rulemaking 
for FY 2021, CMS consulted with IHS and Tribal hospitals regarding 
Worksheet S-10 uncompensated care reporting as well as any potential 
barriers under the current cost reporting instructions to reporting by 
IHS and Tribal hospitals on Worksheet S-10. During the consultation, 
representatives of some hospitals indicated that it was not clear to 
them that they could submit Worksheet S-10 data given the historical 
use of the low-income patient proxy when determining Factor 3 for these 
hospitals. CMS reiterated that the use of the low-income patient proxy 
when determining Factor 3 does not preclude the submission of Worksheet 
S-10 data by these hospitals. CMS explained that IHS and Tribal 
Hospitals should be aware of and comply with the instructions and 
requirements for the submission of Worksheet S-10 data. We noted that 
an o the MLN Matters[supreg] Special Edition article ``Updates to 
Medicare's Cost Report Worksheet S-10 to Capture Uncompensated Care 
Data'' that was released on September 29, 2017, provides an overview of 
the instructions and requirements for reporting on the Worksheet S-10 
and is available on the CMS website at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE17031.pdf. Another source of information is the ``Worksheet 
S-10--Hospital Uncompensated and Indigent Care Data Following 2018 IPPS 
Final Rule Questions and Answers'' that is also available on the CMS 
website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/Worksheet-S-10-UCC-QandAs.pdf. As 
discussed previously in this section, we also noted that CMS continues 
to consider the feedback provided during IHS and Tribal consultation 
for purposes of determining what policies should apply with respect to 
DSH and uncompensated care payments to IHS and Tribal hospitals in 
future years and solicited comment on this issue to assist future 
rulemaking. We also noted that the Paper Reduction Act (PRA) package 
for Form CMS 2552-10 will be an additional opportunity for comments on 
the Worksheet S-10 instructions.
    Therefore, for IHS and Tribal hospitals that have a FY 2013 cost 
report, we proposed to continue the policy first adopted for the FY 
2018 rulemaking regarding the low-income patient proxy. Specifically, 
for FY 2021 we proposed to determine Factor 3 for these hospitals based 
on Medicaid days for FY 2013 and the most recent update of SSI days. 
The aggregate amount of uncompensated care that is used in the Factor 3 
denominator for these hospitals would continue to be based on the low-
income patient proxy; that is, the aggregate amount of uncompensated 
care determined for all DSH eligible hospitals using the low-income 
insured days proxy. We explained that we continue to believe this 
approach is appropriate because the FY 2013 data reflect the most 
recent available information regarding these hospitals' Medicaid days 
before any expansion of Medicaid. At the time of development of the 
proposed rule, for modeling purposes, we computed Factor 3 for these 
hospitals using FY 2013 Medicaid days from a HCRIS extract updated 
through February 19, 2020, and the most recent available FY 2018 SSI 
days.
    We refer the reader to the previous section for a discussion 
regarding comments related to IHS and Tribal hospitals. We are 
finalizing the above methodology for IHS and Tribal hospitals for FY 
2021 as proposed without modification.

 Puerto Rico Hospitals

    In the FY 2021 IPPS/LTCH PPS proposed rule, we explained that we 
had considered calculating the Factor 3 amounts for Puerto Rico 
hospitals for FY 2021 using the same methodology we proposed for 
hospitals other than IHS and Tribal hospitals. However, we concluded 
that the recent natural disasters in Puerto Rico may negatively impact 
the ability of these hospitals to engage in the FY 2021 rulemaking on 
the particular issue of the data to be used to determine Factor 3 for 
Puerto Rico hospitals, while simultaneously focusing on ensuring that 
their FY 2018 uncompensated care Worksheet S-10 data is accurately 
reported and available for use in calculating FY 2022 Medicare 
uncompensated care payments consistent with our proposed approach for 
FY 2022 and subsequent fiscal years.
    Accordingly, for FY 2021 we proposed to determine Factor 3 for 
Puerto Rico hospitals that have a FY 2013 cost report based on the low-
income patient proxy. We would determine Factor 3 for these hospitals 
based on Medicaid days for FY 2013 and the most recent update of SSI 
days. The aggregate amount of uncompensated care that is used in the 
Factor 3 denominator for these hospitals would continue to be based on 
the low-income patient proxy; that is, the aggregate amount of 
uncompensated care determined for all DSH eligible hospitals using the 
low-income insured days proxy. We continue to believe the use of FY 
2013 data in determining the low-income insured days proxy is 
appropriate because the FY 2013 data reflect the most recent available 
information regarding these hospitals' Medicaid days before any 
expansion of Medicaid. At the time of development of the proposed rule, 
for modeling purposes, we computed Factor 3 for these hospitals using 
FY 2013 Medicaid days from a recent HCRIS extract and the most recent 
available FY 2018 SSI days. In addition, because we proposed to 
continue to use 1 year of insured low-income patient days as a proxy 
for uncompensated care for Puerto Rico hospitals and residents of 
Puerto Rico are not eligible for SSI benefits, we proposed to continue 
to use a proxy for SSI days for Puerto Rico hospitals, consisting of 14 
percent of a hospital's Medicaid days, as finalized in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 56953 through 56956).
    We refer the reader to the previous section for a discussion 
regarding comments related to Puerto Rico hospitals. We are finalizing 
the above methodology for Puerto Rico hospitals for FY 2021 as proposed 
without modification.


[[Page 58831]]


 All-Inclusive Rate Providers

    In FY 2018 IPPS/LTCH PPS final rule (82 FR 38218), we indicated 
that we would further explore which trims are appropriate to apply to 
the CCRs on Line 1 of Worksheet S-10, including whether it is 
appropriate to apply a unique trim to certain subsets of hospitals, 
such as all-inclusive rate providers. We noted that all-inclusive rate 
providers have the ability to compute and enter their appropriate CCR 
on Worksheet S-10, Line 1, by answering Yes to the question on 
Worksheet S-2, Part I, Line 115, and not have it computed using 
information from Worksheet C, Part I. We stated that we would give more 
consideration to the utilization of statewide averages in substituting 
outlier CCRs, and that we intended to consider other approaches that 
would ensure validity of the trim methodology and not penalize 
hospitals that use alternative methods of cost apportionment in future 
rulemaking. In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19420), 
we stated that we had examined the CCRs from the FY 2015 cost reports 
and believed the risk that all-inclusive rate providers will have 
aberrant CCRs and, consequently, aberrant uncompensated care data, was 
mitigated by the proposal to apply the trim methodology for potentially 
aberrant uncompensated care costs to all hospitals.
    In preparation for the FY 2021 rulemaking, we conducted a review of 
the CCRs from the FY 2017 cost reports from all-inclusive rate 
providers (AIRPs) and determined that in rare situations they may 
include a potentially aberrant CCR (Worksheet S-10 line 1) which 
results in a ratio of total UCC to total operating costs of greater 
than 50 percent. For FY 2021, we continue to believe that all-inclusive 
rate providers should be excluded from the CCR trim methodology because 
all-inclusive rate providers have alternative methods of cost 
apportionment that are different from those used in the standard CCR 
calculation. However, in order to ensure that we are able to calculate 
a reasonable estimate of the hospital's FY 2017 UCC, we proposed to 
modify the potentially aberrant UCC trim methodology when it is applied 
to all-inclusive rate providers. Specifically, we proposed that when an 
AIRP's total UCC are greater than 50 percent of its total operating 
costs when calculated using the CCR included on its FY 2017 cost 
report, we would recalculate UCC using the CCR reported on Worksheet S-
10, line 1 of the hospital's most recent available prior year cost 
report that would not result in UCC of over 50 percent of total 
operating costs. That is, we would apply the CCR from Worksheet S-10 
line 1 of that prior cost report to the data reported on Worksheet S-10 
of the FY 2017 cost report. For purposes of the proposed rule, we 
identified a few AIRPs that had UCC in excess of 50 percent of their 
total operating costs. For these hospitals, we used the CCR from 
Worksheet S-10, line 1 of their FY 2015 cost report in place of the CCR 
reported on Worksheet S-10, line 1 of their FY 2017 cost report, in 
order to re-calculate their UCC. As we explained in the proposed rule, 
we believe this approach produces a more accurate estimate of the 
AIRP's UCC for purposes of determining Factor 3, while continuing to 
reflect the information on uncompensated care included in the AIRP's FY 
2017 cost report, which for the reasons discussed previously we believe 
is the most appropriate data to be used in determining Factor 3 for FY 
2021.
    Comment: A commenters supported this proposal related to AIRPs.
    Response: We thank the commenter for their support.

 CCR Trim Methodology

    The calculation of a hospital's total uncompensated care costs on 
Worksheet S-10 requires the use of the hospital's cost to charge ratio 
(CCR). Similar to the process used in the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38217 through 38218), the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41415 and 41416), and the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42372) for trimming CCRs, we proposed the following steps to 
determine the applicable CCR:
    Step 1: Remove Maryland hospitals. In addition, we would remove 
all-inclusive rate providers because their CCRs are not comparable to 
the CCRs calculated for other IPPS hospitals.
    Step 2: For FY 2017 cost reports, calculate a CCR ``ceiling'' with 
the following data: For each IPPS hospital that was not removed in Step 
1 (including non-DSH eligible hospitals), we would use cost report data 
to calculate a CCR by dividing the total costs on Worksheet C, Part I, 
Line 202, Column 3 by the charges reported on Worksheet C, Part I, Line 
202, Column 8. (Combining data from multiple cost reports from the same 
fiscal year is not necessary, as the longer cost report would be 
selected.) The ceiling would be calculated as 3 standard deviations 
above the national geometric mean CCR for the applicable fiscal year. 
This approach is consistent with the methodology for calculating the 
CCR ceiling used for high-cost outliers. Remove all hospitals that 
exceed the ceiling so that these aberrant CCRs do not skew the 
calculation of the statewide average CCR.
    Step 3: Using the CCRs for the remaining hospitals in Step 2, 
determine the urban and rural statewide average CCRs for FY 2017 for 
hospitals within each State (including non-DSH eligible hospitals), 
weighted by the sum of total hospital discharges from Worksheet S-3, 
Part I, Line 14, Column 15. (As explained in the proposed rule, this is 
not a change from the methodology used in past years. In past rules, we 
inadvertently referred to Column 14, rather than Column 15.)
    Step 4: Assign the appropriate statewide average CCR (urban or 
rural) calculated in Step 3 to all hospitals, excluding all-inclusive 
rate providers, with a CCR for FY 2017 greater than 3 standard 
deviations above the national geometric mean for that fiscal year (that 
is, the CCR ``ceiling''). For the proposed rule, the statewide average 
CCR was applied to 12 hospitals, of which 4 hospitals had FY 2017 
Worksheet S-10 data. (For this final rule, the statewide average CCR 
was applied to 13 hospitals, of which 3 hospitals have FY 2017 
Worksheet S-10 data.)
    Step 5: For providers that did not report a CCR on Worksheet S-10, 
Line 1, we would assign them the statewide average CCR as determined in 
step 3.
    We proposed that after completing the described previously steps, 
we would re-calculate the hospital's uncompensated care costs (Line 30) 
using the trimmed CCR (the statewide average CCR (urban or rural, as 
applicable)).
    Comment: In relation to the proposed CCR trim methodology a 
commenter requested that CMS reconsider its policy of applying the 
state-wide average CCR for providers with a CCR above the proposed 
ceiling. The commenter suggested an alternative approach of using the 
hospital's previous CCR or an average of two or three years CCRs to 
reflect the provider's actual experience. Another commenter supported 
CMS's proposed policy of excluding All-Inclusive Rate Providers (AIRPs) 
from the CCR trim methodology and agreed with CMS's proposed approach 
of assessing whether the amount of uncompensated care resulting from 
the product of the AIRP-reported CCR and uncompensated care charges is 
greater than 50 percent of total operating costs; in such cases, CMS 
proposed to use the CCR from the 2015 Worksheet S-10, which, according 
to a commenter, the agency has already vetted.
    Response: We appreciate the comments regarding the proposed CCR 
trim methodology. We believe that the

[[Page 58832]]

suggested alternative approaches to the use of the statewide average 
CCR for providers with a CCR above the CCR ``ceiling'', including using 
a hospital's previous CCR or an average of multiple CCRs, may not 
provide a solution as some providers may still have high CCRs in the 
past fiscal years. Further, we note that the proposed CCR trim 
methodology is not only similar to the CCR trim methodology policy that 
has been used for purposes of determining uncompensated care payments 
since FY 2018, but is also consistent with the approach used in the 
outlier payment methodology under Sec.  412.84(h)(3)(ii), which states 
that the Medicare contractor may use a statewide average CCR for 
hospitals whose operating or capital CCR is in excess of 3 standard 
deviations above the corresponding national geometric mean.

 Uncompensated Care Data Trim Methodology

    In the proposed rule, we noted that after applying the CCR trim 
methodology, there are rare situations where a hospital has potentially 
aberrant data that are unrelated to its CCR. Therefore, we proposed to 
continue the trim methodology for potentially aberrant UCC that was 
finalized in the FY 2019 and FY 2020 IPPS/LTCH PPS final rules. That 
is, if the hospital's uncompensated care costs for FY 2017 are an 
extremely high ratio (greater than 50 percent) of its total operating 
costs, we proposed to determine the ratio of uncompensated care costs 
to the hospital's total operating costs from another available cost 
report, and to apply that ratio to the total operating expenses for the 
potentially aberrant fiscal year to determine an adjusted amount of 
uncompensated care costs. Specifically, if the FY 2017 cost report is 
determined to include potentially aberrant data, we proposed that data 
from the FY 2018 cost report would be used for the ratio calculation. 
Thus, the hospital's uncompensated care costs for FY 2017 would be 
trimmed by multiplying its FY 2017 total operating costs by the ratio 
of uncompensated care costs to total operating costs from the 
hospital's FY 2018 cost report to calculate an estimate of the 
hospital's uncompensated care costs for FY 2017 for purposes of 
determining Factor 3 for FY 2021.
    However, because we have audited the FY 2017 Worksheet S-10 data 
for a number of hospitals, we explained our belief that it is necessary 
to modify the UCC data trim methodology for hospitals whose FY 2017 
cost report has been audited. Because the UCC data for these hospitals 
have been subject to audit, we believe there is increased confidence 
that if high uncompensated care costs are reported by these audited 
hospitals, the information is accurate. Therefore, we stated that we no 
longer believe it is necessary to apply the trim methodology for these 
audited hospitals. Accordingly, we proposed to exclude hospitals that 
were part of the audits from the trim methodology for potentially 
aberrant UCC. For those hospitals that do not have audited Worksheet S-
10 data, we proposed to continue to apply the trim methodology as 
previously described.
    Comment: A few commenters expressed support for the proposal to 
substitute extremely high uncompensated care costs with information 
from FY 2018 cost reports and supported the agency's proposed 
modification to the uncompensated care data trim methodology to exempt 
hospitals for which uncompensated care values have been audited from 
the application of the uncompensated care cost adjustment.
    Response: We appreciate the comments regarding our proposed policy 
for trimming uncompensated care costs that are an extremely high ratio 
of a hospital's total operating costs for the same year. We believe the 
proposed approach balances our desire to exclude potentially aberrant 
data with our concern regarding inappropriately reducing FY 2021 
uncompensated care payments to a hospital that may have a legitimately 
high ratio as determined through an audit of their Worksheet S-10 data.

 Summary of Proposed Methodology

    In summary, for FY 2021, we proposed to compute Factor 3 for each 
hospital using the following steps--
    Step 1: Select the provider's longest cost report from its Federal 
fiscal year (FFY) 2017 cost reports. (Alternatively, in the rare case 
when the provider has no FFY 2017 cost report because the cost report 
for the previous Federal fiscal year spanned the FFY 2017 time period, 
the previous Federal fiscal year cost report would be used in this 
step.)
    Step 2: Annualize the uncompensated care costs (UCC) from Worksheet 
S-10 Line 30, if the cost report is more than or less than 12 months. 
(If applicable, use the statewide average CCR (urban or rural) to 
calculate uncompensated care costs.)
    Step 3: Combine adjusted and/or annualized uncompensated care costs 
for hospitals that merged using the merger policy, discussed earlier.
    Step 4: Calculate Factor 3 for Indian Health Service and Tribal 
hospitals and Puerto Rico hospitals using the low-income insured days 
proxy based on FY 2013 cost report data and the most recent available 
SSI ratio (or, for Puerto Rico hospitals, 14 percent of the hospital's 
FY 2013 Medicaid days). The denominator is calculated using the low-
income insured days proxy data from all DSH eligible hospitals.
    Step 5: Calculate Factor 3 for the remaining DSH eligible hospitals 
using annualized uncompensated care costs (Worksheet S-10 Line 30) 
based on FY 2017 cost report data (from Step 1, 2 or 3). The hospitals 
for which Factor 3 was calculated in Step 4 are excluded from this 
calculation.
    We proposed to amend the regulation at Sec.  412.106 by adding a 
new paragraph (g)(1)(iii)(C)(7) to reflect the methodology for 
computing Factor 3 for FY 2021. We also proposed to add a new paragraph 
(g)(1)(iii)(C)(8) to reflect the proposal for all subsequent fiscal 
years to use the most recent available single year of audited Worksheet 
S-10 data to calculate Factor 3 for all eligible hospitals, except IHS 
and Tribal hospitals.
    Comment: Some commenters urged CMS to consider a five to ten 
percent stop-loss policy across all hospitals' uncompensated care 
payments, so as to help mitigate and minimize hospital uncompensated 
care payment fluctuations across years.
    Response: As discussed in last year's final rule (84 FR 42366) and 
prior rulemaking, section 1886(r) does not provide CMS with authority 
to implement a stop-loss policy. Rather, section 1886(r)(2)(C) requires 
that we determine Factor 3 for each hospital based upon the ratio of 
the amount of uncompensated care furnished by the hospital compared to 
the uncompensated care furnished by all DSH-eligible hospitals, and 
there is no authority under section 1886(r) to adjust this amount. We 
note that the use of three years of data to determine Factor 3 for FY 
2018 and FY 2019, as discussed in the FY 2020 IPPS/LTCH PPS final rule 
already provided a mechanism that had the effect of smoothing the 
transition from the use of low-income insured days to the use of 
Worksheet S-10 data. However, we will continue to monitor uncompensated 
care payments for payment fluctuations as we move forward with using 
only one year of Worksheet S-10 for future Factor 3 calculations.
    Comment: A commenter recommended that CMS use the traditional 
payment reconciliation process to calculate final payments for 
uncompensated care costs pursuant to section 1886(r)(2) of the Act. The 
commenter did not object to CMS using

[[Page 58833]]

prospective estimates, derived from the best data available, to 
calculate interim payments for uncompensated care costs. However, the 
commenter stated that interim payments should be subject to later 
reconciliation based on estimates derived from actual data from the 
Federal fiscal year. The commenter also noted that not all FY 2017 
Worksheet S-10 cost reports were audited and that the use of this blend 
of audited and unaudited data would be arbitrary and consistent with 
the statutory requirements. This same commenter also expressed the need 
for meaningful engagement on concerns raised in the rulemaking process, 
and stated that the preclusion of review provision leaves intact the 
agency's responsibilities, including the rulemaking requirements of the 
Administrative Procedure Act and the Medicare Act.
    Response: Consistent with the position that we have taken in 
rulemaking for previous years, we continue to believe that applying our 
best estimates of the three factors used in the calculation of 
uncompensated care payments to determine payments prospectively is most 
conducive to administrative efficiency, finality, and predictability in 
payments (78 FR 50628; 79 FR 50010; 80 FR 49518; 81 FR 56949; 82 FR 
38195; and 84 FR 42373). We believe that, in affording the Secretary 
the discretion to estimate the three factors used to determine 
uncompensated care payments and by including a prohibition against 
administrative and judicial review of those estimates in section 
1886(r)(3) of the Act, Congress recognized the importance of finality 
and predictability under a prospective payment system. As a result, we 
do not agree with the commenter's suggestion that we should establish a 
process for reconciling our estimates of uncompensated care payments, 
which would be contrary to the notion of prospectivity. Furthermore, we 
note that this rulemaking has been conducted consistent with the 
requirements of the Administrative Procedure Act and Title XVIII of the 
Act. Under the Administrative Procedure Act, a proposed rule is 
required to include either the terms or substance of the proposed rule 
or a description of the subjects and issues involved. In this case, the 
FY 2021 IPPS/LTCH PPS proposed rule included a detailed discussion of 
our proposed methodology for calculating Factor 3 and the data that 
would be used. We made public the best data available at the time of 
the proposed rule, in order to allow hospitals to understand the 
anticipated impact of the proposed methodology and submit comments, and 
we have considered those comments in determining our final policies for 
FY 2021.
    After consideration of the public comments we received, and for the 
reasons discussed in the proposed rule and in this final rule, for FY 
2021, we are finalizing the following methodology to compute Factor 3 
for each hospital by--
    Step 1: Selecting the provider's longest cost report from its 
Federal fiscal year (FFY) 2017 cost reports. (Alternatively, in the 
rare case when the provider has no FFY 2017 cost report because the 
cost report for the previous Federal fiscal year spanned the FFY 2017 
time period, the previous Federal fiscal year cost report would be used 
in this step.)
    Step 2: Annualizing the uncompensated care costs (UCC) from 
Worksheet S-10 Line 30, if the cost report is more than or less than 12 
months. (If applicable, use the statewide average CCR (urban or rural) 
to calculate uncompensated care costs.)
    Step 3: Combining adjusted and/or annualized uncompensated care 
costs for hospitals that merged using the merger policy, discussed 
earlier.
    Step 4: Calculating Factor 3 for Indian Health Service and Tribal 
hospitals and Puerto Rico hospitals using the low-income insured days 
proxy based on FY 2013 cost report data and the most recent available 
SSI ratio (or, for Puerto Rico hospitals, 14 percent of the hospital's 
FY 2013 Medicaid days). The denominator is calculated using the low-
income insured days proxy data from all DSH eligible hospitals.
    Step 5: Calculating Factor 3 for the remaining DSH eligible 
hospitals using annualized uncompensated care costs (Worksheet S-10 
Line 30) based on FY 2017 cost report data (from Step 1, 2 or 3). The 
hospitals for which Factor 3 was calculated in Step 4 are excluded from 
this calculation.
    We also are finalizing without modification the other proposals 
related to the Factor 3 methodology that are discussed in this section.
    For this FY 2021 IPPS/LTCH PPS final rule, we are finalizing a 
HCRIS cutoff of June 30, 2020, for purposes of calculating Factor 3, 
except in rare situations where report upload discrepancies by CMS or 
the MACs have been corrected, as appropriate. We are also finalizing 
our proposal to amend the regulations at Sec.  412.106(g)(1)(iii)(C) by 
adding new paragraphs (7) and (8) to reflect the methodology for 
computing Factor 3 for FY 2021 and for subsequent fiscal years. In 
brief, the methodology adopted in this final rule for purposes of 
determining Factor 3 would apply for FY 2022 and subsequent years, 
using Worksheet S-10 data from the most recent cost reporting year for 
which audits have been conducted.
(e) Proposals Related to the Per Discharge Amount of Interim 
Uncompensated Care Payments
    Consistent with the policy adopted in FY 2014 and applied in each 
subsequent fiscal year, we proposed to use a 3-year average of the 
number of discharges for a hospital to produce an estimate of the 
amount of the uncompensated care payment per discharge. Specifically, 
the hospital's total uncompensated care payment amount, is divided by 
the hospital's historical 3-year average of discharges computed using 
the most recent available data. The result of that calculation is a per 
discharge payment amount that will be used to make interim 
uncompensated care payments to each projected DSH eligible hospital. 
The interim uncompensated care payments made to the hospital during the 
fiscal year are reconciled following the end of the year to ensure that 
the final payment amount is consistent with the hospital's 
prospectively determined uncompensated care payment for the Federal 
fiscal year.
    In response to our proposal in the FY 2020 IPPS/LTCH PPS proposed 
rule to continue to determine interim uncompensated care payments using 
a 3-year average of discharges, we received a comment expressing 
concern that discharge growth discrepancies create the risk of 
overpayments of interim uncompensated care payments and unstable cash 
flows for CMS, hospitals, and MA plans (84 FR 42373). Taking the 
commenter's concerns into consideration, for FY 2021, we proposed a 
voluntary process through which a hospital may submit a request to its 
Medicare Administrative Contractor (MAC) for a lower per discharge 
interim uncompensated care payment amount, including a reduction to 
zero, once before the beginning of the Federal fiscal year and/or once 
during the Federal fiscal year. In conjunction with this request, the 
hospital would be required to provide supporting documentation 
demonstrating there would likely be a significant recoupment (for 
example, 10 percent or more of the hospital's total uncompensated care 
payment or at least $100,000) at cost report settlement if the per 
discharge amount were not lowered. For example, a hospital might submit 
documentation showing a large projected increase in discharges during 
the fiscal year to support reduction of its

[[Page 58834]]

per discharge uncompensated care payment amount. As another example, a 
hospital might request that its per discharge uncompensated care 
payment amount be reduced to zero midyear if the hospital's interim 
uncompensated care payments during the year have already surpassed the 
total uncompensated care payment calculated for the hospital.
    We proposed that the hospital's MAC would evaluate these requests 
and the supporting documentation before the beginning of the Federal 
fiscal year and/or with midyear requests when the 3-year average of 
discharges is lower than hospital's projected FY 2021 discharges. If 
following review of the request and the supporting documentation, the 
MAC agrees that there likely would be significant recoupment of the 
hospital's interim Medicare uncompensated care payments at cost report 
settlement, the only change that would be made would be to lower the 
per discharge amount either to the amount requested by the hospital or 
another amount determined by the MAC to be appropriate to reduce the 
likelihood of a substantial recoupment at cost report settlement. No 
change would be made to the total uncompensated care payment amount 
determined for the hospital on the basis of its Factor 3. In other 
words, this proposal would not change how the total uncompensated care 
payment amount will be reconciled at cost report settlement.
    Comments: A few commenters recognized the effort CMS has taken in 
addressing uncompensated care overpayments. These commenters expressed 
support for the proposal to provide an option for hospitals to submit a 
request to their MAC for a lower interim uncompensated care payment. 
The commenters noted that the policy would mitigate discharge growth 
discrepancies that could lead to an overestimate of the per-discharge 
amount of interim uncompensated payments, which could cause unstable 
cash flows for hospitals.
    In contrast, a commenter stated that it seemed unlikely hospitals 
would want to request lower or zero per-claim uncompensated care 
payments because of inherent incentives to maximize their cash flow. 
The commenter also noted that the current claims average does not 
consider the growth in Medicare eligibility since 2019 due to the aging 
of baby boomers. This lack of consideration, according to the 
commenter, results in the risk of overpayments for uncompensated care 
and unstable cash flows for hospitals and MA plans. To minimize this 
risk, the commenter suggested a growth factor, based on the CBO 
estimate of 64 million Part A fee- for-service beneficiaries in 2021 
compared to the 61 million in 2019, be applied to the three-year claims 
average (that is, a growth factor of 1.05 (64/61)).
    The commenter also expressed concern that exorbitant amounts in 
per-claim uncompensated care payments could result in surprise balance 
billing if MA beneficiaries use an out-of-network provider, where 
coinsurance payments could range from 20 percent to 40 percent. To 
avoid this situation, the commenter recommended that CMS place a cap on 
per-discharge uncompensated care payments ``within the range of 
$6,232--$12,464, which represents a range of one to two standard 
deviations of the Estimated Per Claim Amounts for all qualifying 
hospitals.''
    Response: We thank commenters for their thoughtful suggestions 
regarding our proposal to allow hospitals the opportunity to 
voluntarily request a decrease to their per-claim uncompensated care 
payments. We are finalizing the policy as proposed without 
modification, because we believe the policy may facilitate greater 
payment predictability throughout the year and limit recoupment of 
overpayments as part of cost report settlement. We will consider 
commenters' input and suggestions regarding this policy in considering 
any potential modifications or refinements to this policy in future 
rulemaking.
(f) Process for Notifying CMS of Merger Updates and To Report Upload 
Issues
    As we have done for every proposed and final rule beginning in FY 
2014, in conjunction with this final rule, we will publish on the CMS 
website a table listing Factor 3 for all hospitals that we estimate 
will receive empirically justified Medicare DSH payments in FY 2021 
(that is, those hospitals that will receive interim uncompensated care 
payments during the fiscal year), and for the remaining subsection (d) 
hospitals and subsection (d) Puerto Rico hospitals that have the 
potential of receiving a Medicare DSH payment in the event that they 
receive an empirically justified Medicare DSH payment for the fiscal 
year as determined at cost report settlement. We note that, at the time 
of development of this final rule, the FY 2018 SSI ratios were 
available. Accordingly, we computed Factor 3 for Indian Health Service 
and Tribal hospitals and Puerto Rico hospitals using the most recent 
available data regarding SSI days from the FY 2018 SSI ratios.
    We also will publish a supplemental data file containing a list of 
the mergers that we are aware of and the computed uncompensated care 
payment for each merged hospital.
    Hospitals had 60 days from the date of public display of the FY 
2021 IPPS/LTCH PPS proposed rule to review the table and supplemental 
data file published on the CMS website in conjunction with the proposed 
rule and to notify CMS in writing of issues related to mergers and/or 
to report potential upload discrepancies due to MAC mishandling of the 
Worksheet S-10 data during the report submission process (for example, 
report not reflecting audit results due to MAC mishandling or most 
recent report differs from previously accepted amended report due to 
MAC mishandling). We stated that comments that are specific to the 
information included in the table and supplemental data file could be 
submitted to the CMS inbox at [email protected]. We indicated 
we would address these comments as appropriate in the table and the 
supplemental data file that we publish on the CMS website in 
conjunction with the publication of the FY 2020 IPPS/LTCH PPS final 
rule.
    For FY 2021, we proposed that after the publication of the FY 2021 
IPPS/LTCH PPS final rule, hospitals would have 15 business days from 
the date of public display of the FY 2021 IPPS/LTCH PPS final rule to 
review and submit comments on the accuracy of the table and 
supplemental data file published in conjunction with the final rule. We 
stated that any changes to Factor 3 would be posted on the CMS website 
prior to October 1, 2020. We acknowledged that this is less time 
compared to previous years. However, we noted that there is only a 
limited amount of time for CMS to review the information submitted by 
the hospitals and to implement the finalized policies before the start 
of the Federal fiscal year. We explained our belief that hospitals 
would have sufficient opportunity during the comment period for the 
proposed rule to provide information about recent and/or pending 
mergers and/or to report upload discrepancies. We further explained 
that we expected to use data from the March 2020 HCRIS extract for the 
FY 2021 final rule, which contributed to our increased confidence that 
hospitals would be able to comment on mergers and report any upload 
discrepancies during the comment period following the final rule. 
However, we also noted that we might consider using more recent data 
that may become available after March 2020, but before the final rule 
for purpose of

[[Page 58835]]

calculating the final Factor 3s for purposes of the FY 2021 IPPS/LTCH 
PPS final rule. We stated that in the event that there are any 
remaining merger updates and/or upload discrepancies after the final 
rule, the 15 business days from the date of public display of the FY 
2021 IPPS/LTCH PPS final rule deadline should allow for the time 
necessary to prepare and make any corrections to Factor 3 calculations 
before the beginning of the Federal fiscal year. In addition, we noted 
that we intend to revisit in future rulemaking whether to discontinue 
this additional comment process after the final rule, because we 
believe, in general, the comment period for the proposed rule should 
provide sufficient opportunity for hospitals to notify CMS regarding 
pending mergers and/or to report upload discrepancies.
    Comment: Several commenters expressed concern related to the 
proposed 15-business day deadline to submit comments on the accuracy of 
the supplemental data files after the FY 2021 IPPS/LTCH final rule is 
posted. A few commenters requested at least 30 days to review the files 
in order to ensure the accuracy of the data. A commenter indicated that 
the additional time to review would be especially important in light of 
the COVID-19 PHE. The commenter also argued that CMS has consistently 
delayed the release of the proposed rules and that the 15-business day 
period allocated for review after the final rule is not sufficient. 
Related to this, a commenter requested that CMS release the proposed 
rule for FY 2022 and subsequent proposed rules earlier.
    A commenter also recommended that CMS provide at least a 14-day 
period for hospitals to submit corrections to their uncompensated care 
data arising from MAC and/or CMS mishandling of cost report data either 
related to a Worksheet S-10 audit and/or any other report upload issue, 
adding that such a policy would be conceptually consistent with the 14-
day period to submit corrections in the merger listing.
    Response: We thank the commenters for providing feedback on our 
proposed 15-business day timeframe to review and submit comments 
regarding the public use files published in conjunction with this FY 
2021 IPPS/LTCH final rule. We are finalizing the proposal as we 
continue to believe a 15-business day review period is sufficient. 
Hospitals do not enter into mergers without advanced planning. A 
hospital can inform CMS during the comment period regarding merger 
activity not reflected in supplemental file published in conjunction 
with the proposed rule. This is true irrespective of a PHE. We note 
also that the historical FY 2017 cost reports are publically available 
on a quarterly basis on the CMS website for analysis and review of cost 
report data, which is another opportunity to review cost report data, 
separate from the supplemental data file published with this final 
rule.
    In regard to the comment requesting a 14-day period to address MAC 
and/or CMS mishandling of data, we note that we are finalizing our 
proposal to afford hospitals 15 business days from the public display 
of the FY 2021 IPPS/LTCH PPS final rule to submit comments on the 
accuracy of the supplemental data file, including with respect to 
mergers and/or report upload discrepancies. As noted in the FY 2021 
IPPS/LTCH PPS proposed rule, the CMS inbox is not intended for 
Worksheet S-10 audit process related emails or inquiries, which should 
be directed to the respective MAC.
    As noted in the FY 2021 IPPS/LTCH PPS proposed rule, we intend to 
revisit the necessity of this additional review period following the 
publication of the final rule. As discussed in the proposed rule, under 
usual circumstances the 60-day comment period on the supplemental data 
file issued with the proposed rule should be sufficient time to provide 
information about mergers and/or to report upload discrepancies. We 
note that the December HCRIS extract is usually available in January; 
thus, stakeholders would be able to perform initial review of that data 
when it becomes available to confirm their report was properly 
processed. Therefore, this review could occur before the comment period 
for the proposed rule. We will take commenters' suggestions into 
consideration as part of any future rulemaking on the issue of whether 
a review period following the final rule continues to be needed.
    Comment: A commenter identified a discrepancy in the FY 2021 
proposed rule's supplemental tables, in which a provider was 
misclassified as a ``new hospital'' despite having received prior DSH 
payments. The commenter encouraged CMS to reevaluate the status of the 
misclassified provider and update the hospital's status accordingly in 
the public use files in the final rule.
    Another commenter pointed out that in the FY 2021 proposed rule's 
supplemental data file, their hospital is projected to be ineligible 
for DSH because the data used in the proposed rule was based on a cost 
reporting year pre-Medicaid expansion. The commenter indicated that 
while Medicare allows providers to retrospectively settle DSH and 
uncompensated care payments on their Medicare Cost Reports, MA plans 
currently do not, resulting in a significant under-reimbursement in FY 
2021. According to the commenter, they can only receive DSH payments 
from MA plans if the uncompensated care rate is loaded into their 
specific IPPS Pricer File. The commenter requested that CMS consider 
updating their DSH data to reflect the As Filed 2019 Medicare cost 
report in the FY 2021 final rule public use file.
    Response: We appreciate the commenters' diligence in checking that 
their own reports and data were properly processed. As appropriate, we 
have accounted for the inaccuracies identified by commenters in the 
development of the final rule's DSH supplemental data file published in 
conjunction with this FY 2021 IPPS/LTCH final rule, and we will 
continue to pay diligent attention to any data issues and work 
internally and with our contractors to resolve these issues in a timely 
manner.
    In regard to the commenter's concern about the retrospective 
settlement of DSH uncompensated care payments on their cost report and 
the impact of any potential delay in establishing their interim DSH 
eligibility in relation to their contractual relationship with MA 
plans, we note that this issue is beyond the scope of this rulemaking.

H. Payment for Allogeneic Hematopoietic Stem Cell Acquisition Costs 
(Sec.  412.113)

1. Background
    Medicare reimburses allogeneic hematopoietic stem cell transplants 
provided to Medicare beneficiaries for the treatment of certain 
diagnoses if such treatment is considered reasonable and necessary. 
Allogeneic hematopoietic stem cell transplants involve collecting or 
acquiring stem cells from a healthy donor's bone marrow, peripheral 
blood, or cord blood for intravenous infusion to the recipient. 
Currently, acquisition costs associated with allogeneic hematopoietic 
stem cell transplants are included in the operating costs of inpatient 
hospital services for subsection (d) hospitals (that is, hospitals paid 
under the IPPS). In addition, IPPS payments for acquisition services 
associated with allogeneic hematopoietic stem cell transplants are 
currently included in the MS-DRG payments for the allogeneic 
hematopoietic stem cell transplants when the transplants occurred in 
the inpatient setting.

[[Page 58836]]

    Section 108 of the Further Consolidated Appropriations Act, 2020 
(Pub. L. 116-94; hereafter, ``section 108''), provides that, effective 
for cost reporting periods beginning on or after October 1, 2020, costs 
related to hematopoietic stem cell acquisition for the purpose of an 
allogeneic hematopoietic stem cell transplant are not included in the 
definition of ``operating costs of inpatient hospital services'' at 
section 1886(a)(4) of the Act. In addition, section 108 provides that 
in the case of a subsection (d) hospital that furnishes an allogeneic 
hematopoietic stem cell transplant, payment to such hospital for 
hematopoietic stem cell acquisition shall be made on a reasonable cost 
basis, and that the Secretary shall specify the items included in such 
hematopoietic stem cell acquisition in rulemaking. Section 108 also 
requires that, beginning in FY 2021, the payments made based on 
reasonable cost for the acquisition costs of allogeneic hematopoietic 
stem cells be made in a budget neutral manner. We discuss each of the 
amendments under section 108 and our codification and implementation of 
those amendments, in the sections that follow.
2. Revisions to the Regulations for the Payment for Allogeneic 
Hematopoietic Stem Cell Acquisition Costs
a. Payment for Allogeneic Hematopoietic Stem Cell Acquisition Costs on 
a Reasonable Cost Basis
    Section 108 amended section 1886(d)(5) of the Act by adding a new 
paragraph (M)(i) which requires that, for cost reporting periods 
beginning on or after October 1, 2020, in the case of a subsection (d) 
hospital that furnishes an allogeneic hematopoietic stem cell 
transplant to an individual during such a period, payment to such 
hospital for hematopoietic stem cell acquisition shall be made on a 
reasonable cost basis. In the proposed rule, we proposed to amend 42 
CFR 412.113 to reflect this new statutory requirement by adding a new 
paragraph (e). We proposed that this new paragraph (e) would state that 
for cost reporting periods beginning on or after October 1, 2020, in 
the case of a subsection (d) hospital that furnishes an allogeneic 
hematopoietic stem cell transplant to an individual, Medicare payment 
to such hospital for hematopoietic stem cell acquisition costs is made 
on a reasonable cost basis. We stated in the proposed rule that this is 
the same way hospitals with approved transplant centers are reimbursed 
for their acquisition costs for solid organs under 42 CFR 412.113(d).
    In the proposed rule, we proposed to add new paragraph (e)(3) to 42 
CFR 412.113 to specify that a subsection (d) hospital that furnishes 
allogeneic hematopoietic stem cell transplants be required to formulate 
a standard acquisition charge. We stated in the proposed rule that the 
hospital's standard acquisition charge is based on costs expected to be 
reasonably and necessarily incurred in the acquisition of hematopoietic 
stem cells. In the proposed rule we stated that the standard 
acquisition charge does not represent the cost of acquiring stem cells 
for an individual allogeneic hematopoietic stem cell transplant; 
rather, it is a charge that approximates the hospital's average cost of 
acquiring hematopoietic stem cells for all of its allogeneic 
hematopoietic stem cell transplants. We proposed that the standard 
acquisition charge would be billed and paid on an interim payment basis 
as a ``pass-through'' item in accordance with 42 CFR 413.60 and 413.64. 
We proposed that the actual charges by ancillary cost center from the 
provider's records would be included on the Medicare cost report and 
converted to reasonable cost using the corresponding ancillary cost-to-
charge ratios. In the proposed rule we also stated that at the end of 
the cost reporting period, a settlement determination would be made of 
the actual cost incurred compared to the interim payments made during 
the period.
    We proposed to add new paragraph (e)(5) to 42 CFR 412.113 to 
specify that a subsection (d) hospital maintain an itemized statement 
that identifies the services furnished in collecting hematopoietic stem 
cells, the charges, the person receiving the service (donor/recipient, 
if donor the provider must identify the prospective recipient), and the 
recipient's health care insurance number.
    We proposed to add new paragraph (e)(4) to 42 CFR 412.113 to 
specify that the hospital's Medicare share of the hematopoietic stem 
cell acquisition costs is based on the ratio of the number of its 
allogeneic hematopoietic stem cell transplants furnished to Medicare 
beneficiaries to the total number of its allogeneic hematopoietic stem 
cell transplants furnished to all patients, regardless of payer, 
applied to reasonable cost. We stated in the proposed rule that this is 
the same methodology used to reimburse transplant hospitals with 
approved transplant programs for their acquisition costs for solid 
organs, and will be further discussed in a forthcoming Paperwork 
Reduction Act (PRA) package as referenced in section IV.H.3. of the 
preamble of the proposed rule and this final rule.
    In addition, we proposed to amend 42 CFR 412.1(a) to reflect the 
new statutory requirement by revising the parenthetical identifying 
other costs related to inpatient hospital services that are paid for on 
a reasonable cost basis to include costs related to hematopoietic stem 
cell acquisition for the purpose of an allogeneic hematopoietic stem 
cell transplant. In addition, we proposed to make formatting changes to 
42 CFR 412.1(a) to improve the readability of this paragraph. We also 
proposed to add new paragraph (e)(6) to 42 CFR 412.2 to add the costs 
of hematopoietic stem cell acquisition for the purpose of an allogeneic 
hematopoietic stem cell transplant to the list of services which are 
paid for on a reasonable cost basis.
    We summarize in this section the comments we received on these 
proposals.
    Comment: Some commenters supported our proposed amendment to codify 
the statutory requirements of section 108 which provides for Medicare 
payment to a subsection (d) hospital that furnishes an allogeneic 
hematopoietic stem cell transplant to an individual, so that such 
Medicare payment for allogeneic hematopoietic stem cell costs is made 
on a reasonable cost basis, effective for cost reporting periods 
beginning on or after October 1, 2020. A few commenters appreciated our 
reflecting the timing of this statutory change in the regulation.
    Response: We thank the commenters for their support. After 
consideration of the public comments we received, we are finalizing our 
proposed changes to 42 CFR 412.1(a) and 412.2 without modification. We 
are also finalizing our proposal to amend 42 CFR 412.113 by adding a 
new paragraph (e) to reflect this new statutory requirement, with the 
modifications described later this section.
    Comment: The majority of commenters disagreed with our proposal to 
require a subsection (d) hospital that furnishes an allogeneic 
hematopoietic stem cell transplant to formulate a standard acquisition 
charge (SAC), as reflected in proposed new paragraph 42 CFR 
412.113(e)(3).
    A few commenters acknowledged that the proposed billing methodology 
was the same methodology used for billing solid organ acquisition. 
However, a commenter noted that because obtaining solid organs 
frequently involves the use of an Organ Procurement Organization

[[Page 58837]]

(OPO) and acquiring stem cells does not, the billing process is not 
analogous. Many commenters suggested that if the proposed requirement 
is finalized, a subsection (d) hospital furnishing an allogeneic 
hematopoietic stem cell transplant would be required to apply the SAC 
across all payers (for example, commercial payers, Medicaid, etc.), in 
addition to Medicare. Some of these commenters referenced the 
instructions provided in the Provider Reimbursement Manual (PRM) 15-1, 
chapter 22, section 2202.4, which states in part that, ``Charges refer 
to the regular rates established by the provider for services rendered 
to both beneficiaries and to other paying patients. Charges should be 
related consistently to the cost of the services and uniformly applied 
to all patients whether inpatient or outpatient.''
    These commenters suggested that the proposed requirement, if 
finalized, would require a hospital to renegotiate its contracts among 
all payers, which would be administratively burdensome and potentially 
impact hospital reimbursement. A few commenters noted that although the 
proposed methodology requires Medicare to reconcile the SAC with actual 
charges at the end of the cost reporting period, commercial payers 
would be impacted by this approach because no settlement opportunity 
exists for them.
    Several commenters stated that resources and costs associated with 
acquiring hematopoietic stem cells for an allogeneic hematopoietic stem 
cell transplant vary significantly among the different types of donor 
search and stem cell acquisition services (for example, related, 
unrelated, cord blood, haploidentical, etc.). Commenters suggested that 
we consider requiring providers to formulate multiple SACs based on the 
different type of donor search and stem cell acquisition as they stated 
this more accurately aligns different costs with the charges associated 
with the types of acquisition. A commenter also expressed concern that 
requiring an average charge is another form of ``cost compression.''
    The majority of commenters noted that currently, when a subsection 
(d) hospital furnished an allogeneic hematopoietic stem cell transplant 
for a Medicare recipient, the hospital holds all allogeneic 
hematopoietic stem cell acquisition charges and reports the actual 
allogeneic hematopoietic stem cell acquisition charges under revenue 
code 0815 (Allogeneic Stem Cell Acquisition/Donor Services), when the 
transplant occurs. Some commenters noted that this differs from how 
commercial contracts are structured. Many commenters requested that we 
not finalize the proposed requirement and alternatively continue to 
require a subsection (d) hospital to report its actual stem cell 
acquisition charges under revenue code 0815 when the transplant occurs, 
which is the method they are accustomed to. These commenters noted that 
this approach allows all third-party payers to continue their current 
billing practices, is the least complicated to implement, and achieves 
the intent of section 108 which requires reimbursement of hematopoietic 
stem cell acquisition costs on a reasonable cost basis. A commenter 
noted that if we adopted a SAC, new condition or value codes recently 
approved by National Uniform Billing Committee (NUBC) would be 
affected. This commenter wrote that commercial insurance billing 
practice would be complicated at best or could not occur at worst if 
transplant centers are mandated to have one SAC for each transplant 
recipient. A commenter suggested that we delay the implementation of 
the SAC policy to allow hospitals adequate time to adopt charging and 
billing protocols to accommodate this new methodology.
    Response: We appreciate the commenters' feedback on our proposal to 
require a subsection (d) hospital furnishing an allogeneic 
hematopoietic stem cell transplant to formulate and bill a SAC. Our 
proposal to implement payment for hematopoietic allogeneic stem cell 
acquisition costs on a reasonable cost basis was modeled after the 
methodology used by certified transplant centers and OPOs when 
acquiring solid organs, as such organs are also paid for on the basis 
of reasonable cost. In the case of solid organs, a SAC is required in 
order to account for the costs of solid organs acquired by OPOs. We 
agree that OPOs are frequently involved in solid organ acquisition and 
that stem cell acquisition does not involve the use of an OPO and, 
therefore, billing for stem cell acquisition and solid organs is not 
analogous. We also appreciate the concerns raised by commenters 
regarding the use of an average charge such as a SAC where there is 
significant variation in acquisition costs based on the type of donor, 
and agree that the current methodology of billing actual charges would 
address these concerns, including ``cost compression'' concerns, and 
provide more accuracy, given the variability in cost by donor source. 
While we agree that billing multiple SACs by donor search and 
acquisition type, as suggested by some commenters, would address 
concerns about cost variation by donor type better than billing a 
single SAC, billing multiple SACs would increase complexity and would 
still be less accurate than billing actual charges. The current 
methodology for billing allogeneic hematopoietic stem cell acquisition 
costs is familiar to providers and therefore would be less burdensome 
for providers, as compared to billing a SAC (or multiple SACs). As 
commenters noted, it would also appropriately implement the requirement 
in section 108 that we pay reasonable costs for allogeneic 
hematopoietic stem cell acquisition. We also believe the continued use 
of providers' current methodology for billing allogeneic hematopoietic 
stem cell acquisition charges, in place of formulating and billing a 
SAC, would address the concerns raised by commenters regarding 
potential implications for their commercial contracts.
    In summary, after consideration of the comments received and for 
the reasons discussed, we are not finalizing our proposal that 
subsection (d) hospitals formulate and bill a SAC for allogeneic 
hematopoietic stem cell acquisition costs. Instead, we are codifying 
providers' current methodology for billing actual hematopoietic stem 
cell acquisition charges; that is, that subsection (d) hospitals must 
continue to hold their actual donor search and hematopoietic stem cell 
acquisition charges and include them on the Medicare recipient's 
transplant claim under revenue code 0815. The use of revenue code 0815, 
as discussed in the hospital OPPS Final Rule, 81 FR 79585-79587, 
``should include all services required to acquire stem cells from a 
donor, as previously defined, and should be reported on the same date 
of service as the transplant procedure in order to be appropriately 
packaged for payment purposes.'' Furthermore, the use of revenue code 
0815 was requested by CMS and approved by the NUBC, effective January 
1, 2017. For the reasons discussed, we believe this final policy is the 
least burdensome for providers, is familiar to providers, is the most 
accurate way of billing charges incurred by a subsection (d) hospital 
for acquiring allogeneic hematopoietic stem cells for an allogeneic 
hematopoietic stem cell transplant, and appropriately implements 
section 108. As such, there is no need for a delayed implementation 
since providers will not need to adapt their charging and billing 
protocols to accommodate a new methodology.
    Therefore, consistent with this final policy, we are codifying 
under new paragraph (e)(3) of 42 CFR 412.113, that a subsection (d) 
hospital that furnishes

[[Page 58838]]

inpatient allogeneic hematopoietic stem cell transplants is required to 
hold all allogeneic hematopoietic stem cell acquisition charges and 
bill them to Medicare using the appropriate revenue code, when the 
transplant occurs.
    Comment: Several commenters stated that our proposal to bill and 
pay a SAC on an interim payment basis as a ``pass-through'' item would 
be problematic because of inconsistent use of cost center 77 on the 
cost reports and a lack of prior years' actual charges by ancillary 
cost center. Several commenters expressed that until CMS has complete 
data from cost center 77 and prior years' actual charges by ancillary 
cost center, the agency must use alternative methods for interim 
payments for at least the first few years after section 108 is 
implemented.
    These commenters made several recommendations for a temporary 
methodology to use until cost report data issues are resolved, 
including providing interim payments to transplant centers using a 
Provider Statistical and Reimbursement Report summary (PS&R) method, 
whereby we could use each transplant center's prior year PS&R report's 
total Medicare charges billed under revenue code 0815, multiply those 
charges by the individual hospital's cost-to-charge ratio (CCR) and 
then divide by 26 to develop the initial bi-weekly interim payment 
amount. Commenters noted that the contractors could update this amount 
throughout the fiscal year as appropriate, to minimize the amount 
receivable or payable at cost settlement. Commenters also stated that 
this option aligns more closely with the way in which CMS handles pass-
through payments for solid organs, results in more consistent cash flow 
for transplant centers, and is familiar to hospital reimbursement staff 
and to contractors conducting audits.
    Alternatively, commenters suggested a claim-based approach using 
the actual billed charges reported under revenue code 0815 from each 
submitted transplant recipient's claim multiplied by the hospital's 
CCR. CMS would then pay this amount on the remittance as a pass-through 
payment amount in addition to the MS-DRG 014 payment. Commenters noted 
that this would likely result in a lower incidence of large receivables 
or payables at cost report settlement as long as CMS allows actual 
donor charges to be billed. A commenter added that this may better 
reflect the volume and type of donor/cell acquisition costs involved in 
hematopoietic stem cell transplants throughout the year.
    A few commenters noted that several transplant centers were queried 
about their preferences, and that either option was acceptable to them; 
some commenters wrote that both options align with the proposed budget 
neutrality adjustment in section IV.H.4 of this final rule.
    Response: We appreciate the commenters' suggestions. We proposed to 
make payments on an interim basis as a ``pass-through'' item in 
accordance with 42 CFR 413.60 and 413.64, which is similar to the way 
we pay for direct graduate medical education, bad debt and organ 
acquisition costs. As specified in 42 CFR 413.64(c), before complete 
cost report data are available, the initial interim rate of payment 
must be determined by other methods, including allowing the contractor 
to compute an appropriate interim payment for the initial period using 
prior year financial data. We acknowledge commenters' concerns with 
using cost report data, specifically with the inconsistent use of cost 
center 77, and agree that the agency should use alternative methods for 
establishing the initial interim payments as described in 42 CFR 
413.64(c). We considered commenters' suggestions that the initial 
interim payment amount should be based upon their Medicare charges 
reported on their PS&R and billed under revenue code 0815, or upon a 
claims-based approach.
    We agree with commenters who suggested that the initial interim 
payment amount should be based upon their Medicare charges reported on 
their PS&R for the cost reporting year that immediately precedes the 
cost reporting period beginning on or after October 1, 2020 and billed 
under revenue code 0815. These charges should be multiplied by the 
individual hospital's CCR to arrive at cost, and then divided by 26 to 
develop the initial bi-weekly interim payment amount. Interim payments 
after the initial reporting period will follow 42 CFR 413.64(e). The 
PS&R methodology allows for more consistent cash flow for hospitals, 
and is familiar to some hospitals as it is similar to the way CMS 
handles pass-through payments for direct GME, bad debt, and organ 
acquisition costs. Therefore, we are finalizing our proposal to provide 
interim payments on a pass-through basis with the clarification that 
for the initial period, that is, for the hospital's first cost 
reporting period beginning on or after October 1, 2020, the initial 
interim ``pass-through'' payment amount is calculated in accordance 
with 42 CFR 413.64(c)(3) using each subsection (d) hospital's prior 
year PS&R report's total Medicare charges billed under revenue code 
0815, multiplied by the individual hospital's overall CCR to determine 
total estimated cost, divided by 26. As already specified in 42 CFR 
413.64(c)(4), after the initial interim rate has been set, the provider 
may at any time request, and be allowed, an appropriate increase in the 
computed rate, upon presentation of satisfactory evidence to the 
contractor that costs have increased. Likewise, the contractor may 
adjust the interim rate of payment if it has evidence that actual costs 
may fall significantly below the computed rate. We note that since 
providers set their own cost reporting period dates, these initial 
interim payments will begin at different times during FY 2021, 
depending on each hospital's cost reporting period.
    The regulations at 42 CFR 413.64(e) specify how interim payments 
are made after the initial period. In accordance with 42 CFR 413.64(e), 
interim rates of payment made after the initial period for services 
will be established on the basis of the cost report filed for the 
previous year covering Medicare services. Therefore, for the cost 
reporting periods after the initial period, we are clarifying that 
interim payments will be determined using the cost report filed for the 
initial period and each subsequent period. The cost report will contain 
the actual charges by ancillary cost center billed in aggregate under 
revenue code 0815 and converted to reasonable cost using the 
corresponding ancillary cost-to-charge ratios. The total of these 
ancillary costs would be divided by 26 to determine the subsequent 
biweekly interim payment amounts.
    Similar to what occurs with the interim payment for the initial 
period, this interim rate of payment may be adjusted by the contractor 
during an accounting period if the provider submits appropriate 
evidence that its actual costs are or will be significantly higher than 
the computed rate. Likewise, the contractor may adjust the interim rate 
of payment if it has evidence that actual costs may fall significantly 
below the computed rate.
    We are also finalizing our proposal that at the end of the cost 
reporting period, a settlement determination would be made of the 
actual cost incurred compared to the interim payments made during the 
period.
    Comment: A commenter requested that CMS consider the impact of the 
``transitional period,'' where some hospitals will be receiving the 
reasonable cost-based payment while other hospitals will not, based on 
the start of hospitals' cost reporting periods. The commenter noted 
that since the changes to payment for hematopoietic stem cell 
transplant are effective based

[[Page 58839]]

on hospitals' cost reporting periods beginning on or after October 1, 
2020, some hospitals may ``benefit'' from the proposed change while 
others get ``underpaid'' based on when their cost reports are filed, 
and recommended that we adopt an interim reimbursement mechanism for 
hospitals from October 1, 2020 until their first cost reports are 
filed.
    Response: Section 108 of Public Law 116-94 specifies that the 
reasonable cost-based payment for hematopoietic stem cell acquisition 
costs is effective for cost reporting periods beginning on or after 
October 1, 2020. While we agree that under this statute providers will 
begin receiving cost-based payment for hematopoietic stem cell 
acquisition costs at different times, this is consequence of the 
statutory language. Providers will continue to be paid as they are 
currently based on MS-DRG payments until the beginning of a provider's 
cost reporting period that starts on or after October 1, 2020. 
Accordingly, we do not believe there is a need for an interim 
reimbursement mechanism for this limited period.
    Comment: A few commenters noted that many itemized statements may 
be maintained for a single recipient, as there may be several 
evaluations and work-ups of potential donors before a match is 
identified. These commenters stated that this results in multiple 
itemized statements about various donor services to evaluate, collect, 
and obtain cells for a transplant recipient. Some of these commenters 
suggested that for clarity, we finalize the following language: 
Providers must maintain records for all costs defined at 42 CFR 
412.113(e)(1) to include all invoices/statements for purchased services 
and each itemized patient accounting statement for all donors and their 
service charges. Records must be for the person receiving the service 
(donor/recipient, if anonymous donor, the provider must identify the 
prospective recipient), and the recipient's Medicare beneficiary 
identification number.
    Response: We appreciate the commenters' feedback, and agree that 
the regulation text should reflect that there may be multiple invoices 
or billing statements for acquisition costs included in the itemized 
statement in the record for a single recipient. We do not agree with 
the addition to the regulation text regarding anonymous donors (such as 
when cord blood is used as the source of the stem cells), as we believe 
the word ``donor'' covers both anonymous and identified donors. We are 
modifying the proposed regulation text to make clear that all donor 
records (anonymous or not) should identify the prospective recipient. 
We are finalizing that a subsection (d) hospital must maintain an 
itemized statement that identifies, for all costs defined at 42 CFR 
412.113(e)(2), the services furnished in collecting hematopoietic stem 
cells including all invoices or statements for purchased services for 
all donors and their service charges. Records must be for the person 
receiving the services (donor or recipient; for all donor sources, the 
hospital must identify the prospective recipient), and the recipient's 
Medicare beneficiary identification number. We note that we are 
finalizing this regulation at 42 CFR 412.113(e)(4) rather than in 42 
CFR 412.113(e)(5) as proposed, because we are not finalizing the 
proposed text originally in 42 CFR 412.113(e)(4) as discussed in the 
following comment and response.
    Comment: A commenter supported our proposed calculation to 
determine a hospital's Medicare share of its hematopoietic stem cell 
acquisition costs, which is based on the ratio of the number of its 
allogeneic hematopoietic stem cell transplants furnished to Medicare 
beneficiaries to the total number of its allogeneic hematopoietic stem 
cell transplants furnished to all patients, regardless of payer, 
applied to reasonable cost. A few other commenters suggested that this 
simple ratio may not be sufficiently accurate, and recommended that we 
convene a panel of hematologists and others with expertise in 
allogeneic hematopoietic stem cell transplantation to vet this 
allocation mechanism, and develop a more accurate one if necessary. A 
commenter requested that we consider clearly defining in regulation 
and/or policy when allogeneic hematopoietic stem cells should be 
counted as being used for research and excluded from any acquisition 
count used to determine the Medicare share of the allowable acquisition 
cost.
    Response: We thank the commenters for their comments. However, 
since we are not finalizing our proposal that hospitals bill a SAC, but 
instead are finalizing that hospitals must continue to bill their 
actual charges for Medicare allogeneic hematopoietic stem cell 
acquisition as described earlier in this section, there is no need to 
calculate a Medicare share of the costs; we will be able to directly 
calculate the actual Medicare costs. Additionally, because the 
transplant recipient's hospital only bills Medicare once a transplant 
has occurred, we would not need or have visibility to the cost of 
allogeneic hematopoietic stem cell acquisitions used for research. For 
all of these reasons, we are not finalizing the proposed regulation 
text at 42 CFR 412.113(e)(4) related to calculating the Medicare share 
of allogeneic hematopoietic stem cell acquisition costs.
b. Definition of Allogeneic Hematopoietic Stem Cell Transplant
    We noted in the proposed rule that section 108 amended section 
1886(d)(5) of the Act by adding a new paragraph (M)(ii) which defines 
the term `allogeneic hematopoietic stem cell transplant' to mean, with 
respect to an individual, the intravenous infusion of hematopoietic 
cells derived from bone marrow, peripheral blood stem cells, or cord 
blood, but not including embryonic stem cells, of a donor to an 
individual that are or may be used to restore hematopoietic function in 
such individual having an inherited or acquired deficiency or defect. 
In the proposed rule, we proposed to codify this definition by adding 
new paragraph (e)(1) to 42 CFR 412.113.
    Comment: Commenters supported our proposed definition of the term 
`allogeneic hematopoietic stem cell transplant' made in accordance with 
Section 108, and our proposed codification of this definition in new 
paragraph (e)(1) of 42 CFR 412.113.
    Response: We appreciate the commenters' support of the proposed 
definition and we are finalizing our proposal as proposed, without 
modification.
c. Items Included as Allogeneic Hematopoietic Stem Cell Acquisition 
Costs
    As noted in the proposed rule, section 108 amended section 
1886(d)(5) of the Act by adding a new paragraph (M)(i), which also 
requires that the Secretary specify the items included as allogeneic 
hematopoietic stem cell acquisition costs through rulemaking. We stated 
in the proposed rule that allogeneic hematopoietic stem cell 
acquisition costs apply only to hematopoietic allogeneic stem cell 
transplants, for which stem cells are obtained from a donor (other than 
the recipient himself or herself). In the proposed rule, specifically, 
we proposed that allogeneic hematopoietic stem cell acquisition costs 
would include registry fees from a national donor registry described in 
42 U.S.C. 274k, if applicable, for stem cells from an unrelated donor; 
tissue typing of donor and recipient; donor evaluation; physician pre-
admission/pre-procedure donor evaluation services; costs associated 
with the collection procedure such as, general routine and special care

[[Page 58840]]

services, procedure/operating room and other ancillary services, and 
apheresis services; post-operative/post-procedure evaluation of donor; 
and the preparation and processing of stem cells derived from bone 
marrow, peripheral blood stem cells, or cord blood (but not including 
embryonic stem cells). We also proposed to codify this definition of 
allogeneic hematopoietic stem cell acquisition costs by adding proposed 
new paragraph (e)(2) to 42 CFR 412.113. In the proposed rule, we 
invited public comments on whether any additional items should be 
included in the final rule.
    Comment: Several commenters supported our proposed items included 
as allogeneic hematopoietic stem cell acquisition costs. Another 
commenter expressed support for this proposal because it aligns with 
the costs hospitals currently incur for hematopoietic stem cell 
acquisition for the purpose of an allogeneic hematopoietic stem cell 
transplant. A commenter questioned if transportation of the stem cells 
should be included as an allowable hematopoietic stem cell acquisition 
cost and whether a limit on donor follow-up visits should be specified.
    Response: We thank the commenters for their support and input. In 
the proposed rule, we did not propose a limit on donor follow-up visits 
because a physician determines the medically necessary care that is 
appropriate and directly and immediately attributable to stem cell 
donation.
    We appreciate the commenter's suggestion regarding transportation 
costs of allogeneic hematopoietic stem cells and agree that such costs 
should be included as stem cell acquisition costs when incurred or paid 
by the recipient hospital and that section 108 provides the authority 
to include such costs. Therefore, after consideration of the comments 
received, we are finalizing the proposed list of allogeneic 
hematopoietic stem cell acquisition costs with modification, to also 
include transportation costs of stem cells if the recipient hospital 
incurred or paid such costs. Specifically, we are codifying at new 
paragraph (e)(2) of 42 CFR 412.113, that allogeneic hematopoietic stem 
cell acquisition costs would include registry fees from a national 
donor registry described in 42 U.S.C. 274k, if applicable, for stem 
cells from an unrelated donor; tissue typing of donor and recipient; 
donor evaluation; physician pre-admission/pre-procedure donor 
evaluation services; costs associated with the collection procedure 
such as, general routine and special care services, procedure/operating 
room and other ancillary services, apheresis services and 
transportation costs of stem cells if the recipient hospital incurred 
or paid such costs; post-operative/post-procedure evaluation of donor; 
and the preparation and processing of stem cells derived from bone 
marrow, peripheral blood stem cells, or cord blood (but not including 
embryonic stem cells).
3. Clarification of Hospital Cost Reporting Instructions
    In the proposed rule we noted that, in the CY 2017 Outpatient 
Prospective Payment System (OPPS) final rule (81 FR 79587), we 
finalized the policy to update the Medicare hospital cost report (Form 
CMS-2552-10, OMB control number 0938-0050, expiration date March 31, 
2022) by adding a new standard cost center, line 77 ``Allogeneic Stem 
Cell Acquisition'' to Worksheet A (and applicable worksheets) with the 
standard cost center code of ``07700.'' The new cost center line was 
established to record any acquisition costs related to allogeneic stem 
cell transplants as defined in Section 231.11, Chapter 4, of the 
Medicare Claims Processing Manual (Pub. 100-04) in order to develop an 
accurate estimate of allogeneic hematopoietic stem cell donor 
acquisition costs for future ratesetting. In the proposed rule, we 
noted there is a similar discussion of allogeneic stem cell acquisition 
costs when the transplant occurs in the inpatient setting found in the 
Medicare Claims Processing Manual (Pub 100-04), Chapter 3, Section 
90.3.1. We stated in the proposed rule that with the establishment of 
this line came additional challenges on how to reclassify expenses into 
the new cost center from routine and ancillary departments. In 
addition, we stated in the proposed rule that we found inconsistencies 
in the reporting of costs and charges for allogeneic hematopoietic stem 
cell acquisition costs.
    In the proposed rule we noted that the current cost reporting 
instructions require providers to report on line 77, the acquisition 
costs for allogeneic stem cell transplants. Line 77 only allows 
providers to report direct expenses, and does not provide a method for 
determining other routine and ancillary costs that are part of the 
allogeneic stem cell acquisition costs. We stated in the proposed rule 
that some providers are reclassifying costs from routine and ancillary 
cost centers to line 77. However, as noted in the proposed rule, this 
practice does not align costs and charges properly in accordance with 
the Provider Reimbursement Manual, 15-1, chapter 23, sections 2300, 
2302.7 and 2302.8 (available online at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021929). In addition, we stated in the proposed rule that in order 
to reimburse allogeneic hematopoietic stem cell acquisition costs on a 
reasonable cost basis as required by section 108, and to accommodate 
the reporting of both direct and indirect costs on line 77 as well as 
routine and ancillary costs associated with the acquisition of 
hematopoietic stem cells, we are modifying cost reporting forms and 
instructions. We also noted in the proposed rule that we are developing 
a worksheet similar to the Worksheet D-4 for solid organs that will 
allow providers to capture costs from line 77 as well as to report 
charges by routine and ancillary cost center and compute the related 
costs.
    In the proposed rule, we stated that changes to the forms and 
instructions will be described in more detail in a forthcoming PRA 
package, with comment period. We noted in the proposed rule that the 
forthcoming PRA package will address providers' requests for a 
standardized format for data collection as referenced in the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41681 through 41684) and Worksheet S-10 
modifications as referenced in the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42375).
    Comment: Several commenters agreed that the current cost reporting 
forms and instructions require modification in order to facilitate 
reimbursement of allogeneic hematopoietic stem cell acquisition costs. 
A few commenters expressed support of our developing a worksheet for 
stem cell acquisition cost that is similar to the Worksheet D-4, for 
solid organ acquisition costs. A few commenters agreed that the current 
forms and instructions do not provide a method for determining other 
routine and ancillary costs that are part of allogeneic hematopoietic 
stem cell acquisition, and the lack of instruction has resulted in 
inconsistencies. Commenters suggested that detailed instructions would 
benefit providers. A commenter also requested confirmation that both 
direct and indirect costs should be reported on line 77. Finally, a 
commenter requested that we consider modifying the Worksheet S-2, Part 
I, to allow for better cost report editing regarding the use of 
Worksheet A, cost center 77, and our development of a worksheet similar 
to Worksheet D-4.
    Response: We thank the commenters for their support and input. We 
appreciate the commenters' concerns regarding the current challenges of

[[Page 58841]]

reporting stem cell acquisition costs on line 77. We are considering 
the commenter's request to modify Worksheet S-2, Part I, to enhance 
editing and improve compliance with reporting of allogeneic 
hematopoietic stem cell acquisition costs.
    We appreciate that commenters concurred with our developing a 
worksheet to report allogeneic hematopoietic stem cell acquisition 
costs similar to the worksheet for solid organs. This new worksheet 
will allow providers to capture Medicare's share of costs from line 77 
as well as to report charges by routine and ancillary cost centers and 
compute the related costs. As stated in the proposed rule, line 77 only 
allows providers to report direct expenses, and does not provide a 
method for determining routine and ancillary costs that are part of the 
allogeneic stem cell acquisition costs. In addition, our changes will 
include associated updates and clarifications to the cost reporting 
instructions. Commenters will have an opportunity to comment on the 
modifications to the Medicare hospital cost report forms and 
instructions in a forthcoming PRA package.
    Comment: Several commenters suggested we update the sub-regulatory 
guidance that references allogeneic hematopoietic stem cell 
transplants. Another commenter questioned why we were proposing to add 
details regarding allogeneic hematopoietic stem cell acquisition costs 
to the regulation text, instead of sub-regulatory guidance through CMS 
policy manuals or cost reporting instructions.
    Response: We note that section 108 requires the Secretary to 
specify in rulemaking the items included in allogeneic hematopoietic 
stem cell acquisition costs. In addition, modifications will be made to 
the CMS policy manuals, specifically PRM 15-1, chapter 24, PRM 15-2, 
chapter 40, and the Medicare Claims Processing Manual (Pub 100-04) 
chapters 3 and 4.
    Comment: A commenter questioned if there is a Medicare 
certification for allogeneic hematopoietic stem cell transplants that 
needs to be verified, similar to that for solid organs, and if so, will 
it be published at a central location.
    Response: A subsection (d) hospital that furnishes an allogeneic 
hematopoietic stem cell transplant is not required to be a Medicare 
certified transplant center as is required for solid organs; therefore, 
a hospital that bills using revenue code 0815 for inpatient allogeneic 
hematopoietic stem cells is sufficient verification.
    Comment: A commenter requested that we address how section 108 of 
the Further Consolidated Appropriations Act, 2020 will affect Medicare 
Advantage (MA) organizations' payments for allogeneic hematopoietic 
stem cell acquisition costs in both in-network and out-of-network 
cases. This same commenter requested that the relevant MA manuals be 
updated to reflect the section 108 changes in payment for allogeneic 
hematopoietic stem cell acquisition.
    Response: Under section 1852(a) of the Act, when an MA 
organization's coverage responsibilities include payment for services 
furnished to an MA enrollee by a hospital with which the MA 
organization does not have a contract that establishes a payment 
amount, the MA organization's payment to the hospital must be equal to 
the total dollar amount that would have been authorized for such 
services under the Medicare FFS program, less any cost-sharing paid by 
the enrollee under the MA plan. In addition, section 1866(a)(1)(O) of 
the Act provides that a hospital that does not have a contract 
establishing payment amounts for services furnished to an MA enrollee 
must accept as payment in full the amount that the hospital would be 
paid if the MA enrollee had instead been enrolled in Medicare FFS. The 
payment amount established in this rule for the Medicare FFS program 
would therefore apply in cases where an MA organization must cover 
allogeneic hematopoietic stem cell acquisition costs when the MA 
enrollee receives the relevant services from a non-contracted hospital. 
CMS does not interfere in the contracts between an MA organization and 
its contracted providers to require either the MA organization to 
contract with a specific provider or to require a specific payment or 
pricing arrangement; an MA organization and its contracted providers 
may negotiate payment arrangements for covered services furnished to MA 
enrollees. For in-network services and services furnished by contracted 
providers to MA enrollees, this rule and the amendments to section 
1886(d) of the Act by section 108 of the Further Consolidated 
Appropriations Act, 2020, do not impose or set the payment amount from 
an MA organization for these services. CMS will consider whether 
additional guidance specific to payment for allogeneic hematopoietic 
stem cell acquisition by MA organizations is necessary.
4. Budget Neutrality for the Reasonable Cost Based Payment for 
Allogeneic Hematopoietic Stem Cell Acquisition Costs
    Section 108 of the Further Consolidated Appropriations Act, 2020 
(Pub. L. 116-94) amended section 1886(d)(4)(C)(iii) of the Act to 
require that beginning with FY 2021, the reasonable cost based payments 
for allogeneic hematopoietic stem cell acquisition costs be made in a 
manner that assures that the aggregate IPPS payments for discharges in 
the fiscal year are not greater or less than those that would have been 
made without such payments; that is, that the reasonable cost based 
payments for allogeneic hematopoietic stem cell acquisition costs be 
made in a budget neutral manner.
    To implement this requirement, we proposed to make an adjustment to 
the standardized amount to ensure the effects of the additional 
payments for allogeneic hematopoietic stem cell acquisition costs are 
budget neutral, as required under section 108 of Public Law 116-94. We 
also proposed to codify this budget neutrality requirement by adding 
new paragraph (e)(5) to 412.64 to specify that CMS makes an adjustment 
to the standardized amount to ensure that the reasonable cost based 
payments for allogeneic hematopoietic stem cell acquisition costs are 
made in a manner so that aggregate payments to hospitals are not 
affected.
    When the allogeneic stem cell transplant occurs in the inpatient 
setting, the hospital identifies stem cell acquisition charges for 
allogeneic hematopoietic stem cell transplants separately using revenue 
code 0815 on the inpatient hospital bill (see Medicare Claims 
Processing Manual, CMS Pub. 100-04, Chapter 3, section 90.3.1.B., which 
is available online at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03pdf.pdf). To estimate the 
reasonable cost based payments for allogeneic hematopoietic stem cell 
acquisition costs for purposes of the budget neutrality adjustment, we 
used the charges reported on the hospital's inpatient claim in revenue 
center code 0815 (which is reflected in the MedPAR field for the 
Revenue Center Allogeneic Stem Cell Acquisition/Donor Services) and 
converted those charges to costs by applying the hospital's operating 
CCR (that is, the same hospital-specific CCR used to estimate the 
hospital's operating outlier payments).
    In the proposed rule, based on the latest data at that time (that 
is, claims

[[Page 58842]]

from the December 2019 update of the FY 2019 MedPAR file and CCRs from 
the December 2019 update of the PSF), we estimated that reasonable cost 
based payments for allogeneic hematopoietic stem cell acquisition costs 
for FY 2021 would be $15,865,373.61. Therefore, the total amount that 
we proposed to use to make an adjustment to the standardized amounts to 
ensure the additional payments for allogeneic hematopoietic stem cell 
acquisition costs are budget neutral was $15,865,373.61. We further 
proposed that if more recent data become available for the final rule, 
we would use that data to determine the final amount we would use to 
make the budget neutrality adjustment. (We refer readers to section 
II.A.4.f. of the Addendum of the proposed rule for discussion of the 
budget neutrality adjustment factor we proposed to apply to the 
standardized amounts for FY 2021 based on these estimated allogeneic 
hematopoietic stem cell acquisition costs.)
    Comment: We received comments supporting our proposed approach for 
estimating the reasonable cost based payments for allogeneic 
hematopoietic stem cell acquisition costs for FY 2021 for purposes of 
the budget neutrality requirement of section 108 of Public Law 116-94.
    Response: We appreciate the commenters' support for our proposed 
approach.
    After consideration of public comments, we are finalizing our 
proposed approach for estimating the reasonable cost based payments for 
allogeneic hematopoietic stem cell acquisition costs for FY 2021 for 
purposes of the budget neutrality requirement of section 108 of Public 
Law 116-94 without modification, as well as our proposed codification 
of this budget neutrality requirement at new paragraph Sec.  
412.64(e)(5). Consistent with our proposal to use more recent available 
data for this final rule (claims from the March 2020 update of the FY 
2019 MedPAR file and CCRs from the March 2020 update of the PSF), we 
estimate that reasonable cost based payments for allogeneic 
hematopoietic stem cell acquisition costs for FY 2021 will be 
$16,167,790.60. Therefore, the total amount that we are using to make 
an adjustment to the standardized amounts to ensure the additional 
payments for allogeneic hematopoietic stem cell acquisition costs are 
budget neutral is $16,167,790.60. (We refer readers to section 
II.A.4.f. of the Addendum of this final rule for discussion of the 
budget neutrality adjustment factor we are applying to the standardized 
amounts for FY 2021 based on these estimated allogeneic hematopoietic 
stem cell acquisition costs.)

I. Payment Adjustment for CAR T-Cell Clinical Trial and Expanded Access 
Use Immunotherapy Cases (Sec. Sec.  412.85 and 412.312)

    As discussed in section II.D.2.b. of the preamble of this final 
rule, we proposed, and are finalizing, the creation of new MS-DRG 018 
for cases that include procedures describing CAR T-cell therapies, 
which are currently reported using ICD-10-PCS procedure codes XW033C3 
or XW043C3. As a requestor noted, a large percentage of the total cases 
that would group to any new MS-DRG for CAR T-cell therapy cases would 
be clinical trial cases, in which the provider typically does not incur 
the cost of the drug. By comparison, for non-clinical trial cases 
involving CAR T-cell therapy, the drug cost is an extremely large 
portion of the total costs. To address this, as described in section 
II.E.2.b. of this final rule, we proposed to modify our relative weight 
methodology for new MS-DRG 018 in order to develop a relative weight 
that is reflective of the typical costs of providing CAR T-cell 
therapies relative to other IPPS services. Specifically, in determining 
the relative weights, we proposed that clinical trial claims, that 
group to new MS-DRG 018 would not be included when calculating the 
average cost for new MS-DRG 018 that is used to calculate the relative 
weight for this MS-DRG, so that the relative weight generally reflects 
the costs of the CAR T-cell therapy drug. We refer readers to section 
II.E.2.b. of this final rule for discussion of our finalized 
modifications to our relative weight methodology relating to clinical 
trial cases involving CAR-T cell therapy.
    Cases involving clinical trials, like non-clinical trial cases, are 
currently paid using the same relative weight for the MS-DRG to which 
the case is assigned. However, given that the drug cost is an extremely 
large portion of the total costs of the non-clinical trial CAR T-cell 
therapy cases, and that the relative weight for new MS-DRG 018 assumes 
that the provider has incurred the costs of the CAR T-cell therapy 
drug, we proposed an adjustment to the payment amount for clinical 
trial cases that would group to new MS-DRG 018. We proposed to 
calculate this adjustment using the same methodology that we proposed 
to use to adjust the case count for purposes of the relative weight 
calculations:
     Calculate the average cost for cases to be assigned to new 
MS-DRG 018 that contain ICD-10-CM diagnosis code Z00.6 or contain 
standardized drug charges of less than $373,000.
     Calculate the average cost for cases to be assigned to new 
MS-DRG 018 that do not contain ICD-10-CM diagnosis code Z00.6 or 
standardized drug charges of at least $373,000.
     Calculate an adjustor by dividing the average cost 
calculated in step 1 by the average cost calculated in step 2.
     Apply this adjustor when calculating payments for clinical 
trial cases that group to MS-DRG 018 by multiplying the relative weight 
for MS-DRG 018 by the adjustor.
    Consistent with our methodology for calculating the proposed case 
count adjustment for purposes of the relative weight calculations, for 
FY 2021, for purposes of calculating this proposed payment adjustment, 
we identified clinical trial claims to be those historical claims that 
contain ICD-10-CM diagnosis code Z00.6 (Encounter for examination for 
normal comparison and control in clinical research program) or contain 
the proxy of standardized drug charges of less than $373,000.
    For FY 2021, based on the claims data from the December 2019 update 
of the FY 2019 MedPAR files used for the proposed rule, the ratio of 
the average cost for CAR T-cell therapy cases identified as clinical 
trial cases to the average cost for non-clinical trial CAR T-cell 
therapy cases (that is, those cases not identified as being clinical 
trial cases) was 0.15. Therefore, we proposed that the adjustor that 
would be applied to CAR T-cell therapy clinical trial claims would be 
0.15. For example, if the relative weight for new MS-DRG 018 was 30.00, 
we proposed we would multiply 30.00 by the adjustor of 0.15 as part of 
the calculation of the payment for clinical trial claims assigned to 
new MS-DRG 018.
    We stated in the proposed rule that the claims involving CAR T-cell 
therapy that would be subject to this proposed adjustment would be 
cases that would group to new MS-DRG 18 and include ICD-10-CM diagnosis 
code Z00.6 (Encounter for examination for normal comparison and control 
in clinical research program). ICD-10-CM diagnosis code Z00.6 is 
required to be included with clinical trial cases and we stated that we 
expect hospitals to include this code for clinical trial cases that 
would group to MS-DRG 18 for FY 2021 and all subsequent years. 
Consistent with our historical practice, we also proposed to update the 
value of the adjustor based on more recent data for the final rule.
    We also proposed to amend our regulations at 42 CFR part 412, 
subpart F (for operating IPPS payments), and 42

[[Page 58843]]

CFR 412.312 (for capital IPPS payments) to codify this proposed payment 
adjustment for certain clinical trial cases. Under 42 CFR part 412, 
subpart F, we proposed to redesignate existing Sec.  412.86 (which sets 
forth payment for extraordinarily high-cost day outliers for discharges 
occurring before October 1, 1997) as new Sec.  412.83, and to add a new 
center heading and new Sec.  412.85 to codify the proposed payment 
adjustment for certain clinical trial cases. We also proposed to make 
conforming changes to Sec.  412.82(c) to replace the reference to Sec.  
412.86 with Sec.  412.83, and proposed to reserve Sec.  412.86. We 
proposed this restructuring to subpart F in order to keep the sections 
related to payment for outlier cases together under the ``Payment for 
Outlier Cases'' center heading when adding the proposed section to 
codify the proposed payment adjustment. Specifically, proposed new 
Sec.  412.85 provides for a payment adjustment for a discharge assigned 
to MS-DRG 018 that is part of a clinical trial as determined by CMS 
based on the reporting of a diagnosis code indicating the encounter is 
part of a clinical research program on the claim for the discharge. 
Proposed new Sec.  412.85 further provides that payment for such a 
discharge is adjusted by adjusting the DRG weighting factor determined 
under Sec.  412.60(b) by a factor that reflects the average cost for 
cases to be assigned to MS-DRG 018 that are part of a clinical trial to 
the average cost for cases to be assigned to MS-DRG 018 that are not 
part of a clinical trial. Similarly, we proposed to add paragraph (f) 
to Sec.  412.312 to specify that in determining the capital IPPS 
payments under that section for certain clinical trial cases as 
described in Sec.  412.85(b), the DRG weighting factor described in 
Sec.  412.312(b)(1) is adjusted as described in Sec.  412.85(c).
    Comment: Several commenters expressed concerns about the potential 
for over and under-payments due to CMS' proposed methodology for 
defining clinical trial claims as those that group to new MS-DRG 18 and 
include ICD-10-CM diagnosis code Z00.6. Commenters stated that when CAR 
T-cell therapy products are used out of specification (also termed 
expanded access), hospitals do not incur the cost of the CAR T-cell 
therapy product, but the claim would not include ICD-10-CM diagnosis 
code Z00.6 because the case is not part of a clinical trial. Commenters 
identified an additional scenario, in which the CAR T-cell therapy 
product is purchased in the usual manner, but the case involves a 
clinical trial of another drug, in which case ICD-10-CM diagnosis code 
Z00.6 would be included on the claim. A commenter requested that CMS 
clarify that ICD-10-CM diagnosis code Z00.6 may be reported in this 
instance. Other commenters requested that CMS require hospitals to 
report their acquisition cost in value code 90, which could then be 
used to identify whether the provider incurred the cost of the CAR T-
cell therapy product. A commenter stated that the administrative burden 
to hospitals to report their acquisition costs would be outweighed by 
the value of the data collected to improve future rulemaking. Another 
commenter recommended that CMS require hospitals to use the NDC codes 
or cross-reference the clinical trial ID on the claim to determine 
whether the trial is studying CAR T-cell therapies or one of the drugs 
treating complications. A commenter requested that CMS monitor the 
proposed adjustment for clinical trial cases of 0.15 to ensure it is 
adequate to cover the cost of inpatient care for patients participating 
in a clinical trial for CAR T-cell therapies.
    Response: While we disagree with commenters' characterization of 
these situations as potential overpayments or underpayments given the 
nature of the IPPS, we do agree with commenters that given that the 
product cost is an extremely large portion of the total costs of CAR T-
cell therapy cases that do not involve a clinical trial of the CAR T-
cell therapy product, and that the relative weight for new MS-DRG 018 
assumes that the provider has incurred the costs of the CAR T-cell 
therapy product, the same adjustment should be applied to payment for 
cases involving expanded access use of immunotherapy where the hospital 
does not incur the cost of the CAR T-cell therapy product. For this 
same reason, as well as mitigating potential disincentives related to 
clinical trial participation, we also agree with commenters that when 
the CAR T-cell therapy product is purchased in the usual manner, but 
the case involves a clinical trial of a different product, the payment 
adjustment should not be applied in calculating the payment for the 
case. We believe the application of this policy to the scenarios 
identified by the commenters, while occurring with less frequency, is 
consistent with our proposal to apply a differential payment for cases 
where the CAR T-cell therapy product is provided without cost to ensure 
that the payment amount appropriately reflects the relative resources 
required for such cases.
    We will provide instructions for identifying these claims in 
separate guidance. We may consider refinements to our policy in future 
rulemaking as we gain more experience with this new adjustment.
    After consideration of public comments received, we are finalizing 
our proposal to apply a payment adjustment to claims that group to new 
MS-DRG 18 and include ICD-10-CM diagnosis code Z00.6, with the 
modification that when the CAR T-cell therapy product is purchased in 
the usual manner, but the case involves a clinical trial of a different 
product, the payment adjustment will not be applied in calculating the 
payment for the case. We are also finalizing a modification to our 
proposed policy that when there is expanded access use of 
immunotherapy, the payment adjustment will be applied in calculating 
the payment for the case.
    We are also finalizing our proposed methodology for calculating 
this adjustment, which is the same methodology we are finalizing to 
adjust the case count for purposes of the relative weight calculations, 
which includes refinements that (a) when the CAR T-cell therapy product 
is purchased in the usual manner, but the case involves a clinical 
trial of a different product, the claim will be included when 
calculating the average cost for cases not determined to be clinical 
trial cases and (b) when there is expanded access use of immunotherapy, 
these cases will be included when calculating the average cost for 
cases determined to be clinical trial cases. To the best of our 
knowledge there are no claims in the historical data used in the 
calculation of the adjustment for cases involving a clinical trial of a 
different product, and to the extent the historical data contain claims 
for cases involving expanded access use of immunotherapy we believe 
those claims would have drug charges less than $373,000. We are also 
finalizing our proposal to update the value of the adjustor based on 
more recent data for this final rule. As discussed elsewhere in this 
final rule, based on the claims data from the March 2020 update of the 
FY 2019 MedPAR files used for this final rule, the ratio of the average 
cost for CAR T-cell therapy cases determined to be clinical trial or 
expanded access use immunotherapy cases to the average cost for other 
CAR T-cell therapy cases (that is, those cases not determined to be 
clinical trial cases) is 0.17. Therefore, we are finalizing that the 
adjustor that will be applied to CAR T-cell therapy clinical trial or 
expanded access use immunotherapy cases for FY 2021 is 0.17. That is, 
we will multiply the final FY 2021 relative weight for new MS-DRG 018 
by the final adjustor of 0.17 as part of the calculation of the payment 
for claims determined to be applicable clinical trial or expanded use

[[Page 58844]]

access immunotherapy claims assigned to new MS-DRG 018.
    We are also finalizing our proposed amendments to our regulations 
at 42 CFR part 412, subpart F (for operating IPPS payments), and 42 CFR 
412.312 (for capital IPPS payments) to codify this payment adjustment 
for claims appropriately containing Z00.6, as described previously, 
with modification to proposed new 42 CFR 412.85(b) and 412.312(f) to 
reflect that the adjustment will also be applied for cases involving 
expanded access use immunotherapy, and that the payment adjustment only 
applies to applicable clinical trial cases; that is, as discussed 
previously, the adjustment is not applicable to cases where the CAR T-
cell therapy product is purchased in the usual manner, but the case 
involves a clinical trial of a different product. We are also 
finalizing our proposed amendments to 42 CFR 412.85(c) with 
modification to reflect that the adjustment factor will reflect the 
average cost for cases to be assigned to MS DRG 018 that involve 
expanded access use of immunotherapy or are part of an applicable 
clinical trial to the average cost for cases to be assigned to MS-DRG 
018 that do not involve expanded access use of immunotherapy and are 
not part of a clinical trial.

J. Changes for Hospitals With High Percentage of End Stage Renal 
Disease (ESRD) Discharges (Sec.  412.104)

    Under Sec.  412.104(a), CMS provides an additional payment to a 
hospital for inpatient services provided to End Stage Renal Disease 
(ESRD) beneficiaries who receive a dialysis treatment during a hospital 
stay, if the hospital has established that ESRD beneficiary discharges, 
excluding discharges classified into MS-DRG 652 (Kidney Transplant), 
MS-DRG 682 (Renal Failure with MCC), MS-DRG 683 (Renal Failure with 
CC), MS-DRG 684 (Renal Failure without CC/MCC) and MS-DRG 685 (Admit 
for Renal Dialysis), where the beneficiary received dialysis services 
during the inpatient stay, constitute 10 percent or more of its total 
Medicare discharges. (We note that in existing Sec.  412.104(a), the 
title of MS DRG 652 is mistakenly shown as ``Renal Failure'' instead of 
``Kidney Transplant''.)
    As explained in the proposed rule (85 FR 32765 through 32766), for 
FY 2021, we proposed to create a new Pre-MDC MS-DRG for cases 
describing the performance of hemodialysis during an admission where 
the patient received a simultaneous pancreas/kidney transplant 
(proposed new MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with 
Hemodialysis)). We also proposed to create two new MS-DRGs with a two-
way severity level split for cases describing the performance of 
hemodialysis in an admission where the patient received a kidney 
transplant in MDC 11 (proposed new MS-DRG 650 (Kidney Transplant with 
Hemodialysis with MCC) and proposed new MS-DRG 651 (Kidney Transplant 
with Hemodialysis without MCC)). We also explained that the proposed 
relative weights for these MS-DRGs reflect the resources related to the 
provision of inpatient hemodialysis, and accordingly, we believe that 
discharges classified to these new proposed MS-DRGs should be excluded 
in determining a hospital's eligibility for the additional payment for 
hospitals with high percentages of ESRD discharges. Therefore, we 
proposed to add MS-DRGs 019, 650, and 651 to the list of excluded MS-
DRGs set forth in Sec.  412.104(a). We further explained that under the 
proposed MS-DRG logic for kidney transplants, a case with a 
hemodialysis procedure reported on the claim would no longer group to 
MS-DRG 652 (Kidney Transplant). (We note, as discussed in section 
II.D.8.a. of the preamble of this final rule, that we are finalizing 
the creation of new MS-DRGs 019, 650 and 651, and the related MS-DRG 
logic for kidney transplants.) We also noted that MS-DRG 685 (Admit for 
Renal Dialysis) was deleted effective FY 2019 (83 FR 41201 through 
41202). Therefore, we proposed to remove MS-DRGs 652 and 685 from the 
list of excluded MS-DRGs set forth in Sec.  412.104(a).
    We proposed to revise Sec.  412.104(a) to reflect these changes to 
the MS-DRG logic for kidney transplants and the previous deletion of 
MS-DRG 685. We also proposed to make formatting changes to this 
provision to list the MS-DRG exclusions.
    Comments: A commenter suggested that additions and removals of MS-
DRGs from Sec.  412.104(a) should be done based on effective dates.
    Response: We do not believe it is necessary to use effective dates 
in Sec.  412.104(a) for the addition and removal of MS-DRGs from the 
list of MS-DRGs excluded in the determination of a hospital's 
eligibility for the additional payment for hospitals with high 
percentages of ESRD discharges. For example, although MS-DRG 685 was 
deleted effective FY 2019, its inclusion in the list of excluded MS-
DRGs in Sec.  412.104(a) would not have impacted a hospital's ability 
to qualify for the add-on payment since the hospital would not have had 
any discharges on or after October 1, 2018 classified into MS-DRG 685.
    After consideration of public comments, we are finalizing our 
proposal without modification. (As previously noted, and as discussed 
in section II.D.8.a. of the preamble of this final rule, we are 
finalizing the creation of new MS-DRGs 019, 650 and 651 which describe 
the performance of hemodialysis in an admission where the patient 
received a either a simultaneous pancreas/kidney transplant or a kidney 
transplant.)

K. Hospital Readmissions Reduction Program: Updates and Changes 
(Sec. Sec.  412.150 Through 412.154)

1. Statutory Basis for the Hospital Readmissions Reduction Program
    Section 1886(q) of the Act, as amended by section 15002 of the 21st 
Century Cures Act, establishes the Hospital Readmissions Reduction 
Program. Under the Hospital Readmissions Reduction Program, Medicare 
payments under the acute inpatient prospective payment system for 
discharges from an applicable hospital, as defined under section 
1886(d) of the Act, may be reduced to account for certain excess 
readmissions. Section 15002 of the 21st Century Cures Act requires the 
Secretary to compare hospitals with respect to the proportion of 
beneficiaries who are dually eligible for Medicare and full-benefit 
Medicaid (dual-eligibles) in determining the extent of excess 
readmissions. We refer readers to the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49530 through 49531) and the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38221 through 38240) for a detailed discussion of and additional 
information on the statutory history of the Hospital Readmissions 
Reduction Program.
2. Regulatory Background
    We refer readers to the following final rules for detailed 
discussions of the regulatory background and descriptions of the 
current policies for the Hospital Readmissions Reduction Program:
     FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 
51676).
     FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 
53401).
     FY 2014 IPPS/LTCH PPS final rule (78 FR 50649 through 
50676).
     FY 2015 IPPS/LTCH PPS final rule (79 FR 50024 through 
50048).
     FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 
49543).
     FY 2017 IPPS/LTCH PPS final rule (81 FR 56973 through 
56979).
     FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 
38240).
     FY 2019 IPPS/LTCH PPS final rule (83 FR 41431 through 
41439).

[[Page 58845]]

     FY 2020 IPPS/LTCH PPS final rule (84 FR 42380 through 
42390).
    These rules describe the general framework for the implementation 
of the Hospital Readmissions Reduction Program, including: (1) The 
selection of measures for the applicable conditions/procedures; (2) the 
measure removal factors policy; (3) the calculation of the excess 
readmission ratio (ERR), which is used, in part, to calculate the 
payment adjustment factor; (4) the calculation of the proportion of 
``dually eligible'' Medicare beneficiaries which is used to stratify 
hospitals into peer groups and establish the peer group median ERRs; 
(5) the calculation of the payment adjustment factor, specifically 
addressing the base operating DRG payment amount, aggregate payments 
for excess readmissions (including calculating the peer group median 
ERRs), aggregate payments for all discharges, and the neutrality 
modifier; (6) the opportunity for hospitals to review and submit 
corrections using a process similar to what is currently used for 
posting results on Hospital Compare or its successor; (7) the 
extraordinary circumstances exception policy to address hospitals that 
experience a disaster or other extraordinary circumstance; (8) the 
clarification that the public reporting of ERRs will be posted on an 
annual basis to the Hospital Compare website or its successor as soon 
as is feasible following the review and corrections period; and (9) the 
specification that the definition of ``applicable hospital'' does not 
include hospitals and hospital units excluded from the IPPS, such as 
LTCHs, cancer hospitals, children's hospitals, IRFs, IPFs, CAHs, and 
hospitals in United States territories and Puerto Rico.
    We also have codified certain requirements of the Hospital 
Readmissions Reduction Program at 42 CFR 412.152 through 412.154. In 
section IV.K.11. of the preamble of this final rule, we are updating 
the regulatory text to reflect the policies that we are finalizing in 
this final rule.
    We note that we received public comments on the effectiveness, 
measures, and methodology of the Hospital Readmissions Reduction 
Program in response to the FY 2021 IPPS/LTCH PPS proposed rule. We also 
received public comments related to the social risk adjustment in the 
Hospital Readmissions Reduction Program and confidential reporting of 
stratified data for the six readmission measures. While we appreciate 
the commenters' feedback, because we did not include any proposals 
related to these topics in the proposed rule, we consider the public 
comments to be out of the scope of the proposed rule. However, all 
topics that we consider to be out of scope of the proposed rule will be 
taken into consideration when developing policies and program 
requirements for future years.
3. Summary of Policies for the Hospital Readmissions Reduction Program
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed the 
automatic adoption of applicable periods beginning with the FY 2023 
program year and all subsequent program years, unless otherwise 
specified by the Secretary. Additionally, we proposed to update the 
definition of applicable period at 42 CFR 412.152 to align with this 
proposal. After consideration of the public comments we received, we 
are finalizing our policies as proposed. We discuss comments on these 
policies within the respective sections of this final rule.
4. Current Measures for FY 2021 and Subsequent Years
    The Hospital Readmissions Reduction Program currently includes six 
applicable conditions/procedures: Acute myocardial infarction (AMI); 
heart failure (HF); pneumonia; elective primary total hip arthroplasty/
total knee arthroplasty (THA/TKA); chronic obstructive pulmonary 
disease (COPD); and coronary artery bypass graft (CABG) surgery.
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41431 through 41439) for more information about how the Hospital 
Readmissions Reduction Program supports CMS' goal of bringing quality 
measurement, transparency, and improvement together with value-based 
purchasing to the hospital inpatient care setting through the 
Meaningful Measures Initiative. We continue to believe the measures we 
have adopted adequately meet the goals of the Hospital Readmissions 
Reduction Program. Therefore, we did not propose to remove or adopt any 
additional measures at this time.
5. Definition of ``Dual-Eligible'' Beginning in FY 2021 and for 
Subsequent Years
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38226 through 
38229), as part of implementing the 21st Century Cures Act, we 
finalized the definition of dual-eligible as follows: ``[A]n individual 
would be counted as a full-benefit dual patient if the beneficiary was 
identified as full-benefit dual status in the State [Medicare 
Modernization Act] (MMA) files for the month he/she was discharged from 
the hospital.'' In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41437 
through 41438), we codified this definition at 42 CFR 412.152 along 
with other definitions pertinent to dual-eligibility calculations for 
assigning hospitals into peer groups.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42384 through 
42385), we finalized an update to the definition of ``dual-eligible'' 
to specify that, for the payment adjustment factors beginning with the 
FY 2021 program year, ``dual-eligible'' is a patient beneficiary who 
has been identified as having full benefit status in both the Medicare 
and Medicaid programs in data sourced from the State MMA files for the 
month the beneficiary was discharged from the hospital, except for 
those patient beneficiaries who die in the month of discharge, who will 
be identified using the previous month's data sourced from the State 
MMA files.
    We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42384 through 42385) for a more detailed discussion of this topic. We 
did not propose any updates to our definition of ``dual-eligible'' 
beneficiaries in this rule.
6. Automatic Adoption of Applicable Periods for FY 2023 and Subsequent 
Years
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51671) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53375) for 
discussion of our previously finalized policy for defining applicable 
periods. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41434 through 
41435) and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42387), we 
finalized the following ``applicable periods'' consistent with the 
definition specified at 42 CFR 412.152, to calculate the readmission 
payment adjustment factor for FY 2021 and FY 2022, respectively:
     The 3-year time period of July 1, 2016 through June 30, 
2019 for FY 2021.
     The 3-year time period of July 1, 2017 through June 30, 
2020 for FY 2022.\434\
---------------------------------------------------------------------------

    \434\ In accordance with the August 25th COVID IFC, no claims 
data reflecting services provided January 1, 2020-June 30, 2020 will 
be used in calculations for the Hospital Readmissions Reduction 
Program among other Medicare quality reporting and value-based 
purchasing programs. Therefore, the FY 2022 Hospital Readmissions 
Reduction Program will only use data from July 1, 2017 through 
December 31, 2019 for calculations. For more details see the August 
25th COVID IFC.
---------------------------------------------------------------------------

    This is the 3-year period from which CMS uses claims data to 
calculate ERRs and payment adjustment factors for the fiscal year; this 
includes aggregate payments for excess readmissions and aggregate 
payments for all discharges used in the calculation of the payment

[[Page 58846]]

adjustment. The ``applicable period'' for dual-eligibles is the same as 
the ``applicable period'' that we otherwise adopt for purposes of the 
Hospital Readmissions Reduction Program.
    In order to provide greater certainty around future applicable 
periods for the Hospital Readmissions Reduction Program, we proposed 
the automatic adoption of applicable periods for FY 2023 and all 
subsequent program years for the Hospital Readmissions Reduction 
Program. Beginning in FY 2023, the applicable period for the Hospital 
Readmissions Reduction Program will be the 3-year period beginning one 
year advanced from previous program fiscal year's start of the 
applicable period. That is, for FY 2023, the applicable period for the 
Hospital Readmissions Reduction Program measures and for determining 
dual eligibility and payment adjustment factors will be the 3-year 
period from July 1, 2018 through June 30, 2021, which is advanced one 
year from the applicable period for the FY 2022 Hospital Readmissions 
Reduction Program. Under this policy, for all subsequent years, we 
would advance this 3-year period by one year unless otherwise specified 
by the Secretary, which we would convey through notice and comment 
rulemaking. Similarly, the applicable period for dual eligibility will 
continue to correspond to the applicable period for the Hospital 
Readmissions Reduction Program, unless otherwise specified by the 
Secretary. We believe that the automatic adoption of the applicable 
period each year will streamline the process and provide additional 
clarity and consistency to the Program. We received several public 
comments on the proposal for automatic adoption of applicable periods.
    Comment: Commenters expressed support for the automatic adoption of 
applicable periods. Several commenters viewed this proposal as a 
minimal change and noted that this proposal would provide continuity 
and consistency for future program years.
    Response: We thank the commenters for their support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to automatically adopt applicable periods for 
the Hospital Readmissions Reduction Program beginning with the FY 2023 
program year.
7. Identification of Aggregate Payments for Each Condition/Procedure 
and All Discharges for FY 2021
    When calculating the numerator (aggregate payments for excess 
readmissions), we determine the base operating DRG payment amount for 
an individual hospital for the applicable period for each condition/
procedure, using Medicare inpatient claims from the MedPAR file with 
discharge dates that are within the applicable period. Under our 
established methodology, we use the update of the MedPAR file for each 
Federal fiscal year, which is updated 6 months after the end of each 
Federal fiscal year within the applicable period, as our data source.
    In identifying discharges for the applicable conditions/procedures 
to calculate the aggregate payments for excess readmissions, we apply 
the same exclusions to the claims in the MedPAR file as are applied in 
the measure methodology for each of the applicable conditions/
procedures. For the FY 2021 applicable period, this includes the 
discharge diagnoses for each applicable condition/procedure based on a 
list of specific ICD-10-CM and ICD-10-PCS code sets, as applicable, for 
that condition/procedure, because diagnoses and procedure codes for 
discharges occurring on or after October 1, 2015 (FY 2016) began 
reporting under the ICD-10- CM and ICD-10-PCS code sets as opposed to 
the previous ICD-9CM code set.
    We identify Medicare fee-for-service (FFS) claims that meet the 
criteria previously described for each applicable condition/procedure 
to calculate the aggregate payments for excess readmissions. This means 
that claims paid for under Medicare Part C (Medicare Advantage) are not 
included in this calculation. This policy is consistent with the 
methodology to calculate ERRs based solely on admissions and 
readmissions for Medicare FFS patients. Therefore, consistent with our 
established methodology, for FY 2021, we proposed to continue to 
exclude admissions for patients enrolled in Medicare Advantage (MA), as 
identified in the Medicare Enrollment Database.
    For FY 2021, we proposed to determine aggregate payments for excess 
readmissions, and aggregate payments for all discharges using data from 
MedPAR claims with discharge dates that align with the FY 2021 
applicable period. As we stated in FY 2018 IPPS/LTCH PPS final rule (82 
FR 38232), we will determine the neutrality modifier using the most 
recently available full year of MedPAR data. However, we note that, for 
the purpose of modeling the estimated FY 2021 readmissions payment 
adjustment factors for this final rule, we used the proportion of dual-
eligibles, excess readmission ratios, and aggregate payments for each 
condition/procedure and all discharges for applicable hospitals from 
the FY 2021 Hospital Readmissions Reduction Program applicable period. 
For the FY 2021 program year, applicable hospitals will have the 
opportunity to review and correct calculations based on the proposed FY 
2021 applicable period of July 1, 2016 to June 30, 2019, before they 
are made public under our policy regarding reporting of hospital-
specific information. Again, we reiterate that this period is intended 
to review the program calculations, and not the underlying data. For 
more information on the review and correction process, we refer readers 
to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53399 through 53401).
    We proposed the continued use of the MedPAR data corresponding to 
the applicable period for the Hospital Readmissions Reduction Program 
calculations. We proposed to use the March update of the fiscal year 
MedPAR to identify discharges within the applicable period during that 
fiscal year. We received no comments on this proposal, and therefore 
are finalizing our proposal to use MedPAR data corresponding to the 
applicable period for the Hospital Readmissions Reduction Program 
without modification.
8. Calculation of Payment Adjustment Factors for FY 2021
    As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38226), section 1886(q)(3)(D) of the Act requires the Secretary to 
group hospitals and apply a methodology that allows for separate 
comparisons of hospitals within peer groups in determining a hospital's 
adjustment factor for payments applied to discharges beginning in FY 
2019. Section 1886(q)(3)(D) also states that this methodology could be 
replaced through the application of subclause (E)(i), which states that 
the Secretary may take into account the studies conducted and the 
recommendations made by the reports required by section 2(d)(1) of the 
IMPACT Act of 2014 (Pub. L. 113-185; 42 U.S.C. 1395 note) with respect 
to risk adjustment methodologies. The second Office of the Assistant 
Secretary for Planning and Evaluation (ASPE) study on social risk and 
Medicare's value-based purchasing programs came out on June 29, 2020. 
We will examine these recommendations more closely going forward.
    We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38226 through 38237) for a detailed discussion of the payment 
adjustment methodology. We did not propose any

[[Page 58847]]

changes to this payment adjustment calculation methodology for FY 2021.
9. Calculation of Payment Adjustment for FY 2021
    Section 1886(q)(3)(A) of the Act defines the payment adjustment 
factor for an applicable hospital for a fiscal year as ``equal to the 
greater of: (i) The ratio described in subparagraph (B) for the 
hospital for the applicable period (as defined in paragraph (5)(D)) for 
such fiscal year; or (ii) the floor adjustment factor specified in 
subparagraph (C).'' Section 1886(q)(3)(B) of the Act, in turn, 
describes the ratio used to calculate the adjustment factor. 
Specifically, it states that the ratio is equal to 1 minus the ratio 
of--(1) the aggregate payments for excess readmissions; and (2) the 
aggregate payments for all discharges, scaled by the neutrality 
modifier. The methodology used for the calculation of this ratio is 
codified at 42 CFR 412.154(c)(1) and the methodology for the 
calculation of the floor adjustment factor is codified at 42 CFR 
412.154(c)(2). Section 1886(q)(3)(C) of the Act specifies the floor 
adjustment factor at 0.97 for FY 2015 and subsequent fiscal years.
    Consistent with section 1886(q)(3) of the Act, codified in our 
regulations at 42 CFR 412.154(c)(2), for FY 2021, the payment 
adjustment factor will be either the greater of the ratio or the floor 
adjustment factor of 0.97. Under our established policy, the ratio is 
rounded to the fourth decimal place. In other words, for FY 2021, a 
hospital subject to the Hospital Readmissions Reduction Program would 
have an adjustment factor that is between 1.0 (no reduction) and 0.9700 
(greatest possible reduction).
    For additional information on the FY 2021 payment calculation, we 
refer readers to the Hospital Readmissions Reduction Program 
information and resources available on our QualityNet website. We did 
not propose any changes to our calculation of the payment methodology.
10. Confidential Reporting of Stratified Data for Hospital Quality 
Measures
    Consistent with our plans described in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42388 through 42390), we included in confidential 
hospital-specific reports (HSR) data stratified by patient dual-
eligible status for the six readmissions measures included in the 
Hospital Readmissions Reduction Program in the Spring of 2020. These 
data included two disparity methodologies designed to illuminate 
potential disparities within individual hospitals and across hospitals 
nationally and supplement the measure data currently publicly reported 
on the Hospital Compare website. However, these stratified data are 
provided in confidential reports and not publicly reported at this 
time. The first methodology, the Within-Hospital Disparity Method, 
highlights differences in outcomes for dual-eligible versus non-dual-
eligible patients within an individual hospital, while the second 
methodology, the Dual Eligible Outcome Method, allows for a comparison 
of performance in care for dual-eligible patients across hospitals (82 
FR 38405 through 38407; 83 FR 41598; 84 FR 42388 through 42389). These 
two disparity methods are separate from the methodology used by the 
Hospital Readmissions Reduction Program that assesses hospital 
performance relative to other hospitals with a similar proportion of 
dual-eligible patients (that is, peer group), and we emphasize that the 
two disparity methods would not be used in payment adjustment factor 
calculations under the Hospital Readmissions Reduction Program. We note 
that the two disparity methods do not place any additional collection 
or reporting burden on hospitals because dual-eligibility data are 
readily available in claims data. In addition, we reiterate that these 
confidential hospital-specific reports data do not impact the 
calculation of hospital payment adjustment factors under the Hospital 
Readmissions Reduction Program.
    We did not propose any updates to the confidential reporting of 
stratified data in the proposed rule.
11. Revisions of Regulatory Text
    We proposed to revise 42 CFR 412.152 to reflect the proposed policy 
to automatically adopt applicable periods for the Program as previously 
discussed in section IV.K.6. of the preamble of this final rule. 
Specifically, we proposed to revise the definition of ``applicable 
period'' and ``applicable period for dual eligibility'' as follows:
    Applicable period is, with respect to a fiscal year, the 3-year 
period (specified by the Secretary) from which data are collected in 
order to calculate excess readmission ratios and adjustments under the 
Hospital Readmissions Reduction Program. The applicable period for FY 
2022 is the 3-year period from July 1, 2017 through June 30, 2020. 
Beginning with the FY 2023 program year, the applicable period is the 
3-year period advanced by 1-year from the prior year's period from 
which data are collected in order to calculate excess readmission 
ratios and adjustments under the Hospital Readmissions Reduction 
Program, unless otherwise specified by the Secretary.
    Applicable period for dual-eligibility is the 3-year data period 
corresponding to the applicable period for the Hospital Readmissions 
Reduction Program, unless otherwise established by the Secretary.
    We received several public comments on our proposal to revise 42 
CFR 412.152 to reflect the proposed policy to automatically adopt 
applicable periods for the Program.
    Comment: Commenters supported this proposal. Several commenters 
viewed this proposal as a minimal change and noted that this proposal 
would provide continuity and consistency for future program years.
    Response: We thank commenters for their support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to update the regulatory text as proposed.
12. Overall Hospital Quality Star Ratings
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48772 through 49082), 
we proposed a methodology to calculate the Overall Hospital Quality 
Star Ratings (Overall Star Ratings). The Overall Star Ratings would 
utilize data collected on hospital inpatient and outpatient measures 
that are publicly reported on a CMS website, including data from the 
Hospital Readmissions Reduction Program. We refer readers to section 
XVI. of the CY 2021 OPPS/ASC proposed rule for details.

L. Hospital Value-Based Purchasing (VBP) Program: Updates

1. Background
a. Statutory Background and Overview of Past Program Years
    Section 1886(o) of the Act requires the Secretary to establish a 
hospital value based purchasing program (the Hospital VBP Program) 
under which value-based incentive payments are made in a fiscal year 
(FY) to hospitals that meet performance standards established for a 
performance period for such fiscal year. Both the performance standards 
and the performance period for a fiscal year are to be established by 
the Secretary.
    For more of the statutory background and descriptions of our 
current policies for the Hospital VBP Program, we refer readers to the 
Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547); 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51653 through 51660); the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74527 through 
74547); the FY 2013 IPPS/LTCH PPS final rule (77 FR 53567 through 
53614); the FY 2014 IPPS/LTCH PPS final rule

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(78 FR 50676 through 50707); the CY 2014 OPPS/ASC final rule (78 FR 
75120 through 75121); the FY 2015 IPPS/LTCH PPS final rule (79 FR 50048 
through 50087); the FY 2016 IPPS/LTCH PPS final rule (80 FR 49544 
through 49570); the FY 2017 IPPS/LTCH PPS final rule (81 FR 56979 
through 57011); the CY 2017 OPPS/ASC final rule with comment period (81 
FR 79855 through 79862); the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38240 through 38269); the FY 2019 IPPS/LTCH PPS final rule (83 FR 41440 
through 41472); and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42390 
through 42402).
    We also have codified certain requirements for the Hospital VBP 
Program at 42 CFR 412.160 through 412.167.
b. FY 2021 Program Year Payment Details
    Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce 
the base operating DRG payment amount for a hospital for each discharge 
in a fiscal year by an applicable percent. Under section 1886(o)(7)(A) 
of the Act, the sum total of these reductions in a fiscal year must 
equal the total amount available for value-based incentive payments for 
all eligible hospitals for the fiscal year, as estimated by the 
Secretary. We finalized details on how we would implement these 
provisions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 
53573), and we refer readers to that rule for further details.
    Under section 1886(o)(7)(C)(v) of the Act, the applicable percent 
for the FY 2021 program year is 2 percent. Using the methodology we 
adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 
53573), we estimate that the total amount available for value-based 
incentive payments for FY 2021 is approximately $1.9 billion, based on 
the March 2020 update of the FY 2019 MedPAR file.
    As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53573 
through 53576), we will utilize a linear exchange function to translate 
this estimated amount available into a value-based incentive payment 
percentage for each hospital, based on its Total Performance Score 
(TPS). We will then calculate a value-based incentive payment 
adjustment factor that will be applied to the base operating DRG 
payment amount for each discharge occurring in FY 2021, on a per-claim 
basis. We published proxy value-based incentive payment adjustment 
factors in Table 16 associated with the FY 2021 IPPS/LTCH PPS proposed 
rule (which is available via the internet on the CMS website at https://www.cms.gov/medicare/acute-inpatient-pps/fy-2021-ipps-proposed-rule-home-page#Tables). We are publishing updated proxy value-based 
incentive payment adjustment factors in Table 16A associated with this 
final rule (available via the internet on the CMS website). The proxy 
factors are based on the TPSs from the FY 2020 program year. These FY 
2020 performance scores are the most recently available performance 
scores that hospitals have been given the opportunity to review and 
correct. The updated slope of the linear exchange function used to 
calculate the proxy value-based incentive payment adjustment factors in 
Table 16A is 2.8109251372. This slope, along with the estimated amount 
available for value-based incentive payments, has been updated based on 
the March 2020 update to the FY 2019 MedPAR file and is also published 
in Table 16A (available via the internet on the CMS website).
    After hospitals have been given an opportunity to review and 
correct their actual TPSs for FY 2021, we will post Table 16B 
associated with the final rule (which will be available via the 
internet on the CMS website) to display the actual value-based 
incentive payment adjustment factors, exchange function slope, and 
estimated amount available for the FY 2021 program year. We expect 
Table 16B will be posted on the CMS website in the Fall of 2020.
2. Retention and Removal of Quality Measures
a. Retention of Previously Adopted Hospital VBP Program Measures and 
Relationship Between the Hospital IQR and Hospital VBP Program Measure 
Sets
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592), we finalized 
a policy to retain measures from prior program years for each 
successive program year, unless otherwise proposed and finalized. In 
the FY 2019 IPPS/LTCH PPS final rule (83 FR 41440 through 41441), we 
finalized a revision to our regulations at 42 CFR 412.164(a) to clarify 
that once we have complied with the statutory prerequisites for 
adopting a measure for the Hospital VBP Program (that is, we have 
selected the measure from the Hospital IQR Program measure set and 
included data on that measure on Hospital Compare or its successor for 
at least 1 year prior to its inclusion in a Hospital VBP Program 
performance period), the Hospital VBP Program statute does not require 
that the measure continue to remain in the Hospital IQR Program. We did 
not propose any changes to these policies.
b. Measure Removal Factors for the Hospital VBP Program
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41441 through 
41446), in alignment with the Hospital IQR Program, we finalized 
measure removal factors for the Hospital VBP Program, and we refer 
readers to that final rule for details. We did not propose any changes 
to these policies.
c. Summary of Previously Adopted Measures for the FY 2023 and FY 2024 
Program Years
    We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42392 through 42393) for summaries of previously adopted measures for 
the FY 2022 and FY 2023 program years, and to the tables in this 
section showing summaries of previously adopted measures for the FY 
2023 and FY 2024 program years. We note that in the FY 2021 IPPS/LTCH 
PPS proposed rule (85 FR 32769 through 32771), we did not propose to 
add new measures or remove measures from the Hospital VBP Program.
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BILLING CODE 4120-01-C
3. Previously Adopted Baseline and Performance Periods
a. Background
    Section 1886(o)(4) of the Act requires the Secretary to establish a 
performance period for the Hospital VBP Program that begins and ends 
prior to the beginning of such fiscal year. We refer readers to the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56998 through 57003) for baseline 
and performance periods that we have adopted for the FY 2020, FY 2021, 
and FY 2022 program years. In the same final rule, we finalized a 
schedule for all future baseline and performance periods for previously 
adopted measures. We refer readers to the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38256 through 38261), the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41466 through 41469), and the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42393 through 42395) for additional baseline and performance 
periods that we have adopted for the FY 2022, FY 2023, and subsequent 
program years.
    We note that on March 22, 2020,\435\ in response to the COVID-19 
Public Health Emergency (PHE), we announced relief for clinicians, 
providers, hospitals, and facilities participating in Medicare QRPs and 
VBP programs. In addition, on

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March 27, 2020,\436\ we published a supplemental guidance memorandum 
that described in more detail the scope and duration of the nationwide 
ECEs we were granting under each Medicare QRP and VBP program. Due to 
concerns about the national comparability of the data we updated the 
nationwide ECE to allow us to not score these data, even if voluntarily 
reported, in the Medicare and Medicaid Programs, Clinical Laboratory 
Improvement Amendments (CLIA), and Patient Protection and Affordable 
Care Act; Additional Policy and Regulatory Revisions in Response to the 
COVID-19 Public Health Emergency announced on August 25, 2020 
(hereafter referred to as the ``August 25th COVID-19 IFC'') (that is 
scheduled to appear in the September 2, 2020 Federal Register). 
Pursuant to the August 25th COVID-19 IFC, no claims data or chart-
abstracted data reflecting services provided January 1, 2020-June 30, 
2020 will be used in calculations for the Hospital VBP Program due to 
the COVID-19 PHE. Please refer to the August 25th COVID-19 IFC for more 
details.
---------------------------------------------------------------------------

    \435\ CMS Announced Relief for Clinicians, Providers, Hospitals 
and Facilities Participating in Quality Reporting Programs in 
Response to COVID-19. Available at: https://www.cms.gov/newsroom/press-releases/cms-announces-relief-clinicians-providers-hospitals-and-facilities-participating-quality-reporting.
    \436\ Exceptions and Extensions for Quality Reporting 
Requirements for Acute Care Hospitals, PPS-Exempt Cancer Hospitals, 
Inpatient Psychiatric Facilities, Skilled Nursing Facilities, Home 
Health Agencies, Hospices, Inpatient Rehabilitation Facilities, 
Long-Term Care Hospitals, Ambulatory Surgical Centers, Renal 
Dialysis Facilities, and MIPS Eligible Clinicians Affected by COVID-
19. Available at: https://www.cms.gov/files/document/guidance-memo-exceptions-and-extensions-quality-reporting-and-value-based-purchasing-programs.pdf.
---------------------------------------------------------------------------

b. Person and Community Engagement Domain
    Since the FY 2015 program year, we have adopted a 12-month baseline 
period and a 12-month performance period for measures in the Person and 
Community Engagement domain (previously referred to as the Patient- and 
Caregiver-Centered Experience of Care/Care Coordination domain) (77 FR 
53598; 78 FR 50692; 79 FR 50072; 80 FR 49561). In the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 56998), we finalized our proposal to adopt a 12-
month performance period for the Person and Community Engagement domain 
that runs on the calendar year 2 years prior to the applicable program 
year and a 12-month baseline period that runs on the calendar year 4 
years prior to the applicable program year, for the FY 2019 program 
year and subsequent years.
    We did not propose any changes to these policies.
c. Clinical Outcomes Domain
    For the FY 2020 and FY 2021 program years, we adopted a 36-month 
baseline period and a 36-month performance period for measures in the 
Clinical Outcomes domain (previously referred to as the Clinical Care 
domain) (79 FR 50073; 80 FR 49563 through 49564). In the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57001), we also adopted a 22-month 
performance period and a 36-month baseline period specifically for the 
MORT-30-PN (updated cohort) measure for the FY 2021 program year.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57000), we adopted a 
36-month performance period and a 36-month baseline period for the FY 
2022 program year for each of the previously finalized measures in the 
Clinical Outcomes domain--that is, the MORT-30-AMI, MORT-30-HF, MORT-
30-COPD, COMP-HIP-KNEE, and MORT-30-CABG measures. In the same final 
rule (81 FR 57001), we adopted a 34-month performance period and a 36-
month baseline period for the MORT-30-PN (updated cohort) measure for 
the FY 2022 program year.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38259), we adopted a 
36-month performance period and a 36-month baseline period for the 
MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG, MORT-30-PN 
(updated cohort), and COMP-HIP-KNEE measures for the FY 2023 program 
year and subsequent years. Specifically, for the mortality measures 
(MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG, and MORT-30-PN 
(updated cohort)), the performance period runs for 36 months from July 
1, 5 years prior to the applicable fiscal program year, to June 30, 2 
years prior to the applicable fiscal program year, and the baseline 
period runs for 36 months from July 1, 10 years prior to the applicable 
fiscal program year, to June 30, 7 years prior to the applicable fiscal 
program year. For the COMP-HIP-KNEE measure, the performance period 
runs for 36 months from April 1, 5 years prior to the applicable fiscal 
program year, to March 31, 2 years prior to the applicable fiscal 
program year, and the baseline period runs for 36 months from April 1, 
10 years prior to the applicable fiscal program year, to March 31, 7 
years prior to the applicable fiscal program year.
    We did not propose any changes to the length of these performance 
or baseline periods.
d. Safety Domain
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57000), we finalized 
our proposal to adopt a performance period for all measures in the 
Safety domain--with the exception of the CMS Patient Safety and Adverse 
Events Composite (CMS PSI 90) measure--that runs on the calendar year 2 
years prior to the applicable program year and a baseline period that 
runs on the calendar year 4 years prior to the applicable program year 
for the FY 2019 program year and subsequent program years.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38258), for the FY 
2023 program year, we adopted a 21-month baseline period (October 1, 
2015 to June 30, 2017) and a 24-month performance period (July 1, 2019 
to June 30, 2021) for the CMS PSI 90 measure. In the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38258 through 38259), we adopted a 24-month 
performance period and a 24-month baseline period for the CMS PSI 90 
measure for the FY 2024 program year and subsequent years. 
Specifically, the performance period runs from July 1, 4 years prior to 
the applicable fiscal program year, to June 30, 2 years prior to the 
applicable fiscal program year, and the baseline period runs from July 
1, 8 years prior to the applicable fiscal program year, to June 30, 6 
years prior to the applicable fiscal program year.
    We did not propose any changes to these policies.
e. Efficiency and Cost Reduction Domain
    Since the FY 2016 program year, we have adopted a 12-month baseline 
period and a 12-month performance period for the MSPB measure in the 
Efficiency and Cost Reduction domain (78 FR 50692; 79 FR 50072; 80 FR 
49562). In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56998), we 
finalized our proposal to adopt a 12-month performance period for the 
MSPB measure that runs on the calendar year 2 years prior to the 
applicable program year and a 12-month baseline period that runs on the 
calendar year 4 years prior to the applicable program year for the FY 
2019 program year and subsequent years.
    We did not propose any changes to these policies.
f. Summary of Previously Adopted Baseline and Performance Periods for 
the FY 2023 Through FY 2026 Program Years
    These tables summarize the baseline and performance periods that we 
have previously adopted.
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BILLING CODE 4120-01-C
4. Performance Standards for the Hospital VBP Program
a. Background
    Section 1886(o)(3)(A) of the Act requires the Secretary to 
establish performance standards for the measures selected under the 
Hospital VBP Program for a performance period for the applicable fiscal 
year. The performance standards must include levels of achievement and 
improvement, as required by section 1886(o)(3)(B) of the Act, and must 
be established no later than 60 days before the beginning of the 
performance period for the fiscal year involved, as required by section 
1886(o)(3)(C) of the Act. We refer readers to the Hospital Inpatient 
VBP Program final rule (76 FR 26511 through 26513) for further 
discussion of achievement and improvement standards under the Hospital 
VBP Program.
    In addition, when establishing the performance standards, section 
1886(o)(3)(D) of the Act requires the Secretary to consider appropriate 
factors, such as: (1) Practical experience with the measures involved, 
including whether a significant proportion of hospitals failed to meet 
the performance standard during previous performance periods; (2) 
historical performance standards; (3) improvement rates; and (4) the 
opportunity for continued improvement.
    We refer readers to the FY 2013, FY 2014, and FY 2015 IPPS/LTCH PPS 
final rules (77 FR 53599 through 53605; 78 FR 50694 through 50699; and 
79 FR 50077 through 50081, respectively) for a more detailed discussion 
of the general scoring methodology used in the Hospital VBP Program. We 
refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42396) for 
previously established performance standards for the FY 2022 program 
year.
    We note that the performance standards for all of the following 
measures are calculated with lower values representing better 
performance:
     CDC NHSN HAI measures (CLABSI, CAUTI, CDI, MRSA 
Bacteremia, and Colon and Abdominal Hysterectomy SSI).
     CMS PSI 90 measure.
     COMP-HIP-KNEE measure.
     MSPB measure.
    This distinction is made in contrast to other measures--HCAHPS and 
the mortality measures, which use survival rates rather than mortality 
rates--for which higher values indicate better performance. As 
discussed further in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50684), the performance standards for the Colon and Abdominal 
Hysterectomy SSI measure are computed separately for each procedure 
stratum, and we first award achievement and improvement points to each 
stratum separately, and then compute a weighted average of the points 
awarded to each stratum by predicted infections.
b. Previously Established and Estimated Performance Standards for the 
FY 2023 Program Year
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38264 through 
38265), we established performance standards for the FY 2023 program 
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-
HIP-KNEE) and for the Efficiency and Cost Reduction domain measure 
(MSPB). In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41471 through 
41472), we established, for the FY 2023 program year, the performance 
standards for the Safety domain measure, CMS PSI 90. We note that the 
performance standards for the MSPB measure are based on performance 
period data. Therefore, we are unable to provide numerical equivalents 
for the standards at this time.
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32775 through 
32777), in accordance with our methodology for calculating performance 
standards discussed more fully in the Hospital Inpatient VBP Program 
final rule (76 FR 26511 through 26513) and codified at 42 CFR 412.160, 
we estimated additional performance standards for the FY 2023 program 
year. In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32775), we 
noted that the numerical values for the performance standards for the 
Safety and Person and Community Engagement domains for the FY 2023 
program year were estimates based on the most recently available data, 
and that we intended to update the numerical values in the FY 2021 
IPPS/LTCH PPS final rule.
    The previously established and newly established performance 
standards for the measures in the FY 2023 program year are set out in 
these tables.

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    The eight dimensions of the HCAHPS measure are calculated to 
generate the HCAHPS Base Score. For each of the eight dimensions, 
Achievement Points (0-10 points) and Improvement Points (0-9 points) 
are calculated, the larger of which is then summed across the eight 
dimensions to create the HCAHPS Base Score (80 points). Each of the 
eight dimensions is of equal weight; therefore, the HCAHPS Base Score 
ranges from 0 to 80 points. HCAHPS Consistency Points are then 
calculated, which range from 0 to 20 points. The Consistency Points 
take into consideration the scores of all eight Person and Community 
Engagement dimensions. The final element of the scoring formula is the 
summation of the HCAHPS Base Score and the HCAHPS Consistency Points, 
which results in the Person and Community Engagement Domain score that 
ranges from 0 to 100 points.

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c. Previously Established Performance Standards for Certain Measures 
for the FY 2024 Program Year
    We have adopted certain measures for the Safety domain, Clinical 
Outcomes domain, and Efficiency and Cost Reduction domain for future 
program years in order to ensure that we can adopt baseline and 
performance periods of sufficient length for performance scoring 
purposes. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41472), we 
established performance standards for the FY 2024 program year for the 
Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-HF, MORT-30-PN 
(updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and 
the Efficiency and Cost Reduction domain measure (MSPB). In the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42395 through 42398), we established, 
for the FY 2024 program year, the performance standards for the Safety 
domain measure, CMS PSI 90. We note that the performance standards for 
the MSPB measure are based on performance period data. Therefore, we 
are unable to provide numerical equivalents for the standards at this 
time. The previously established performance standards for these 
measures are set out in this table.
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d. Previously Established and Newly Established Performance Standards 
for Certain Measures for the FY 2025 Program Year
    We have adopted certain measures for the Safety domain, Clinical 
Outcomes domain, and the Efficiency and Cost Reduction domain for 
future program years in order to ensure that we can adopt baseline and 
performance periods of sufficient length for performance scoring 
purposes. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42398 through 
42399), we established performance standards for the FY 2025 program 
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-
HIP-KNEE) and the Efficiency and Cost Reduction domain measure (MSPB). 
We note that the performance standards for the MSPB measure are based 
on performance

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period data. Therefore, we are unable to provide numerical equivalents 
for the standards at this time.
    In accordance with our methodology for calculating performance 
standards discussed more fully in the Hospital Inpatient VBP Program 
final rule (76 FR 26511 through 26513) and codified at 42 CFR 412.160, 
we are establishing performance standards for the CMS PSI 90 measure 
for the FY 2025 program year. The previously established and newly 
established performance standards for these measures are set out in 
this table.
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e. Newly Established Performance Standards for Certain Measures for the 
FY 2026 Program Year
    As previously discussed, we have adopted certain measures for the 
Clinical Outcomes domain (MORT-30-AMI, MORT-30-HF, MORT-30-PN (updated 
cohort), MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and the 
Efficiency and Cost Reduction domain (MSPB) for future program years in 
order to ensure that we can adopt baseline and performance periods of 
sufficient length for performance scoring purposes. In accordance with 
our methodology for calculating performance standards discussed more 
fully in the Hospital Inpatient VBP Program final rule (76 FR 26511 
through 26513), and our performance standards definitions codified at 
42 CFR 412.160, we are establishing the following performance standards 
for the FY 2026 program year for the Clinical Outcomes domain and the 
Efficiency and Cost Reduction domain. We note that the performance 
standards for the MSPB measure are based on performance period data. 
Therefore, we are unable to provide numerical equivalents for the 
standards at this time. The newly established performance standards for 
these measures are set out in this table.

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    We received several public comments on our newly established 
performance periods for FY 2024 through FY 2026.
    Comment: A few commenters expressed their support for the newly 
established performance standards for certain measures for the FY 2023 
through FY 2026 program years.
    Response: We thank commenters for their support.
    After consideration of the public comments that we received, we are 
establishing the performance standards for the FY 2023 through FY 2026 
program years as previously discussed.
5. Scoring Methodology and Data Requirements
a. Domain Weighting for the FY 2022 Program Year and Subsequent Years 
for Hospitals That Receive a Score on All Domains
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38266), we adopted a 
policy to retain the equal weight of 25 percent for each of the four 
domains in the Hospital VBP Program for the FY 2020 program year and 
subsequent years for hospitals that receive a score in all domains. We 
did not propose any changes to these domain weights.
b. Domain Weighting for the FY 2022 Program Year and Subsequent Years 
for Hospitals Receiving Scores on Fewer Than Four Domains
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50084 through 
50085), for the FY 2017 program year and subsequent years, we adopted a 
policy that hospitals must receive domain scores on at least three of 
four quality domains in order to receive a TPS, and hospitals with 
sufficient data on only three domains will have their TPSs 
proportionately reweighted. We did not propose any changes to these 
domain weights.
c. Minimum Numbers of Measures for Hospital VBP Program Domains
    Based on our previously finalized policies (82 FR 38266), for a 
hospital to receive domain scores:
     A hospital must report a minimum number of 100 completed 
HCAHPS surveys for a hospital to receive a Person and Community 
Engagement domain score.
     A hospital must receive a minimum of two measure scores 
within the Clinical Outcomes domain to receive a Clinical Outcomes 
domain score.
     A hospital must receive a minimum of two measure scores 
within the Safety domain to receive a Safety domain score.
     A hospital must receive a minimum of one measure score 
within the Efficiency and Cost Reduction domain to receive an 
Efficiency and Cost Reduction domain score.
    We did not propose any changes to these policies.
d. Minimum Numbers of Cases for Hospital VBP Program Measures
(1) Background
    Section 1886(o)(1)(C)(ii)(IV) of the Act requires the Secretary to 
exclude for the fiscal year hospitals that do not report a minimum 
number (as determined by the Secretary) of cases for the measures that 
apply to the hospital for the performance period for the fiscal year. 
For additional discussion of the previously finalized minimum numbers 
of cases for measures under the Hospital VBP Program, we refer readers 
to the Hospital Inpatient VBP Program final rule (76 FR 26527 through 
26531); the CY 2012 OPPS/ASC final rule (76 FR 74532 through 74534); 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53610); the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50085 through 50086); the FY 
2016 IPPS/LTCH PPS final rule (80 FR 49570); the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57011); the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38266 through 38267); the FY 2019 IPPS/LTCH PPS final rule (83 FR 41465 
through 41466); and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42399 
through 42400). We did not propose any changes to these policies.
(2) Summary of Previously Adopted Minimum Numbers of Cases
    The previously adopted minimum numbers of cases for these measures 
are set forth in this table.

[[Page 58860]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.221

e. Summary of Previously Adopted Administrative Policies for NHSN 
Healthcare-Associated Infection (HAI) Measure Data
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42400 through 
42402), we finalized our proposal for the Hospital VBP Program to use 
the same data to calculate the CDC NHSN HAI measures that the HAC 
Reduction Program uses for purposes of calculating the measures under 
that program, beginning on January 1, 2020 \437\ for CY 2020 data 
collection, which would apply to the Hospital VBP Program starting with 
data for the FY 2022 program year performance period. In the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42402), we also finalized our proposal 
for the Hospital VBP Program to use the same processes adopted by the 
HAC Reduction Program for hospitals to review and correct data for the 
CDC NHSN HAI measures and to rely on HAC Reduction Program validation 
to ensure the accuracy of CDC NHSN HAI measure data used in the 
Hospital VBP Program. We did not propose any changes to these policies 
in the proposed rule.
---------------------------------------------------------------------------

    \437\ Pursuant to the August 25th COVID-19 IFC, no claims data 
or chart-abstracted data reflecting services provided January 1, 
2020-June 30, 2020 will be used in calculations for the Hospital 
Value-Based Purchasing Program among other Medicare quality 
reporting and value-based purchasing programs due to the COVID-19 
Public Health Emergency. Please refer to the August 25th COVID-19 
IFC for more details.
---------------------------------------------------------------------------

    We refer readers to section IV.M. of the preamble of this final 
rule for additional information about HAC Reduction Program refinements 
to validation policies for the CDC NHSN HAI measures.
6. Overall Hospital Quality Star Rating
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
we proposed a methodology to calculate the Overall Hospital Quality 
Star Rating (Overall Star Rating). The Overall Star Rating would 
utilize data collected on hospital inpatient and outpatient measures 
that are publicly reported on a CMS website, including data from the 
Hospital VBP Program. We refer readers to section XVI of the CY 2021 
OPPS/ASC proposed rule for details.

M. Hospital-Acquired Conditions (HAC) Reduction Program: Updates and 
Changes (Sec.  412.170)

1. Regulatory Background
    We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50707 through 50708) for a general overview of the HAC Reduction 
Program and to the same final rule (78 FR 50708 through 50709) for a 
detailed discussion of the statutory basis for the Program. For 
additional descriptions of our previously finalized policies for the 
HAC Reduction Program, we also refer readers to the following final 
rules:
     The FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 
50729).
     The FY 2015 IPPS/LTCH PPS final rule (79 FR 50087 through 
50104).
     The FY 2016 IPPS/LTCH PPS final rule (80 FR 49570 through 
49581).
     The FY 2017 IPPS/LTCH PPS final rule (81 FR 57011 through 
57026).
     The FY 2018 IPPS/LTCH PPS final rule (82 FR 38269 through 
38278).
     The FY 2019 IPPS/LTCH PPS final rule (83 FR 41472 through 
41492).
     The FY 2020 IPPS/LTCH PPS final rule (84 FR 42402 through 
42411).
    These rules describe the general framework for the HAC Reduction 
Program's implementation, including: (1) The relevant definitions 
applicable to the program; (2) the payment adjustment under the 
program; (3) the measure selection process and conditions for the 
program, including a risk adjustment and scoring methodology; (4) 
performance scoring; (5) data collection; (6) validation; (7) measure 
removal factors policy; (8) the process for making hospital-specific 
performance information available to the public, including the 
opportunity for a hospital to review the information and submit 
corrections; (9) the extraordinary circumstances exception policy; and 
(10) limitation of administrative and judicial review. We remind 
readers that data collection and validation policies (items (5) and 
(6)) were finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41472 through 41492) and further clarified in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42402 through 42411).
    We have also codified certain requirements of the HAC Reduction 
Program at 42 CFR 412.170 through 412.172.
1. Summary of Policies for the HAC Reduction Program
    In section IV.M.4. of the preamble of this final rule, we discuss 
the automatic adoption of applicable periods beginning with the FY 2023 
program year and all subsequent program years, unless otherwise 
specified by the Secretary. In section IV.M.6. of the preamble of this 
final rule, we discuss

[[Page 58861]]

our refinements to the HAC Reduction Program validation procedures. 
Finally, in section IV.M.7. of the preamble of this final rule, we 
discuss our update to the definition of applicable period at 42 CFR 
412.170 to align with our finalized changes. We note that we received 
public comments related to the structure of the program, its measures, 
and the overall Medicare quality evaluation strategy for the HAC 
Reduction Program in response to the FY 2021 IPPS/LTCH PPS proposed 
rule. While we appreciate the commenters' feedback, because we did not 
include any proposals related to these topics in the proposed rule, we 
consider the public comments to be out of the scope of the proposed 
rule. However, all topics that we consider to be out of scope of the 
proposed rule will be taken into consideration when developing policies 
and program requirements for future years.
2. Measures for FY 2021 and Subsequent Years
a. Current Measures
    The HAC Reduction Program has adopted six measures to date. In the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized the use of 
five CDC NHSN HAI measures: (1) CAUTI; (2) CDI; (3) CLABSI; (4) Colon 
and Abdominal Hysterectomy SSI; and (5) MRSA bacteremia. In the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57014), we also finalized the use of 
the CMS PSI 90 measure. These previously finalized measures, with their 
full measure names, are shown in this table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.222

    Technical specifications for the CMS PSI 90 measure can be found on 
the QualityNet website at: https://www.qualitynet.org/inpatient/measures/psi/resources. Technical specifications for the CDC NHSN HAI 
measures can be found at CDC's NHSN website at: http://www.cdc.gov/nhsn/acute-care-hospital/index.html. Both websites provide measure 
updates and other information necessary to guide hospitals 
participating in the collection of HAC Reduction Program data.
    In this final rule, we note that we did not propose to adopt or 
remove any measures.
b. Measure Removal Factors Policy
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41472 through 41474) for more information about how the HAC Reduction 
Program supports CMS' goal of bringing quality measurement, 
transparency, and improvement together with value-based purchasing to 
the hospital inpatient care setting through the Meaningful Measures 
Initiative. We also refer readers to the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42404 through 42406) for information about our measure 
removal and retention factors for the HAC Reduction Program. In this 
final rule, we note that we did not propose any measure removal and 
retention factor policy changes.
4. Applicable Period for the HAC Reduction FY 2023 Program Year and 
Subsequent Years
    As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), 
we believe that using 24-month data collection periods for the CMS PSI 
90 and CDC NHSN HAI measures for the HAC Reduction Program provides 
hospitals and the general public the most current data available. The 
24-month data period also allows time to complete the complex 
calculation process for these measures, to perform comprehensive 
quality assurance to enhance the accuracy of measure results, and to 
disseminate confidential reports on hospital-level results to 
individual hospitals. Though we had truncated the applicable period to 
shorter than a 24-month data collection period for the CMS PSI 90 to 
accommodate the transition to the ICD-10 classification system for FY 
2018 and 2019, we returned to using the full 24-month data collection 
period as soon as the ICD-10 transition was complete. In the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38271), for FY 2020, we finalized the 
applicable period for the CMS PSI 90 as the 24-month period from July 
1, 2016 through June 30, 2018. Additionally, we finalized the 
applicable period for the CDC NHSN HAI measures (CLABSI, CAUTI, Colon 
and Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI), as the 24-
month period from January 1, 2017 through December 31, 2018. We have 
finalized the 24-month applicable

[[Page 58862]]

periods for FYs 2021 and 2022 \438\ consistent with these applicable 
periods and with the definition specified at 42 CFR 412.170.
---------------------------------------------------------------------------

    \438\ FY 2019 IPPS/LTCH PPS final rule (83 FR 41489); FY 2020 
IPPS/LTCH PPS final rule (84 FR 42410).
---------------------------------------------------------------------------

    In order to provide greater certainty around future applicable 
periods for the HAC Reduction Program, we proposed the automatic 
adoption of applicable periods for the FY 2023 program year and all 
subsequent program years for the HAC Reduction Program. Beginning in FY 
2023, the applicable period for both the CMS PSI 90 and CDC NHSN HAI 
measures will be the 24-month period beginning 1 year advanced from the 
previous program year's start of the applicable period. That is, for FY 
2023, the applicable period for the CMS PSI 90 would be the 24-month 
period from July 1, 2019 through June 30, 2021, and the applicable 
period for CDC NHSN HAI measures would be the 24-month period from 
January 1, 2020 through December 31, 2021, which is advanced 1 year 
from the applicable period for the FY 2022 HAC Reduction Program.\439\ 
All subsequent years would advance this 24-month period by 1 year 
unless otherwise specified by the Secretary, which we would convey 
through notice and comment rulemaking. We believe that the automatic 
adoption of the applicable period each year would streamline the 
process and provide additional clarity and consistency to the Program.
---------------------------------------------------------------------------

    \439\ Pursuant to [August 25th COVID IFC, no claims and chart-
abstracted data reflecting services provided January 1, 2020-June 
30, 2020 will be used in calculations for the HAC Reduction Program 
and other value-based purchasing and quality reporting programs, and 
some data has been made optional because of the COVID 19 PHE. For 
more details on the impact to scoring, please refer to the CMS-3401-
IFC: Medicare and Medicaid Programs, Clinical Laboratory Improvement 
Amendments (CLIA), and Patient Protection and Affordable Care Act; 
Additional Policy and Regulatory Revisions in Response to the COVID-
19 Public Health Emergency.
---------------------------------------------------------------------------

    We invited public comment on our proposal to automatically adopt 
applicable periods for the Program beginning with the FY 2023 program 
year. We received several public comments on our proposal for the 
automatic adoption of applicable periods for the HAC Reduction Program.
    Comment: Several commenters expressed support for the automatic 
adoption of applicable periods. Some of these commenters viewed this 
proposal as a minimal change and noted that this proposal would provide 
continuity and consistency for future program years.
    Response: We thank the commenters for their support.
    Comment: One commenter noted that in the proposed rule we stated 
that the 24-month period for CDC NHSN HAI measures in the FY 2023 
program year would be January 1, 2020 through December 31, 2022. They 
noted that the timeframe we provided was 3 years and questioned if we 
meant to say January 1, 2020 through December 31, 2021.
    Response: We thank the commenter for their correction and agree 
that the applicable period for the CDC NHSN HAI measures for the FY 
2023 program year should be January 1, 2020 through December 31, 2021. 
That updated period is reflected in the previous text.
    After consideration of the public comments that we received, we are 
finalizing our proposal to automatically adopt applicable periods for 
the HAC Reduction Program beginning with the FY 2023 program year.
5. HAC Reduction Program Scoring Methodology and Scoring Review and 
Correction Period
    In FY 2019 IPPS/LTCH PPS final rule (83 FR 41484 through 41489), we 
adopted the Equal Measure Weights approach to scoring and clarified the 
``Scoring Calculations Review and Correction Period'' (83 FR 41484). 
Hospitals must register for a QualityNet Secure Portal account in order 
to access their annual hospital-specific reports. We will continue 
using this scoring methodology and the ``Scoring Calculations Review 
and Correction Period'' process in FY 2021 and for subsequent years. In 
this final rule, we note that we did not propose any changes to the HAC 
Reduction Program scoring methodology or Scoring Calculations Review 
and Correction Period.
6. Validation of HAC Reduction Program Data
a. Background
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41478 through 
41484), we adopted processes to validate the CDC NHSN HAI measure data 
used in the HAC Reduction Program, because the Hospital IQR Program 
finalized its proposals to remove the CDC NHSN HAI measures from its 
program. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42406 through 
42410), we provided additional clarification to the validation 
selection and scoring methodology. We also refer readers to the 
QualityNet website for more information regarding chart-abstracted data 
validation of measures.
    In the FY 2019 IPPS/LTCH PPS final rule, we finalized our policy 
that the FY 2023 HAC Reduction Program will begin validation with Q3 
2020 discharges, which must be reported by February 2021 using the 
following validation schedule.

[[Page 58863]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.223

    We also adopted a policy that any nonsubstantive updates to the 
procedures for measure validation of chart-abstracted measures will be 
provided on the QualityNet website.
---------------------------------------------------------------------------

    \440\ The CMS Clinical Data Abstraction Center (CDAC) performs 
the validation.
---------------------------------------------------------------------------

    We proposed several changes to the process for validation of HAC 
Reduction Program measure data to align this program with the proposed 
changes to the Hospital IQR Program measure validation process. 
Specifically, we will align the hospital selection and submission 
quarters beginning with FY 2024 Hospital IQR and HAC Reduction 
Programs' validation so that we only require one pool of hospitals to 
submit data for validation. We believe that this would reduce burden 
and streamline processes. Our specific proposals to update the HAC 
Reduction Program validation process are described later in this 
section. For more information on the finalized updates to the Hospital 
IQR Program measure validation process, see section VIII.A. of the 
preamble of this final rule.
b. Updates to Processes for Validation of HAC Reduction Program Measure 
Data
(1) Aligning Submission Quarters to Hospital IQR Submissions
    To support the transition to an aligned validation process for the 
HAC Reduction Program and the Hospital IQR Program, we proposed to 
change the quarters of data used for HAC Reduction Program measure 
validation. Under the existing validation structure, hospitals selected 
for validation for the FY 2023 program year would be required to submit 
HAC Reduction Program measure data from the third and fourth quarters 
of 2020 and the first and second quarters of 2021 (as depicted in the 
table in section IV.M.6.a. of the preamble of this final rule).
    In order to align the quarters used for HAC Reduction Program and 
Hospital IQR validation, we proposed to only use measure data from the 
third and fourth quarters of 2020 for the FY 2023 program year 
(illustrated in this table). We will use measure data from only these 
quarters for both the random and targeted validation pools.
[GRAPHIC] [TIFF OMITTED] TR18SE20.224

    For the FY 2024 program year and subsequent years, we proposed to 
use measure data from all of CY 2021 for both the HAC Reduction Program 
and the Hospital IQR Program. Under this approach, the data submission 
deadlines for chart-abstracted measures will be in the middle of the 
month, the fifth month following the end of the reporting quarter.
[GRAPHIC] [TIFF OMITTED] TR18SE20.225


[[Page 58864]]


    We invited public comment on our proposed revision to the 
validation period for the FY 2023 program year and alignment of the 
quarters of data used for validation with the Hospital IQR Program 
beginning with validation for the FY 2024 program year. We received 
several public comments on the proposals to align the quarters of 
validation for the HAC Reduction Program and Hospital IQR Program.
    Comment: Several commenters supported the proposal to align the 
quarters of validation for the HAC Reduction Program and Hospital IQR 
Program.
    Response: We thank the commenters for their support of the proposal 
to revise the validation period for the FY 2023 program year and 
alignment the quarters used for validation beginning with validation 
for the FY 2024 program year.
    Comment: One commenter recommended limiting the chart-abstracted 
validation to one calendar quarter and reducing the number of hospitals 
selected during the validation process in order to reduce provider 
burden.
    Response: While we agree with this commenter that restricting data 
validation to fewer calendar quarters may lead to some reduction to 
provider burden, we do not believe that such a restriction would be 
consistent with our approach which has been designed to increase 
opportunities to detect poor reporting (77 FR 53540). Additionally, 
requiring fewer quarters of data for validation, by reducing sample 
size, would impede the calculation of statistically sound validation 
scores needed to make payment determinations.
    After consideration of the public comments we received, we are 
finalizing our proposals to revise the validation period for the FY 
2023 HAC Reduction Program to Q3 2020 and Q4 2020, and to align the 
quarters used for validation with the Hospital IQR Program beginning 
with validation of data from the first quarter of 2021 for the FY 2024 
program year.
(2) Aligning Hospital Selection
    Currently, a total of up to 600 hospitals may be selected for 
validation under the HAC Reduction Program. This is achieved by the HAC 
Reduction Program taking an annual sample of up to 400 randomly 
selected hospitals and selecting up to 200 hospitals using targeting 
criteria. We did not propose any changes to the hospital selection for 
validation for the FY 2023 program year. However, we proposed to update 
the policies to reduce the total validation pool from up to 600 
hospitals to up to 400 hospitals, effective beginning with validation 
for the FY 2024 program year. This would align with proposed changes 
for by the Hospital IQR Program as described in section VIII.A. of the 
preamble of this final rule. To achieve this reduction, we proposed 
reducing the randomly selected hospital pool from up to 400 hospitals 
to up to 200 hospitals for validation for the FY 2024 program year and 
subsequent years. We note that these will be the same hospitals as 
those selected for validation under the Hospital IQR Program to the 
extent that the Hospital IQR Program has measures for those hospitals; 
therefore, we will be selecting a total of up to 400 hospitals across 
both the HAC Reduction Program and the Hospital IQR Program. This would 
reduce the total number of hospitals selected for validation across 
both programs by approximately one third each year. We believe reducing 
the total number of hospitals randomly selected for chart-abstracted 
measure validation to up to 200 will maintain a sufficient sample size 
for a statistically meaningful estimate of hospitals' reporting 
accuracy and help streamline the process for both programs.
    We invited public comment on our proposed revision to align 
hospital selection for validation with the Hospital IQR Program 
beginning with validation for the FY 2024 program year. We received 
several public comments on reducing the number of hospitals selected 
for chart-abstracted validation under the HAC Reduction and Hospital 
IQR Programs from up to 600 to up to 400.
    Comment: Several commenters supported the proposal to reduce the 
number of hospitals selected for chart-abstracted validation under the 
HAC Reduction and Hospital IQR Programs from up to 600 to up to 400.
    Response: We thank the commenters for their support of the proposal 
to reduce the number of hospitals selected for validation from up to 
600 to up to 400.
    Comment: We received one comment requesting that the number of 
hospitals selected for validation be further limited from up to 400 to 
up to 200. The commenter requested that CMS take as many steps as 
possible to minimize provider reporting burden as providers continue to 
face disruption to care delivery during the COVID-19 public health 
emergency.
    Response: Because the minimum sample size required to assess the 
percentage of hospitals in the HAC Reduction Program depends on the 
expected percentage of hospitals that fail validation, we do not 
believe that we can reduce the number of selected hospitals in this 
section of this rule to up to 200 at this time. We will continue to 
evaluate the number of hospitals required to be confident that 
hospitals in the HAC Reduction Program population are achieving the 
requisite reliability score.
    After consideration of the public comments we received, we are 
finalizing our proposal to reduce the total number of hospitals 
selected for validation under the HAC Reduction Program from up to 600 
to up to 400 beginning with the FY 2024 program year, that is, for data 
beginning with calendar year 2021.
(3) Requiring the Use of Digital Submissions for Medical Records 
Requests
    We proposed to require hospitals to submit digital files when 
submitting medical records for validation of HAC Reduction Program 
measures, for the FY 2024 program year and subsequent years. Currently, 
hospitals may choose to submit paper copies of medical records for 
chart-abstracted measure validation or they may submit patient charts 
for validation by securely transmitting electronic versions of medical 
information (83 FR 41478 through 41484). Currently, submission via 
secure transmission can either entail downloading or copying the 
digital image of the patient chart onto CD, DVD, or flash drive, or 
submission of PDFs using a CMS-approved secured file transfer system.
    In the FY 2021 IPPS/LTCH PPS proposed rule, in alignment with 
proposals made for the Hospital IQR Program in the same proposed rule, 
we proposed to discontinue the option of sending CD, DVD, or flash 
drives containing digital images of patient charts, beginning with Q1 
2021 for FY 2024 program year validation. Under this approach, 
hospitals would be required to submit PDF copies of medical records 
using direct electronic files submission via a CMS-approved secure file 
transmission process. We would continue to reimburse hospitals at $3.00 
per chart, consistent with current reimbursement for electronic 
submissions of charts.
    We discussed in the proposed rule that we strive to provide the 
public with accurate quality data while maintaining alignment with 
hospital recordkeeping practices. We appreciate that hospitals have 
rapidly adopted EHR systems as their primary source of information 
about patient care, which can facilitate the process of producing 
electronic copies of medical records (78 FR 50834).

[[Page 58865]]

Additionally, we monitor the medical records submissions to the CMS 
Clinical Data Abstraction Center (CDAC) contractor, and have found 
almost two-thirds of providers use the option to submit PDF copies of 
medical records as electronic files. We noted that paper submissions 
can be reimbursed at a higher rate than for electronic submissions, 
especially for longer records because paper submissions are reimbursed 
on a per page basis, while electronic submissions are reimbursed using 
a flat rate for each submission. In our assessment based on the 
monitoring, we believe the electronic submissions can be a more 
effective and efficient process for the hospitals selected for 
validation. Requiring electronic file submissions reduces the burden of 
not only coordinating numerous paper-based pages of medical records and 
making photocopies, but also shipping it to the CDAC. Therefore, we 
stated we believe it is appropriate to require that hospitals use 
electronic submissions via a CMS-approved secure file transmission 
process.
    We invited public comment on this proposed requirement to 
electronically submit medical records for validation. We received 
several public comments related to the requirement of electronic 
submissions of medical records for validation beginning with data 
submissions of Q1 2021 discharges for FY 2024 program year validation.
    Comment: Several commenters supported the requirement of electronic 
submissions of medical records for validation beginning with data 
submissions of Q1 2021 discharges for FY 2024 program year validation.
    Response: We thank the commenters for their support of the 
transition to electronic submission of medical records.
    Comment: Several commenters supported the requirement of electronic 
submissions of medical records for validation, but requested that the 
implementation be delayed a year as providers address the ongoing 
disruption in care delivery due to the COVID-19 public health 
emergency.
    Response: We appreciate the commenters support for the proposal but 
disagree that requiring electronic file submission will be burdensome. 
Based on our monitoring of medical record submissions to the CDAC, we 
believe requiring electronic file submissions is a more effective and 
efficient process and will reduce burden for hospitals selected for 
validation, which we believe to be especially critical during the 
COVID-19 PHE. Medical records for Q1 2021 would be anticipated to be 
due around August 2021.
    Comment: A commenter requested that we provide additional clarity 
on the processes for electronic submissions. Specifically, the 
commenter questioned if the format for the validation record requests 
to hospitals would be modified and if CMS would require all 
communication for the validation process to be electronic.
    Response: At this time, the medical records request packets sent to 
the selected hospitals by the CDAC will continue to be distributed in a 
physical FedEx-mailed format, complemented with an electronic Case 
Selection Report, or the like, similar to the current process. The 
physical medical record request packet ensures that CMS receives a 
signed delivery receipt at the official physical location of the 
hospital.
    After consideration of the public comments we received, we are 
finalizing our proposal to require the electronic submission of PDF 
copies of medical records to the CDAC for validation purposes for the 
HAC Reduction Program beginning with Q1 2021 discharge data for the FY 
2024 program year.
7. Regulatory Updates (42 CFR 412.170)
    We proposed to amend the definition of applicable period at 42 CFR 
412.170 to align with our finalized automatic adoption of applicable 
periods in future program years. Section 42 CFR 412.170 currently 
defines applicable period as the 2-year period specified by the 
Secretary from which data are collected in order to calculate the total 
hospital-acquired condition score under the HAC Reduction Program. The 
proposed amendment to the definition will add language to specify: (1) 
The applicable period of the CMS PSI 90 and CDC NHSN HAI measures for 
the FY 2023 HAC Reduction Program; and (2) beginning with the FY 2023 
program year, the applicable period will be advanced by 1 year from the 
prior from the prior fiscal year's applicable period. This addition to 
the definition at 42 CFR 412.170 makes it so applicable periods for 
future program years do not need to be defined during rulemaking.
    We invited public comment on our proposal to amend the definition 
of applicable period at 42 CFR 412.170 to align with finalized 
automatic adoption of applicable periods in future program years.
    We did not receive any public comments on the update to the 
definition of applicable period and are finalizing our proposed updates 
to the regulatory text at 42 CFR 412.170.
8. Overall Hospital Quality Star Ratings
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48772through 49082), 
we proposed a methodology to calculate the Overall Hospital Quality 
Star Ratings (Overall Star Ratings). The Overall Star Ratings would 
utilize data collected on hospital inpatient and outpatient measures 
that are publicly reported on a CMS website, including data from the 
HAC Reduction Program. We refer readers to section XVI of the CY 2021 
OPPS/ASC proposed rule for details.

N. Payments for Indirect and Direct Graduate Medical Education Costs 
(Sec. Sec.  412.105 and 413.75 Through 413.83)

1. Overview of Medicare Direct GME and IME
    The Medicare program makes payments to teaching hospitals to 
account for two types of costs, the direct costs (direct GME) and the 
indirect costs (IME) of a hospital's graduate medical education 
program. Direct GME payments represent the direct costs of training 
residents (for example, resident salaries, fringe benefits, and 
teaching physician costs associated with an approved GME program) and 
generally are calculated by determining the product of the Medicare 
patient load (that is, the percentage of the hospital's Medicare 
inpatient days), the hospital's per resident payment amount, and the 
weighted number of FTE residents training at the hospital during the 
cost reporting period.
    The IME adjustment is made to teaching hospitals for the additional 
indirect patient care costs attributable to teaching activities. For 
example, teaching hospitals typically offer more technologically 
advanced treatments to their patients, and therefore, patients who are 
sicker and need more sophisticated treatment are more likely to go to 
teaching hospitals. Furthermore, there are additional costs related to 
the presence of inefficiencies associated with teaching residents 
resulting from the additional tests or procedures ordered by residents 
and the demands put on physicians who supervise, and staff who support, 
the residents. IME payments are made for each inpatient discharge as a 
percentage add-on adjustment to the Hospital Inpatient Prospective 
Payment System (IPPS) payment, and are calculated based on the 
hospital's ratio of FTE residents to available beds as defined at Sec.  
412.105(b). The statutory formula for calculating the IME adjustment 
is: c x [(1 + r)\.405\-1], where ``r'' represents the hospital's ratio 
of FTE residents to beds, and ``c'' represents an IME multiplier, which 
is set by the Congress.

[[Page 58866]]

    The amount of IME payment a hospital receives for a particular 
discharge is dependent upon the number of FTE residents the hospital 
trains, the hospital's number of available beds, the current level of 
the statutory IME multiplier, and the per discharge IPPS payment. 
Sections 1886(d)(5)(B)(v) and 1886(h)(4)(F) of the Act established 
hospital-specific limits (that is, caps) for purposes of calculating 
indirect and direct GME payments, respectively with regard to the 
number of allopathic and osteopathic FTE residents that hospitals may 
count.
2. Existing Regulations Related to Residency Program or Teaching 
Hospital Closure
    The regulations at 42 CFR 413.79(h) for direct GME, and 42 CFR 
412.105(f)(1)(ix) for IME, provide for a hospital that is closing or 
closing its residency program(s) to volunteer to temporarily transfer a 
portion of its hospital-specific direct GME and IME FTE resident caps 
to other hospitals that are willing to accept and train the displaced 
resident(s) for the duration of the resident's training program. CMS 
first implemented regulations regarding residents displaced by teaching 
hospital closure in the July 30, 1999 IPPS final rule (64 FR 41522). We 
made the change to allow a receiving hospital to receive temporary IME 
and direct GME cap adjustments in limited circumstances for assuming 
the training of displaced residents due to hospital closure, because of 
a reluctance on the part of receiving hospitals to assume such 
displaced residents without receiving increases to their IME and direct 
GME FTE resident caps to ensure receipt of Medicare funding. We define 
``closure of a hospital'' at 42 CFR 413.79(h)(1)(i) as a situation in 
which the hospital terminates its Medicare agreement under the 
provisions of Sec.  489.52 of this chapter. At 42 CFR 413.79(h)(2), our 
regulations state that a hospital may receive a temporary adjustment to 
its FTE cap to reflect residents added because of another hospital's 
closure if the hospital meets the following conditions: The hospital is 
training additional residents from a hospital that closed on or after 
July 1, 1996, and no later than 60 days after the hospital begins to 
train the residents, the hospital submits a request to its contractor 
for a temporary adjustment to its FTE cap, documents that the hospital 
is eligible for this temporary adjustment by identifying the residents 
who have come from the closed hospital and have caused the hospital to 
exceed its cap, and specifies the length of time the adjustment is 
needed.
    Subsequently, in the August 1, 2001 IPPS final rule (66 FR 39899), 
we further added to the regulations at 42 CFR 413.79(h) to also allow a 
receiving hospital to receive temporary IME and direct GME cap 
adjustments due to closure of a residency program (although the 
hospital itself would remain open) for assuming the training of 
displaced residents, due to similar reluctance on the part of receiving 
hospitals to accept these displaced residents without obtaining 
increases to their IME and direct GME FTE resident caps to ensure 
receipt of Medicare funding. We define ``closure of a hospital 
residency training program'' at 42 CFR 413.79(h)(1)(ii) to mean the 
hospital ceases to offer training for residents in a particular 
approved medical residency training program. However, because the 
hospital with the closing program itself remains open in the case of 
program closure, it retains its full IME and direct GME FTE resident 
caps. In order to prevent the situation of double payment for the same 
FTE resident cap slots, where the originating hospital closes a program 
and fills its vacated slots with residents from a different specialty, 
while the receiving hospital also receives payment for training the 
displaced resident, we stated in regulation that a receiving hospital 
could only receive the temporary FTE resident cap adjustment if the 
originating hospital with the closed program voluntarily agreed to 
temporarily reduce its FTE resident caps for the duration of the 
displaced residents' training at the receiving hospital (see 66 FR 
39900 August 1, 2001). We revised the regulations at 42 CFR 
413.79(h)(3) to specify the responsibilities of the closing hospital or 
program and the receiving hospital.
3. Policy Change Related to Medical Residents Affected by Residency 
Program or Teaching Hospital Closure
    When teaching hospitals have closed, we receive many inquiries from 
concerned stakeholders about whether Medicare IME and direct GME 
funding could be seamlessly maintained for the medical residents that 
would have to find alternate training hospitals to complete their 
training. However, although not explicitly stated in regulations text, 
our current policy is that the definition of a displaced resident is 
one that is physically present at the hospital training on the day 
prior to or the day of hospital or program closure. This longstanding 
policy derived from the fact that in both the regulations text under 
hospital closure and program closure, there is a requirement that the 
receiving hospital identifies the residents ``who have come from the 
closed hospital,'' or ``identifies the residents who were in training 
at the time of the program's closure'' (see 42 CFR 413.79(h)(2)(ii) and 
(h)(3)(ii)(B)). We considered the residents who were physically present 
at the hospital to be those residents who were ``training at the time 
of the program or hospital closure,'' thereby granting them the status 
of ``displaced residents.'' However, stakeholders have voiced their 
concern that by limiting the ``displaced residents'' to only those 
physically present at the time of closure, it becomes much more 
administratively challenging for the following groups of residents at 
closing hospitals/programs to have their residencies continue to be 
funded by Medicare: (1) Residents who leave the program after the 
closure is publicly announced to continue training at another hospital, 
but before the actual closure; (2) residents assigned to and training 
at planned rotations at other hospitals who will be unable to return to 
their rotations at the closing hospital or program; and (3) individuals 
(such as medical students or would-be fellows) who matched into GME 
programs at the closing hospital or program but have not yet started 
training at the closing hospital or program. Other groups of residents 
who, under current policy, are already considered ``displaced 
residents'' include-- (1) residents who are physically training in the 
hospital on the day prior to or day of program or hospital closure; and 
(2) residents who would have been at the closing hospital/program on 
the day prior to or of closure, but for the fact that they were on 
approved leave at that time, and will be unable to return to their 
training at the closing hospital/program.
    We proposed to amend the Medicare policy with regard to closing 
teaching hospitals and closing residency programs to address the needs 
of residents attempting to find alternative hospitals in which to 
complete their training and the incentives of originating and receiving 
hospitals with regard to seamless Medicare IME and direct GME funding. 
We proposed to change two aspects of the current Medicare policy. 
First, rather than link the Medicare temporary funding for the affected 
residents to the day prior to or the day of program or hospital 
closure, we proposed that the key day would be the day that the closure 
was publicly announced (for example, via a press release or a formal 
notice to the Accreditation Council on Graduate Medical Education 
(ACGME)). This would provide greater flexibility for the residents to 
transfer while the hospital

[[Page 58867]]

operations or residency programs were winding down, rather than waiting 
until the last day of hospital or program operation. This would address 
the needs of the first group of residents as previously described: 
Residents who would leave the program after the closure was publicly 
announced to continue training at another hospital, but before the day 
of actual closure. Second, by removing the link between Medicare 
temporary funding for the residents, and the day prior to or the day of 
program or hospital closure, we proposed to also allow funding to be 
transferred temporarily for the second and third group of residents who 
are not physically at the closing hospital/closing program, but had 
intended to train at (or return to training at, in the case of 
residents on rotation) the closing hospital/closing program.
    Thus, we proposed to revise our policy with regard to which 
residents can be considered ``displaced'' for Medicare temporary FTE 
resident cap transfer purposes in the situation where a hospital 
announces publicly that it is closing, and/or that it is closing a 
residency program(s). Specifically, we proposed to add the definition 
of ``displaced resident'' in new 42 CFR 413.79(h)(1)(iii) to read as 
set out in the regulatory text of this document.
    Current IME regulations at 42 CFR 412.105(f)(1)(ix) link to the 
direct GME regulations at 42 CFR 413.79(h), so this regulation change 
would apply to the IME FTE cap transfers for displaced residents as 
well. In order to fully coordinate these IME regulations with the new 
definition of ``displaced resident,'' we proposed to slightly modify 
the regulations at 42 CFR 412.105(f)(1)(ix) to add the word 
``displaced'' to describe residents added by a receiving hospital due 
to a hospital or program closure. In addition, we proposed to change 
another detail of the policy specific to the requirements for the 
receiving hospital. To apply for the temporary increase in the Medicare 
resident cap, the receiving hospital would have to submit a letter to 
its Medicare Administrative Contractor within 60 days after beginning 
to train the displaced residents. In the July 30, 1999 IPPS final rule 
(64 FR 41523), we stated that this letter must include the names and 
social security numbers of the displaced residents, the hospital and 
programs in which the residents were training previously, and the 
amount of the cap increase needed for each resident (based on how much 
the receiving hospital is in excess of its caps and the length of time 
for which the adjustments are needed (42 CFR 413.79(h)(2)(ii)). To 
reduce the amount of personally identifiable information (PII) included 
in these agreements, we proposed to no longer require the full social 
security number for each resident. However, in order to still provide 
enough information for the hospitals and MACs to be able to 
differentiate among many residents, some which may have similar names, 
we proposed to require the receiving hospital to include the names and 
the last four digits of each displaced resident's social security 
number.
    We also noted that as under current policy, the maximum number of 
FTE resident cap slots that could be transferred to all receiving 
hospitals is the number of IME and direct GME FTE resident cap slots 
belonging to the hospital that has the closed program, or that is 
closing. Therefore, if the originating hospital is training residents 
in excess of its caps, then being a displaced resident does not 
guarantee that a cap slot will be transferred along with that resident. 
A closure situation does not grant the Medicare program the authority 
to fund additional residency slots in excess of the cap amounts at the 
originating hospital. If there are more displaced residents than 
available cap slots, the slots may be apportioned, according to the 
closing hospital's discretion. The decision to transfer a cap slot if 
one is available is voluntary and made at the sole discretion of the 
originating hospital (42 CFR 413.79(h)(3)(ii)). However, if the 
originating hospital decides to do so, then it is the originating 
hospital's and/or sponsor's responsibility to determine how much of an 
available cap slot goes with a particular resident (if any). (Also note 
that only to the extent a receiving hospital would exceed its FTE cap 
by training displaced residents would it be eligible for the temporary 
adjustment (66 FR 39899, Sec.  413.79(h)(3)(i)(B)). A receiving 
hospital is paid for the displaced resident using its own direct GME 
and IME factors, that is, the same rates as those used for residents in 
its own programs (see 66 FR 39901 August 1, 2001).
    Comment: We received many comments in support of our proposals 
relating to changing the policy for what constitutes a displaced 
resident for Medicare DGME and IME funding purposes. Commenters 
believed the proposals will ensure that all displaced residents are 
fairly considered during a temporary transfer of DGME/IME FTE cap 
slots. However, two national associations believed CMS should have been 
more generous in its proposals, by making the new definition of 
``displaced resident'' effective retroactively. One of these commenters 
stated that CMS should make the effective date retroactive to 2015, to 
send a strong message of support to residents. The other commenter 
stated that CMS should make the effective date retroactive to the 
summer of 2019 when Hahnemann University Hospital closed. This 
commenter argued that CMS could use authority under section 
1871(e)(1)(A)(ii) of the Social Security Act (the Act), which states 
that a substantive change in regulations shall not be applied 
retroactively unless the failure to apply the change retroactively 
would be contrary to the public interest. This commenter believed that 
failure to apply this change to the regulation retroactively would be 
contrary to the public interest. In the case of Hahnemann University 
Hospital, the commenter argued that hundreds of residents were 
displaced and needed to quickly find alternative positions at other 
hospitals or risk being unable to become Board certified physicians. In 
addition, it would be in the public interest for these hospitals to 
receive DGME and IME funding for taking in these residents.
    Response: We appreciate the support received for our proposals, and 
agree that all displaced residents will have a fair chance of receiving 
a temporary cap transfer when residency programs or teaching hospitals 
close in the future. Section 1871(e)(1)(A) of the Act permits 
retroactive application of a substantive change to a regulation if the 
Secretary determines that such retroactive application is necessary to 
comply with statutory requirements or that failure to apply the change 
retroactively would be contrary to the public interest. Here, 
retroactive application of the change to the definition of displaced 
resident is not necessary to comply with statutory requirements, nor 
would retroactive application at this point a year later assist those 
residents who, at the time of Hahnemann University Hospital's closure, 
according to the commenter, had ``to quickly find alternative positions 
at other hospitals or risk being unable to become Board certified 
physicians,'' since we are currently unaware of residents who did not 
find new training sites. Therefore, we are not accepting the 
commenters' request to make the effective date of these proposals 
retroactive.
    Comment: A commenter appreciated CMS's proposal to link the 
Medicare temporary funding for the affected residents to the day that 
the closure is publicly announced (for example, via a press release or 
a formal notice to the Accreditation Council on Graduate Medical 
Education (ACGME)), but the commenter requested that CMS should

[[Page 58868]]

modify this proposal to include an ``outer boundary'' of 30 to 60 days 
prior to the actual program or hospital closure. The commenter believed 
this would prevent situations where, if the closure is announced far in 
advance of the actual closure, the residents may depart too early, 
leaving the remaining program(s) and patient care in disarray.
    Response: We appreciate the challenges on multiple fronts that 
closing hospitals may face, particularly with regard to ensuring 
provision of proper patient care in a safe and efficient manner while 
operations wind down. While it may be possible that there could be some 
unforeseen consequences of our proposals relating to broadening the 
definition of what constitutes a ``displaced resident,'' we believe it 
is prudent not to further restrict this definition by instituting an 
``outer boundary'' of time which would limit the timeframe that a 
resident may choose to depart the closing program or hospital and 
relocate to another teaching hospital. We believe that decisions 
regarding the timing of how to wind down operations and when and to 
where displaced residents should be relocated are best left to the 
hospital, program directors, and residents, and should not be mandated 
by federal regulation. Therefore, we are not linking Medicare temporary 
funding to only residents that depart a closing hospital or program 
within a predetermined ``outer boundary'' of time.
    Comment: A few commenters requested that CMS institute a rule that 
when teaching hospitals close, the IME and DGME FTE resident caps would 
be automatically divided and assigned to each resident that is seeking 
an alternative hospital in which to complete his/her training. A 
commenter specified that keeping the authority to divide the FTE 
resident caps in the hands of the closing hospital only serves to 
increase the anxiety and uncertainty of the affected residents. The 
commenters believed that CMS should mitigate the anxiety and 
uncertainty faced by residents training in a closing hospital, by 
removing the authority to divide the cap from the closing hospital, and 
by instituting a predetermined process whereby each cap slot is equally 
divided among all residents seeking an alternative training home. 
Another option stated by one of the commenters was to require closing 
hospitals to formalize cap transfers ten days after the closure 
announcement.
    Response: Under existing regulations, if there are more displaced 
residents than available cap slots, the slots may be apportioned 
according to the closing hospital's discretion. The decision to 
transfer a cap slot if one is available is voluntary and made at the 
sole discretion of the originating hospital (42 CFR 413.79(h)(3)(ii)). 
However, if the originating hospital decides to do so, then it is the 
originating hospital's and/or sponsor's responsibility to determine how 
much of an available cap slot goes with a particular resident (if any). 
We appreciate the commenters' desire to mitigate the uncertainty and 
disruption experienced by residents in the situation of a closing 
teaching hospital. While an automatic equal division of the IME and 
DGME FTE resident caps among all residents seeking alternative training 
sites (that is, total number of FTE residents at the closing hospital 
divided by the closing hospital's IME and DGME FTE Resident caps, 
respectively) may seem like a simple and fair approach, this could 
result in an advanced resident displaced in the final months of his/her 
training receiving the same amount of FTE resident cap as a resident 
displaced within his/her first year of training. In other words, a 
resident in his/her final months of training requires less of a share 
of the FTE resident cap, while a resident still at the beginning of 
his/her residency training requires a larger share of the FTE resident 
cap; therefore, assigning both the advanced resident and the new 
resident the same amount of FTE resident cap may, in fact, be 
inequitable. Therefore, we are not adopting the automatic and equal 
division policy offered by the commenters. With respect to the timeline 
for the cap transfer, CMS, through regulation, has provided hospitals 
with the flexibility to temporarily transfer Medicare funded FTE 
resident caps. We believe that the details of the transfer of FTE 
resident cap slots (such as when to release slots, the amount of slots 
to release per each resident, and so forth) be left in the hands of the 
closing hospital and/or the sponsor of the residency program(s) who are 
familiar with the dynamics of their own residency programs. 
Furthermore, we believe that organizations representing the interests 
of residents and overseeing the actual operation of residency programs 
are in a better position to establish rules regarding treatment of 
residents and their rights in the circumstance of a program or teaching 
hospital closure. Therefore, we are not adopting the commenters' 
recommendations to require automatic and equal division of the FTE 
resident caps upon hospital closure, nor are we requiring that FTE 
resident cap transfers be formalized within a certain number of days 
after the announcement of a hospital closure.
    Comment: A commenter urged CMS to work with the Accreditation 
Council for Graduate Medical Education (ACGME) to establish regulations 
that protect residents and fellows impacted by sudden program or 
hospital closure. These regulations should include:
     Notice by the training hospital, intending to file for 
bankruptcy within 30 days, to all residents and fellows primarily 
associated with the training hospital, as well as those contractually 
matched at that training institution who may not yet have matriculated, 
of its intention to close, along with provision of reasonable and 
appropriate procedures to assist current and matched residents and 
fellows to find and obtain alternative training positions that minimize 
undue financial and professional consequences, including but not 
limited to maintenance of specialty choice, length of training, initial 
expected time of graduation, location and reallocation of funding, and 
coverage of tail medical malpractice insurance that would have been 
offered had the program or hospital not closed; and
     Protections against discrimination among displaced 
residents and fellows on the basis of sex, age, race, creed, national 
origin, gender identity, or sexual orientation.
    Response: We do not believe it is CMS's role to regulate program 
requirements or advocate on behalf of the residents themselves. As 
previously stated, we believe that organizations representing the 
interests of residents and overseeing the actual operation of residency 
programs are in a better position to establish rules regarding 
treatment of residents and their rights in the circumstance of a 
program or teaching hospital closure.
    Comment: Some commenters recalled the increased concern and 
uncertainty experienced by residents at Hahnemann University Hospital, 
when the hospital closure was announced and the sale of Hahnemann 
University Hospital's IME and DGME FTE resident cap slots to other 
hospitals was proffered as a possibility. These commenters requested 
that CMS clarify that selling of residency cap slots from one hospital 
to another is not permissible.
    Response: CMS and closing teaching hospitals that participate in 
the Medicare program must abide by the Medicare statute, specifically 
section 1886(h)(4)(H)(vi) which provides for the redistribution of the 
closed teaching hospital's IME and DGME FTE resident cap slots to other 
eligible hospital(s) according to specific criteria. The sale or

[[Page 58869]]

auctioning off of Medicare funded IME and DGME FTE resident cap slots 
is in direct conflict with section 1886(h)(4)(H)(vi) of the Act.
    Comment: A commenter requested that CMS require the MACs to 
formally respond to and approve requests for temporary cap adjustments 
made to the MACs by hospitals taking in displaced residents under 42 
CFR 413.79(h). The commenter stated that such approvals would smooth 
future audit work, which happens several years after the actual cost 
report year in which the hospital took in the displaced residents, 
particularly in the case where the MAC may change.
    Response: We appreciate the challenges that may arise for both 
hospitals and MACs, because as is often the nature of audits, the 
audits occur 2 years or more after a cost report is submitted. However, 
we are uncertain of the value of MAC approval of temporary cap 
adjustment requests shortly after the submission of those requests by 
hospitals taking in displaced residents. This is because the total 
amount of the temporary cap increase and the amount of displaced cap 
applicable to each displaced FTE resident training at the requesting 
hospital can only be verified based on review of rotation schedules 
documenting where and for how much time each displaced resident 
ultimately trained at each receiving hospital. Review of such 
documentation, which is detailed in nature, can only occur during a 
cost report audit, as it would interfere with the normal day to day 
reimbursement activities of the MACs. However, we will consider whether 
this commenter's request would be beneficial to MACs and hospitals.
    Comment: A commenter noticed CMS's clarifying statement in the 
proposed rule that under current policy, the maximum number of FTE 
resident cap slots that could be transferred to all receiving hospitals 
is the number of IME and direct GME FTE resident cap slots belonging to 
the hospital that has the closed program, or that is closing (85 FR 
32786). Based upon this clarifying statement of the current policy, the 
commenter believes that additional corresponding regulatory text may be 
warranted under 42 CFR 413.79(h)(2) for the closure of a hospital in 
order to require receiving hospitals of displaced residents to submit a 
copy of a signed and dated voluntary FTE transfer statement from the 
closing hospital. While this requirement is noted in the regulatory 
text under 42 CFR 413.79(h)(3) as being applicable for the closure of a 
hospital's residency training program, it is not noted as being 
applicable to a closure of a hospital situation under 42 CFR 
413.79(h)(2).
    Response: The commenter is pointing out a deliberate distinction 
between the regulations text for closing hospitals as compared to 
hospitals remaining open but just closing a residency program(s). In 
the case of a closing hospital, since there is no concern that the 
hospital will close a program, only to fill the vacated residency slots 
with residents from another program, and since the closing hospital's 
Medicare provider agreement along with the IME and DGME FTE resident 
caps will terminate, there would be no remaining resident caps to 
``voluntarily'' agree to reduce. Therefore, the responsibility to 
notify the respective MAC lies only with the receiving hospital. 
Accordingly, current regulations at 42 CFR 413.79(h)(2), which we do 
not believe need modification, state that a hospital may receive a 
temporary adjustment to its FTE cap to reflect residents added because 
of another hospital's closure if the hospital meets the following 
criteria: (i) The hospital is training additional residents from a 
hospital that closed on or after July 1, 1996; (ii) No later than 60 
days after the hospital begins to train the residents, the hospital 
submits a request to its contractor for a temporary adjustment to its 
FTE cap, documents that the hospital is eligible for this temporary 
adjustment by identifying the residents who have come from the closed 
hospital and have caused the hospital to exceed its cap, and specifies 
the length of time the adjustment is needed.(bold emphasis added).
    Comment: A commenter supported the proposed broadened definition of 
``displaced resident'' and commented that with regard to the inclusion 
of residents who are matched, but have not yet started training at the 
program at the closing hospital, CMS should clarify that when it uses 
the term ``matched'' that it means not only residents who were matched 
through the National Resident Matching Program (NRMP) on Match Day, but 
also those residents who are offered positions through the Supplemental 
Offer and Acceptance Program (SOAP) in the days following the initial 
Match process.
    Response: We included in our proposed definition of ``displaced 
resident'' individuals (such as medical students or would-be fellows) 
who matched into GME programs at the closing hospital or program but 
have not yet started training at the closing hospital or program. We 
did not specify a particular match, nor did we limit the types of 
matches that would be acceptable. We are clarifying that eligible 
displaced residents may include those who matched either through the 
National Resident Matching Program (NRMP) or Supplemental Offer and 
Acceptance Program (SOAP), and may even include residents and fellows 
who are accepted into an approved medical residency program external to 
one of the commonly used match platforms. In response to this comment, 
we are modifying the proposed regulations text at 42 CFR 
413.79(h)(1)(iii)(C) to remove the word ``match'' and instead state a 
resident who ``is accepted into a GME program at the closing hospital 
or program but has not yet started training at the closing hospital or 
program.''
    Comment: A commenter wondered why CMS would continue to require use 
of social security numbers, albeit only the last 4 digits, of displaced 
residents to be included in temporary cap transfer agreements, when CMS 
could require use of the resident's National Provider Identification 
(NPI) number instead. The commenter noted that once assigned, a 
provider's NPI is permanent and remains with the provider regardless of 
job or location changes, and that while not required initially, as soon 
as residents transmit any health data, such as write prescriptions, 
refer patients, or order tests for patients in claims transactions, or 
for faculty to bill for their services, they are considered covered 
health care providers and must have an NPI number.
    Response: In the proposed rule (85 FR 32786), we proposed that 
rather than continue to require inclusion of each displaced resident's 
full social security number in the temporary cap adjustment request 
submitted to a receiving hospital's Medicare Administrative Contractor, 
we proposed to require the receiving hospital to include the names and 
only the last four digits of each displaced resident's social security 
number. As the commenter stated, NPIs are not required initially, and 
therefore, it is likely that many PGY1 residents, in addition to 
individuals who graduated medical school and have been accepted into a 
residency program at the closing program or hospital, but have not yet 
started training at the closing program or hospital, would not yet have 
an NPI. Therefore, they could not be tracked by the MACs in the 
temporary cap transfer agreements with NPIs. As a compromise, we are 
modifying our proposal to require inclusion of either--(1) the last 4 
digits of the social security number of a displaced resident; or (2) 
the NPI of the displaced resident, in the receiving hospital's letter 
to its MAC requesting the temporary increase in its IME and DGME FTE 
resident caps.

[[Page 58870]]

    Comment: A commenter questioned CMS's policy about providing pass-
through funding for pharmacy residents displaced by hospital closure.
    Response: This comment is beyond the scope of the proposals in the 
proposed rule; therefore, we are not addressing this comment at this 
time.
    We are finalizing our proposed policy with slight modification with 
regard to which residents can be considered ``displaced'' for Medicare 
temporary FTE resident cap transfer purposes in the situation where a 
hospital announces publicly that it is closing, and/or that it is 
closing a residency program(s). Specifically, we are finalizing the 
addition of the definition of ``displaced resident'' in new 42 CFR 
413.79(h)(1)(iii) to read as set out in the regulatory text of this 
document, but at 42 CFR 413.79(h)(1)(iii)(C), we are removing the word 
``match'' and instead stating a resident who ``is accepted into a GME 
program at the closing hospital or program but has not yet started 
training at the closing hospital or program.'' In addition, we are 
finalizing our proposal with modification that to apply for the 
temporary increase in the IME and DGME FTE resident caps, the receiving 
hospital would have to submit a letter to its Medicare Administrative 
Contractor no later than 60 days after beginning to train the displaced 
residents, and must include in the letter either-- (1) the last 4 
digits of the social security number of the displaced resident; or (2) 
the NPI of the displaced resident.
    Current IME regulations at 42 CFR 412.105(f)(1)(ix) link to the 
direct GME regulations at 42 CFR 413.79(h), so this regulation change 
would apply to the IME FTE cap transfers for displaced residents as 
well. In order to fully coordinate these IME regulations with the new 
definition of ``displaced resident,'' we are finalizing our proposal to 
slightly modify the regulations at 42 CFR 412.105(f)(1)(ix) to add the 
word ``displaced'' to describe residents added by a receiving hospital 
due to a hospital or program closure.

O. Rural Community Hospital Demonstration Program

1. Introduction
    The Rural Community Hospital Demonstration was originally 
authorized for a 5-year period by section 410A of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) 
(Pub. L. 108-173), and extended for another 5-year period by sections 
3123 and 10313 of the Affordable Care Act (Pub. L. 111-148). 
Subsequently, section 15003 of the 21st Century Cures Act (Pub. L. 114-
255), enacted December 13, 2016, amended section 410A of Public Law 
108-173 to require a 10-year extension period (in place of the 5-year 
extension required by the Affordable Care Act, as further discussed in 
this final rule). Section 15003 also required that, no later than 120 
days after enactment of Public Law 114-255, the Secretary had to issue 
a solicitation for applications to select additional hospitals to 
participate in the demonstration program for the second 5 years of the 
10-year extension period, so long as the maximum number of 30 hospitals 
stipulated by Public Law 114-148 was not exceeded. In this final rule, 
we are providing a description of the provisions of section 15003 of 
Public Law 114-255, our final policies for implementation, and the 
finalized budget neutrality methodology for the extension period 
authorized by section 15003 of Public Law 114-255. We note that the 
periods of participation for a number of the hospitals selected prior 
to the extension period authorized by Public Law 114-255 will have 
ended by the close of FY 2021, and that the budget neutrality 
methodology for this upcoming fiscal year will take into account the 
schedule of end dates.
2. Background
    Section 410A(a) of Public Law 108-173 required the Secretary to 
establish a demonstration program to test the feasibility and 
advisability of establishing rural community hospitals to furnish 
covered inpatient hospital services to Medicare beneficiaries. The 
demonstration pays rural community hospitals under a reasonable cost-
based methodology for Medicare payment purposes for covered inpatient 
hospital services furnished to Medicare beneficiaries. A rural 
community hospital, as defined in section 410A(f)(1), is a hospital 
that--
     Is located in a rural area (as defined in section 
1886(d)(2)(D) of the Act) or is treated as being located in a rural 
area under section 1886(d)(8)(E) of the Act;
     Has fewer than 51 beds (excluding beds in a distinct part 
psychiatric or rehabilitation unit) as reported in its most recent cost 
report;
     Provides 24-hour emergency care services; and
     Is not designated or eligible for designation as a CAH 
under section 1820 of the Act.
    Section 410A of Public Law 108-173 required a 5-year period of 
performance. Subsequently, sections 3123 and 10313 of Public Law 111-
148 required the Secretary to conduct the demonstration program for an 
additional 5-year period, to begin on the date immediately following 
the last day of the initial 5-year period. Public Law 111-148 required 
the Secretary to provide for the continued participation of rural 
community hospitals in the demonstration program during the 5-year 
extension period, in the case of a rural community hospital 
participating in the demonstration program as of the last day of the 
initial 5-year period, unless the hospital made an election to 
discontinue participation. In addition, Public Law 111-148 limited the 
number of hospitals participating to no more than 30. We refer readers 
to previous final rules for a summary of the selection and 
participation of these hospitals. Starting from December 2014 and 
extending through December 2016, the 21 hospitals that were still 
participating in the demonstration ended their scheduled periods of 
performance on a rolling basis, respectively, according to the end 
dates of the hospitals' cost report periods.
3. Provisions of the 21st Century Cures Act (Pub. L. 114-255) and 
Finalized Policies for Implementation
a. Statutory Provisions
    As stated earlier, section 15003 of Public Law 114-255 further 
amended section 410A of Public Law 108-173 to require the Secretary to 
conduct the Rural Community Hospital Demonstration for a 10-year 
extension period (in place of the 5-year extension period required by 
Public Law 111-148), beginning on the date immediately following the 
last day of the initial 5-year period under section 410A(a)(5) of 
Public Law 108-173. Thus, the Secretary is required to conduct the 
demonstration for an additional 5-year period. Specifically, section 
15003 of Public Law 114-255 amended section 410A(g)(4) of Public Law 
108-173 to require that, for hospitals participating in the 
demonstration as of the last day of the initial 5-year period, the 
Secretary shall provide for continued participation of such rural 
community hospitals in the demonstration during the 10-year extension 
period, unless the hospital makes an election, in such form and manner 
as the Secretary may specify, to discontinue participation. 
Furthermore, section 15003 of Public Law 114-255 added subsection 
(g)(5) to section 410A of Public Law 108-173 to require that, during 
the second 5 years of the 10-year extension period, the Secretary shall 
apply the provisions of section 410A(g)(4) of Public Law 108-173 to 
rural community hospitals that are not described in subsection (g)(4) 
but that were participating in the demonstration as of December 30, 
2014,

[[Page 58871]]

in a similar manner as such provisions apply to hospitals described in 
subsection (g)(4).
    In addition, section 15003 of Public Law 114-255 amended section 
410A of Public Law 108-173 to add paragraph (g)(6)(A) which requires 
that the Secretary issue a solicitation for applications no later than 
120 days after enactment of paragraph (g)(6) to select additional rural 
community hospitals located in any State to participate in the 
demonstration program for the second 5 years of the 10-year extension 
period, without exceeding the maximum number of hospitals (that is, 30) 
permitted under section 410A(g)(3) of Public Law 108-173 (as amended by 
Pub. L. 111-148). Section 410A(g)(6)(B) of the Act provides that, in 
determining which hospitals submitting an application pursuant to this 
solicitation are to be selected for participation in the demonstration, 
the Secretary must give priority to rural community hospitals located 
in one of the 20 States with the lowest population densities, as 
determined using the 2015 Statistical Abstract of the United States. 
The Secretary may also consider closures of hospitals located in rural 
areas in the State in which an applicant hospital is located during the 
5-year period immediately preceding the date of enactment of Public Law 
114-255 (December 13, 2016), as well as the population density of the 
State in which the rural community hospital is located.
(b) Terms of Participation for the Extension Period Authorized by 
Public Law 114-255
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38280), we finalized 
our policy with regard to the effective date for the application of the 
reasonable cost-based payment methodology under the demonstration for 
those previously participating hospitals choosing to participate in the 
second 5-year extension period. According to our finalized policy, each 
previously participating hospital began the second 5 years of the 10-
year extension period and payment for services provided under the cost-
based payment methodology under section 410A of Public Law 108-173 (as 
amended by section 15003 of Public Law 114-255) on the date immediately 
after the period of performance ended under the first 5-year extension 
period.
    Seventeen of the 21 hospitals that completed their periods of 
participation under the extension period authorized by Public Law 111-
148 elected to continue in the second 5-year extension period for the 
full second 5-year extension period. (Of the four hospitals that did 
not elect to continue participating, three hospitals converted to CAH 
status during the time period of the second 5-year extension period). 
Therefore, the 5-year period of performance for each of these hospitals 
started on dates beginning May 1, 2015 and extending through January 1, 
2017. On November 20, 2017, we announced that, as a result of the 
solicitation issued earlier in the year responding to the requirement 
in Public Law 114-255, 13 additional hospitals were selected to 
participate in the demonstration in addition to these 17 hospitals 
continuing participation from the first 5-year extension period. 
(Hereafter, these two groups are referred to as ``newly participating'' 
and ``previously participating'' hospitals, respectively.) We announced 
that each of these newly participating hospitals would begin its 5-year 
period of participation effective with the start of the first cost-
reporting period on or after October 1, 2017. One of the hospitals 
selected from the solicitation in 2017 withdrew from the demonstration 
program prior to beginning participation in the demonstration on July 
1, 2018. In addition, one of the previously participating hospitals 
closed effective January 2019, and another withdrew effective October 
1, 2019. Therefore, 27 hospitals were participating in the 
demonstration as of this date--15 previously participating and 12 newly 
participating. For four of the previously participating hospitals, this 
5-year period of participation will end during FY 2020; while one of 
the previously participating hospitals, scheduled to end in 2021, chose 
in February of this past year to withdraw effective September 2019. 
Therefore, the budget neutrality calculations in this final rule are 
based on 22 hospitals. For seven of the remaining 10 hospitals among 
the original group, participation will end during FY 2021, with 
participation ending for the other three on December 31, 2021. The 
newly participating hospitals are all scheduled to end their 
participation either at the end of FY 2022 or during FY 2023.
4. Budget Neutrality
a. Statutory Budget Neutrality Requirement
    Section 410A(c)(2) of Public Law 108-173 requires that, in 
conducting the demonstration program under this section, the Secretary 
shall ensure that the aggregate payments made by the Secretary do not 
exceed the amount which the Secretary would have paid if the 
demonstration program under this section was not implemented. This 
requirement is commonly referred to as ``budget neutrality.'' 
Generally, when we implement a demonstration program on a budget 
neutral basis, the demonstration program is budget neutral on its own 
terms; in other words, the aggregate payments to the participating 
hospitals do not exceed the amount that would be paid to those same 
hospitals in the absence of the demonstration program. Typically, this 
form of budget neutrality is viable when, by changing payments or 
aligning incentives to improve overall efficiency, or both, a 
demonstration program may reduce the use of some services or eliminate 
the need for others, resulting in reduced expenditures for the 
demonstration program's participants. These reduced expenditures offset 
increased payments elsewhere under the demonstration program, thus 
ensuring that the demonstration program as a whole is budget neutral or 
yields savings. However, the small scale of this demonstration program, 
in conjunction with the payment methodology, made it extremely unlikely 
that this demonstration program could be held to budget neutrality 
under the methodology normally used to calculate it--that is, cost-
based payments to participating small rural hospitals were likely to 
increase Medicare outlays without producing any offsetting reduction in 
Medicare expenditures elsewhere. In addition, a rural community 
hospital's participation in this demonstration program would be 
unlikely to yield benefits to the participants if budget neutrality 
were to be implemented by reducing other payments for these same 
hospitals. Therefore, in the 12 IPPS final rules spanning the period 
from FY 2005 through FY 2016, we adjusted the national inpatient PPS 
rates by an amount sufficient to account for the added costs of this 
demonstration program, thus applying budget neutrality across the 
payment system as a whole rather than merely across the participants in 
the demonstration program. (A different methodology was applied for FY 
2017.) As we discussed in the FYs 2005 through 2017 IPPS/LTCH PPS final 
rules (69 FR 49183; 70 FR 47462; 71 FR 48100; 72 FR 47392; 73 FR 48670; 
74 FR 43922, 75 FR 50343, 76 FR 51698, 77 FR 53449, 78 FR 50740, 77 FR 
50145; 80 FR 49585; and 81 FR 57034, respectively), we believe that the 
language of the statutory budget neutrality requirements permits the 
agency to implement the budget neutrality provision in this manner.

[[Page 58872]]

b. Methodology Used in Previous Final Rules for Periods Prior to the 
Extension Period Authorized by the 21st Century Cures Act (Pub. L. 114-
255)
    We have generally incorporated two components into the budget 
neutrality offset amounts identified in the final IPPS rules in 
previous years. First, we have estimated the costs of the demonstration 
for the upcoming fiscal year, generally determined from historical, 
``as submitted'' cost reports for the hospitals participating in that 
year. Update factors representing nationwide trends in cost and volume 
increases have been incorporated into these estimates, as specified in 
the methodology described in the final rule for each fiscal year. 
Second, as finalized cost reports became available, we determined the 
amount by which the actual costs of the demonstration for an earlier, 
given year, differed from the estimated costs for the demonstration set 
forth in the final IPPS rule for the corresponding fiscal year, and 
incorporated that amount into the budget neutrality offset amount for 
the upcoming fiscal year. If the actual costs for the demonstration for 
the earlier fiscal year exceeded the estimated costs of the 
demonstration identified in the final rule for that year, this 
difference was added to the estimated costs of the demonstration for 
the upcoming fiscal year when determining the budget neutrality 
adjustment for the upcoming fiscal year. Conversely, if the estimated 
costs of the demonstration set forth in the final rule for a prior 
fiscal year exceeded the actual costs of the demonstration for that 
year, this difference was subtracted from the estimated cost of the 
demonstration for the upcoming fiscal year when determining the budget 
neutrality adjustment for the upcoming fiscal year. We note that we 
have calculated this difference for FYs 2005 through 2015 between the 
actual costs of the demonstration as determined from finalized cost 
reports once available, and estimated costs of the demonstration as 
identified in the applicable IPPS final rules for these years.
c. Budget Neutrality Methodology for the Extension Period Authorized by 
the 21st Century Cures Act (Pub. L. 114-255)
(1) General Approach
    We finalized our budget neutrality methodology for periods of 
participation under the second 5 years of the 10-year extension period 
in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38285 through 38287). 
Similar to previous years, we stated in this rule, as well as in the FY 
2019 and FY 2020 IPPS/LTCH PPS proposed and final rules (83 FR 20444 
and 41503, and 84 FR19452 and 42421, respectively) that we would 
incorporate an estimate of the costs of the demonstration, generally 
determined from historical, ``as submitted'' cost reports for the 
participating hospitals and appropriate update factors, into a budget 
neutrality offset amount to be applied to the national IPPS rates for 
the upcoming fiscal year. In addition, we stated that we would continue 
to apply our general policy from previous years of including, as a 
second component to the budget neutrality offset amount, the amount by 
which the actual costs of the demonstration for an earlier, given year 
(as determined from finalized cost reports when available) differed 
from the estimated costs for the demonstration set forth in the final 
IPPS rule for the corresponding fiscal year.
    In these proposed and final rules, we described several distinct 
components to the budget neutrality offset amount for the specific 
fiscal years of the extension period authorized by Public Law 114-255.
     We included a component to our overall methodology similar 
to previous years, according to which an estimate of the costs of the 
demonstration for both previously and newly participating hospitals for 
the upcoming fiscal year is incorporated into a budget neutrality 
offset amount to be applied to the national IPPS rates for the upcoming 
fiscal year. In the FY 2019 IPPS final rule (83 FR 41506), we included 
such an estimate of the costs of the demonstration for each of FYs 2018 
and 2019 into the budget neutrality offset amount for FY 2019. In the 
FY 2020 IPPS final rule, we included an estimate of the costs of the 
demonstration for FY 2020 for 28 hospitals.
     Similar to previous years, we continued to implement the 
policy of determining the difference between the actual costs of the 
demonstration as determined from finalized cost reports for a given 
fiscal year and the estimated costs indicated in the corresponding 
year's final rule, and including that difference as a positive or 
negative adjustment in the upcoming year's final rule. (For each 
previously participating hospital that decided to participate in the 
second 5 years of the 10-year extension period, the cost-based payment 
methodology under the demonstration began on the date immediately 
following the end date of its period of performance for the first 5-
year extension period. In addition, for previously participating 
hospitals that converted to CAH status during the time period of the 
second 5-year extension period, the demonstration payment methodology 
was applied to the date following the end date of its period of 
performance for the first extension period to the date of conversion). 
In the FY 2020 final rule, we included the difference between the 
amount determined for the cost of the demonstration in each of FYs 2014 
and 2015 and the estimated amount included in the budget neutrality 
offset in the final rule for each of these respective fiscal years. For 
FY 2016 and subsequent years we will use finalized cost reports when 
available that detail the actual costs of the demonstration for each of 
these fiscal years and incorporate these amounts into the budget 
neutrality calculation.
(2) Methodology for Estimating Demonstration Costs for FY 2021
    We are using a methodology similar to previous years, according to 
which an estimate of the costs of the demonstration for the upcoming 
fiscal year is incorporated into a budget neutrality offset amount to 
be applied to the national IPPS rates for the upcoming fiscal year, 
that is, FY 2021. Noting again that four of the previously 
participating hospitals will end their participation during FY 2020, we 
are conducting this estimate for FY 2021 on the basis of the 22 
hospitals that will participate during that fiscal year. The 
methodology for calculating this amount for FY 2021 proceeds according 
to the following steps:
    Step 1: For each of these 22 hospitals, we identify the reasonable 
cost amount calculated under the reasonable cost-based methodology for 
covered inpatient hospital services, including swing beds, as indicated 
on the ``as submitted'' cost report for the most recent cost reporting 
period available. For each of these hospitals, the ``as submitted'' 
cost report is that with cost report period end date in CY 2018. We 
note that among the seven hospitals that are scheduled to end 
participation during FY 2021, four will end prior to September 30, 
2021. Therefore, consistent with previous practice, we prorate the cost 
amounts for these hospitals by the fraction of total months in the 
demonstration period of participation that fall within FY 2021 out of 
the total of 12 months in the fiscal year. For example, for a hospital 
withe period of performance ending June 30, 2021, this prorating factor 
is 0.75. We sum these hospital-specific amounts to arrive at a total 
general amount representing the costs for covered inpatient hospital 
services, including

[[Page 58873]]

swing beds, across the total 22 hospitals participating during FY 2021.
    Then, we multiply this amount by the FYs 2019, 2020 and 2021 IPPS 
market basket percentage increases, which are formulated by the CMS 
Office of the Actuary. (We are using the final market basket percentage 
increase for FY 2021, which can be found at section IV.B. of the 
preamble to this final rule). The result for the 22 participating 
hospitals is the general estimated reasonable cost amount for covered 
inpatient hospital services for FY 2021.
    Consistent with our methods in previous years for formulating this 
estimate, we are applying the IPPS market basket percentage increases 
for FYs 2019 through 2021 to the applicable estimated reasonable cost 
amount (previously described) in order to model the estimated FY 2021 
reasonable cost amount under the demonstration. We believe that the 
IPPS market basket percentage increases appropriately indicate the 
trend of increase in inpatient hospital operating costs under the 
reasonable cost methodology for the years involved.
    Step 2: For each of the participating hospitals, we identify the 
estimated amount that would otherwise be paid in FY 2021 under 
applicable Medicare payment methodologies for covered inpatient 
hospital services, including swing beds (as indicated on the same set 
of ``as submitted'' cost reports as in Step 1), if the demonstration 
were not implemented. (Also, similar to step 1, we are prorating the 
amounts for hospitals whose period of participation ends prior to the 
end of FY 2021 by the fraction of total months in the demonstration 
period of participation for the hospital that fall within FY 2021 out 
of the total of 12 months in the fiscal year). We sum these hospital-
specific amounts, and, in turn, multiply this sum by the FYs 2019, 2020 
and 2021 IPPS applicable percentage increases. (Again, for FY 2021, we 
are using the final applicable percentage increase, per section IV.B. 
of the preamble of this final rule). This methodology differs from Step 
1, in which we apply the market basket percentage increases to the 
hospitals' applicable estimated reasonable cost amount for covered 
inpatient hospital services. We believe that the IPPS applicable 
percentage increases are appropriate factors to update the estimated 
amounts that generally would otherwise be paid without the 
demonstration. This is because IPPS payments constitute the majority of 
payments that would otherwise be made without the demonstration and the 
applicable percentage increase is the factor used under the IPPS to 
update the inpatient hospital payment rates.
    Step 3: We subtract the amount derived in Step 2 from the amount 
derived in Step 1. According to our methodology, the resulting amount 
indicates the total difference for the 22 hospitals (for covered 
inpatient hospital services, including swing beds), which will be the 
general estimated amount of the costs of the demonstration for FY 2021.
    For this final rule, the resulting amount is $39,825,670, which we 
are incorporating into the budget neutrality offset adjustment for FY 
2021. This estimated amount is based on the specific assumptions 
regarding the data sources used, that is, recently available ``as 
submitted'' cost reports and historical update factors for cost and 
payment. We noted in the proposed rule that if updated data become 
available prior to the final rule, we would use them as appropriate to 
estimate the costs for the demonstration program for FY 2021 in 
accordance with our methodology for determining the budget neutrality 
estimate). Accordingly, we have revised the update factors from the 
proposed rule to indicate those presently finalized; and, in addition, 
accounted for the withdrawal of one hospital.
    (3) Reconciling Actual and Estimated Costs of the Demonstration for 
Previous Years
    As described earlier, we have calculated the difference for FYs 
2005 through 2015 between the actual costs of the demonstration, as 
determined from finalized cost reports once available, and estimated 
costs of the demonstration as identified in the applicable IPPS final 
rules for these years.
    In the proposed rule, we stated that if finalized cost reports for 
the entire set of hospitals that completed cost report periods under 
the demonstration payment methodology beginning in FY 2016 were 
available, we would include in the final budget neutrality offset 
amount for FY 2021 the difference between the actual cost as determined 
from these cost reports and the estimated amount identified in the 
final rule for FY 2016 At this point, however, not all cost reports 
have been finalized for the 18 hospitals that completed cost report 
periods under the demonstration payment methodology beginning in FY 
2016. Therefore, we will not be able to incorporate this amount in this 
final rule, but, instead, plan to address accordingly in the FY 2022 
IPPS/LTCH PPS proposed and final rules.
(4) Total Budget Neutrality Offset Amount for FY 2020
    Therefore, for this FY 2021 IPPS/LTCH PPS final rule, the budget 
neutrality offset amount for FY 2021 is based on the amount determined 
under section X.4.c.(2). of the preamble of this final rule, 
representing the difference applicable to FY 2021 between the sum of 
the estimated reasonable cost amounts that would be paid under the 
demonstration to the 22 hospitals participating in the fiscal year for 
covered inpatient hospital services and the sum of the estimated 
amounts that would generally be paid if the demonstration had not been 
implemented. This estimated amount is $39,825,670.
    Comment: A commenter expressed support for the continuation of the 
program, but stated, that as a demonstration, the program does not 
offer long-term financial sustainability needed to maintain health care 
access in rural areas.
    Response: We appreciate the comment. We have conducted the 
demonstration program in accordance with Congressional mandates.

P. Market-Based MS-DRG Relative Weight Data Collection and Potential 
Change in Methodology for Calculating MS-DRG Relative Weights

1. Overview
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule, on October 
12, 2017, President Trump issued Executive Order (E.O.) 13813 on 
Promoting Healthcare Choice and Competition Across the United States. 
E.O. 13813 directs the administration, to the extent consistent with 
law, to facilitate, ``the development and operation of a healthcare 
system that provides high-quality care at affordable prices for the 
American people,'' by increasing consumer choice and promoting 
competition in healthcare markets and by removing and revising 
government regulation.
    As a result of E.O. 13813, the Secretary published a report 
entitled, ``Reforming America's Healthcare System Through Choice and 
Competition,'' which recognized the importance of price transparency in 
bringing down the cost of healthcare (for more information regarding 
this report, we refer readers to: https://www.hhs.gov/sites/default/files/Reforming-Americas-Healthcare-System-Through-Choice-and-Competition.pdf). Building on the importance of transparency in 
healthcare pricing, in accordance with the President's E.O. on 
Improving Price

[[Page 58874]]

and Quality Transparency in American Healthcare to Put Patients First 
(issued on June 24, 2019), we proposed in the CY 2020 Proposed Changes 
to Hospital Outpatient Prospective Payment and Ambulatory Surgical 
Center Payment Systems (OPPS/ASC PPS) proposed rule to establish 
requirements for all hospitals in the United States to make available 
to the public their standard charges for the items and services they 
provide, including their payer-specific negotiated charges for all of 
their items and services, and a more consumer-friendly display of their 
payer-specific negotiated charges for certain selected shoppable 
services (84 FR 39571). In the CY 2020 OPPS/ASC PPS, Price Transparency 
Requirements for Hospitals to Make Standard Charges Public final rule 
(CMS-1717-F2, referred to herein as the Hospital Price Transparency 
final rule) (84 FR 65538), we finalized these requirements for all 
hospitals in the United States for making hospital standard charges 
available to the public, beginning January 1, 2021, as well as an 
enforcement scheme to enforce those requirements. We also finalized 
that the term ``standard charge'' means the regular rate established by 
the hospital for an item or service provided to a specific group of 
paying patient, and includes all of the following as defined in our 
regulations at 45 CFR 180.20: (1) Gross charge; (2) payer-specific 
negotiated charge; (3) de-identified minimum negotiated charge; (4) de-
identified maximum negotiated charge; and (5) discounted cash price.
    There are three broad types of hospital rates, depending on the 
patient and payer: (1) Medicaid and Medicare fee for service (FFS) 
rates; (2) negotiated rates with private issuers or health plans; and 
(3) uninsured or self-pay, as discussed in the Hospital Price 
Transparency final rule (84 FR 65538).
    Medicaid FFS rates are dictated by each State and tend to be at the 
lower end of market rates. Medicare FFS rates are determined by CMS and 
those rates tend to be higher than Medicaid rates within a state. 
Privately negotiated rates vary with the competitive structure of the 
geographic market and usually tend to be somewhat higher than Medicare 
rates, but in some areas of the country the two sets of rates tend to 
converge. Uninsured or self-pay patient rates are often the same as 
chargemaster \441\ (gross) rates, which are usually highly inflated in 
order to secure higher payments from Medicare and private payers.\442\
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    \441\ CMS currently refers to chargemasters as a Charge 
Description Master or CDM, which means the list of all individual 
items and services maintained by a hospital for which the hospital 
has established a charge.
    \442\ Richman BD, et al. Battling the Chargemaster: A Simple 
Remedy to Balance Billing for Unavoidable Out-of-Network Care. Am J 
Manag Care. 2017;23(4):e100-e105 Available at: https://www.ajmc.com/journals/issue/2017/2017-vol23-n4/battling-the-chargemaster-a-simple-remedy-to-balance-billing-for-unavoidable-out-of-network-care.
---------------------------------------------------------------------------

    Under the old hospital reimbursement system, the more services a 
hospital provided and longer a patient's stay, the greater the 
reimbursement. Congress, recognizing that the reimbursement system 
created disincentives to provide efficient care, enacted in 1983 a 
prospective payment system. The primary objective of the prospective 
payment system is to create incentives for hospitals to operate 
efficiently and minimize unnecessary costs while at the same time 
ensuring that payments are sufficient to adequately compensate 
hospitals for their legitimate costs in delivering necessary care to 
Medicare beneficiaries.
    To partly compensate hospitals for certain overly costly 
hospitalizations, hospitals may receive an ``outlier'' payment which is 
based on the hospital's billed charges, adjusted to cost, in comparison 
to the payment that would otherwise be received and an outlier 
threshold (see 42 CFR 412.84). To determine whether an individual case 
would qualify for an outlier payment, the hospital's cost-to-charge 
ratio (CCR) is applied to the covered charges to estimate the costs of 
the case. In the late 1990s, many hospitals began manipulating or 
gaming that ratio to make it easier to qualify for outlier payments. 
The larger the charges, the smaller the ratio, but it takes time for 
the ratio to be updated (unless the hospital directly updated their 
cost-to-charge ratio with the MAC). Thus, by way of example, if a 
hospital had a cost-to-charge ratio 1 to 5, or 20 percent, then a pill 
which cost the hospital $1 to purchase might be billed to a patient at 
$5. However, if the hospital doubled the charge to the patient to $10, 
the corresponding change in its ratio would take time to be updated. 
Its costs might look like $2 instead of $1 in the interim. Rule changes 
such as those made in the IPPS/LTCH PPS Change in Methodology for 
Determining Payment for Extraordinarily High-Cost Cases (Cost Outliers) 
Final Rule (June 9, 2003; 68 FR 34497 through 34504), we established 
policies related to updating CCRs and the reconciliation of outlier 
payments, which reduced such manipulation (for more information 
regarding these changes we refer readers to: https://www.govinfo.gov/content/pkg/FR-2003-06-09/pdf/03-14492.pdf). Nevertheless, some 
hospitals' charges do not reflect market rates. Hospital bills that are 
generated off these chargemaster rates can be inherently unreasonable 
when judged against prevailing market rates.
    Recognizing that chargemaster (gross) rates rarely reflect the true 
market costs, we believe that by reducing our reliance on the hospital 
chargemaster, we can adjust Medicare payment rates so that they reflect 
the relative market value for inpatient items and services. 
Additionally, we have received public feedback that the Medicare 
program's use of hospital gross charges for some payments in 
ratesetting has served as the most significant barrier to hospitals' 
efforts to rebase their chargemasters. These stakeholders argued that 
this Medicare payment process serves as a barrier for rebasing changes, 
because any reduction in charges requires coordination with Medicare, 
Medicaid and commercial health plans so that any changes occur in a 
revenue-neutral manner to the hospital. We continue to believe that our 
existing administrative mechanisms for hospitals to voluntarily lower 
their charges adequately address these commenters' concerns. 
Specifically, if a hospital is planning on voluntarily lowering its 
charges, it can request a CCR change pursuant to 42 CFR 412.84(i)(1) 
and as also discussed in prior rulemaking (84 FR 42630). Nevertheless, 
we agree in general that a decreased reliance on hospital chargemasters 
in Medicare payment would be desirable, if an appropriate alternative 
mechanism exists and is permitted by statute.
    Furthermore, the goal of reducing the Medicare program's reliance 
on the chargemaster and adopting payment strategies that are more 
reflective of the commercial insurance market was showcased within E.O. 
13890 on Protecting and Improving Medicare for Our Nation's Seniors, 
which President Trump issued on October 3, 2019. The E.O. described the 
market benefits provided under the Medicare Advantage program as 
providing, ``efficient and value-based care through choice and private 
competition, and has improved aspects of the Medicare program that 
previously failed seniors.'' E.O. 13890 then directed the Medicare 
program to adopt and implement those market-based recommendations 
developed pursuant to Executive Order 13813 of October 12, 2017 
(Promoting Healthcare Choice and Competition Across the United States), 
and published in the Administration's report on, ``Reforming America's 
Healthcare System Through Choice and Competition.'' Furthermore, E.O. 
13890 directed HHS to identify,

[[Page 58875]]

``approaches to modify Medicare FFS payments to more closely reflect 
the prices paid for services in MA and the commercial insurance market, 
to encourage more robust price competition, and otherwise to inject 
market pricing into Medicare FFS reimbursement.'' E.O. 13890 directed 
the Secretary, in consultation with other partners, to produce a report 
with approaches to achieve the goal of establishing more market-based 
pricing within Medicare FFS reimbursements within 180 days of the 
E.O.'s issuance. (For additional information on E.O. 13890, we refer 
readers to: https://www.federalregister.gov/documents/2019/10/08/2019-22073/protecting-and-improving-medicare-for-our-nations-seniors.) (For 
more information on E.O. 13813, we direct readers to: https://www.federalregister.gov/documents/2017/10/17/2017-22677/promoting-healthcare-choice-and-competition-across-the-united-states.)
    In order to reduce the Medicare program's reliance on the hospital 
chargemaster, thereby advancing the critical goals of EOs 13813 and 
13890, and to support the development of a market-based approach to 
payment under the Medicare FFS system, we proposed that hospitals would 
be required to report certain market-based payment rate information on 
their Medicare cost report for cost reporting periods ending on or 
after January 1, 2021, to be used in a potential change to the 
methodology for calculating the IPPS MS-DRG relative weights to reflect 
relative market-based pricing.
    As described further in section IV.P.2.c. of the preamble of this 
final rule, we specifically proposed that hospitals would report on the 
Medicare cost report two median payer-specific negotiated charges ``by 
MS-DRG.'' For a third party payer that uses the same MS-DRG patient 
classification system used by Medicare, the payer-specific negotiated 
charges that the hospital uses to calculate the median by MS-DRG would 
be the payer-specific negotiated charges the hospital negotiated with 
that third party payer for the MS-DRG to which the patient discharge 
was classified. However, we recognize that not all third party payers 
use the MS-DRG patient classification system. For those third party 
payers that do not, the payer-specific negotiated charges they 
negotiate with hospitals would be based on the system used by that 
third party payer, such as per diem rates or APR-DRGs. In that case, 
the hospital would determine and report the median payer-specific 
negotiated charges by MS-DRG using its payer-specific negotiated 
charges for the same or similar package of services that can be 
crosswalked to an MS-DRG. For simplicity, we refer to this data 
collection herein as collecting the median payer-specific negotiated 
charge by MS-DRG. We believed that the use of these data in the MS-DRG 
relative weight setting methodology would represent a significant and 
important step in reducing the Medicare program's reliance on hospital 
chargemasters, and would better reflect relative market-based pricing 
in Medicare FFS inpatient reimbursements.
    Specifically, we proposed that hospitals would report on the 
Medicare cost report: (1) The median payer-specific negotiated charge 
that the hospital has negotiated with all of its Medicare Advantage 
(MA) organizations (also referred to as MA organizations) payers, by 
MS-DRG; and (2) the median payer-specific negotiated charge the 
hospital has negotiated with all of its third party payers, which would 
include MA organizations, by MS-DRG. The market-based rate information 
we proposed to collect on the Medicare cost report would be the median 
of the payer-specific negotiated charges by MS-DRG, as described 
previously, for a hospital's MA organization payers and all of its 
third party payers. The payer-specific negotiated charges used by 
hospitals to calculate these medians would be the payer-specific 
negotiated charges for service packages that hospitals are required to 
make public under the requirements we finalized in the Hospital Price 
Transparency final rule (84 FR 65524) that can be crosswalked to an MS-
DRG. We stated that if we finalized this market-based data collection 
proposal, hospitals would use the payer-specific negotiated charge data 
that they would be required to make public, as a result of the Hospital 
Price Transparency final rule, to then calculate the median payer-
specific negotiated charges (as described further in section IV.P.2.c. 
of this final rule) to report on the Medicare cost report. We believed 
that because hospitals are already required to publicly report payer-
specific negotiated charges, in accordance with the Hospital Price 
Transparency final rule, that the additional calculation and reporting 
of the median payer-specific negotiated charge will be less burdensome 
for hospitals.
    We also sought comment on a potential change to the methodology for 
calculating the IPPS MS-DRG relative weights to incorporate this 
market-based rate information, beginning in FY 2024, which we stated 
that we may consider adopting in the FY 2021 IPPS/LTCH PPS final rule. 
As described in greater detail in section IV.P.d. of the preamble of 
this final rule, this methodology would involve using hospitals' 
reported median payer-specific negotiated charges to develop market-
based IPPS payments to reflect the relative hospital resources used to 
provide inpatient services to patients. The use of payer-specific 
negotiated charges would replace the current use of gross charges that 
are reflected on a hospital's chargemaster and cost information from 
Medicare cost reports for the development of the IPPS MS-DRG relative 
weights. CMS requested comment on the use of hospitals' reported median 
payer-specific negotiated charge data, which would be calculated using 
a subset of the payer-specific negotiated charges that, starting 
January 1, 2021, hospitals are required to make public under 45 CFR 
part 180. As proposed, the median payer-specific negotiated charges 
calculated and submitted by hospitals for each MS-DRG would be limited 
to charges hospitals have negotiated with: (1) MA organizations; and 
(2) third party payers, including MA organizations. As noted 
previously, we believed the use of payer-specific negotiated charge 
data in the MS-DRG relative weight setting methodology would help 
reduce the Medicare program's reliance on hospital chargemasters, and 
would reflect relative market-based pricing in Medicare FFS inpatient 
reimbursements.
2. Market-Based MS-DRG Relative Weight Estimation
a. Overview
    Section 1886(d)(4)(A) of the Act states that the Secretary shall 
establish a classification of inpatient hospital discharges by 
diagnosis-related groups and a methodology for classifying specific 
hospital discharges within these groups. Section 1886(d)(4)(B) of the 
Act states that for each such diagnosis-related group the Secretary 
shall assign an appropriate weighting factor which reflects the 
relative hospital resources used with respect to discharges classified 
within that group compared to discharges classified within other 
groups. For the reasons discussed, we believed the use of market-based 
data, to be collected on the Medicare cost report, may support the 
development of an appropriate market-based approach to payment under 
the Medicare FFS system by incorporating such data into the estimation 
of the relative hospital resources used with respect to discharges 
classified within a single MS-DRG compared to discharges

[[Page 58876]]

classified within other MS-DRGs, as required by statute.
    As stated in the proposed rule, we currently use a cost-based 
methodology to estimate an appropriate weight for each MS-DRG. These 
weights reflect the relative hospital resources used with respect to 
discharges classified within that MS-DRG compared to discharges 
classified within other MS-DRGs. The current cost-based methodology 
primarily uses hospital charges from the MedPAR claims data and cost 
report data from the Healthcare Cost Report Information System (HCRIS) 
to establish the MS-DRG relative weights (the collection of cost report 
data is authorized under OMB 0938-0050, which is used to produce both 
files). (We refer readers to section II.E. of this final rule for the 
discussion of the finalized methodology used to recalibrate the FY 2021 
MS-DRG cost-based relative weights.) This cost-based methodology was 
originally proposed and finalized with revisions in the FY 2007 IPPS 
rulemaking (71 FR 24006 through 24011 and 71 FR 47881 through 47898); 
it has since been modified in subsequent IPPS rulemaking. Prior to the 
FY 2007 IPPS rulemaking, we used a charge-based DRG relative weight 
methodology.
    Hospitals are already required to make their payer-specific 
negotiated charge data for service packages publicly available under 
the Hospital Price Transparency final rule (45 CFR 180.20). As 
discussed in the proposed rule, consistent with the desire to reduce 
the Medicare program's reliance on the hospital chargemaster, as well 
as to inject market pricing into Medicare FFS reimbursement, we believe 
it is again appropriate to reconsider our current approach to 
calculating the MS-DRG relative weights. For these reasons, we have 
reexamined the need to continue to use the charges on IPPS hospital 
claims, in conjunction with charge and cost data on hospital cost 
reports, to estimate the MS-DRG relative weights. In particular, we 
stated that we were considering whether the payer-specific negotiated 
charges by MS-DRG for MA organizations, or alternatively the payer-
specific negotiated charges by MS-DRG for all third party payers (we 
note that this would include MA organization data), or some other 
approach that would reflect relative market-based charges by MS-DRG, 
could provide an appropriate basis for estimating the relative hospital 
resources used with respect to discharges classified within a single 
MS-DRG compared to discharges classified within other MS-DRGs, as 
required by statute.
b. Research Comparing Medicare, Medicare Advantage Organization, and 
Commercial Payment Rates
    As an initial matter, as discussed in the proposed rule, we focused 
on the charges negotiated between hospitals and MA organizations given 
that MA plans are often paying for the same units and types of services 
as fee-for-service (FFS) Medicare. As part of our consideration of this 
issue, we looked to existing public research on the relationship 
between Medicare FFS inpatient payment rates and the payment rates 
negotiated between hospitals and MA organizations. Berenson et al.\443\ 
surveyed senior hospital and health plan executives and found that MA 
plans nominally pay only 100 to 105 percent of traditional Medicare 
rates and, in real economic terms, possibly less. Respondents broadly 
identified three primary reasons for near payment equivalence: 
statutory and regulatory provisions that limit out-of-network payments 
to traditional Medicare rates, de facto budget constraints that MA 
plans face because of the need to compete with traditional Medicare and 
other MA plans, and a market equilibrium that permits relatively lower 
MA rates as long as commercial rates remain well above the traditional 
Medicare rates.
---------------------------------------------------------------------------

    \443\ Berenson R.A., Sunshine J.H., Helms D., Lawton E. Why 
Medicare Advantage plans pay hospitals traditional Medicare prices. 
Health Aff (Millwood). 2015;34(8):1289-1295.
---------------------------------------------------------------------------

    We next researched empirically based comparisons of Medicare FFS 
rates, MA organization rates, and rates of other commercial payers. 
Baker et al.\444\ used data from Medicare and the Health Care Cost 
Institute (HCCI) to identify the prices paid for hospital services by 
FFS Medicare, MA plans, and commercial insurers in 2009 and 2012. They 
calculated the average price per admission, and its trend over time, in 
each of the three types of insurance for fixed baskets of hospital 
admissions across metropolitan areas. After accounting for differences 
in hospital networks, geographic areas, and case-mix between MA and FFS 
Medicare, they found that MA plans paid 5.6 percent less for hospital 
services compared to FFS Medicare. For the time period studied, the 
authors suggest that at least one channel through which MA plans paid 
lower prices was by obtaining greater discounts on types of FFS 
Medicare admissions that were known to have very short lengths-of-stay. 
They also found that the rates paid by commercial plans were much 
higher than those of either MA or FFS Medicare, and growing. At least 
some of this difference they indicated came from the much higher prices 
that commercial plans paid for profitable service lines.
---------------------------------------------------------------------------

    \444\ Baker L.C., Bundorf M.K., Devlin A.M., Kessler D.P. 
Medicare Advantage plans pay less than traditional Medicare pays. 
Health Aff (Millwood). 2016;35(8):1444-1451.
---------------------------------------------------------------------------

    Maeda and Nelson \445\ also analyzed data from the HCCI in their 
research. They compared the hospital prices paid by MA organizations 
and commercial plans with Medicare FFS prices using 2013 claims from 
the HCCI. The HCCI claims were used to calculate hospital prices for 
private insurers, and Medicare's payment rules were used to estimate 
Medicare FFS prices. The authors focused on stays at acute care 
hospitals in metropolitan statistical areas (MSAs). They found MA 
prices to be roughly equal to Medicare FFS prices, on average, but 
commercial prices were 89 percent higher than FFS prices. In addition, 
commercial prices varied greatly across and within MSAs, but MA prices 
varied much less. The authors considered their results generally 
consistent with the Baker et al. study findings in that hospital 
payments by MA plans were much more similar to Medicare FFS levels than 
they were to commercial payment levels, although they noted that they 
used slightly different methods to calculate Medicare FFS prices.
---------------------------------------------------------------------------

    \445\ Maeda J.L.K., Nelson L. How Do the Hospital Prices Paid by 
Medicare Advantage Plans and Commercial Plans Compare with Medicare 
Fee-for-Service Prices? The Journal of Health Care Organization, 
Provision, and Financing. 2018;55(1-8).
---------------------------------------------------------------------------

    In their study, Maeda and Nelson also examined whether the ratio of 
MA prices to FFS prices varied across DRGs to assess whether there were 
certain DRGs for which MA plans tended to pay more or less than FFS. 
They ranked the ratio of MA prices to FFS prices and adjusted for 
outlier payments. The authors state that they found that, ``there were 
some DRGs where the average MA price was much higher than FFS and there 
were some DRGs where the average MA price was a bit lower than FFS.'' 
For example, for the time period in question, on average, MA plans paid 
129 percent more than FFS for rehabilitation stays (DRG 945), 33 
percent more for depressive neuroses (DRG 881), and 27 percent more for 
stays related to psychoses (DRG 885). But MA plans paid an average of 9 
percent less than FFS for stays related to pathological fractures (DRG 
542) and wound debridement and skin graft (DRG 464) (see Online 
Appendix Table 5 from their study). The authors state these results 
suggest that there may be certain services where MA plans pay more than 
FFS possibly because the FFS rates for

[[Page 58877]]

those services are too low, but that there may be other services where 
MA plans pay less than FFS possibly because the FFS rates for those 
DRGs are too high (Maeda, Nelson, 2018 p. 5).
    Taken as a whole, we continue to believe this body of research 
suggests that payer-specific charges negotiated between hospitals and 
MA organizations are generally well-correlated with Medicare IPPS 
payment rates, and payer-specific charges negotiated between hospitals 
and other commercial payers are generally not as well-correlated with 
Medicare IPPS payment rates. With respect to either type of payer-
specific negotiated charges, there may be instances where those 
negotiated charges may reflect the relative hospital resources used 
within an MS-DRG differently than our current cost-based methodology.
    Considering the public availability of payer-specific negotiated 
charges starting in CY 2021 and the desire to reduce the Medicare 
program's reliance on the hospital chargemaster, we believed we could 
adjust the methodology for calculating the MS-DRG relative weights to 
reflect a more market-based approach under our authority under sections 
1886(d)(4)(A), 1886(d)(4)(B) and 1886(d)(4)(C) of the Act.
c. Market-Based Data Collection
    For the reasons discussed, in order to support the development of a 
relative market-based payment methodology under the IPPS, as well as 
satisfy E.O.s 13813 and E.O. 13890 by reducing our reliance on the 
hospital chargemaster, we proposed to collect market-based payment rate 
information on Medicare cost reports beginning with cost reporting 
periods ending on or after January 1, 2021. Sections 1815(a) and 
1833(e) of the Act provide that no Medicare payments will be made to a 
provider unless it has furnished the information, as may be requested 
by the Secretary, to determine the amount of payments due the provider 
under the Medicare program. We require that providers follow reasonable 
cost principles under section 1861(v)(1)(A) of the Act when completing 
the Medicare cost report. Under the regulations at 42 CFR 413.20 and 
413.24, we define adequate cost data and require cost reports from 
providers on an annual basis. As previously discussed, the collection 
of this market-based data on the Medicare cost report would allow for 
the adoption of market-based strategies in determining Medicare FFS 
payments and would reduce our reliance on the hospital chargemaster for 
ratesetting purposes, in particular for purposes of estimating the 
appropriate weighting factor to reflect the relative hospital resources 
used with respect to hospital discharges, as required under sections 
1886(d)(4)(B) and 1886(d)(4)(C) of the Act.
    First, we proposed to collect on the Medicare cost report the 
median payer-specific negotiated charge that the hospital has 
negotiated with all of its MA organization payers, by MS-DRG. Second, 
we proposed to collect on the Medicare cost report the median payer-
specific negotiated charge the hospital has negotiated with all of its 
third party payers, which would include MA organizations, by MS-DRG. We 
proposed to collect the median of the hospital payer-specific 
negotiated charges, because the median is a common measure of central 
tendency that is less influenced by outlier values. As described in 
more detail later in this section, we proposed to collect the 
hospital's median payer-specific negotiated charges by MS-DRG, which 
would be calculated using the payer-specific negotiated charge data for 
service packages that hospitals are required to make public under the 
Hospital Price Transparency final rule that can be cross-walked to an 
MS-DRG.
    Medicare certified providers, such as Medicare certified hospitals, 
are required to submit an annual cost report to their Medicare 
Administrative Contractor (MAC). The Medicare cost report contains 
provider information such as facility characteristics, cost and charges 
by cost center, in total and for Medicare, Medicare settlement data, 
and financial statement data. The cost report must be submitted in a 
standard (ASCII) electronic cost report (ECR) format. CMS maintains the 
cost report data in the HCRIS dataset. The HCRIS data supports our 
reimbursement policymaking, congressional studies, legislative health 
care reimbursement initiatives, Medicare profit margin analysis, and 
relative weight updates. As such, every data point from hospital cost 
reports beginning on or after May 1, 2010 is reflected on the HCRIS 
dataset, and available for public access and use.
    We stated in the proposed rule that accordingly, if we were to 
finalize this proposal to collect the proposed market-based information 
(specifically, the median payer-specific negotiated charges negotiated 
between a hospital and all its MA organization payers, by MS-DRG and 
the median payer-specific negotiated charges negotiated between a 
hospital and all its third party payers, by MS-DRG) on the cost report, 
that this data would become publicly accessible on the HCRIS dataset in 
a de-identified manner and would be usable for analysis by third 
parties. The data would, by definition, be de-identified since we 
proposed that the hospital calculate the median rate (that is, the 
specific rate that is negotiated between a hospital and a specific 
third party payer for an MS-DRG would not be reported and need to be 
de-identified). For more information or to obtain HCRIS data we refer 
readers to: https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Cost-Reports-by-Fiscal-Year.html.
    A payer-specific negotiated charge is the charge that a hospital 
has negotiated with a third party payer for an item or service provided 
by the hospital. We noted that the definition of third party payer, for 
the purposes of this rule and data collection proposal, includes MA 
organizations. As described later in this section, we proposed that the 
two median payer-specific negotiated charges by MS-DRG that hospitals 
would be required to report on the Medicare cost report for cost 
reporting periods ending on or after January 1, 2021, would be 
calculated using the payer-specific negotiated charges for service 
packages that hospitals are required to make publicly available under 
the Hospital Price Transparency final rule that can be cross-walked to 
a MS-DRG.
    The Hospital Price Transparency final rule required that hospitals 
make publicly available via the internet their standard charges 
(including, as applicable, gross charges, payer-specific negotiated 
charges, de-identified minimum negotiated charges, de-identified 
maximum negotiated charges, and discounted cash prices) in two 
different ways: (1) A single machine-readable file containing a list of 
standard charges for all items and services provided by the hospital 
that complies with requirements described in 45 CFR 180.50; and (2) a 
consumer-friendly list of standard charges for as many of the 70 CMS-
specified shoppable services that are provided by the hospital, and as 
many additional hospital-selected shoppable services as is necessary 
for a combined total of at least 300 shoppable services, that complies 
with requirements described in 45 CFR 180.60. For purposes of this rule 
and data collection proposal, we proposed that hospitals would 
calculate the median payer-specific negotiated charge by MS-DRG using 
the payer-specific negotiated charge data by MS-DRG from the single 
machine-readable file for all items and services (as required by the 
Hospital Price Transparency final rule) and not the

[[Page 58878]]

version of payer-specific negotiated charge data included within the 
file for public production, in a consumer-friendly manner, of CMS-
specified and hospital-selected shoppable services.
    We proposed the following methodology for how each hospital would 
calculate its median payer-specific negotiated charge for MA 
organizations by MS-DRG and its median payer-specific negotiated charge 
for all third party payers by MS-DRG. We proposed to collect this data 
for purposes of incorporating market-based rate information into the 
IPPS payment methodologies. We stated that the median payer-specific 
negotiated charge data would be reported by MS-DRG for consistency with 
the grouping system that we currently use to classify inpatient 
hospital discharges under section 1886(d)(4)(A) of the Act. Therefore, 
as referenced previously, hospitals would report the payer-specific 
negotiated charges by MS-DRG and not by another DRG classification 
system.
    To determine the median payer-specific negotiated charge for MA 
organizations for a given MS-DRG, a hospital would list, by MS-DRG, 
each discharge in its cost reporting period that was paid for by an MA 
organization, and the corresponding payer-specific negotiated charge 
that was negotiated as payment for items and services provided for that 
discharge. The median payer-specific negotiated charge for payers that 
are MA organizations, for that MS-DRG, would be the median payer-
specific negotiated charge in that list of discharges.
    A simplified example for the purpose of illustrating this process 
is as follows. Hospital A has negotiated four different payer-specific 
charges with four MA organizations for hypothetical MS-DRG 123. The 
four payer-specific negotiated charges are $7,300, $7,400, $7,600, and 
$7,700. In its cost reporting period, Hospital A had 3 discharges for 
which $7,300 was the basis for payment for the items and services 
provided for that discharge, 2 discharges for which $7,400 was the 
basis for payment for the items and services provided for that 
discharge, 1 discharge for which $7,600 was the basis for payment for 
the items and services provided for that discharge, and 1 discharge for 
which $7,700 was the basis for payment for the items and services 
provided for that discharge. Therefore, for Hospital A, the payer-
specific negotiated charges for its list of discharges paid for by MA 
organizations in its cost reporting period for MS-DRG 123 is $7,300, 
$7,300, $7,300, $7,400, $7,400, $7,600, and $7,700. The median of this 
list is $7,400. Hospital A's median payer-specific negotiated charge 
for MS-DRG 123 for payers that are MA organizations would be $7,400.
    The methodology we proposed for how each hospital would calculate 
its median payer-specific negotiated charge for a given MS-DRG for all 
third party payers, including MA organizations, is the same as the 
process outlined previously.
    For purposes of this calculation, we proposed to define the term, 
``payer-specific negotiated charge'' as the charge that a hospital has 
negotiated with a third party payer for an item or service. We proposed 
to use this definition of the payer-specific negotiated charge, because 
it would capture the charges that are negotiated between hospitals and 
third party payers, including MA organizations, and can provide the 
data needed to evaluate the use of market-based information for payment 
purposes within the MS-DRG relative weight calculation. For 
consistency, the definition of payer-specific negotiated charge that we 
proposed to use for purposes of this proposal is the same definition of 
``payer-specific negotiated charge'' that we finalized for purposes of 
our requirements for hospitals to make their standard charges available 
to the public under the Hospital Price Transparency final rule. We also 
proposed to define, ``items and services'' as all items and services, 
including individual items and services and service packages, that 
could be provided by a hospital to a patient in connection with an 
inpatient admission for which the hospital has established a standard 
charge. An MS-DRG, as established by CMS under the MS-DRG 
classification system, is a type of service package consisting of items 
and services based on patient diagnosis and other characteristics. We 
proposed this definition of items and services, because we believed it 
captured the types of items and services, including service packages, 
that a hospital would use to calculate and report the median payer-
specific negotiated charge for each MS-DRG to support the use of 
market-based rate information by MS-DRG within the MS-DRG relative 
weight calculation. This proposed definition is also the same 
definition of items and services that we finalized for purposes of our 
requirements for hospitals to make their standard charges available to 
the public under the Hospital Price Transparency final rule, except 
that we have omitted the reference to outpatient department visits, 
because we would not require hospitals to calculate the median of their 
payer-specific negotiated charges for items and services provided in 
the hospital outpatient setting under our proposal.
    For purposes of this calculation, an MA organization is defined in 
42 CFR 422.2; namely, an MA organization means a public or private 
entity organized and licensed by a State as a risk-bearing entity (with 
the exception of provider-sponsored organizations receiving waivers) 
that is certified by CMS as meeting the MA contract requirements.
    For purposes of this calculation, we proposed to define third party 
payer as an entity that is, by statute, contract, or agreement, legally 
responsible for payment of a claim for a healthcare item or service. As 
the reference to ``third party'' suggests, this definition excludes an 
individual who pays for a healthcare item or service that he or she 
receives (such as self-pay patients). We proposed to use this 
definition of third party payer, because these are the types of 
entities that contract with hospitals to reimburse for services on 
behalf of patients. This definition is also the definition of third 
party payer finalized in the Hospital Price Transparency final rule.
    We invited public comment on the proposed definitions of payer-
specific negotiated charge, items and services, and third party payer. 
As discussed previously, we recognized that hospitals may negotiate 
rates in several ways and under different circumstances. For example, 
hospitals may negotiate rates with third party payers as a percent 
discount off chargemaster rates, on a per diem basis, or by MS-DRG or 
other similar DRG system. We also recognized that there may be 
hospitals that do not negotiate charges for service packages by MS-DRG 
or for service packages that may be crosswalked to an MS-DRG. 
Therefore, we sought comment on whether hospitals' median payer-
specific negotiated charges across all types of payment methodologies 
should be included in the determination of the median payer-specific 
negotiated charge for the conditions and procedures that are classified 
under the MS-DRG system and if so, how the proposed definitions should 
be modified to encompass these other types of negotiation strategies or 
methodologies. We also sought comment on the appropriateness of using 
MS-DRGs or MS-DRG equivalents for this methodology, as well as whether 
we should potentially collect this information for payers that use MS-
DRGs separately from payers that use other DRG systems. Furthermore, we 
sought comment on alternatives that would capture market-based 
information for the potential use in Medicare FFS payments. We also

[[Page 58879]]

welcomed comments and suggested refinements to our proposed 
definitions, as well as market-based alternatives that we should 
consider when identifying the market-based information that reflects 
the charges that a hospital negotiates for a specific MS-DRG.
    In order to address some of the issues noted previously, as an 
alternative, we considered requiring hospitals to submit a median 
negotiated reimbursement amount across all MA organizations and across 
all third party payers (including MA organizations) by MS-DRG (or by an 
MS-DRG equivalent, such as APR-DRG). Under this alternative approach, 
we stated we would define the ``negotiated reimbursement amount'' as 
the amount the hospital received as payment for the services rendered 
for a patient discharge, as classified under the MS-DRG system, and for 
which the hospital negotiated payment with a third party payer, 
including a MA organization, for hospital cost reporting periods ending 
on or after January 1, 2021. Hospitals would be required to determine 
and submit the median negotiated reimbursement amount for--(1) MA 
organizations; and (2) all third party payers, which includes MA 
organizations.
    For example, a hospital may negotiate a case rate (that is, a 
payer-specific negotiated charge) of $30,000 with Payer A for a major 
joint replacement paid under the APR-DRG system (equivalent to MS-DRG 
470). The hospital and payer have agreed to a stop loss threshold of 
$150,000 and that the hospital will be reimbursed at 50 percent off the 
gross (chargemaster) rate for each dollar charged over the stop-loss 
amount. Additionally, the hospital would be reimbursed for 60 percent 
of the cost of the implanted hardware, an amount that, in some cases, 
may be variable depending on the type or style of hardware implanted. 
In this example, we stated that the hospital's payer-specific 
negotiated charge for a major joint replacement (MS-DRG 470 equivalent) 
is $30,000. However, we stated that the resulting payment per discharge 
would vary, depending upon factors such as whether the patient's course 
of treatment exceeded the agreed-upon stop loss amount and the cost of 
the hardware implant.
    We considered this alternative, because the median of the 
``negotiated reimbursement amount'' is an amount that may take into 
consideration the actual and final payment amounts received by 
hospitals from third party payers, and MA organizations, for care of 
individuals, as compared to a standard charge negotiated for a 
particular service package identified by MS-DRG. We requested comment 
on this alternative approach, which we believed may also provide a 
reasonable market-based estimate of the relative resources used to 
provide services for an MS-DRG, and may take into account the several 
ways that hospitals and third party payers negotiate charges.
    We also sought comment on the relative burden of calculating and 
submitting a median negotiated reimbursement amount for MA 
organizations and for all other third party payers as compared to 
calculating and submitting the median payer-specific negotiated charge 
for MA organizations and median payer-specific negotiated charge for 
third party payers by MS-DRG payment system.
    We proposed that subsection (d) hospitals in the 50 states and DC, 
as defined at section 1886(d)(1)(B) of the Act, and subsection (d) 
Puerto Rico hospitals, as defined under section 1886(d)(9)(A) of the 
Act, would be required to report the median payer-specific negotiated 
charge information. We noted that hospitals that do not negotiate 
payment rates and only receive non-negotiated payments for service 
would be exempted from this proposed data collection. We recognized 
that Critical Access Hospitals (CAHs) may, in some instances, negotiate 
payment rates; however, because CAHs are not subsection (d) hospitals 
and are not paid on the basis of MS-DRGs, CAHs would be excluded from 
this proposed data collection requirement. We proposed that hospitals 
in Maryland, which are currently paid under the Maryland Total Cost of 
Care Model, would be exempted from this data collection requirement 
during the performance period of the Model. Examples of subsection (d) 
hospitals that only receive non-negotiated payment rates include 
hospitals operated by an Indian Health Program as defined in section 
4(12) of the Indian Health Care Improvement Act or federally owned and 
operated facilities. We noted that this proposed data collection 
requirement would apply to a smaller subset of hospitals as compared to 
the public reporting requirements under the Hospital Price Transparency 
final rule.
    We proposed that for cost reporting periods ending on or after 
January 1, 2021, a hospital would report on its cost report the median 
payer-specific negotiated charge for each MS-DRG for payers that are MA 
organizations, and the median payer-specific negotiated charge for each 
MS-DRG for all third party payers, which includes MA organizations. We 
stated that the required cost report reporting changes to accomplish 
this would be in more detail in the Information Collection Request 
approved under OMB No. 0938-0050.
    We also proposed to amend 42 CFR 413.20(d)(3) to reflect this 
proposed requirement. Specifically, we proposed to amend 42 CFR 
413.20(d)(3) to require hospitals to report the median payer-specific 
negotiated charge by MS-DRG for payers that are MA organizations and 
for all third party payers on the Medicare cost report. We proposed to 
capture this proposed data collection requirement in regulation at the 
new paragraph 42 CFR 413.20(d)(3)(i)(B). This proposed requirement 
would be effective for cost reporting periods ending on or after 
January 1, 2021.
    As described previously, we proposed to require hospitals to report 
on the Medicare cost report both the hospital's median payer specific 
negotiated charge by MS-DRG for all MA organizations and the hospital's 
median payer-specific negotiated charge by MS-DRG for all third party 
payers, which includes MA organizations, for cost reporting periods 
ending on or after January 1, 2021. We noted that we may also consider 
finalizing the collection of alternative market-based data, such as the 
median negotiated reimbursement amount as explained previously, or any 
refinements to the definition of median payer-specific negotiated 
charge, based on review of public comments. We stated that we were also 
considering a modification to the market based data collection 
proposal, to require only the reporting of the median payer-specific 
negotiated charge for MA organizations on the Medicare cost report. We 
invited public comments on our proposed data collection, as well as on 
these or other alternative data collections of payer-specific 
negotiated charges or other market-based information on the Medicare 
cost report, which we stated that we may consider finalizing in the FY 
2021 IPPS/LTCH PPS final rule for cost reporting periods ending on or 
after January 1, 2021, after consideration of the comments received.
d. Market-Based MS-DRG Relative Weight Methodology
    We also requested comments on a potential new market-based 
methodology for estimating the MS-DRG relative weights, beginning in FY 
2024, which we stated we may consider adopting in the FY 2021 IPPS/LTCH 
PPS final rule. We described this potential new market-based 
methodology as based on the proposed median payer-specific negotiated 
charge information collected on the Medicare cost report. We stated 
that by implementing this potential new

[[Page 58880]]

market-based methodology beginning in FY 2024 it would allow for 
sufficient time, should we finalize our data collection proposal, for 
CMS to collect and evaluate the median payer-specific negotiated charge 
data submitted on hospital cost reports and provide the public with 
information regarding our analysis in future rulemaking. Specifically, 
we considered a methodology for estimating the MS-DRG relative weights 
using the median payer-specific negotiated charge for each MS-DRG for 
payers that are MA organizations, as described in this section. We 
further noted that the MA program provides efficient and value-based 
care to patients through choice and private competition. We believed 
that by using the median payer-specific negotiated charge for payers 
that are MA organizations within the MS-DRG relative weight calculation 
would allow for a more market-based approach to determining Medicare 
FFS reimbursement and reduce our reliance on the hospital chargemaster.
    We also considered alternatives to this approach, such as the use 
of the median payer-specific negotiated charge for all third party 
payers (instead of the median payer-specific negotiated charge for all 
MA organizations), or other alternative collections of payer-specific 
negotiated charges or other market-based information such as a median 
negotiated reimbursement amount that a hospital negotiates with its MA 
organizations or third party payers (as described further in section 
IV.P.2.c of the preamble of this final rule), within the MS-DRG 
relative weight methodology. We also noted in the proposed rule that 
the same relative weight calculation described in this section would be 
used if an alternative to the median payer-specific negotiated charge 
was finalized to be collected on the Medicare cost report, as described 
in section IV.P.2.c. of the preamble of the proposed final rule.
    We stated that the same relative weight calculation described in 
this section would be used if an alternative to the median payer-
specific negotiated charge was finalized to be collected on the 
Medicare cost report, as described in section IV.P.2.c of the preamble 
of the proposed rule. We also invited public comment on this potential 
change to the relative weight methodology beginning in FY 2024 to use 
the median payer-specific negotiated charge for MA organizations, as 
well as the other potential alternative data collections as described 
in section IV.P.2.c of the preamble of this final rule, which we stated 
we may consider finalizing in the FY 2021 IPPS/LTCH PPS final rule. We 
also stated that if we were to finalize a change in the IPPS FY 2021 
rulemaking to incorporate payer-specific negotiated charges within the 
MS-DRG relative weight methodology, effective for FY 2024, we were open 
to adjusting any finalized policy, through future rulemaking, prior to 
the FY 2024 effective date. We also stated that should we finalize our 
data collection proposal, we would conduct further analysis based on 
the data received and provide an opportunity for public comment on that 
analysis, prior to the finalized effective date of any MS-DRG relative 
weight methodology change.
    Below is a description of the steps for a MS-DRG relative weight 
methodology change using the payer-specific negotiated charge data, as 
described in IV.P.2.c of the proposed rule.

 Step One: Standardize the Median MA Organizations Payer-
Specific Negotiated Charges

    In order to make the median MA organization payer-specific 
negotiated charges from the cost reports more comparable among 
hospitals, we stated that we would standardize the median payer-
specific negotiated charges by removing the effects of differences in 
area wage levels, and cost-of living adjustments for hospital claims 
from Alaska and Hawaii, in the same manner as under the current MS-DRG 
relative weight calculation for those effects. We sought comment on the 
appropriate standardization for the median MA organization payer-
specific negotiated charges, and any differences that should be taken 
into account in standardizing the median payer-specific negotiated 
charges for all third party payers.

 Step Two: Create a Single Weighted Average Standardized Median 
MA Organization Payer-Specific Negotiated Charge by MS-DRG Across 
Hospitals

    For each MS-DRG, we stated we would create a single weighted 
average across hospitals of the standardized median payer-specific 
negotiated charges. We stated we would weight the standardized payer-
specific negotiated charge for each MS-DRG for each hospital using that 
hospital's Medicare transfer-adjusted case count for that MS-DRG, with 
transfer adjusted case counts calculated exactly the same way as under 
the current MS-DRG relative weight methodology (84 FR 42621). We 
believed that using the Medicare transfer-adjusted case counts would be 
a reasonable approach to combining the data across hospitals because it 
would reflect relative volume and transfer activity (that is, larger 
hospitals responsible for more discharges would be weighted more 
heavily in the calculation, hospitals that transfer more often would be 
weighted less heavily), however, we noted in the proposed rule that we 
may also consider alternative approaches, such as using the unadjusted 
Medicare case counts, or other alternative approaches based on the 
review of public comments. We sought comment on the most appropriate 
weighting factor for purposes of calculating a single weighted average 
standardized median MA organization payer-specific negotiated charge 
across hospitals.

 Step Three: Create a Single National Weighted Average 
Standardized Payer-Specific Negotiated Charge Across all MS-DRGs

    We stated that we would create a single national weighted average 
across MS-DRGs of the results of Step Two, where the weights were the 
national Medicare transfer adjusted case counts by MS-DRG. We noted 
that if we used an alternative weighting factor to the Medicare 
transfer adjusted case counts in Step Two, as described previously, we 
would use that same alternative weighting factor here in Step Three.

     Step Four: Calculate the Market-Based Relative Weights
    For each MS-DRG, we stated that the market-based relative weight 
would be calculated as the ratio of the single weighted average 
standardized median MA organization payer-specific negotiated charge 
for that MS-DRG across hospitals from Step Two to the single national 
weighted average standardized median MA organization payer-specific 
negotiated charge across all MS-DRGs from Step Three.

 Step Five: Normalize the Market-Based Relative Weights

    We noted in the proposed rule that as under the current cost-based 
MS-DRG relative weight methodology, the market-based relative weights 
would be normalized by an adjustment factor so that the average case 
weight after recalibration would be equal to the average case weight 
before recalibration. We stated that as under the current cost-based 
relative weight estimation methodology, the normalization adjustment is 
intended to help ensure that recalibration by itself neither increases 
nor decreases total payments under the IPPS, as required by section 
1886(d)(4)(C)(iii) of the Act.
    We requested comments on this potential new market-based 
methodology for estimating the MS-DRG relative weights beginning in FY 
2024, including comments on any suggested refinements to this potential 
methodology or alternative approaches,

[[Page 58881]]

which we stated we may consider adopting in the FY 2021 IPPS/LTCH final 
rule.
    In the FY 2021 IPPS/LTCH proposed rule we noted that some 
stakeholders requested that we take a measured approach to any changes 
to adopting any market-based payment method for establishing Medicare 
IPPS reimbursements. We stated that we were therefore also interested 
in comments, on whether, if we were to adopt some form of a market-
based approach to the MS-DRG relative weight calculation, we should, 
for some period of time, continue to estimate and publicly provide the 
MS-DRG relative weights as calculated using our current cost-based 
estimation methodology. We also expressed an interest in comments on 
whether we should provide a transition to any new market-based MS-DRG 
methodology, and, if so, on the appropriate design of any such 
transition. We described in the FY 2021 IPPS/LTCH proposed rule that 
when we adopted the cost-based MS-DRG methodology for FY 2007 IPPS 
payments, we provided a 3-year transition from the charge-based MS-DRG 
relative weight calculation to the cost-based MS-DRG relative weight 
calculation (71 FR 47898). We recapped that for the first year of the 
3-year transition of the relative weights, the relative weights were 
based on a blend of 33 percent of the cost-based weights and 67 percent 
of the charge weights. In the second year of the transition, the 
relative weights were based on a blend of 33 percent of the charge 
weights and 67 percent of the cost-based weights. In the third year of 
the transition, we noted that the relative weights were based on 100 
percent of the cost-based weights. We requested comments, in the FY 
2021 IPPS/LTCH proposed rule, on whether we should provide a similar 
type of transition from a cost-based weight methodology to a market-
based weight methodology.
    Lastly, we noted in the FY 2021 IPPS/LTCH proposed rule that in 
future rulemaking, we may consider ways to further reduce the role of 
hospital chargemasters in Medicare IPPS payments and further reflect 
market-based approaches in Medicare FFS payments. In particular, we 
requested comments on alternatives to the current use of hospital 
charges in determining other inpatient hospital payments, including 
outlier payments and new technology add-on payments, to the extent 
permitted by law.
    As described further in the following sections, we are finalizing 
that hospitals would report on their Medicare cost report the median 
payer-specific negotiated charge that the hospital has negotiated with 
all of its Medicare Advantage (MA) organizations (also referred to as 
MA organizations) payers, by MS-DRG, for cost reporting periods ending 
on or after January 1, 2021. At this time, we are not finalizing the 
requirement that hospitals would report on their Medicare cost report 
the median payer-specific negotiated charge the hospital has negotiated 
with all of its third party payers by MS-DRG, as proposed. 
Additionally, we are finalizing the adoption of a market-based MS-DRG 
relative weight methodology for calculating the MS-DRG relative 
weights, beginning in FY 2024, as described in the proposed rule, and 
which we indicated we may consider finalizing in this FY 2021 final 
rule. The market-based MS-DRG relative weight methodology would utilize 
the median payer-specific negotiated charge data negotiated between 
hospitals and MA organizations.
    We are finalizing the requirement that hospitals would report on 
their Medicare cost report the median payer-specific negotiated charge 
that the hospital has negotiated with all of its MA organization 
payers, and not finalizing the requirement with respect to all of its 
third-party payers, for two primary reasons. These reasons take into 
account commenters' feedback on the relationship between MA 
organization rates and Medicare FFS rates, which was also supported by 
our literature review, feedback on the potential challenges in 
comparing data across all third party payers based on the variety of 
ways hospitals and other third party payers negotiate charges, and 
concerns expressed regarding Medicare payment impacts. First, we agree 
that there may be potential challenges in comparing data across all 
third party payers based on the variety of ways hospitals and other 
third party payers negotiate charges. It may take additional time to 
adequately address these challenges. We believe based on the closer 
relationship between MA organization rates and Medicare FFS rates that 
these challenges are mitigated, and therefore the collection and use of 
the median payer-specific negotiated charge that the hospital has 
negotiated with all of its MA organization payers allows the 
incorporation of market-based pricing calculations within our Medicare 
payment calculations sooner. Second, we believe that based on the 
closer relationship between MA organization rates and Medicare FFS 
rates that using the MA organization data will provide a more moderate 
impact on the MS-DRG relative weights calculated under a market-based 
MS-DRG relative weight methodology.
    We will make our analysis of this market-based data available for 
public review prior to the effective date of this policy in FY 2024. As 
described in the proposed rule, we remain open to adjusting this 
finalized policy, through future rulemaking, prior to the FY 2024 
effective date. We are not finalizing, at this time, a transition 
period to this market-based MS-DRG relative weight methodology, but may 
consider this in future rulemaking prior to FY 2024. We expect that, 
for some period of time, as discussed in the proposed rule, we would 
continue to estimate and publicly provide the MS-DRG relative weights 
calculated using the cost-based estimation methodology for 
informational purposes after implementation of the new market-based 
methodology.
    In this section, we summarize and respond to the public comments 
received. Commenters included individuals, consumer and patient 
advocacy organizations, hospitals and health systems, hospital and 
state hospital associations, medical associations, health benefits 
consultants, health information technology (IT) organizations, and 
academic institutions, among others. We note that some commenters 
raised concerns with the Hospital Price Transparency final rule 
requirements (84 FR 39571), which we consider out of scope as they 
discussed policies previously finalized under a separate notice and 
comment rulemaking.
    Comment: A few commenters requested that if CMS proceeded to 
collect this market-based data and utilized it within the MS-DRG 
relative weight methodology that CMS should proceed with caution. Some 
commenters believed CMS was conflating market rates with cost and noted 
that utilization of various MS-DRGs are dissimilar between Medicare, 
Medicaid, commercially insured, and worker's compensation patients. 
Commenters also argued that this data was not representative of the 
hospital resources used when providing inpatient care. Other commenters 
believed chargemaster rates rarely reflect true market costs, and that 
there are other rate-influencing factors to consider. Other commenters 
believed that since CMS uses hospital charges from the MedPAR claims 
data and cost report data from the Healthcare Cost Report Information 
System (HCRIS) to establish the MS-DRG relative weights, that CMS does 
not rely solely on the

[[Page 58882]]

chargemaster and already uses market based information.
    A commenter speculated that over time, the MS-DRG system could 
become obsolete and fail to be reflective of new technologies and the 
relative hospital resources needed to provide state of the art, cost-
effective care. Another commenter believed rates should reflect 
resource intensity, and that lower reimbursement without reference to 
resources would result in employment cuts and ultimately a reduction in 
access to care, including service line and hospital closures. A few 
commenters stated the adoption of a national market-based payment 
methodology would cripple the ability for sole community hospitals and 
rural hospitals to continue to provide care at the current levels the 
communities depend on and would result in closures of hospitals. 
Another commenter believed that the proposal may redistribute payments 
across services based on the relativity of payments for different 
patient populations, but that it would not increase competition. A 
commenter believed that the proposal would only change a single factor 
of determining an IPPS payment, the relative weight, but nothing else.
    Response: We recognize that the chargemaster is only one component 
of current Medicare payment methodologies, but that by moving to a 
market-based MS-DRG relative weight methodology in FY 2024, we will 
begin to reduce our reliance on the hospital chargemaster. As we noted 
in the CY 2020 OPPS proposed rule and in the FY 2021 IPPS/LTCH PPS 
proposed rule, we will continue to examine ways to further incorporate 
market based strategies within Medicare FFS payments, including to 
further examine the current use of charges converted to cost in setting 
Medicare payment for hospital services as part of our larger goal of 
reducing reliance on the hospital chargemaster. As noted in the 
proposed rule (85 FR 32790), we sought public comment within the CY 
2020 OPPS PPS proposed rule (84 FR 39609) on ways to improve these 
aspects of the current hospital payment system. As discussed in the 
proposed rule, we received public feedback indicating that the use of 
hospital charges for payments and ratesetting is viewed as the most 
significant barrier to hospitals' efforts to change their chargemasters 
(85 FR 32790).
    General economic principles indicate that a firm would not operate 
at a loss in the long-run, otherwise it would face a shutdown.\446\ We 
believe that payer-specific negotiated charges that hospitals negotiate 
with MA organizations capture the relative resources used to provide 
services to patients in order to maximize profits (or, in the case of 
not-for-profit hospitals, net income). By using market-based data, we 
believe that we can reduce our reliance on the hospital chargemaster 
and utilize this data in Medicare payment methodologies so that 
payments more closely reflect the true market cost and therefore the 
relative market value and resource utilization for inpatient items and 
services.
---------------------------------------------------------------------------

    \446\ See Phelps, Charles E. Health economics. 3rd edition. 
Boston: Addison-Wesley, 2002. Pp. 271-275. See also Varian, H.R. 
(2004). Microeconomic analysis. 1992. New York, London: WW Norton & 
Company. Chapter 2. (General economic principles state that firms do 
not operate at a loss.)
---------------------------------------------------------------------------

    We disagree that this market-based data would not provide an 
appropriate basis for estimating the relative hospital resources used 
with respect to discharges classified within a single MS-DRG compared 
to discharges classified within other MS-DRGs. We believe that it is 
important that the MS-DRG relative weights reflect true market costs 
and resource utilization, as discussed in the FY 2021 IPPS/LTCH PPS 
proposed rule. This concept was supported by commenters that stated 
chargemaster (gross) rates rarely reflect true market costs. We believe 
that by reducing our reliance on the hospital chargemaster that we can 
adjust Medicare payment rates so that they further reflect other 
factors that may change the relative use of hospital resources, as 
permitted and required by section 1886(d)(4)(C)(i) of the Act. We 
disagree with the commenter that argued we already use market-based 
information within our current MS-DRG relative weight methodology, 
given other commenters' statements about how chargemaster (gross) rates 
rarely reflect true market costs.
    We remain committed to engaging with commenters regarding the 
concerns they raised with the potential for payments to be 
redistributed based on different patient populations. We also intend to 
provide our analysis of the market-based data for public review, prior 
to the implementation of the new MS-DRG relative weight methodology in 
FY 2024.
    We were persuaded by commenters' requests that we take a more 
measured approach when adopting a market-based MS-DRG relative weight 
methodology. As discussed previously, we believe there will be minimal 
impacts to the relative weights calculated under the new market based 
MS-DRG relative weight methodology (which would utilize the median 
payer-specific negotiated charge data negotiated between hospitals and 
their MA organization payers) beginning in FY 2024, given the 
relationship between the MA organization rates and Medicare FFS rates 
(as evidenced by feedback from commenters and the results of our 
literature review). We refer readers to the Appendix A of this rule for 
further description of the impact analysis.
    Comment: A few commenters offered sentiments related to the 
directives under Executive Orders 13813 and 13890, expressing that they 
did not believe the collection of information proposed in the rule was 
mandated or reasonably related to the goals of increasing consumer 
choice and promoting competition as outlined in the Executive Orders. A 
commenter believed that the proposed rule directly contradicts with the 
policy goals of the Executive Orders by relying on federal ratesetting 
in lieu of true market-based pricing.
    Response: We thank commenters for their feedback. We clarify that 
the goal of this final policy is to reduce our reliance on the hospital 
chargemaster by incorporating market-based data within Medicare FFS 
payments. Further, we disagree with the notion that the collection of 
information proposed in the rule is not reasonably related to the goals 
outlined in Executive Orders 13813 and 13890. We believe these policies 
align with our goal of reducing the Medicare program's reliance on the 
chargemaster and adopting payment strategies that are more reflective 
of the commercial insurance market, which were themes also addressed 
with Executive Order 13890 on Protecting and Improving Medicare for Our 
Nation's Seniors, which President Trump issued on October 3, 2019.
    Comment: Several commenters supported the proposal to report 
market-based rate information on Medicare cost reports. These 
commenters noted that by requiring the reporting of these market-based 
summary measures that CMS would further promote greater transparency in 
health care pricing and more accurate market-based reimbursement within 
the Medicare Fee-For-Service system that would be subject to less 
manipulation and inflation by hospital-set chargemaster prices. Other 
commenters supported our data collection proposal, because they viewed 
it as helping fix existing Medicare payment policy issues that have 
increased payments calculated off of hospital reported gross charges. A 
commenter noted that hospital chargemasters have long been seen as an

[[Page 58883]]

arcane and outdated accounting system. This commenter stated that, 
``the chargemaster system has endured over time because payers have 
developed methodological approaches to establish payments that do not 
equate to hospital charges.'' A commenter suggested CMS also require 
reporting of patient specific cost sharing and align cost with quality. 
A few commenters recommended focusing on providing consumers with the 
cost and quality information that they stated was needed to make 
informed healthcare purchasing decisions. However, a commenter noted 
that the disclosure of the median negotiated rate alone does not 
sufficiently unveil underlying pricing and revenue management 
objectives.
    Response: We thank the commenters for their support of our 
proposals to report the median payer-specific negotiated charge by MS-
DRG for payers that are MA organizations and median payer-specific 
negotiated charges for third party payers by MS-DRG on the Medicare 
cost report, and the support of utilizing this data within a market-
based methodology for calculating IPPS MS-DRG relative weights that is 
more reflective of market-based pricing. We agree with commenters' 
assertions that it may be time to reduce our reliance on the hospital 
chargemaster so Medicare FFS payments further reflect the relative 
market value for inpatient items and services. The purpose of this data 
collection requirement is to collect market-based data so that the data 
may be used within Medicare payment calculations. As it is true for all 
data collected in the Medicare cost report, this information will be 
publicly available on the HCRIS data set. In response to commenters 
concerns with the reporting of certain cost sharing information, we 
refer readers to the Hospital Price Transparency final rule for 
specific information on this type of disclosure (84 FR 65524).
    Comment: Some commenters expressed concern regarding the utility of 
collecting median payer-specific negotiated charges by MS-DRG for 
payers that are MA organizations and the median payer-specific 
negotiated charges by MS-DRG for third party payers. Specifically, some 
commenters were concerned that the median payer-specific negotiated 
charge for MA organizations would not be useful as they only reflected 
the rates paid under Medicare Fee-For-Service. Other commenters 
expressed concern that because MA organization rates were set based on 
previous rates of Medicare FFS, they would set-up a system with no 
updates in rates to reflect changes or continued reductions. Many 
commenters expressed concern about the difficulty of comparing charges 
used under the MS-DRG systems to different systems used by commercial 
payers, and that crosswalking charges from one classification system 
would be burdensome to calculate and may introduce variation in the 
relative rates. Some commenters argued that this could disrupt 
competition in the market.
    Many commenters expressed concern about the comparability of 
charges negotiated for Medicare Advantage, Medicare FFS and third party 
payers, and questioned CMS's capability to account for different 
negotiation tactics. Commenters suggested that Medicare Advantage 
patients may be healthier and have lower risk than Medicare FFS 
patients, while generally the Medicare population may be older and have 
more comorbidities compared to the beneficiary population served by 
commercial payers. Commenters also discussed that some commercial 
payers may cover certain services that are not covered by Medicare, and 
that there may be certain types of payment structures that are singular 
to the Medicare program that do not translate to commercial insurance 
practices. A few commenters suggested that commercial rates may be 
negotiated using different tactics to account for different risk 
arrangements, such as: Episodes of care, separately negotiated outlier 
payments, stop loss provisions, quality payment, capitated payments, 
claw-back provisions or acquisition costs that would not easily be 
comparable, and that CMS should describe how the median payer-specific 
negotiated charge calculation will account for these arrangements. 
Without accounting for these arrangements, a few comments suggested 
that utilizing this market-based data for Medicare FFS payments could 
shift costs to the private sector.
    A commenter suggested that hospitals are required to be paid 
Medicare FFS rates by MA organizations with which they do not contract, 
so the reported charges might not reflect negotiated charges. Several 
commenters expressed concern that those rates were affected by matters 
outside of the costs of care and may reflect market dynamics and 
broader issues associated with negotiating a large number of healthcare 
services.
    Response: We appreciate the additional feedback from commenters 
regarding differences in potential reimbursement methodologies among 
the different commercial payers and MA organizations, and the presence 
of different payment contracts between hospitals and payers, 
specifically among commercial payers. We thank commenters for their 
concerns regarding the comparability of payer-specific negotiated 
charges by MS-DRG for all third party payers given the myriad of 
negotiation tactics that may be used when third party payers negotiate 
with hospitals. As noted previously, we were persuaded by commenters' 
concerns and are finalizing only to collect and utilize the median 
payer-specific negotiated charge negotiated between hospitals and MA 
organizations.
    We recognize, based on the literature review we conducted and 
feedback from commenters, that MA rates and Medicare FFS rates are 
often similar and/or are highly reliant on one another. However, MA 
rates to MA contracted inpatient hospitals are not required to be the 
same as (or based on) Medicare FFS rates; the Medicare statute only 
requires MA organizations to pay FFS rates to a health care provider 
for services furnished to an MA enrollee when the MA organization does 
not have a contract with the health care provider. We believe that if 
market based data (median payer-specific negotiated charges for MA 
organizations) are incorporated into the calculation of the MS-DRG 
relative weights, initially there may be limited impact on the relative 
weights given the highly reliant nature between MA organization and 
Medicare FFS rates, but that over time markets will adjust to this 
policy and further influence the Medicare FFS payments. We also 
appreciate the additional feedback from commenters regarding the 
characteristics of beneficiaries that choose an MA plan. Our review and 
analysis of the market-based data collected, as discussed previously, 
may allow us to explore those relationships further.
    Comment: Several commenters expressed concern with the requirement 
to disclose negotiated rates and make them publicly available through 
the Healthcare Cost Report Information System (HCRIS) dataset, saying 
the negotiated rates are confidential and proprietary. A few commenters 
expressed concern that in health care markets with a small number of 
payers, these proposals would allow for the re-identification of the 
median payer-specific negotiated charge by MS-DRG for payers that are 
MA organizations. A commenter expressed concern that the public release 
of MA charge data may encourage hospitals to stop participating in MA 
plans. A commenter suggested that information should not be reported if 
the hospital is in a region with a low

[[Page 58884]]

number of MA plans in order to avoid revealing the actual charges for 
individual MA plans.
    Response: We disagree with commenters, and note that the negotiated 
amount is already disclosed to patients when they receive the 
explanation of benefits for services received. We also disagree with 
commenters' assertion that public release of MA charge data may 
encourage hospitals to stop participating in MA plans. As noted in the 
proposed rule, we will be requiring hospitals to report the median, 
which is a summary measure. We are not requiring that the hospitals 
report the negotiated charge and corresponding payer for which they 
have negotiated the charge information. We remind readers that we are 
requiring the collection of this market-based measure on the Medicare 
cost report for purposes of utilizing the data within Medicare 
payments. This information will be publicly available, along with all 
other data reported on the Medicare cost report, on the HCRIS dataset, 
for the purposes of calculating Medicare payments and will continue to 
provide full transparency to the public on how these payments, and 
others, are calculated.
    Comment: Several commenters requested refinements or clarifications 
in information that would be reported by hospitals on the Medicare cost 
report, and requested more detail on how hospitals should account for 
certain factors and payments when calculating the median payer-specific 
negotiated charge. A few commenters requested that the full 
distribution of charges be included, not just the median. A commenter 
requested clarification on whether the median payer-specific negotiated 
charges would include or exclude items such as disproportionate share 
hospital payments, uncompensated care payments, graduate medical 
education payments, pass through payments, outlier payments, transfer 
adjustments, and quality program payments. A commenter requested 
clarification on whether hospitals should report the average negotiated 
charge based on historical claims data for payers that have negotiated 
a per diem or a percentage of charge arrangement and also do the same 
for those payers that have negotiated a base MS-DRG rate plus 
percentage of charge for devices that are in addition to the base rate. 
Commenters made several requests: That averages be reported instead of 
medians due to the difficulty of calculating medians; a discount rate 
be reported in addition to median charges; CMS limit data collection to 
a representative sample of hospitals as opposed to requiring all 
hospitals to report; CMS provide clearer guidance for reporting the 
charges associated with MS-DRGs and how discounts might be applied in 
the calculation; guidance on the inclusion of items such as 
uncompensated care and quality program adjustments in performing the 
calculation; and that outliers be removed for purposes of calculating 
charges.
    Response: We believe that hospitals have the capacity, based on the 
instructions provided within this final rule, and the forthcoming 
revision of the Information Collection Request currently approved under 
OMB control number 0938-0050, expiration date March 31, 2022, to report 
this data on the Medicare cost report for cost reporting periods ending 
on or after January 1, 2021. We may provide additional guidance as 
appropriate or as determined necessary. Absent additional guidance, we 
believe that hospitals have the capability to report this market-based 
data for cost reporting periods ending on or after January 1, 2021.
    While commenters suggested CMS clarify the reporting instructions 
to hospitals and also describe how we planned to take into account 
several factors when standardizing the market-based data once it was 
collected, commenters did not provide examples or recommendations for 
how to specifically adjust or account for these factors. We note that, 
as described previously, the market-based MS-DRG relative weight 
methodology, as finalized in this final rule, would standardize the 
market based data collected under section IV.P.2.d. of this final rule 
for area wage levels and cost-of-living adjustments for hospital claims 
from Alaska and Hawaii, in the same manner as under the cost-based MS-
DRG methodology (Step One of the market based MS-DRG relative weight 
methodology). We believe this action would adjust for geographic 
factors referenced by commenters. As noted in the proposed rule, under 
Step Two of the market based MS-DRG methodology, we would standardize 
the median payer-specific negotiated charge data by the hospital's 
Medicare transfer-adjusted case count for that MS-DRG, with transfer 
adjusted case counts calculated the same way as under the current cost-
based MS-DRG relative weight methodology (84 FR 42621). We note that 
quality payment adjustments are not accounted for within the existing 
MS-DRG relative weight process. We remain open to adjusting any 
finalized policy, through future rulemaking, prior to the FY 2024 
effective date.
    Comment: A commenter supported the alternative of requiring the 
reporting of a median negotiated reimbursement amount across all MA 
organizations and across all third-party payers by MS-DRG. Several 
other commenters supported our alternative proposal of limiting the 
data collection requirement to only the median payer-specific 
negotiated charges by MS-DRG for payers that are MA organizations, and 
noted that they opposed reporting any market-based data but favored the 
reporting of Medicare Advantage data only over reporting charges for 
other payer types.
    Several commenters opposed the alternative of reporting of a median 
negotiated reimbursement amount across all MA organizations and across 
all third-party payers by MS-DRG. These commenters primarily expressed 
concern over the technical challenge and burden of calculating this 
data suggesting that matching negotiated rates to an MS-DRG is not 
straightforward and would require significant time and labor by 
hospitals because reimbursement methodologies vary significantly by 
payer. A commenter suggested that this would require more work as the 
calculation could not be derived from the files created under the 
requirements of the Hospital Price Transparency rule.
    Response: For the reasons discussed previously, we are finalizing 
the collection of the median payer-specific negotiated charge by MS-DRG 
for payers that are MA organizations for cost reporting periods ending 
on or after January 1, 2021. We are not finalizing the collection of 
the median negotiated reimbursement amount measure or another 
alternative measure, as discussed in the proposed rule, because we were 
persuaded by commenters that calculating and reporting this alternative 
would require a high level of effort since it would not be derived from 
files created under the requirements of the Hospital Price Transparency 
rule.
    Comment: Some commenters expressed concern that requiring the 
reporting of median payer-specific negotiated charges raises numerous 
Constitutional and antitrust issues. Commenters argued that forced 
disclosure of negotiated rates unconstitutionally compels speech in 
violation of the First Amendment. Commenters argued that the reporting 
of payer-specific negotiated rates does not advance the agency's goals 
of adopting a more market-based pricing strategy and there are ways for 
CMS to achieve

[[Page 58885]]

this goal without requiring compelled speech.
    Commenters also asserted reporting of payer-specific negotiated 
charges violates the Takings Clause by forcing the disclosure of trade 
secret information (that is, confidential negotiated rates between 
hospitals and issuers). Additionally, commenters argued that requiring 
providers to report payer-specific negotiated rates crosses into 
infringement of antitrust laws and places hospitals in an untenable 
position of having to choose between violating their contractual 
obligations for confidentiality and violating the new rule. Commenters 
argued that compliance with this data collection requirement may put 
hospitals in legal jeopardy under contractual confidentiality 
provisions or under state trade secrets laws.
    Response: We do not believe that the payer-specific negotiated 
charges hospitals would be required to disclose would constitute trade 
secrets. To the contrary, this information is already generally 
disclosed to the public in a variety of ways, for example, through 
State databases and patient explanation of benefits (84 FR 65544).
    We also question whether our collection of data via the cost report 
raises a First Amendment issue. Federal agencies routinely require 
regulated entities to disclose data to the government. To the extent 
that our rule is deemed to implicate First Amendment concerns, it 
satisfies applicable requirements. Under the approach articulated in 
Zauderer,\447\ courts uphold the required disclosures of factual 
information in the realm of commercial speech where the disclosure 
requirement reasonably relates to a government interest and is not 
unjustified or unduly burdensome such that it would chill protected 
speech.\448\ These disclosures also satisfy the test articulated in 
Central Hudson,\449\ under which agencies can compel speech where the 
regulation advances a substantial government interest and the 
regulation is no more extensive than necessary to serve that interest. 
The policies finalized in this final rule advance the substantial 
government interest in setting MS-DRG relative weights based on 
hospital resource use, and the requirement to disclose a summary 
measure on a cost report does not burden the hospitals' speech in any 
way, and we do not understand commenters to be arguing otherwise. To 
the extent that commenters assert that the rule creates a burden in 
terms of compliance costs, we believe that such costs are not a burden 
on speech specifically and therefore do not implicate the First 
Amendment.
---------------------------------------------------------------------------

    \447\ Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 
(1985).
    \448\ See Zauderer, 471 U.S. at 651; Milavetz v.United States, 
559 U.S. 229, 250, 252-53 (2010); NIFLA, 138 S. Ct. at 2376 (``[W]e 
do not question the legality of . . . purely factual and 
uncontroversial disclosures about commercial products.'').
    \449\ Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n, 447 
U.S. 557 (1980).
---------------------------------------------------------------------------

    As detailed in the proposed rule, we are specifically requiring 
that hospitals report the median, which is a summary measure. We 
proposed to collect the median of the hospital payer-specific 
negotiated charges by MS-DRG, because the median is a common measure of 
central tendency that is less influenced by outlier values; however, we 
note that in the event a hospital has listed an even number of payer-
specific negotiated charges by discharges for that specific MS-DRG, the 
hospital, in its calculation of the median, would use the average of 
the two remaining payer-specific negotiated charges in order to 
calculate the median; this will further de-identify the payer-specific 
negotiated charge data required under this policy.
    Comment: Commenters urged CMS not to finalize the market-based 
payment proposal, asserting that privately negotiated rates will not 
further CMS's goal of paying market rates, while others expressed 
concern that CMS had not articulated a sufficient policy basis for 
using payer-specific negotiated charges as a substitute for hospital 
data to calculate the IPPS relative weights. Commenters argued that CMS 
did not provide sufficient analysis or rationale to show that payer-
specific negotiated charges measure a hospital's relative resource use 
for a particular MS-DRG, as required by statute.
    A few commenters noted that negotiations are based on multiple 
factors, of which cost is one factor, and that the current cost-based 
relative weight methodology adequately captures hospital relative 
resource use. A commenter argued that after reviewing the proposal with 
the statutory language contained in sections 1815(a) and 1833(e), they 
were concerned that CMS may be citing baseless authorities, and that 
CMS should also comply with section 1861(v)(1)(A) of the Act. The 
commenter stated that all other complexity added after this provision, 
whether it is the determination of cost-computing methods or the 
distillation of cost into specific metrics or units, does not negate 
the foundational requirement that hospitals must ``incur'' something in 
order to report it. The commenter urged CMS to explain the discrepancy 
between the proposed rule and the plain language of statutory 
authorities before finalizing. Commenters further argued that CMS did 
not adequately explain why market prices, rather than costs, are a 
better measure of hospital resources and, therefore, the proposed rule 
constitutes an arbitrary and capricious rulemaking, violating the 
Administrative Procedure Act.
    Response: We disagree with commenters that stated we did not 
articulate a sufficient policy basis for our data collection policy. As 
discussed in the proposed rule, sections 1815(a) and 1833(e) of the Act 
provide us with the authority to collect data for purposes of 
determining the amount of payments due to the provider under the 
Medicare program. We proposed to collect this negotiated charge data so 
that it may be used in determining relative weights for purposes of 
payment under the IPPS.
    CMS also has authority to assign and update MS-DRG weighting 
factors to reflect relative resource use. As previously discussed, 
section 1886(d)(4)(A) of the Act states that the Secretary shall 
establish a classification of inpatient hospital discharges by 
diagnosis-related groups and a methodology for classifying specific 
hospital discharges within these groups. Section 1886(d)(4)(B) of the 
Act states that for each such diagnosis-related group the Secretary 
shall assign an appropriate weighting factor which reflects the 
relative hospital resources used with respect to discharges classified 
within that group compared to discharges classified within other 
groups. Section 1886(d)(4)(C)(i) of the Act states that the Secretary 
shall adjust the weighting factors at least annually to reflect changes 
in treatment patterns, technology, and other factors which may change 
the relative use of hospital resources. As noted by commenters, 
relative resources are accounted for when hospitals establish the cost 
of services, and costs of services are considered when negotiating with 
payers. Because of this, we believe that relative resources are one of 
the factors considered when negotiating amounts between hospitals and 
payers, and therefore the payer-specific negotiated charge would 
reflect relative resources used. We believe that relative resources are 
accounted for when hospitals and payers negotiate payments and would be 
captured within payer-specific negotiated charge data reported on the 
Medicare cost report by MS-DRG, as previously described.
    Commenters noted that hospitals may negotiate based on the market 
share, cost of services, risk of certain services,

[[Page 58886]]

patient population, and other factors, but did not articulate why the 
resources necessary to perform these services based on these 
negotiation tactics would not be considered in a hospital's starting 
point negotiations with payers. If costs are considered when hospitals 
are negotiating payments, and commenters stated the current system of 
establishing MS-DRG relative weights, which is a cost-based 
methodology, accounts for relative resources used, then we do not agree 
that negotiated charges would not encompass relative resources used. 
The commenters seem to suggest that a hospital would consider 
utilization when negotiating its contracts, but not the resources 
necessary to provide those items and services for that level of patient 
utilization anticipated. As discussed previously, general economic 
principles indicate that a firm would not operate at a loss in the 
long-run or would face a shutdown.\450\ We believe the rates that 
hospitals negotiate with MA organizations capture the relative resource 
use to provide services to patients in order to maximize profits (or, 
in the case of not-for-profit hospitals, net income), subject to market 
constraints and conditions (supply and demand, community benefit 
requirements, etc.). Therefore, we believe that payer-specific 
negotiated charges provide greater insight into the resource use of a 
hospital.
---------------------------------------------------------------------------

    \450\ See Phelps, Charles E. Health economics. 3rd edition. 
Boston: Addison-Wesley, 2002. Pp. 271-275. See also Varian, H.R. 
(2004). Microeconomic analysis. 1992. New York, London: WW Norton & 
Company. Chapter 2. (General economic principles state that firms do 
not operate at a loss.)
---------------------------------------------------------------------------

    We also believe that these data can be used in determining the 
relative resource use for an MS-DRG. The market-based MS-DRG relative 
weight methodology, which we are finalizing with a FY 2024 effective 
date, would create the relative weight by calculating the ratio of the 
single weighted average standardized median MA organization payer 
specific negotiated charge for that MS-DRG across hospitals (Step 2) to 
the single national weighted average standardized median MA 
organization payer-specific negotiated charge across all MS-DRGs (Step 
3). By virtue of calculating this ratio establishing the relativity, 
the weights would reflect the resources used with respect to a 
discharge classified within that group.
    To the commenter's specific point that rather than the authority we 
cite, CMS should focus on section 1861(v)(1)(A) of the Act, we note 
that we did include a reference to the requirement that providers 
follow reasonable cost principles under Section 1861(v)(1)(A) of the 
Act when completing Medicare cost reports. We further note that Section 
1861(v)(1)(A) of the Act requires reporting of data elements beyond 
just cost, including non-cost items and items used to determine the 
cost of services.
    Comment: Many commenters recommended that CMS not proceed with this 
proposal because the validity of the Hospital Price Transparency final 
rule is pending appeal before the U.S. Court of Appeals for the D.C. 
Circuit, in which several hospital associations and individual 
hospitals are seeking to invalidate that rule. See Am. Hosp. Ass'n v. 
Azar, 2020 WL 3429774 (D.D.C. June 23, 2020), appeal pending, No. 20-
5193 (D.C. Cir. docketed June 30, 2020). Furthermore, commenters stated 
that because they believed CMS did not have the authority to collect 
this market-based data, that CMS therefore could not proceed with 
utilizing this data under the potential market-based MS-DRG relative 
weight methodology, as described in the proposed rule.
    Commenters recommended that CMS should not proceed with this 
proposal, or at a minimum it should wait until the legality of the 
Hospital Price Transparency final rule is settled by the Courts.
    Response: CMS did not rely on the statutory authority under 42 
U.S.C. 300gg-18(e) for purposes of the proposed collection of the 
median negotiated charge information on the Medicare cost report, nor 
for purposes of the potential change in the relative weighting 
methodology. We refer the commenters to our prior responses for a 
discussion of the relevant statutory authority for purposes of this 
rulemaking as well as our prior discussions responding to various 
constitutional concerns.
    Comment: Many commenters expressed concern that there were several 
potential unintended consequences of collecting market-based data and 
utilizing that data to establish MS-DRG relative weights. Specifically, 
several commenters noted that there had been recent state action 
addressing health care price transparency, the results of which have 
not yet been assessed. Commenters noted that neither CMS nor 
independent researchers have produced analyses that suggests that 
negotiated charge data are reliable, reasonably consistent across 
hospitals, or representative of the FFS population. Commenters argued 
that given the lack of a publicly available dataset containing 
negotiated charge data, they cannot determine any potential unintended 
consequences of these data.
    Several commenters cautioned CMS to consider the downstream effects 
of potentially adopting a market-based MS-DRG relative weight 
methodology and requested that CMS adopt a more moderate approach, 
should CMS adopt this market-based methodology. Specifically, 
commenters were concerned about the incorporation of quality-based 
payments and recommended CMS engage stakeholders to determine how this 
policy aligns with the adoption of value-based contracting 
arrangements. Commenters noted that establishing a policy that ignores 
value-based arrangements stymies the progression to value-based 
arrangements. Another commenter argued that many value-based bundled 
payment models require reconciliation well after the time of the 
patient encounter. Other commenters noted that certain payment 
arrangements may result in the final negotiated amount differing from 
the ``base'' negotiated rate, such as in capitated arrangements. If CMS 
adopted a market-based MS-DRG relative weight methodology that utilized 
payer-specific negotiated charge data, commenters requested that CMS 
publish this information so commenters could replicate and review the 
calculation of the MS-DRG relative weights under this market-based 
methodology, as commenters argued is CMS's current practice under the 
cost-based MS-DRG relative weight methodology.
    Some commenters recommended that CMS task a multi-stakeholder group 
of subject matter experts to gather the necessary data, conduct a 
thorough and transparent analysis of the reliability of the data, and 
evaluate a range of methodologies with the sole purpose of identifying 
mechanisms to make payments more value-based and reflective of the 
actual true relative hospital resources used to deliver care. Other 
commenters recommended that CMS, limit the scope of this data reporting 
requirement to a small representative sample of hospitals and use that 
data to evaluate the impact it would have more broadly, consider 
phasing-in this methodology over time, and establish guardrails that 
would limit the year-to-year change on MS-DRG relative weights to a 
certain percentage. A few commenters recommended that CMS delay 
implementation until the agency has adequately explained the basis for 
concluding that payer-specific negotiated charges by MS-DRG reflect 
resources used and stakeholders have had another opportunity to comment 
on the proposal. A few commenters

[[Page 58887]]

requested CMS first evaluate and report to House and Senate Committees 
of Jurisdiction on the extent to which charge data that would be 
reported under the Hospital Price Transparency final rule would reflect 
market-based pricing dynamics, and the resultant impact that would have 
on the IPPS MS-DRG relative weight. Another commenter believed that 
CMS's proposal could be a diversion from mission-critical efforts and 
would therefore be at odds with other CMS policies intended to reduce 
the paperwork burden and enhance policy flexibilities for health 
providers, such as the Patients over Paperwork Initiative and the 
Quality Payment Program.
    Response: We agree with commenters that we should provide an 
additional opportunity for the public to review the market-based data 
collected under section IV.P.2.c. of the final rule. We intend to 
provide an opportunity for the public to review our analysis of the 
median payer-specific negotiated charge data received, which we intend 
to do prior to the utilization of the MA organization median payer-
specific negotiated charge data in the market-based MS-DRG relative 
weight methodology beginning in FY 2024. We believe this allows for 
additional discussions, public review, and conversation about utilizing 
this market-based data in the MS-DRG relative weight methodology. We 
also were persuaded by commenters' concerns that collecting all third 
party payer payer-specific negotiated charge data would not provide for 
a direct data comparison between hospitals, because of the different 
negotiation tactics used and beneficiary populations served by the 
commercial insurance market. We believe that by instead collecting and 
utilizing MA organization negotiated charge data, we are finalizing a 
more moderate approach.
    Comment: Several commenters disagreed with how the term ``charges'' 
was defined and expressed concern that CMS's inconsistent use of the 
term may cause confusion. Commenters recommended that CMS provide a 
clearer definition to the proposed requirements. A commenter requested 
that CMS use more precision in their language to clarify that 
``charges'' only reflect amounts in the hospital chargemaster. The 
commenter stated that given all the variations in patients' unique 
situations and other variables in contract terms, it would be nearly 
impossible for providers to comply consistently. Furthermore, another 
commenter emphasized that it is counterintuitive for CMS to disregard 
the Provider Reimbursement Manual (PRM) when it comes to the definition 
of ``charges'' but rely on it heavily when it comes to questions of 
Medicare bad debt. The commenter referenced a section of the PRM that 
states ``charges should be uniformly applied to all patients'' and 
asserted that by CMS's definition a payer-specific negotiated charge 
cannot be considered a standard charge, simply because the same charge 
is not applied to all patients. Another commenter suggested limiting 
the word ``charges'' to ``gross charges'' listed for items and services 
on the hospital's chargemaster. The commenter also suggested that the 
word ``rate'' refer to the negotiated payment amount or price of a 
particular service. Additionally, another comment recommended that CMS 
replace the term charges with rates altogether. Lastly, a commenter 
advised CMS to carefully consider the definition of ``cost'' because 
the term is misleading.
    Response: We appreciate the commenters' request for clarity and 
precision in CMS's definitions with respect to this proposal. For the 
purposes of this rule, we proposed, and are finalizing, to define 
``payer-specific negotiated charge'' as the charge that a hospital has 
negotiated with a third-party payer for an item or service. As 
discussed in the proposed rule, we proposed to use this definition 
because it would capture the charges that are negotiated between 
hospitals and MA organizations, and hospitals and all its third party 
payers, including MA organizations, and can provide the data needed to 
evaluate the use of market-based information for payment purposes 
within the MS-DRG relative weight calculation. This definition of 
payer-specific negotiated charge is the same definition of ``payer-
specific negotiated charge'' that we finalized for the purposes of 
hospitals making their standard charges available to the public under 
the Hospital Price Transparency final rule. We note that the definition 
of third party payer, for the purposes of reporting median payer-
specific negotiated charges set forth in this rule, includes MA 
organizations that have contracted with CMS. As we have discussed, 
because hospitals are already required to publicly report payer-
specific negotiated charges under the final policy set forth in the 
Hospital Price Transparency final rule, using the same definition of 
payer-specific negotiated charges required for posting under the 
Hospital Price Transparency final rule to calculate the median payer-
specific negotiated charge by MS-DRG for payers that are MA 
organizations, as required under this final rule, reduces burden on 
hospitals.
    Additionally, we responded to many of these same comments in the 
Hospital Price Transparency final rule; we refer readers to the 
Hospital Price Transparency final rule (84 FR 65541) for the discussion 
regarding ``standard charges''.
    Comment: A commenter opposed aspects of CMS's definition of ``items 
and services.'' In particular, the commenter disagreed that MS-DRG 
items and services are established as standard charges in inpatient 
settings. The commenter acknowledged services provided for a particular 
MS-DRG are quite similar across patients; however, the commenter stated 
that hospitals generally do not establish a standard charge for an 
inpatient admission. Instead, there are often standard negotiated rates 
for inpatient admission equal to the product of rate and the negotiated 
relative weight of the MS-DRG.
    Response: We believe that since hospitals assign the underlying 
ICD-10-CM principal diagnosis, and any other secondary diagnosis codes 
and ICD-10-PCS procedure codes, which determine how patients are 
assigned to an MS-DRG, that hospitals are able to associate those items 
and services to MS-DRGs for each discharge. Additionally, hospitals 
that are not as familiar with MS-DRGs have access to the most current 
publically available version of the CMS Grouper used to group ICD-10 
codes to MS-DRGs, and are able to use this software to uniformly group 
inpatient items and services to MS-DRGs, either initially by 
proactively using the same Grouper version used by CMS, or 
retrospectively after an inpatient hospital stay, but prior to 
submitting this information on the hospital cost report. This 
definition of ``items and services'' is the same definition of ``items 
and services'' that we finalized for purposes of our requirements for 
hospitals to make their standard charges available to the public under 
the Hospital Price Transparency final rule, except that we have omitted 
the reference to outpatient department visits, because we would not 
require hospitals to calculate the median payer-specific negotiated 
charges for items and services provided in the hospital outpatient 
setting under this requirement. As we have discussed, because hospitals 
are already required to publicly report payer-specific negotiated 
charges under the final policy set forth in the Hospital Price 
Transparency final rule, using the same definition of ``items and 
services,'' as required for posting under the Hospital

[[Page 58888]]

Price Transparency final rule, to calculate the median payer-specific 
negotiated charge by MS-DRG for payers that are MA organizations, 
reduces burden on hospitals.
    Comment: A commenter disagreed with CMS's definition of ``third 
party payer'' and suggested CMS consider explicitly excluding payers 
that would not logically fit within a hospital's MS-DRG relative weight 
calculation, such as stand-alone dental plans.
    Response: We thank this commenter for their input; however, we 
believe that using this definition of ``third party payer,'' which we 
note includes MA organizations and is also the definition of third 
party payer finalized for purposes of the Hospital Price Transparency 
final rule, reduces burden on providers as discussed previously. 
Additionally, because the Medicare FFS program provides for limited 
coverage of dental procedures, there may be limited instances where 
dental items and services would be grouped to an MS-DRG.
    Comment: A few commenters expressed concern that long term care 
hospitals (LTCHs) will be directly and significantly affected by the 
change in methodology for calculating MS-DRG relative rates. A 
commenter expressed concern that the proposed changes to IPPS payment 
rate setting will further destabilize the LTCH PPS for many Medicare 
beneficiaries. This commenter noted that the LTCH PPS utilizes the IPPS 
rates to determine the site neutral payment rate used for LTCH 
admissions that do meet the LTCH patient criteria. Second, these 
commenters noted that IPPS payment rates are used in the LTCH PPS 
payment rate for short-stay outlier cases where the payment rate is a 
blend of the IPPS per diem amount and 120% of the LTC-DRG per diem 
amount. Another commenter expressed concern that because LTCHs contract 
with Medicare Advantage differently from other hospitals, their data 
would not be useful in determining charges. Commenters recommended that 
CMS further clarify how the proposed rule will impact post-acute care 
hospitals, including LTCHs.
    A commenter urged CMS to revise the proposed regulation so that it 
clearly limits these new reporting requirements to short term acute 
care hospitals paid under the IPPS. Another commenter strongly opposed 
any attempt to expand data collection to LTCHs. A commenter requested 
sole community hospitals be exempt from this regulation. While other 
commenters requested that CMS clarify whether non subsection (d) 
hospitals would be exempted from this data collection proposal.
    Response: We did not propose any changes to the LTCH PPS nor the 
MS-LTC-DRG methodology, only to the IPPS and MS-DRG relative weight 
methodology. As discussed in this final rule, we were persuaded by 
commenters' request that we continue to publish the MS-DRG relative 
weights under the cost-based MS-DRG methodology. Therefore, we expect 
to continue to publish the MS-DRG relative weights under both the cost-
based MS-DRG methodology and the market-based MS-DRG methodology, for a 
period of time. This will enhance our review of the market-based data 
collected under IV.P.2.c. of this final rule, and will allow us to 
monitor for any unintended consequences, as also requested by 
commenters.
    We are finalizing, as proposed, that subsection (d) hospitals in 
the 50 states and DC, as defined at section 1886(d)(1)(B) of the Act, 
and subsection (d) Puerto Rico hospitals, as defined under section 
1886(d)(9)(A) of the Act, would be required to report the median payer-
specific negotiated charge information. We note that hospitals that are 
not categorized under the above sections of the Act, and hospitals that 
do not negotiate payments for services would be exempted from this data 
collection requirement. We refer readers to the proposed rule (85 FR 
32795) for a full discussion of this policy. We further note that we 
are open to adjusting any finalized policy through future rulemaking. 
We therefore believe that there would be additional opportunities for 
the public to provide feedback on our finalized policies.
    Comment: Many commenters expressed concern with the timing of the 
implementation and stated that CMS has underestimated the time, 
resources, and cost required for hospitals to meet the negotiated 
payment data requirements by January 1, 2021. Commenters argued that 
due to the burden of the current COVID-19 public health emergency, CMS 
should delay implementation. Commenters argued that the current public 
health focus on COVID-19 is straining the resources of the nation's 
health care system. Commenters described these data collection 
requirements as enormous and stated that they are too administratively 
burdensome to implement until after the health system returns to 
normal, or at minimum, a commenter requested that CMS delay 
implementation for at least a year to give hospitals additional months 
to adapt to the impact of COVID-19 on healthcare utilization and 
payment. Additionally, a few commenters cautioned CMS from finalizing 
requirements for Calendar Year 2021, in order to learn from the 
finalized price transparency requirements already in place.
    Response: We appreciate commenters' concerns about the strain on 
the nation's health care system due to the COVID-19 public health 
emergency. However, as discussed, the payer-specific negotiated charges 
used by hospitals to calculate these medians would be the payer-
specific negotiated charges for service packages that hospitals are 
required to make public under the requirements we finalized in the 
Hospital Price Transparency final rule (84 FR 65524), beginning in 
January 1, 2021, that can be crosswalked to an MS-DRG. Hospitals would 
use the payer-specific negotiated charge data that they would be 
required to make public, as a result of the Hospital Price Transparency 
final rule, to then calculate the median payer-specific negotiated 
charges (as described further in section IV.P.2.c. of this final rule) 
to report on the Medicare cost report. We believe that because 
hospitals are already required to publicly report payer-specific 
negotiated charges, in accordance with the Hospital Price Transparency 
final rule, that the additional calculation and reporting of the median 
payer-specific negotiated charge will be less burdensome for hospitals, 
because hospitals will use the payer-specific negotiated charges 
calculated for purposes of meeting the Hospital Price Transparency 
final rule requirements to then calculate the median payer-specific 
negotiated charge by MS-DRG for MA organizations, as required under 
section IV.P.2.c. of this final rule.
    Additionally, the majority of Medicare certified hospitals have 
cost reporting periods that end between July and September of each 
year. Hospitals also have a 5-month period after their cost reporting 
periods end to submit the Medicare cost report. This means that the 
majority of hospitals will not submit their Medicare cost report until, 
at the earliest, November 2021. We will also conduct further analysis 
based on the market-based data received and provide an opportunity for 
public comment on that analysis, which may include consideration of any 
unknown impacts of the COVID-19 PHE on this data.
    Comment: Some commenters expressed concern that CMS grossly 
underestimated the amount of time and burden it will take hospitals to 
collect, organize, properly format, calculate, update and report the 
median payer-specific negotiated charges by MS-DRG. Commenters argued 
that hospitals cannot complete the task of

[[Page 58889]]

implementing the reporting requirements themselves, nor have they been 
able to find vendors capable of accomplishing the task. Commenters 
noted that a health system operating in numerous states will have 
multiple contracts for each individual hospital, within each state, and 
with each payer. Commenters argued that this could result in the system 
needing to arrange the payer-specific negotiated charges for hundreds 
of discharges for a given MS-DRG across hundreds of different payer 
contracts in order to determine the median. Additionally, commenters 
argued that some third-party payers do not pay based on MS-DRGs and as 
a result, hospitals will need to calculate an MS-DRG based on the same 
or similar package of services. Commenters noted that this process 
becomes even more complicated if commercial plans do not pay the 
hospital based on FFS rates.
    A few commenters provided a range of estimates for complying with 
the requirements of this final rule. A commenter estimated that initial 
compliance with the Hospital Price Transparency final rule would 
require a minimum of 120 hours of work, or a cost of approximately 
$10,000 for hospitals that have the internal technical expertise. This 
commenter further stated that hospitals without technical expertise 
would require a consultant, at the cost of $20,000 or more. This 
commenter argued that compliance with the policies CMS proposed would 
require significant effort beyond those initial requirements. Another 
commenter estimated it would cost around $50,000 and require a team of 
professionals from multiple departments to fulfill the reporting 
requirements. Another commenter stated the reporting requirements would 
entail a substantial investment of hospitals' time and resources and 
estimated a minimum of more than 6,000 hours per year of additional 
work to engage in this coding at a cost of at least $210,000. Another 
commenter recommended that CMS should work closely with hospitals and 
with the relevant financial software vendors to, at least, understand 
the enormity of these functions and develop a more reasonable 
determination of the time and cost required for a provider to comply.
    A few commenters suggested that health plans, including MA plans, 
should instead report this data for utilization within the MS-DRG 
relative weight calculation and be responsible for providing consumers 
with pricing information. Finally, a commenter incorrectly stated that 
the proposal requires hospitals to post rates for outpatient surgical 
services, arguing that there would be a further need to post 
independent outpatient codes separately for items contracted 
individually on a FFS basis within the same grouped contracts.
    Response: We note that hospitals are already required to publicly 
report the payer-specific negotiated charge information that they will 
use to calculate median payer-specific negotiated charges by MS-DRG for 
payers that are MA organizations, based on the requirements finalized 
in the Hospital Price Transparency final rule (we refer readers to 
burden estimates finalized in the Hospital Price Transparency final 
rule). We therefore believe that the additional calculation and 
reporting of requirements in this final rule will be less burdensome 
for hospitals since hospitals will already have this initial data 
compiled. To address the commenter's specific concerns that the rule 
further requires hospitals to post outpatient negotiated rates, we 
remind readers that our proposal, as described in the FY 2021 IPPS/LTCH 
PPS proposed rule (85 FR 32794) and finalized in this final rule, 
requires hospitals to calculate and report the median of their payer-
specific negotiated charges for items and services provided only in the 
hospital inpatient setting.
    We appreciate that different hospitals may face different 
constraints when estimating their burden and resources required. We 
also acknowledge that some hospitals may require more time and 
resources than others to gather the relevant data, prepare for its 
electronic reporting, and update that information.
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32887), we 
estimated a total annual burden to hospitals of 15 hours per hospital: 
5 hours for recordkeeping, including hours for bookkeeping, accounting 
and auditing clerks; and 10 hours for reporting, including accounting 
and audit professionals' activities. We estimated an initial annual 
burden of 47,835 annual burden hours for 3,189 hospitals, at cost of 
$971.10 per hospital, or $3,096,838 across all hospitals. After 
consideration of the comments received, we agree that the burden 
estimate should be revised to reflect an increased number of hours. A 
few commenters provided estimates based on both their unique 
experiences, as well as experiences from a variety of health financial 
management experts and members. While commenters did not provide a 
range of estimated hours, the commenters that did provide dollar 
estimates noted the estimates fell within a range of a minimum of 
$20,000 per hospital to $210,000 per hospital.
    We believe the estimates that commenters provided are not 
reasonable given the fact that hospitals are already required to 
publicly report the payer-specific negotiated charge information, which 
they will use to calculate these medians, in accordance with the 
Hospital Price Transparency final rule at the time that this data 
collection requirement goes into effect. We continue to believe that 
the additional calculation and reporting of the median payer-specific 
negotiated charge will be less burdensome for hospitals since hospitals 
are already required to have this information compiled and the burden 
associated with that compilation is already assumed.
    We note that commenters did not provide a breakdown of the tasks 
and hours associated with the estimates that they provided. However, we 
are increasing the burden estimate after consideration of comments 
stating that additional effort would be necessary to crosswalk 
discharges to an MS-DRG, specifically if a hospital is not familiar 
with the MS-DRG classification system, for use in calculating the 
median payer-specific negotiated charges. As such, we have increased 
the initial estimate of 10 hours associated with reporting the median 
payer-specific negotiated charge to 15 hours, in order to account for 
this additional effort that commenters described.
    Therefore, given the policies that we are finalizing in this final 
rule, we believe an estimate of 20 hours per hospital represents a 
broad industry view that takes into account the range of hospital 
readiness and ability to comply with these requirements. We are 
maintaining our estimate for the hours associated with recordkeeping at 
5 and are increasing the estimate of hours associated with reporting 
from 10 to 15, which equals 20 hours of annual burden per hospital and 
63,780 hours of estimated annual burden across all 3,189 hospitals. 
This equals a cost of $1,353.40 per hospital, or $4,315,993 across all 
hospitals.
    Comment: A few commenters noted that because hospitals will be 
required to publicly report payer-specific negotiated charges, in 
accordance with the Hospital Price Transparency final rule, the 
additional calculation and reporting of the median payer-specific 
negotiated charge by MS-DRG for payers that are MA organizations will 
be less burdensome for hospitals.
    Response: We agree that the additional calculation and reporting of 
the median payer-specific negotiated charge by MS-DRG for payers that 
are

[[Page 58890]]

MA organizations will be less burdensome for hospitals.
    Comment: A commenter stated that CMS may penalize hospitals that 
fail to provide median negotiated rates on Medicare cost reports 
beginning with cost reporting periods ending on or after January 1, 
2021 and that those hospitals that do not report would not receive any 
Medicare reimbursement. The commenter stated that this punitive action 
is exceptionally harsh and should be re-considered.
    Response: Sections 1815(a) and 1833(e) of the Act state that no 
Medicare payments will be made to a provider unless it has furnished 
information requested by the Secretary to determine payment amounts due 
under the Medicare program. Sections 1815(a) and 1833(e) of the Act 
pertain to CMS's authority to collect information on the Medicare cost 
report. If a Medicare provider does not furnish payment information on 
the cost report, then potentially no Medicare payments will be 
provided.
    Comment: A few commenters questioned how the provisions in this 
regulation will impact new technology and hospital ambulatory settings 
within provider-based arrangements. A commenter requested if the MS-DRG 
weights will be updated each year and, if not, how new technology will 
be addressed. Another commenter noted that the regulation does not 
account for the posting of charges and development of median rates for 
hospitals with ambulatory settings within provider-based arrangements.
    Response: The methodology we discussed in the FY 2021 IPPS/LTCH PPS 
proposed rule concerned the use of market-based data in the MS-DRG 
relative weight calculation, and did not address changes to new 
technology payments through the new technology add-on payment program, 
nor changes to the ambulatory payment policies. As discussed, we 
proposed and are finalizing the definition of the ``payer-specific 
negotiated charge'' as the charge that a hospital has negotiated with a 
third-party payer for an item or service, with an ``item and service'' 
being defined as all items and services, including individual items and 
services and service packages, that could be provided by a hospital to 
a patient in connection with an inpatient admission for which the 
hospital has established a standard charge. We further note that an MS-
DRG, as established by CMS under the MS-DRG classification system, is a 
type of service package consisting of items and services based on 
patient diagnosis and other characteristics.
    New technology add-on payment methodologies are not addressed in 
this policy and hospital ambulatory settings within provider-based 
arrangements are not included within the definition of ``items and 
services.''
    Comment: Several commenters had suggestions of alternative 
approaches that they believed would reduce CMS's reliance on the 
hospital chargemaster. Other commenters believed that the existing 
cost-based relative weight methodology already reflected some market 
dynamics and suggested reforming the hospital cost-reporting guidance 
and practices to better reflect true relative hospital resources used 
to deliver care. Similarly, several commenters referenced an 
alternative model, the Direct Cost Model, which suggested that data 
should be derived from hospital cost accounting systems to submit an 
allowable cost per discharge or outpatient service. A few commenters 
suggested CMS should develop a multi-payer voluntary demonstration that 
would allow providers to work with CMS to explore ways to rebase and 
reset relative costs within their chargemasters based on market data. 
Another commenter believed MS-DRG payments should be set by patient 
severity and acuity rather than comparisons of various patient acuities 
across multiple payers.
    Response: We thank commenters for their input. We are open to 
adjusting any finalized policy, through future rulemaking, prior to the 
FY 2024 effective date. We welcome continued dialogue with 
stakeholders.
    Comment: Several commenters requested that CMS continue to estimate 
and publicly provide the MS-DRG relative weights as calculated using 
the current cost-based estimation methodology along with the relative 
weights using the market-based estimation methodology, if CMS did 
finalize the market based data collection proposal and adopt a market-
based MS-DRG relative weight methodology. A few commenters stated that 
large payers rely on CMS's MS-DRG relative weights and assignments for 
their pricing arrangements.
    Response: As discussed previously, we were persuaded by commenters' 
concerns and recognize that other payers may use the CMS MS-DRG 
relative weights published as part of the IPPS/LTCH PPS rulemaking. We 
expect, for some period of time following implementation of the market-
based MS-DRG relative weight methodology, as discussed in the proposed 
rule, to continue to estimate and publicly provide the MS-DRG relative 
weights calculated using the cost-based estimation methodology.
    Comment: A few commenters provided a critique of Steps One through 
Five of the potential market-based MS-DRG relative weight methodology, 
which was outlined in the proposed rule. These commenters requested 
that CMS amend the potential market-based MS-DRG relative weight 
methodology, to adjust for disproportionate share hospital payments, 
uncompensated care payments, graduate medical education payments, pass 
through payments, outliers payments, transfer adjustments, quality 
program adjustments or other value-based purchasing arrangements, and 
standardize the data based on geographic region or different resource 
consumption such as complication or comorbidity or major complication 
or comorbidity, the patient population served, local market conditions, 
the impact of prior authorization, and other utilization management 
activities on the data. Additionally, other commenters suggested that 
it was too early for CMS to request feedback on the potential market 
based MS-DRG relative weights methodology since the payer-specific 
negotiated charge data described to be utilized within the methodology 
had not yet been reported or analyzed.
    Response: While commenters suggested CMS take into account several 
factors when standardizing the data for use in the market-based MS-DRG 
relative weight methodology, commenters did not provide examples or 
recommendations for how to specifically adjust or account for these 
factors within the methodology. We note that, as described previously, 
the market-based MS-DRG relative weight methodology, as described in 
the proposed rule and finalized in this final rule, would adjust for 
geographic factors by standardizing the market-based data for area wage 
levels and cost-of-living adjustments for hospital claims from Alaska 
and Hawaii, in the same manner as under the cost-based MS-DRG 
methodology (Step One of the market based MS-DRG relative weight 
methodology). As also described in the proposed rule, under Step Two of 
the market based MS-DRG methodology, we would standardize the median 
payer-specific negotiated charge data by the hospital's Medicare 
transfer-adjusted case count for that MS-DRG, with transfer adjusted 
case counts calculated exactly the same way as under the current MS-DRG 
relative weight methodology (84 FR 42621). We note that quality payment 
adjustments are not accounted for within the existing MS-DRG relative 
weight process. We

[[Page 58891]]

remain open to adjusting our finalized policy, through future 
rulemaking, prior to the FY 2024 effective date.
    Comment: Several commenters requested that CMS implement a 
transition period to monitor for unintended consequences of the new 
market based MS-DRG relative weight methodology. Other commenters urged 
CMS to provide ample transition time and clarity on the impact of 
changes by region and institution, while making efforts to minimize 
disruptions to the reimbursement system and provide certainty to 
hospitals and health care providers.
    Response: At this time we believe it is appropriate to finalize 
this market-based MS-DRG relative weight methodology with an effective 
date of FY 2024, but we will continue to consider these comments 
recommending a transition period for future rulemaking. We are 
finalizing a FY 2024 effective data in this rulemaking because an 
effective date of FY 2024 is the earliest the market-based data would 
be available for use and we want to provide as much advanced notice to 
hospitals as possible.
    Comment: We received comments on other issues, such as, a few 
commenters believed CMS did not provide enough evidence to suggest that 
system-wide cost reduction solely through reimbursement cuts for 
services delivered to beneficiaries was a driving force behind health 
care inflation, and suggested that CMS propose policies targeted at 
solving that particular problem directly. A few commenters expressed 
concern with the exclusion of costs associated with the overhead, 
handling, and other operating expenses associated with high-cost 
implantable devices. A commenter noted that CMS's MS-DRG relative 
weight calculations for procedures associated with high-cost medical 
devices may be underweighted and result in payments less than 
hospitals' costs to perform these procedures. Another commenter 
suggested that CMS issue new instructions for how hospitals should 
consistently report charges associated with high-cost implantable 
devices, including designating a new cost center for the purchase of 
high-cost implantable medical devices that includes the reporting of 
the acquisition cost of the medical device and the overhead expenses 
associated with acquisition, handling, and operating of the device. A 
commenter expressed concern that the format of pricing information may 
not align with the prohibition on information blocking and that well-
intended exceptions to information blocking may overlap and require 
every health care provider to create new information blocking policies 
and procedures and significant documentation to justify the use of the 
exceptions.
    Response: We thank commenters for this feedback. With respect to 
comments regarding cost reduction, we note that overall health care 
inflation was not the primary focus of our proposal. Step Five of the 
market-based MS-DRG relative weight methodology, as finalized, would 
normalize the relative weights by an adjustment factor so that the 
average case weight after recalibration would be equal to the average 
case weight before recalibration. As under the current cost-based 
relative weight estimation methodology, the normalization adjustment is 
intended to help ensure that recalibration by itself neither increases 
nor decreases total payments under the IPPS, as required by section 
1886(d)(4)(C)(iii) of the Act.
    In regards to additional guidance on these remaining issues raised 
by commenters on high cost implantable devices and information 
blocking, we do not fully understand the commenters' concerns in the 
context of our proposed or final policies. Nevertheless, we remain open 
to continued conversations with commenters, and adjusting any finalized 
policy, through future rulemaking, prior to the FY 2024 effective date 
and may provide additional reporting guidance as appropriate or as 
determined necessary. However, absent additional reporting guidance, we 
believe that hospitals have the capability to report this market based 
data to account for relative resource use by MS-DRG, for cost reporting 
periods ending on or after January 1, 2021.
    For example, with respect to high cost implantable devices, if the 
commenter is requesting additional clarity on how negotiated charges 
for high-cost implantable devices should be accounted for within the 
median payer-specific negotiated charges by MS-DRG, as described 
earlier, since hospitals assign the underlying ICD-10-CM principal 
diagnosis, and any other secondary diagnosis codes and ICD-10-PCS 
procedure codes, which determine how patients are assigned to an MS-
DRG, that hospitals are able to associate those items and services to 
MS-DRGs for each discharge. Additionally, hospitals that are not as 
familiar with MS-DRGs have access to the most current publically 
available version of the CMS Grouper used to group ICD-10 codes to MS-
DRGs, and are able to use this software to uniformly group inpatient 
items and services to MS-DRGs, either initially by proactively using 
the same Grouper version used by CMS, or retrospectively after an 
inpatient hospital stay, but prior to submitting this information on 
the hospital cost report.
    Final Action: After consideration of the comments received, and for 
the reasons previously discussed, we are finalizing our proposed 
market-based data collection requirement with a modification. 
Specifically, we are finalizing that hospitals would report on the 
Medicare cost report the median payer-specific negotiated charge that 
the hospital has negotiated with all of its MA organization payers, by 
MS-DRG, for cost reporting periods ending on or after January 1, 2021. 
We are not finalizing the proposed requirement that hospitals report on 
the Medicare cost report the median payer-specific negotiated charge 
the hospital has negotiated with all of its third-party payers, by MS-
DRG. We are also not finalizing the collection of the alternative data 
collection measure, the median negotiated reimbursement amount, as 
discussed in the proposed rule. To determine the median payer-specific 
negotiated charge for MA organizations for a given MS-DRG, a hospital 
would follow the process as outlined in the proposed rule (85 FR 32794) 
and discussed previously in this final rule. We are finalizing our 
definitions of ``payer-specific negotiated charge,'' ``third party 
payer,'' ``MA organization'' and ``items and services,'' as proposed. 
For the purposes of calculating and reporting the median payer-specific 
negotiated charge the hospital has negotiated with all of its MA 
organization payers, by MS-DRG, we define an MA organization the same 
way as proposed, and defined in 42 CFR 422.2; namely, an MA 
organization means a public entity or private entity organized and 
licensed by a State as a risk-bearing entity (with the exception of 
provider-sponsored organizations receiving waivers) that is certified 
by CMS as meeting the MA contract requirements. We note that the 
definition of third party payer, for the purposes of reporting median 
payer-specific negotiated charges set forth in this rule, includes MA 
organizations that have contracted with CMS.
    We are finalizing our proposed amendment to the regulations to 
specify this data collection requirement at 42 CFR 413.20(d)(3), with 
modification, to require the collection of only the median payer-
specific negotiated charge by MS-DRG for payers that are MA 
organizations. This data collection requirement is effective for cost 
reporting periods ending on or after January 1, 2021. As stated in the

[[Page 58892]]

proposed rule, further instructions for the reporting of this market-
based data collection requirement on the Medicare cost report will be 
discussed in a forthcoming revision of the Information Collection 
Request currently approved under OMB control number 0938-0050, 
expiration date March 31, 2022. We may provide additional guidance 
regarding this data collection policy as determined appropriate or 
necessary. However, absent additional guidance, we believe that 
hospitals have the capability to report this market-based data, as 
required, for cost reporting periods ending on or after January 1, 
2021.
    We are also finalizing the adoption of a market-based MS-DRG 
relative weight methodology effective for FY 2024. We are finalizing 
the market-based MS-DRG relative weight methodology, as described 
within the FY 2021 IPPS/LTCH PPS proposed rule, without modification. 
Specifically, we will begin using the median payer-specific negotiated 
charge by MS-DRG for MA organizations in the market-based MS-DRG 
relative weight methodology beginning with the relative weights 
calculated for FY 2024. We also remain open, as described in the 
proposed rule, to making modifications and refinements to this market-
based methodology, through rulemaking prior to the FY 2024 effective 
date. We are not finalizing, at this time, a transition period to this 
market-based MS-DRG relative weight methodology, but may consider this 
in future rulemaking prior to FY 2024. We expect, for some period of 
time, following implementation of this market-based MS-DRG relative 
weight methodology, as discussed in the proposed rule, to continue to 
estimate and publicly provide the MS-DRG relative weights calculated 
using the cost-based estimation methodology for informational purposes.
    We will continue to consider ways to reduce the role of hospital 
chargemasters in Medicare IPPS payments, as we described in the 
proposed rule, to further reflect market-based approaches in Medicare 
FFS payments, to the extent permitted by law.

V. Changes to the IPPS for Capital-Related Costs

A. Overview

    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient acute hospital services in 
accordance with a prospective payment system established by the 
Secretary. Under the statute, the Secretary has broad authority in 
establishing and implementing the IPPS for acute care hospital 
inpatient capital-related costs. We initially implemented the IPPS for 
capital-related costs in the FY 1992 IPPS final rule (56 FR 43358). In 
that final rule, we established a 10-year transition period to change 
the payment methodology for Medicare hospital inpatient capital-related 
costs from a reasonable cost-based payment methodology to a prospective 
payment methodology (based fully on the Federal rate).
    FY 2001 was the last year of the 10-year transition period that was 
established to phase in the IPPS for hospital inpatient capital-related 
costs. For cost reporting periods beginning in FY 2002, capital IPPS 
payments are based solely on the Federal rate for almost all acute care 
hospitals (other than hospitals receiving certain exception payments 
and certain new hospitals). (We refer readers to the FY 2002 IPPS final 
rule (66 FR 39910 through 39914) for additional information on the 
methodology used to determine capital IPPS payments to hospitals both 
during and after the transition period.)
    The basic methodology for determining capital prospective payments 
using the Federal rate is set forth in the regulations at 42 CFR 
412.312. For the purpose of calculating capital payments for each 
discharge, the standard Federal rate is adjusted as follows:
    (Standard Federal Rate) x (DRG Weight) x (Geographic Adjustment 
Factor (GAF)) x (COLA for hospitals located in Alaska and Hawaii) x (1 
+ Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if 
applicable).
    In addition, under Sec.  412.312(c), hospitals also may receive 
outlier payments under the capital IPPS for extraordinarily high-cost 
cases that qualify under the thresholds established for each fiscal 
year.

B. Additional Provisions

1. Exception Payments
    The regulations at 42 CFR 412.348 provide for certain exception 
payments under the capital IPPS. The regular exception payments 
provided under Sec.  412.348(b) through (e) were available only during 
the 10-year transition period. For a certain period after the 
transition period, eligible hospitals may have received additional 
payments under the special exceptions provisions at Sec.  412.348(g). 
However, FY 2012 was the final year hospitals could receive special 
exceptions payments. For additional details regarding these exceptions 
policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51725).
    Under Sec.  412.348(f), a hospital may request an additional 
payment if the hospital incurs unanticipated capital expenditures in 
excess of $5 million due to extraordinary circumstances beyond the 
hospital's control. Additional information on the exception payment for 
extraordinary circumstances in Sec.  412.348(f) can be found in the FY 
2005 IPPS final rule (69 FR 49185 and 49186).
2. New Hospitals
    Under the capital IPPS, the regulations at 42 CFR 412.300(b) define 
a new hospital as a hospital that has operated (under previous or 
current ownership) for less than 2 years and lists examples of 
hospitals that are not considered new hospitals. In accordance with 
Sec.  412.304(c)(2), under the capital IPPS, a new hospital is paid 85 
percent of its allowable Medicare inpatient hospital capital-related 
costs through its first 2 years of operation, unless the new hospital 
elects to receive full prospective payment based on 100 percent of the 
Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51725) for additional information on payments to new hospitals 
under the capital IPPS.
3. Payments for Hospitals Located in Puerto Rico
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57061), we revised 
the regulations at 42 CFR 412.374 relating to the calculation of 
capital IPPS payments to hospitals located in Puerto Rico beginning in 
FY 2017 to parallel the change in the statutory calculation of 
operating IPPS payments to hospitals located in Puerto Rico, for 
discharges occurring on or after January 1, 2016, made by section 601 
of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). Section 
601 of Public Law 114-113 increased the applicable Federal percentage 
of the operating IPPS payment for hospitals located in Puerto Rico from 
75 percent to 100 percent and decreased the applicable Puerto Rico 
percentage of the operating IPPS payments for hospitals located in 
Puerto Rico from 25 percent to zero percent, applicable to discharges 
occurring on or after January 1, 2016. As such, under revised Sec.  
412.374, for discharges occurring on or after October 1, 2016, capital 
IPPS payments to hospitals located in Puerto Rico are based on 100 
percent of the capital Federal rate.

C. Annual Update for FY 2021

    The annual update to the national capital Federal rate, as provided 
for in

[[Page 58893]]

42 CFR 412.308(c), for FY 2021 is discussed in section III. of the 
Addendum to this FY 2021 IPPS/LTCH PPS final rule.
    In section II.D. of the preamble of this FY 2021 IPPS/LTCH PPS 
final rule, we present a discussion of the MS-DRG documentation and 
coding adjustment, including previously finalized policies and 
historical adjustments, as well as the adjustment to the standardized 
amount under section 1886(d) of the Act that we are making for FY 2021, 
in accordance with the amendments made to section 7(b)(1)(B) of Public 
Law 110-90 by section 414 of the MACRA. Because these provisions 
require us to make an adjustment only to the operating IPPS 
standardized amount, we are not making a similar adjustment to the 
national capital Federal rate (or to the hospital-specific rates).
    We also note that in section II.D.2.b. of the preamble of this 
final rule, we are finalizing new MS-DRG 018 for cases that include 
procedures describing CAR T-cell therapies, and in section II.E.2.b. of 
this final rule, we are finalizing a modification to our relative 
weight methodology for new MS-DRG 018 in order to develop a relative 
weight that is reflective of the typical costs of providing CAR T-cell 
therapies relative to other IPPS services. In addition, in section 
IV.I. of the preamble of this final rule, we discuss our finalized 
adjustment to the payment amount for clinical trial cases or expanded 
access use immunotherapy that will group to new MS-DRG 018 for both 
operating IPPS payments and capital IPPS payments. We refer readers to 
section IV.I. of this preamble for additional details on the payment 
adjustment for these cases.

VI. Changes for Hospitals Excluded From the IPPS

A. Rate-of-Increase in Payments to Excluded Hospitals for FY 2021

    Certain hospitals excluded from a prospective payment system, 
including children's hospitals, 11 cancer hospitals, and hospitals 
located outside the 50 States, the District of Columbia, and Puerto 
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa) receive payment for 
inpatient hospital services they furnish on the basis of reasonable 
costs, subject to a rate-of-increase ceiling. A per discharge limit 
(the target amount, as defined in Sec.  413.40(a) of the regulations) 
is set for each hospital based on the hospital's own cost experience in 
its base year, and updated annually by a rate-of-increase percentage. 
For each cost reporting period, the updated target amount is multiplied 
by total Medicare discharges during that period and applied as an 
aggregate upper limit (the ceiling as defined in Sec.  413.40(a)) of 
Medicare reimbursement for total inpatient operating costs for a 
hospital's cost reporting period. In accordance with Sec.  403.752(a) 
of the regulations, religious nonmedical health care institutions 
(RNHCIs) also are subject to the rate-of-increase limits established 
under Sec.  413.40 of the regulations discussed previously. 
Furthermore, in accordance with Sec.  412.526(c)(3) of the regulations, 
extended neoplastic disease care hospitals also are subject to the 
rate-of-increase limits established under Sec.  413.40 of the 
regulations discussed previously.
    As explained in the FY 2006 IPPS final rule (70 FR 47396 through 
47398), beginning with FY 2006, we have used the percentage increase in 
the IPPS operating market basket to update the target amounts for 
children's hospitals, the 11 cancer hospitals, and RNHCIs. Consistent 
with the regulations at Sec. Sec.  412.23(g) and 413.40(a)(2)(ii)(A) 
and (c)(3)(viii), we also have used the percentage increase in the IPPS 
operating market basket to update target amounts for short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa. In the FYs 2014 and 2015 IPPS/LTCH 
PPS final rules (78 FR 50747 through 50748 and 79 FR 50156 through 
50157, respectively), we adopted a policy of using the percentage 
increase in the FY 2010-based IPPS operating market basket to update 
the target amounts for FY 2014 and subsequent fiscal years for 
children's hospitals, cancer hospitals, RNHCIs, and short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa. However, in the FY 2018 IPPS/LTCH 
PPS final rule, we rebased and revised the IPPS operating basket to a 
2014 base year, effective for FY 2018 and subsequent years (82 FR 38158 
through 38175), and finalized the use of the percentage increase in the 
2014-based IPPS operating market basket to update the target amounts 
for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-
term acute care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa for FY 2018 and subsequent 
years. Accordingly, for FY 2021, the rate-of-increase percentage to be 
applied to the target amount for these hospitals would be the FY 2021 
percentage increase in the 2014-based IPPS operating market basket.
    For the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32798), based on 
IGI's 2019 fourth quarter forecast, we estimated that the 2014-based 
IPPS operating market basket update for FY 2021 would be 3.0 percent 
(that is, the estimate of the market basket rate-of-increase). Based on 
this estimate, we stated that the FY 2021 rate-of-increase percentage 
that would be applied to the FY 2020 target amounts in order to 
calculate the FY 2021 target amounts for children's hospitals, the 11 
cancer hospitals, RNCHIs, and short-term acute care hospitals located 
in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and 
American Samoa would be 3.0 percent, in accordance with the applicable 
regulations at 42 CFR 413.40. However, we proposed that if more recent 
data became available for the final rule, we would use such data, if 
appropriate, to calculate the final IPPS operating market basket update 
for FY 2021. For this FY 2021 IPPS/LTCH PPS final rule, based on IGI's 
2020 second quarter forecast, the 2014-based IPPS operating market 
basket update for FY 2021 is 2.4 percent (that is, the estimate of the 
market basket rate-of-increase). Therefore, the FY 2021 rate-of-
increase percentage that will be applied to the FY 2020 target amounts 
in order to calculate the FY 2021 target amounts for children's 
hospitals, the 11 cancer hospitals, RNCHIs, and short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa is 2.4 percent, in accordance with 
the applicable regulations at 42 CFR 413.40.
    In addition, payment for inpatient operating costs for hospitals 
classified under section 1886(d)(1)(B)(vi) of the Act (which we refer 
to as ``extended neoplastic disease care hospitals'') for cost 
reporting periods beginning on or after January 1, 2015, is to be made 
as described in 42 CFR 412.526(c)(3), and payment for capital costs for 
these hospitals is to be made as described in 42 CFR 412.526(c)(4). 
(For additional information on these payment regulations, we refer 
readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38321 through 
38322).) Section 412.526(c)(3) provides that the hospital's Medicare 
allowable net inpatient operating costs for that period are paid on a 
reasonable cost basis, subject to that hospital's ceiling, as 
determined under Sec.  412.526(c)(1), for that period. Under Sec.  
412.526(c)(1), for each cost reporting period, the ceiling was 
determined by multiplying the updated target amount, as defined in 
Sec.  412.526(c)(2), for that period by the

[[Page 58894]]

number of Medicare discharges paid during that period. Section 
412.526(c)(2)(i) describes the method for determining the target amount 
for cost reporting periods beginning during FY 2015. Section 
412.526(c)(2)(ii) specifies that, for cost reporting periods beginning 
during fiscal years after FY 2015, the target amount will equal the 
hospital's target amount for the previous cost reporting period updated 
by the applicable annual rate-of-increase percentage specified in Sec.  
413.40(c)(3) for the subject cost reporting period (79 FR 50197).
    For FY 2021, in accordance with Sec. Sec.  412.22(i) and 
412.526(c)(2)(ii) of the regulations, for cost reporting periods 
beginning during FY 2021, the update to the target amount for extended 
neoplastic disease care hospitals (that is, hospitals described under 
Sec.  412.22(i)) is the applicable annual rate-of-increase percentage 
specified in Sec.  413.40(c)(3) for FY 2021, which would be equal to 
the percentage increase in the hospital market basket index, which is 
estimated to be the percentage increase in the 2014-based IPPS 
operating market basket (that is, the estimate of the market basket 
rate-of-increase). Accordingly, the update to an extended neoplastic 
disease care hospital's target amount for FY 2021 is 2.4 percent, which 
is based on IGI's 2020 second quarter forecast. Furthermore, we 
proposed that if more recent data become available for the final rule, 
we would use such data, if appropriate, to calculate the IPPS operating 
market basket update for FY 2021.
    We did not receive comments in response to the proposals, as 
previously discussed. Therefore, for the reasons set forth in this 
final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, we are 
finalizing as proposed, without modification, our policy for updating 
the target amounts for excluded hospitals. As discussed previously, 
based on IGI's 2020 second quarter forecast, the FY 2021 rate-of-
increase percentage that will be applied to the FY 2020 target amounts 
in order to calculate the FY 2021 target amounts for children's 
hospitals, the 11 cancer hospitals, RNCHIs, extended neoplastic disease 
care hospitals, and short-term acute care hospitals located in the U.S. 
Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa 
is 2.4 percent.

B. Report on Adjustment (Exception) Payments

    Section 4419(b) of Public Law 105-33 requires the Secretary to 
publish annually in the Federal Register a report describing the total 
amount of adjustment payments made to excluded hospitals and hospital 
units by reason of section 1886(b)(4) of the Act during the previous 
fiscal year.
    The process of requesting, adjusting, and awarding an adjustment 
payment is likely to occur over a 2-year period or longer. First, 
generally, an excluded hospital must file its cost report for the 
fiscal year in accordance with Sec.  413.24(f)(2) of the regulations. 
The MAC reviews the cost report and issues a notice of provider 
reimbursement (NPR). Once the hospital receives the NPR, if its 
operating costs are in excess of the ceiling, the hospital may file a 
request for an adjustment payment. After the MAC receives the 
hospital's request in accordance with applicable regulations, the MAC 
or CMS, depending on the type of adjustment requested, reviews the 
request and determines if an adjustment payment is warranted. This 
determination is sometimes not made until more than 180 days after the 
date the request is filed because there are times when the request 
applications are incomplete and additional information must be 
requested in order to have a completed request application. However, in 
an attempt to provide interested parties with data on the most recent 
adjustment payments for which we have data, we are publishing data on 
adjustment payments that were processed by the MAC or CMS during FY 
2019.
    The table that follows includes the most recent data available from 
the MACs and CMS on adjustment payments that were adjudicated during FY 
2019. As indicated previously, the adjustments made during FY 2019 only 
pertain to cost reporting periods ending in years prior to FY 2019. 
Total adjustment payments made to IPPS-excluded hospitals during FY 
2019 are $44,068,703. The table depicts for each class of hospitals, in 
the aggregate, the number of adjustment requests adjudicated, the 
excess operating costs over the ceiling, and the amount of the 
adjustment payments.
[GRAPHIC] [TIFF OMITTED] TR18SE20.226

C. Critical Access Hospitals (CAHs)

1. Background
    Section 1820 of the Act provides for the establishment of Medicare 
Rural Hospital Flexibility Programs (MRHFPs), under which individual 
States may designate certain facilities as critical access hospitals 
(CAHs). Facilities that are so designated and meet the CAH conditions 
of participation under 42 CFR part 485, subpart F, will be certified as 
CAHs by CMS. Regulations governing payments to CAHs for services to 
Medicare beneficiaries are located in 42 CFR part 413.
2. Frontier Community Health Integration Project (FCHIP) Demonstration
a. Background and Overview
    As discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42044 
through 42701), section 123 of the Medicare Improvements for Patients 
and Providers Act of 2008 (Pub. L. 110-275), as amended by section 3126 
of the Affordable Care Act, authorized a demonstration project to allow 
eligible entities to develop and test new models for the delivery of 
health care services in eligible counties in order to improve access to 
and better integrate the delivery of acute care, extended care and 
other health care services to Medicare beneficiaries. The demonstration 
was titled ``Demonstration Project on Community Health Integration 
Models in Certain Rural Counties,'' and commonly known as the Frontier 
Community Health Integration Project (FCHIP) demonstration.
    The authorizing statute stated the eligibility criteria for 
entities to be able to participate in the demonstration. An eligible 
entity, as defined in section 123(d)(1)(B) of Public Law 110-275, as 
amended, is an MRHFP grantee under

[[Page 58895]]

section 1820(g) of the Act (that is, a CAH); and is located in a State 
in which at least 65 percent of the counties in the State are counties 
that have 6 or less residents per square mile.
    The authorizing statute stipulated several other requirements for 
the demonstration. Section 123(d)(2)(B) of Public Law 110-275, as 
amended, limited participation in the demonstration to eligible 
entities in not more than 4 States. Section 123(f)(1) of Public Law 
110-275 required the demonstration project to be conducted for a 3-year 
period. In addition, section 123(g)(1)(B) of Public Law 110-275 
required that the demonstration be budget neutral. Specifically, this 
provision stated that, in conducting the demonstration project, the 
Secretary shall ensure that the aggregate payments made by the 
Secretary do not exceed the amount which the Secretary estimates would 
have been paid if the demonstration project under the section were not 
implemented. Furthermore, section 123(i) of Public Law 110-275 stated 
that the Secretary may waive such requirements of titles XVIII and XIX 
of the Act as may be necessary and appropriate for the purpose of 
carrying out the demonstration project, thus allowing the waiver of 
Medicare payment rules encompassed in the demonstration.
    In January 2014, we released a request for applications (RFA) for 
the FCHIP demonstration. Using 2013 data from the U.S. Census Bureau, 
CMS identified Alaska, Montana, Nevada, North Dakota, and Wyoming as 
meeting the statutory eligibility requirement for participation in the 
demonstration. The RFA solicited CAHs in these five States to 
participate in the demonstration, stating that participation would be 
limited to CAHs in four of the States. To apply, CAHs were required to 
meet the eligibility requirements in the authorizing legislation, and 
to describe a proposal to enhance health-related services that would 
complement those currently provided by the CAH and better serve the 
community's needs. In addition, in the RFA, CMS interpreted the 
eligible entity definition in the statute as meaning a CAH that 
receives funding through the MHRFP. The RFA identified four 
interventions, under which specific waivers of Medicare payment rules 
would allow for enhanced payment for telehealth, skilled nursing 
facility/nursing facility beds, ambulance services, and home health 
services, respectively. These waivers were formulated with the goal of 
increasing access to care with no net increase in costs.
    Ten CAHs were selected for participation in the demonstration, 
which started on August 1, 2016, and concluded on July 31, 2019. The 
selected CAHs were located in Montana, Nevada, and North Dakota, and 
participated in three of the four interventions identified in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57064 through 57065), the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38294 through 38296), and the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41516 through 41517), and the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42044 through 42701). Eight CAHs 
participated in the telehealth intervention, three CAHs participated in 
the skilled nursing facility/nursing facility bed intervention, and two 
CAHs participated in the ambulance services intervention. Each CAH was 
allowed to participate in more than one of the interventions. None of 
the selected CAHs were participants in the home health intervention, 
which was the fourth intervention included in the RFA.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57064 through 
57065), we finalized a policy to address the budget neutrality 
requirement for the demonstration. We also discussed this policy in the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38294 through 38296), the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41516 through 41517), and the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42044 through 42701), but did not 
make any changes to the policy that was adopted in FY 2017. As 
explained in the FY 2017 IPPS/LTCH PPS final rule, we based our 
selection of CAHs for participation in the demonstration with the goal 
of maintaining the budget neutrality of the demonstration on its own 
terms (that is, the demonstration would produce savings from reduced 
transfers and admissions to other health care providers, thus 
offsetting any increase in Medicare payments as a result of the 
demonstration). However, because of the small size of the demonstration 
and uncertainty associated with the projected Medicare utilization and 
costs, the policy we adopted in the FY 2017 IPPS/LTCH PPS final rule 
provides a contingency plan to ensure that the budget neutrality 
requirement in section 123 of Public Law 110-275 is met. If analysis of 
claims data for Medicare beneficiaries receiving services at each of 
the participating CAHs, as well as from other data sources, including 
cost reports for these CAHs, shows that increases in Medicare payments 
under the demonstration during the 3-year period are not sufficiently 
offset by reductions elsewhere, we will recoup the additional 
expenditures attributable to the demonstration through a reduction in 
payments to all CAHs nationwide. Because of the small scale of the 
demonstration, we indicated that we did not believe it would be 
feasible to implement budget neutrality by reducing payments to only 
the participating CAHs. Therefore, in the event that this demonstration 
is found to result in aggregate payments in excess of the amount that 
would have been paid if this demonstration were not implemented, we 
will comply with the budget neutrality requirement by reducing payments 
to all CAHs, not just those participating in the demonstration. We 
stated that we believe it is appropriate to make any payment reductions 
across all CAHs because the FCHIP demonstration was specifically 
designed to test innovations that affect delivery of services by the 
CAH provider category. We explained our belief that the language of the 
statutory budget neutrality requirement at section 123(g)(1)(B) of 
Public Law 110-275 permits the agency to implement the budget 
neutrality provision in this manner. The statutory language merely 
refers to ensuring that aggregate payments made by the Secretary do not 
exceed the amount which the Secretary estimates would have been paid if 
the demonstration project was not implemented, and does not identify 
the range across which aggregate payments must be held equal.
    Based on actuarial analysis using cost report settlements for FYs 
2013 and 2014, the FCHIP demonstration is projected to satisfy the 
budget neutrality requirement and likely yield a total net savings. For 
this FY 2021 IPPS/LTCH PPS final rule, we estimate that the total 
impact of the payment recoupment (if needed) will be no greater than 
0.03 percent of CAHs' total Medicare payments (that is, Medicare Part A 
and Part B) within 1 fiscal year. The final budget neutrality estimates 
for the FCHIP demonstration will be based on costs incurred during the 
entire demonstration period, which is August 1, 2016, through July 31, 
2019.
b. FCHIP Budget Neutrality Methodology and Analytical Approach
    As explained in the FY 2021 IPPS/LTCH PPS proposed rule, our goal 
was to maintain the budget neutrality of the demonstration on its own 
terms (that is, the demonstration would produce savings from reduced 
transfers and admissions to other health care providers, thus 
offsetting any increase in payments to the participating CAHs

[[Page 58896]]

resulting from the demonstration). The budget neutrality assessment 
will seek to determine if this goal has been met by examining 
expenditures for beneficiaries who received an intervention-related 
service(s) at a demonstration CAH or a comparison CAH. The 
demonstration and comparison groups will be identified as Medicare 
beneficiaries receiving an intervention-related service (that is, 
telemedicine, SNF/NF or ambulance) at participating CAHs and non-
participating CAHs, respectively. To ensure that there is no cross 
contamination between the groups, the demonstration and comparison 
groups will be mutually exclusive so beneficiaries who received 
intervention-related services at both participating and non-
participating CAHs will be included in the demonstration (intervention) 
group only. The analysis of budget neutrality will seek to identify 
both the costs related to providing the intervention-related services 
under the demonstration and any potential downstream effects of these 
services, including any savings that may have accrued.
    We intend to incorporate two components into the budget neutrality 
analytical approach: (1) Medicare cost reports; and (2) Medicare 
administrative claims. As described in the FY 2021 IPPS/LTCH PPS 
proposed rule (85 FR 32800), we propose to estimate the cost of the 
demonstration for each fiscal year of the demonstration period using 
Medicare cost reports for the participating hospitals, and Medicare 
administrative claims and enrollment data for beneficiaries who 
received demonstration intervention related services.
    First, using Medicare administrative claims and enrollment data, a 
difference-in-difference (DID) regression analysis will be used to 
compute the impact of the demonstration interventions on Medicare 
expenditures, relative to what expenditures would have looked like 
without the demonstration. The DID regression analysis will compare the 
direct cost and potential downstream effects of intervention services, 
including any savings that may have accrued, during the baseline and 
performance period for both the demonstration and comparison groups.
    Second, the Medicare administrative claims analysis will be 
reconciled using data obtained from auditing the participating CAHs' 
Medicare cost reports. We will estimate the costs of the demonstration 
using ``as submitted'' cost reports for each hospital's financial 
fiscal year participation within each demonstration performance year. 
While the majority of demonstration participants had cost reporting 
years that aligned with the demonstration period start date of July 1, 
2016, several participating CAHs did not have cost reporting years that 
coincided with the demonstration start date. The cost report is 
structured to gather costs, revenues and statistical data on the 
provider's financial fiscal period. As a result, when a CAH's cost 
reporting year does not align with the timeframes used under the 
demonstration, additional calculations are necessary to carve-out data 
that relates to the portion of a cost reporting year when the 
demonstration was not in effect. We will determine the final budget 
neutrality results for the demonstration once complete data is 
available for the demonstration period. As we stated in the proposed 
rule, while this discussion represents our anticipated approach to 
assessing the financial impact of the demonstration based on the data 
available to date, upon receiving data for the full demonstration 
period, we may update and/or modify the FCHIP budget neutrality 
methodology and analytical approach to ensure that the full impact of 
the demonstration is appropriately captured.
    Under the policy finalized in the FY 2017 IPPS/LTCH PPS final rule, 
in the event the demonstration is found not to have been budget 
neutral, any excess costs will be recouped over a period of 3 cost 
reporting years. The 3-year period for recoupment will allow for a 
reasonable timeframe for the payment reduction and minimize any impact 
on CAHs' operations. Under the policy adopted in FY 2017 IPPS/LTCH PPS 
final rule, in the event the demonstration is found not to have been 
budget neutral, any excess costs will be recouped beginning in CY 2020. 
In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32810), we stated 
that based on the currently available data, the determination of budget 
neutrality results is preliminary and the amount of any reduction to 
CAH payments that will be needed in order to recoup excess costs under 
the demonstration remains uncertain. Therefore, we proposed to revise 
the policy originally adopted in the FY 2017 IPPS/LTCH PPS final rule, 
to delay the implementation of any budget neutrality adjustment and 
stated that we will revisit this policy in rulemaking for FY 2022, when 
we expect to have complete data for the demonstration period. Since our 
data analysis is incomplete, it is not possible to determine the impact 
of this policy for any national payment system for FY 2021.
    Comment: Commenters expressed support for our proposal to delay 
implementation of any budget neutrality adjustment until we have 
complete data.
    Response: We acknowledge and appreciate the comments. After 
consideration of the public comments received, we are finalizing this 
proposal without modification.

VII. Changes to the Long-Term Care Hospital Prospective Payment System 
(LTCH PPS) for FY 2021

A. Background of the LTCH PPS

1. Legislative and Regulatory Authority
    Section 123 of the Medicare, Medicaid, and SCHIP (State Children's 
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113), as amended by section 307(b) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106554), provides for payment for both the operating 
and capital-related costs of hospital inpatient stays in long-term care 
hospitals (LTCHs) under Medicare Part A based on prospectively set 
rates. The Medicare prospective payment system (PPS) for LTCHs applies 
to hospitals that are described in section 1886(d)(1)(B)(iv) of the 
Act, effective for cost reporting periods beginning on or after October 
1, 2002.
    Section 1886(d)(1)(B)(iv)(I) of the Act originally defined an LTCH 
as a hospital which has an average inpatient length of stay (as 
determined by the Secretary) of greater than 25 days. Section 
1886(d)(1)(B)(iv)(II) of the Act (``subclause II'' LTCHs) also provided 
an alternative definition of LTCHs. However, section 15008 of the 21st 
Century Cures Act (Pub. L. 114-255) amended section 1886 of the Act to 
exclude former ``subclause II'' LTCHs from being paid under the LTCH 
PPS and created a new category of IPPS-excluded hospitals, which we 
refer to as ``extended neoplastic disease care hospitals,'' to be paid 
as hospitals that were formally classified as ``subclause (II)'' LTCHs 
(82 FR 38298).
    Section 123 of the BBRA requires the PPS for LTCHs to be a ``per 
discharge'' system with a diagnosis-related group (DRG) based patient 
classification system that reflects the differences in patient 
resources and costs in LTCHs.
    Section 307(b)(1) of the BIPA, among other things, mandates that 
the Secretary shall examine, and may provide for, adjustments to 
payments under the LTCH PPS, including adjustments to DRG weights, area 
wage

[[Page 58897]]

adjustments, geographic reclassification, outliers, updates, and a 
disproportionate share adjustment.
    In the August 30, 2002 Federal Register, we issued a final rule 
that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR 
55954). For the initial implementation of the LTCH PPS (FYs 2003 
through FY 2007), the system used information from LTCH patient records 
to classify patients into distinct long-term care-diagnosis-related 
groups (LTCDRGs) based on clinical characteristics and expected 
resource needs. Beginning in FY 2008, we adopted the Medicare severity-
long-term care-diagnosis related groups (MS-LTC-DRGs) as the patient 
classification system used under the LTCH PPS. Payments are calculated 
for each MS-LTC-DRG and provisions are made for appropriate payment 
adjustments. Payment rates under the LTCH PPS are updated annually and 
published in the Federal Register.
    The LTCH PPS replaced the reasonable cost-based payment system 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) 
(Pub. L. 97248) for payments for inpatient services provided by an LTCH 
with a cost reporting period beginning on or after October 1, 2002. 
(The regulations implementing the TEFRA reasonable-cost-based payment 
provisions are located at 42 CFR part 413.) With the implementation of 
the PPS for acute care hospitals authorized by the Social Security 
Amendments of 1983 (Pub. L. 9821), which added section 1886(d) to the 
Act, certain hospitals, including LTCHs, were excluded from the PPS for 
acute care hospitals and were paid their reasonable costs for inpatient 
services subject to a per discharge limitation or target amount under 
the TEFRA system. For each cost reporting period, a hospital specific 
ceiling on payments was determined by multiplying the hospital's 
updated target amount by the number of total current year Medicare 
discharges. (Generally, in this section of the preamble of this final 
rule, when we refer to discharges, we describe Medicare discharges.) 
The August 30, 2002 final rule further details the payment policy under 
the TEFRA system (67 FR 55954).
    In the August 30, 2002 final rule, we provided for a 5-year 
transition period from payments under the TEFRA system to payments 
under the LTCH PPS. During this 5-year transition period, an LTCH's 
total payment under the PPS was based on an increasing percentage of 
the Federal rate with a corresponding decrease in the percentage of the 
LTCH PPS payment that is based on reasonable cost concepts, unless an 
LTCH made a one-time election to be paid based on 100 percent of the 
Federal rate. Beginning with LTCHs' cost reporting periods beginning on 
or after October 1, 2006, total LTCH PPS payments are based on 100 
percent of the Federal rate.
    In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification 
system, relative weights, payment rates, additional payments, and the 
budget neutrality requirements mandated by section 123 of the BBRA. The 
same final rule that established regulations for the LTCH PPS under 42 
CFR part 412, subpart O, also contained LTCH provisions related to 
covered inpatient services, limitation on charges to beneficiaries, 
medical review requirements, furnishing of inpatient hospital services 
directly or under arrangement, and reporting and recordkeeping 
requirements. We refer readers to the August 30, 2002 final rule for a 
comprehensive discussion of the research and data that supported the 
establishment of the LTCH PPS (67 FR 55954).
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 
49623), we implemented the provisions of the Pathway for Sustainable 
Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated 
the application of the ``site neutral'' payment rate under the LTCH PPS 
for discharges that do not meet the statutory criteria for exclusion 
beginning in FY 2016. For cost reporting periods beginning on or after 
October 1, 2015, discharges that do not meet certain statutory criteria 
for exclusion are paid based on the site neutral payment rate. 
Discharges that do meet the statutory criteria continue to receive 
payment based on the LTCH PPS standard Federal payment rate. For more 
information on the statutory requirements of the Pathway for SGR Reform 
Act of 2013, we refer readers to the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49601 through 49623) and the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57068 through 57075).
    In the FY 2018 IPPS/LTCH PPS final rule, we implemented several 
provisions of the 21st Century Cures Act (``the Cures Act'') (Pub. L. 
114-255) that affected the LTCH PPS. (For more information on these 
provisions, we refer readers to 82 FR 38299.)
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41529), we made 
conforming changes to our regulations to implement the provisions of 
section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), 
which extends the transitional blended payment rate for site neutral 
payment rate cases for an additional 2 years. We refer readers to 
section VII.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule 
for a discussion of our final policy. In addition, in the FY 2019 IPPS/
LTCH PPS final rule, we removed the 25-percent threshold policy under 
42 CFR 412.538.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42439), we further 
revised our regulations to implement the provisions of the Pathway for 
SGR Reform Act of 2013 (Pub. L. 113-67) that relate to the payment 
adjustment for discharges from LTCHs that do not maintain the requisite 
discharge payment percentage and the process by which such LTCHs may 
have the payment adjustment discontinued.
    We received several public comments that addressed issues, 
including the Coronavirus disease 2019 (COVID-19) pandemic, that were 
outside the scope of the FY 2021 IPPS/LTCH PPS proposed rule. We will 
keep these comments in mind and may consider them for future 
rulemaking.
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
    Under the regulations at Sec.  412.23(e)(1), to qualify to be paid 
under the LTCH PPS, a hospital must have a provider agreement with 
Medicare. Furthermore, Sec.  412.23(e)(2)(i), which implements section 
1886(d)(1)(B)(iv) of the Act, requires that a hospital have an average 
Medicare inpatient length of stay of greater than 25 days to be paid 
under the LTCH PPS. In accordance with section 1206(a)(3) of the 
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), as amended by 
section 15007 of Public Law 114-255, we amended our regulations to 
specify that Medicare Advantage plans' and site neutral payment rate 
discharges are excluded from the calculation of the average length of 
stay for all LTCHs, for discharges occurring in cost reporting period 
beginning on or after October 1, 2015.
b. Hospitals Excluded From the LTCH PPS
    The following hospitals are paid under special payment provisions, 
as described in Sec.  412.22(c) and, therefore, are not subject to the 
LTCH PPS rules:
     Veterans Administration hospitals.
     Hospitals that are reimbursed under State cost control 
systems approved under 42 CFR part 403.
     Hospitals that are reimbursed in accordance with 
demonstration projects authorized under section 402(a) of the

[[Page 58898]]

Social Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-
1), section 222(a) of the Social Security Amendments of 1972 (Pub. L. 
92-603) (42 U.S.C. 1395b1 (note)) (Statewide--all payer systems, 
subject to the--rate-of increase--test at section 1814(b) of the Act), 
or section 3201 of the Patient Protection and Affordable Care Act (Pub. 
L. 111-148) (42 U.S.C. 1315a).
     Nonparticipating hospitals furnishing emergency services 
to Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
    In the August 30, 2002 final rule, we presented an in-depth 
discussion of beneficiary liability under the LTCH PPS (67 FR 55974 
through 55975). This discussion was further clarified in the RY 2005 
LTCH PPS final rule (69 FR 25676). In keeping with those discussions, 
if the Medicare payment to the LTCH is the full LTC-DRG payment amount, 
consistent with other established hospital prospective payment systems, 
Sec.  412.507 currently provides that an LTCH may not bill a Medicare 
beneficiary for more than the deductible and coinsurance amounts as 
specified under Sec. Sec.  409.82, 409.83, and 409.87, and for items 
and services specified under Sec.  489.30(a). However, under the LTCH 
PPS, Medicare will only pay for services furnished during the days for 
which the beneficiary has coverage until the short-stay outlier (SSO) 
threshold is exceeded. If the Medicare payment was for a SSO case (in 
accordance with Sec.  412.529), and that payment was less than the full 
LTC-DRG payment amount because the beneficiary had insufficient 
coverage as a result of the remaining Medicare days, the LTCH also is 
currently permitted to charge the beneficiary for services delivered on 
those uncovered days (in accordance with Sec.  412.507). In the FY 2016 
IPPS/LTCH PPS final rule (80 FR 49623), we amended our regulations to 
expressly limit the charges that may be imposed upon beneficiaries 
whose LTCHs' discharges are paid at the site neutral payment rate under 
the LTCH PPS. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57102), we 
amended the regulations under Sec.  412.507 to clarify our existing 
policy that blended payments made to an LTCH during its transitional 
period (that is, an LTCH's payment for discharges occurring in cost 
reporting periods beginning in FYs 2016 through 2019) are considered to 
be site neutral payment rate payments.

B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-
DRG) Classifications and Relative Weights for FY 2021

1. Background
    Section 123 of the BBRA required that the Secretary implement a PPS 
for LTCHs to replace the cost-based payment system under TEFRA. Section 
307(b)(1) of the BIPA modified the requirements of section 123 of the 
BBRA by requiring that the Secretary examine the feasibility and the 
impact of basing payment under the LTCH PPS on the use of existing (or 
refined) hospital DRGs that have been modified to account for different 
resource use of LTCH patients.
    When the LTCH PPS was implemented for cost reporting periods 
beginning on or after October 1, 2002, we adopted the same DRG patient 
classification system utilized at that time under the IPPS. As a 
component of the LTCH PPS, we refer to this patient classification 
system as the ``long-term care diagnosis-related groups (LTC-DRGs).'' 
Although the patient classification system used under both the LTCH PPS 
and the IPPS are the same, the relative weights are different. The 
established relative weight methodology and data used under the LTCH 
PPS result in relative weights under the LTCH PPS that reflect the 
differences in patient resource use of LTCH patients, consistent with 
section 123(a)(1) of the BBRA (Pub. L. 106-113).
    As part of our efforts to better recognize severity of illness 
among patients, in the FY 2008 IPPS final rule with comment period (72 
FR 47130), the MS-DRGs and the Medicare severity long-term care 
diagnosis-related groups (MS-LTC-DRGs) were adopted under the IPPS and 
the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 
2008). For a full description of the development, implementation, and 
rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers 
to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 
47175 and 47277 through 47299). (We note that, in that same final rule, 
we revised the regulations at Sec.  412.503 to specify that for LTCH 
discharges occurring on or after October 1, 2007, when applying the 
provisions of 42 CFR part 412, subpart O applicable to LTCHs for policy 
descriptions and payment calculations, all references to LTC-DRGs would 
be considered a reference to MS-LTC-DRGs. For the remainder of this 
section, we present the discussion in terms of the current MS-LTC-DRG 
patient classification system unless specifically referring to the 
previous LTC-DRG patient classification system that was in effect 
before October 1, 2007.)
    The MS-DRGs adopted in FY 2008 represent an increase in the number 
of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). The MS-DRG 
classifications are updated annually. There are currently 761 MS-DRG 
groupings. For FY 2021, there will be 767 MS-DRG groupings based on the 
changes, as discussed in section II.E. of the preamble of this final 
rule. Consistent with section 123 of the BBRA, as amended by section 
307(b)(1) of the BIPA, and Sec.  412.515 of the regulations, we use 
information derived from LTCH PPS patient records to classify LTCH 
discharges into distinct MS-LTC-DRGs based on clinical characteristics 
and estimated resource needs. Then we assign an appropriate weight to 
the MS-LTC-DRGs to account for the difference in resource use by 
patients exhibiting the case complexity and multiple medical problems 
characteristic of LTCHs.
    In this section of this final rule, we provide a general summary of 
our existing methodology for determining the FY 2021 MS-LTC-DRG 
relative weights under the LTCH PPS.
    As we proposed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32803), in general, for FY 2021, we are continuing to use our existing 
methodology to determine the MS-LTC-DRG relative weights (as discussed 
in greater detail in section VII.B.3. of the preamble of this final 
rule). As we established when we implemented the dual rate LTCH PPS 
payment structure codified under Sec.  412.522, which began in FY 2016, 
as we proposed, the annual recalibration of the MS-LTC-DRG relative 
weights are determined: (1) Using only data from available LTCH PPS 
claims that would have qualified for payment under the new LTCH PPS 
standard Federal payment rate if that rate had been in effect at the 
time of discharge when claims data from time periods before the dual 
rate LTCH PPS payment structure applies are used to calculate the 
relative weights; and (2) using only data from available LTCH PPS 
claims that qualify for payment under the new LTCH PPS standard Federal 
payment rate when claims data from time periods after the dual rate 
LTCH PPS payment structure applies are used to calculate the relative 
weights (80 FR 49624). That is, under our current methodology, our MS-
LTC-DRG relative weight calculations do not use data from cases paid at 
the site neutral payment rate under Sec.  412.522(c)(1) or data from 
cases that

[[Page 58899]]

would have been paid at the site neutral payment rate if the dual rate 
LTCH PPS payment structure had been in effect at the time of that 
discharge. For the remainder of this discussion, we use the phrase 
``applicable LTCH cases'' or ``applicable LTCH data'' when referring to 
the resulting claims data set used to calculate the relative weights 
(as described later in greater detail in section VII.B.3.c. of the 
preamble of this final rule). In addition, for FY 2021, as we proposed, 
we are continuing to exclude the data from all-inclusive rate providers 
and LTCHs paid in accordance with demonstration projects, as well as 
any Medicare Advantage claims from the MS-LTC-DRG relative weight 
calculations for the reasons discussed in section VII.B.3.c. of the 
preamble of this final rule.
    Furthermore, for FY 2021, in using data from applicable LTCH cases 
to establish MS-LTC-DRG relative weights, as we proposed, we are 
continuing to establish low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs 
with less than 25 cases) using our quintile methodology in determining 
the MS-LTC-DRG relative weights because LTCHs do not typically treat 
the full range of diagnoses as do acute care hospitals. Therefore, for 
purposes of determining the relative weights for the large number of 
low-volume MS-LTC-DRGs, we grouped all of the low-volume MS-LTC-DRGs 
into five quintiles based on average charges per discharge. Then, under 
our existing methodology, we accounted for adjustments made to LTCH PPS 
standard Federal payments for short-stay outlier (SSO) cases (that is, 
cases where the covered length of stay at the LTCH is less than or 
equal to five-sixths of the geometric average length of stay for the 
MS-LTC-DRG), and we made adjustments to account for nonmonotonically 
increasing weights, when necessary. The methodology is premised on more 
severe cases under the MS-LTC-DRG system requiring greater expenditure 
of medical care resources and higher average charges such that, in the 
severity levels within a base MS-LTC-DRG, the relative weights should 
increase monotonically with severity from the lowest to highest 
severity level. (We discuss each of these components of our MS-LTC-DRG 
relative weight methodology in greater detail in section VII.B.3.g. of 
the preamble of this final rule.)
2. Patient Classifications Into MS-LTC-DRGs
a. Background
    The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under 
the LTCH PPS) are based on the CMS DRG structure. As noted previously 
in this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs 
although they are structurally identical to the MS-DRGs used under the 
IPPS.
    The MS-DRGs are organized into 25 major diagnostic categories 
(MDCs), most of which are based on a particular organ system of the 
body; the remainder involve multiple organ systems (such as MDC 22, 
Burns). Within most MDCs, cases are then divided into surgical DRGs and 
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy 
that orders operating room (O.R.) procedures or groups of O.R. 
procedures by resource intensity. The GROUPER software program does not 
recognize all ICD-10-PCS procedure codes as procedures affecting DRG 
assignment. That is, procedures that are not surgical (for example, 
EKGs), or minor surgical procedures (for example, a biopsy of skin and 
subcutaneous tissue (procedure code 0JBH3ZX)) do not affect the MS-LTC-
DRG assignment based on their presence on the claim.
    Generally, under the LTCH PPS, a Medicare payment is made at a 
predetermined specific rate for each discharge that varies based on the 
MS-LTC-DRG to which a beneficiary's discharge is assigned. Cases are 
classified into MS-LTC-DRGs for payment based on the following six data 
elements:
     Principal diagnosis.
     Additional or secondary diagnoses.
     Surgical procedures.
     Age.
     Sex.
     Discharge status of the patient.
    Currently, for claims submitted using version ASC X12 5010 format, 
up to 25 diagnosis codes and 25 procedure codes are considered for an 
MS-DRG assignment. This includes one principal diagnosis and up to 24 
secondary diagnoses for severity of illness determinations. (For 
additional information on the processing of up to 25 diagnosis codes 
and 25 procedure codes on hospital inpatient claims, we refer readers 
to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS 
final rule (75 FR 50127).)
    Under the HIPAA transactions and code sets regulations at 45 CFR 
parts 160 and 162, covered entities must comply with the adopted 
transaction standards and operating rules specified in subparts I 
through S of part 162. Among other requirements, on or after January 1, 
2012, covered entities were required to use the ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3--Health Care Claim: 
Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata 
to Health Care Claim: Institutional (837) ASC X12 Standards for 
Electronic Data Interchange Technical Report Type 3, October 2007, ASC 
X12N/005010X233A1 for the health care claims or equivalent encounter 
information transaction (45 CFR 162.1102(c)).
    HIPAA requires covered entities to use the applicable medical data 
code set requirements when conducting HIPAA transactions (45 CFR 
162.1000). Currently, upon the discharge of the patient, the LTCH must 
assign appropriate diagnosis and procedure codes from the most current 
version of the International Classification of Diseases, 10th Revision, 
Clinical Modification (ICD-10-CM) for diagnosis coding and the 
International Classification of Diseases, 10th Revision, Procedure 
Coding System (ICD-10-PCS) for inpatient hospital procedure coding, 
both of which were required to be implemented October 1, 2015 (45 CFR 
162.1002(c)(2) and (3)). For additional information on the 
implementation of the ICD-10 coding system, we refer readers to section 
II.F.1. of the preamble of the FY 2017 IPPS/LTCH PPS final rule (81 FR 
56787 through 56790) and section II.E.1. of the preamble of this final 
rule. Additional coding instructions and examples are published in the 
AHA's Coding Clinic for ICD-10-CM/PCS.
    To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base 
DRGs were subdivided according to the presence of specific secondary 
diagnoses designated as complications or comorbidities (CCs) into one, 
two, or three levels of severity, depending on the impact of the CCs on 
resources used for those cases. Specifically, there are sets of MS-DRGs 
that are split into 2 or 3 subgroups based on the presence or absence 
of a CC or a major complication or comorbidity (MCC). We refer readers 
to section II.D. of the preamble of the FY 2008 IPPS final rule with 
comment period for a detailed discussion about the creation of MS-DRGs 
based on severity of illness levels (72 FR 47141 through 47175).
    MACs enter the clinical and demographic information submitted by 
LTCHs into their claims processing systems and subject this information 
to a series of automated screening processes called the Medicare Code 
Editor (MCE). These screens are designed to identify cases that require 
further review before assignment into a MS-LTC-DRG can be made. During 
this process, certain cases are selected for further explanation (74 FR 
43949).

[[Page 58900]]

    After screening through the MCE, each claim is classified into the 
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the 
basis of diagnosis and procedure codes and other demographic 
information (age, sex, and discharge status). The GROUPER software used 
under the LTCH PPS is the same GROUPER software program used under the 
IPPS. Following the MS-LTC-DRG assignment, the MAC determines the 
prospective payment amount by using the Medicare PRICER program, which 
accounts for hospital-specific adjustments. Under the LTCH PPS, we 
provide an opportunity for LTCHs to review the MS-LTC-DRG assignments 
made by the MAC and to submit additional information within a specified 
timeframe as provided in Sec.  412.513(c).
    The GROUPER software is used both to classify past cases to measure 
relative hospital resource consumption to establish the MS-LTC-DRG 
relative weights and to classify current cases for purposes of 
determining payment. The records for all Medicare hospital inpatient 
discharges are maintained in the MedPAR file. The data in this file are 
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes 
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during 
our annual update under both the IPPS (Sec.  412.60(e)) and the LTCH 
PPS (Sec.  412.517), respectively.
b. Changes to the MS-LTC-DRGs for FY 2021
    As specified by our regulations at Sec.  412.517(a), which require 
that the MS-LTC-DRG classifications and relative weights be updated 
annually, and consistent with our historical practice of using the same 
patient classification system under the LTCH PPS as is used under the 
IPPS, in this final rule, as we proposed, we updated the MS-LTC-DRG 
classifications effective October 1, 2020 through September 30, 2021 
(FY 2021), consistent with the changes to specific MS-DRG 
classifications presented in section II.F. of the preamble of this 
final rule. Accordingly, the MS-LTC-DRGs for FY 2021 presented in 
section II.F. of the preamble of this final rule are the same as the 
MS-DRGs that are being used under the IPPS for FY 2021. In addition, 
because the MS-LTC-DRGs for FY 2021 are the same as the MS-DRGs for FY 
2021, the other changes that affect MS-DRG (and by extension MS-LTC-
DRG) assignments under GROUPER Version 38 as discussed in section II.E. 
of the preamble of this final rule, including the changes to the MCE 
software and the ICD-10-CM/PCS coding system, also are applicable under 
the LTCH PPS for FY 2021.
3. Development of the FY 2021 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG Relative 
Weights
    One of the primary goals for the implementation of the LTCH PPS is 
to pay each LTCH an appropriate amount for the efficient delivery of 
medical care to Medicare patients. The system must be able to account 
adequately for each LTCH's case-mix in order to ensure both fair 
distribution of Medicare payments and access to adequate care for those 
Medicare patients whose care is costlier (67 FR 55984). To accomplish 
these goals, we have annually adjusted the LTCH PPS standard Federal 
prospective payment rate by the applicable relative weight in 
determining payment to LTCHs for each case. In order to make these 
annual adjustments under the dual rate LTCH PPS payment structure, 
beginning with FY 2016, we recalibrate the MS-LTC-DRG relative 
weighting factors annually using data from applicable LTCH cases (80 FR 
49614 through 49617). Under this policy, the resulting MS-LTC-DRG 
relative weights would continue to be used to adjust the LTCH PPS 
standard Federal payment rate when calculating the payment for LTCH PPS 
standard Federal payment rate cases.
    The established methodology to develop the MS-LTC-DRG relative 
weights is generally consistent with the methodology established when 
the LTCH PPS was implemented in the August 30, 2002 LTCH PPS final rule 
(67 FR 55989 through 55991). However, there have been some 
modifications of our historical procedures for assigning relative 
weights in cases of zero volume and/or nonmonotonicity resulting from 
the adoption of the MS-LTC-DRGs, along with the change made in 
conjunction with the implementation of the dual rate LTCH PPS payment 
structure beginning in FY 2016 to use LTCH claims data from only LTCH 
PPS standard Federal payment rate cases (or LTCH PPS cases that would 
have qualified for payment under the LTCH PPS standard Federal payment 
rate if the dual rate LTCH PPS payment structure had been in effect at 
the time of the discharge). (For details on the modifications to our 
historical procedures for assigning relative weights in cases of zero 
volume and/or nonmonotonicity, we refer readers to the FY 2008 IPPS 
final rule with comment period (72 FR 47289 through 47295) and the FY 
2009 IPPS final rule (73 FR 48542 through 48550).) For details on the 
change in our historical methodology to use LTCH claims data only from 
LTCH PPS standard Federal payment rate cases (or cases that would have 
qualified for such payment had the LTCH PPS dual payment rate structure 
been in effect at the time) to determine the MS-LTC-DRG relative 
weights, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49614 through 49617). Under the LTCH PPS, relative weights for each 
MS-LTC-DRG are a primary element used to account for the variations in 
cost per discharge and resource utilization among the payment groups 
(Sec.  412.515). To ensure that Medicare patients classified to each 
MS-LTC-DRG have access to an appropriate level of services and to 
encourage efficiency, we calculate a relative weight for each MS-LTC-
DRG that represents the resources needed by an average inpatient LTCH 
case in that MS-LTC-DRG. For example, cases in an MS-LTC-DRG with a 
relative weight of 2 would, on average, cost twice as much to treat as 
cases in an MS-LTC-DRG with a relative weight of 1.
b. Development of the MS-LTC-DRG Relative Weights for FY 2021
    In this final rule, as we proposed in the FY 2021 IPPS/LTCH PPS 
proposed rule (85 FR 32805), we are continuing to use our current 
methodology to determine the MS-LTC-DRG relative weights for FY 2021, 
including the continued application of established policies related to: 
The hospital-specific relative value methodology, the treatment of 
severity levels in the MS-LTC-DRGs, low-volume and no-volume MS-LTC-
DRGs, adjustments for nonmonotonicity, the steps for calculating the 
MS-LTC-DRG relative weights with a budget neutrality factor, and only 
using data from applicable LTCH cases (which includes our policy of 
only using cases that would meet the criteria for exclusion from the 
site neutral payment rate (or, for discharges occurring prior to the 
implementation of the dual rate LTCH PPS payment structure, would have 
met the criteria for exclusion had those criteria been in effect at the 
time of the discharge)).
    In this section, we present our application of our existing 
methodology for determining the MS-LTC-DRG relative weights for FY 
2021, and we discuss the effects of our policies concerning the data 
used to determine the FY 2021 MS-LTC-DRG relative weights on the 
various components of our existing methodology in the discussion that 
follows.
    We generally provide the low-volume quintiles and no-volume 
crosswalk data

[[Page 58901]]

previously published in Tables 13A and 13B for each annual proposed and 
final rule as one of our supplemental IPPS/LTCH PPS related data files 
that are made available for public use via the internet on the CMS 
website for the respective rule and fiscal year (that is, FY 2019 and 
subsequent fiscal years) at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html to streamline the 
information made available to the public that is used in the annual 
development of IPPS Table 11 and to make it easier for the public to 
navigate and find the relevant data and information used for the 
development of proposed and final payment rates or factors for the 
applicable payment year while continuing to furnish the same 
information the tables provided in previous fiscal years (83 FR 41522). 
We refer readers to the CMS website for the low-volume quintiles and 
no-volume crosswalk data previously furnished via Tables 13A and 13B.
c. Data
    For the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32805), 
consistent with our proposals regarding the calculation of the proposed 
MS-LTC-DRG relative weights for FY 2021, we obtained total charges from 
FY 2019 Medicare LTCH claims data from the December 2019 update of the 
FY 2019 MedPAR file, which was the best available data at that time, 
and we proposed to use Version 38 of the GROUPER to classify LTCH 
cases. Consistent with our historical practice, we proposed that if 
more recent data become available, we would use those data and the 
finalized Version 38 of the GROUPER in establishing the FY 2021 MS-LTC-
DRG relative weights in the final rule. Accordingly, for this final 
rule, we are establishing the FY 2021 MS-LTC-DRG relative weights based 
on updated FY 2019 Medicare LTCH claims data from the March 2020 update 
of the FY 2019 MedPAR file, which is the best available data at the 
time of development of this final rule, and used the finalized Version 
38 of the GROUPER to classify LTCH cases.
    To calculate the FY 2021 MS-LTC-DRG relative weights under the dual 
rate LTCH PPS payment structure, as we proposed, we continued to use 
applicable LTCH data, which includes our policy of only using cases 
that meet the criteria for exclusion from the site neutral payment rate 
(or would have met the criteria had they been in effect at the time of 
the discharge) (80 FR 49624). Specifically, we began by first 
evaluating the LTCH claims data in the March 2020 update of the FY 2019 
MedPAR file to determine which LTCH cases would meet the criteria for 
exclusion from the site neutral payment rate under Sec.  412.522(b) or 
had the dual rate LTCH PPS payment structure applied to those cases at 
the time of discharge. We identified the FY 2019 LTCH cases that were 
not assigned to MS-LTC-DRGs 876, 880, 881, 882, 883, 884, 885, 886, 
887, 894, 895, 896, 897, 945, and 946, which identify LTCH cases that 
do not have a principal diagnosis relating to a psychiatric diagnosis 
or to rehabilitation; and that either--
     The admission to the LTCH was ``immediately preceded'' by 
discharge from a subsection (d) hospital and the immediately preceding 
stay in that subsection (d) hospital included at least 3 days in an 
ICU, as we define under the ICU criterion; or
     The admission to the LTCH was ``immediately preceded'' by 
discharge from a subsection (d) hospital and the claim for the LTCH 
discharge includes the applicable procedure code that indicates at 
least 96 hours of ventilator services were provided during the LTCH 
stay, as we define under the ventilator criterion. Claims data from the 
FY 2019 MedPAR file that reported ICD-10-PCS procedure code 5A1955Z 
were used to identify cases involving at least 96 hours of ventilator 
services in accordance with the ventilator criterion. (We note that, 
for purposes of developing the MS-LTC-DRG relative weights we have 
previously addressed the treatment of cases that would have been 
excluded from the site neutral payment rate under the statutory 
provisions that provided for temporary exception from the site neutral 
payment rate under the LTCH PPS for certain spinal cord specialty 
hospitals or for certain severe wound care discharges from certain 
LTCHs provided by sections 15009 and 15010 of Public Law 114-255, 
respectively. The temporary exception from the site neutral payment 
rate for certain spinal cord specialty hospitals is effective for 
discharges in cost reporting periods beginning during FYs 2018 and 
2019, and the temporary exception from the site neutral payment rate 
for certain severe wound care discharges from certain LTCHs was 
effective for a discharge in cost reporting period beginning during FY 
2018. These statutory provisions will no longer be in effect for any 
discharges occurring in FY 2021 (that is, an LTCH with a cost reporting 
period that begins on the last day of FY 2019, on September 30, 2019, 
would end on September 29, 2020, the day prior to the start of FY 2021 
on October 1, 2020). Therefore, we no longer need to address the 
treatment of these cases for purposes of developing the MS-LTC-DRG 
relative weights for FY 2021 and subsequent years.
    Furthermore, consistent with our historical methodology, we 
excluded any claims in the resulting data set that were submitted by 
LTCHs that were all-inclusive rate providers and LTCHs that are paid in 
accordance with demonstration projects authorized under section 402(a) 
of Public Law 90-248 or section 222(a) of Public Law 92-603. In 
addition, consistent with our historical practice and our policies, we 
excluded any Medicare Advantage (Part C) claims in the resulting data. 
Such claims were identified based on the presence of a GHO Paid 
indicator value of ``1'' in the MedPAR files. The claims that remained 
after these three trims (that is, the applicable LTCH data) were then 
used to calculate the MS-LTC-DRG relative weights for FY 2021.
    In summary, in general, we identified the claims data used in the 
development of the FY 2021 MS-LTC-DRG relative weights in this final 
rule, as we proposed, by trimming claims data that were paid the site 
neutral payment rate or would have been paid the site neutral payment 
rate had the dual payment rate structure been in effect. Finally, as we 
proposed, we trimmed the claims data of all-inclusive rate providers 
reported in the March 2020 update of the FY 2019 MedPAR file and any 
Medicare Advantage claims data. There were no data from any LTCHs that 
are paid in accordance with a demonstration project reported in the 
March 2020 update of the FY 2019 MedPAR file, but, had there been any, 
we would have trimmed the claims data from those LTCHs as well, in 
accordance with our established policy. As we proposed, we used the 
remaining data (that is, the applicable LTCH data) to calculate the 
relative weights for FY 2021.
d. Hospital-Specific Relative Value (HSRV) Methodology
    By nature, LTCHs often specialize in certain areas, such as 
ventilator-dependent patients. Some case types (MS-LTC-DRGs) may be 
treated, to a large extent, in hospitals that have, from a perspective 
of charges, relatively high (or low) charges. This nonrandom 
distribution of cases with relatively high (or low) charges in specific 
MS-LTC-DRGs has the potential to inappropriately distort the measure of 
average charges. To account for the fact that cases may not be randomly 
distributed across LTCHs, consistent with the methodology we have used 
since the implementation of the LTCH

[[Page 58902]]

PPS, in this FY 2021 IPPS/LTCH PPS final rule, as we proposed in the FY 
2021 IPPS/LTCH PPS proposed rule (85 FR 32806), we continued to use a 
hospital-specific relative value (HSRV) methodology to calculate the 
MS-LTC-DRG relative weights for FY 2021. We believe that this method 
removes this hospital-specific source of bias in measuring LTCH average 
charges (67 FR 55985). Specifically, under this methodology, we reduce 
the impact of the variation in charges across providers on any 
particular MS-LTC-DRG relative weight by converting each LTCH's charge 
for an applicable LTCH case to a relative value based on that LTCH's 
average charge for such cases.
    Under the HSRV methodology, we standardize charges for each LTCH by 
converting its charges for each applicable LTCH case to hospital-
specific relative charge values and then adjusting those values for the 
LTCH's case-mix. The adjustment for case-mix is needed to rescale the 
hospital-specific relative charge values (which, by definition, average 
1.0 for each LTCH). The average relative weight for an LTCH is its 
case-mix; therefore, it is reasonable to scale each LTCH's average 
relative charge value by its case-mix. In this way, each LTCH's 
relative charge value is adjusted by its case-mix to an average that 
reflects the complexity of the applicable LTCH cases it treats relative 
to the complexity of the applicable LTCH cases treated by all other 
LTCHs (the average LTCH PPS case-mix of all applicable LTCH cases 
across all LTCHs).
    In accordance with our established methodology, for FY 2021, as we 
proposed, we continued to standardize charges for each applicable LTCH 
case by first dividing the adjusted charge for the case (adjusted for 
SSOs under Sec.  412.529 as described in section VII.B.3.g. of the 
preamble of this final rule (Step 3) of the preamble of this final 
rule) by the average adjusted charge for all applicable LTCH cases at 
the LTCH in which the case was treated. SSO cases are cases with a 
length of stay that is less than or equal to five-sixths the average 
length of stay of the MS-LTC-DRG (Sec. Sec.  412.529 and 412.503). The 
average adjusted charge reflects the average intensity of the health 
care services delivered by a particular LTCH and the average cost level 
of that LTCH. The resulting ratio was multiplied by that LTCH's case-
mix index to determine the standardized charge for the case.
    Multiplying the resulting ratio by the LTCH's case-mix index 
accounts for the fact that the same relative charges are given greater 
weight at an LTCH with higher average costs than they would at an LTCH 
with low average costs, which is needed to adjust each LTCH's relative 
charge value to reflect its case-mix relative to the average case-mix 
for all LTCHs. By standardizing charges in this manner, we count 
charges for a Medicare patient at an LTCH with high average charges as 
less resource intensive than they would be at an LTCH with low average 
charges. For example, a $10,000 charge for a case at an LTCH with an 
average adjusted charge of $17,500 reflects a higher level of relative 
resource use than a $10,000 charge for a case at an LTCH with the same 
case-mix, but an average adjusted charge of $35,000. We believe that 
the adjusted charge of an individual case more accurately reflects 
actual resource use for an individual LTCH because the variation in 
charges due to systematic differences in the markup of charges among 
LTCHs is taken into account.
e. Treatment of Severity Levels in Developing the MS-LTC-DRG Relative 
Weights
    For purposes of determining the MS-LTC-DRG relative weights, under 
our historical methodology, there are three different categories of MS-
DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-LTC-
DRGs with at least 25 applicable LTCH cases in the data used to 
calculate the relative weight, which are each assigned a unique 
relative weight; (2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that 
contain between 1 and 24 applicable LTCH cases that are grouped into 
quintiles (as described later in this section of this final rule) and 
assigned the relative weight of the quintile); and (3) no-volume MS-
LTC-DRGs that are cross-walked to other MS-LTC-DRGs based on the 
clinical similarities and assigned the relative weight of the cross-
walked MS-LTC-DRG (as described in greater detail in this final rule). 
For FY 2021, as we proposed in the FY 2021 IPPS/LTCH PPS proposed rule 
(85 FR 32806), we are continuing to use applicable LTCH cases to 
establish the same volume-based categories to calculate the FY 2021 MS-
LTC-DRG relative weights.
    In determining the FY 2021 MS-LTC-DRG relative weights, when 
necessary, as is our longstanding practice, as we proposed, we made 
adjustments to account for nonmonotonicity, as discussed in greater 
detail later in Step 6 of section VII.B.3.g. of the preamble of this 
final rule. We refer readers to the discussion in the FY 2010 IPPS/RY 
2010 LTCH PPS final rule for our rationale for including an adjustment 
for nonmonotonicity (74 FR 43953 through 43954).
f. Low-Volume MS-LTC-DRGs
    In order to account for MS-LTC-DRGs with low-volume (that is, with 
fewer than 25 applicable LTCH cases), consistent with our existing 
methodology, as we proposed in the FY 2021 IPPS/LTCH PPS proposed rule 
(85 FR 32807), we are continuing to employ the quintile methodology for 
low-volume MS-LTC-DRGs, such that we grouped the ``low-volume MS-LTC-
DRGs'' (that is, MS-LTC-DRGs that contain between 1 and 24 applicable 
LTCH cases into one of five categories (quintiles) based on average 
charges (67 FR 55984 through 55995; 72 FR 47283 through 47288; and 81 
FR 25148).) In cases where the initial assignment of a low-volume MS-
LTC-DRG to a quintile results in nonmonotonicity within a base-DRG, as 
we proposed, we made adjustments to the resulting low-volume MS-LTC-
DRGs to preserve monotonicity, as discussed in detail in section 
VII.B.3.g. (Step 6) of the preamble of this final rule.
    In this final rule, based on the best available data (that is, the 
March 2020 update of the FY 2019 MedPAR files), we identified 251 MS-
LTC-DRGs that contained between 1 and 24 applicable LTCH cases. This 
list of MS-LTC-DRGs was then divided into 1 of the 5 low-volume 
quintiles, each containing at least 50 MS-LTC-DRGs (251/5 = 50 with a 
remainder of 1). We assigned the low-volume MS-LTC-DRGs to specific 
low-volume quintiles by sorting the low-volume MS-LTC-DRGs in ascending 
order by average charge in accordance with our established methodology. 
Based on the data available for this final rule, the number of MS-LTC-
DRGs with less than 25 applicable LTCH cases was not evenly divisible 
by 5 and, therefore, as we proposed, we employed our historical 
methodology for determining which of the low-volume quintiles would 
contain the additional low-volume MS-LTC-DRG. Specifically for this 
final rule, because the average charge of the 151st low-volume MS-LTC-
DRG in the sorted list was closer to the average charge of the 152nd 
low-volume MS-LTC-DRG (assigned to Quintile 4) than to the average 
charge of the 150th low-volume MS-LTC-DRG (assigned to Quintile 3), we 
assigned it to Quintile 4 (such that Quintile 4 contains 51 low-volume 
MS-LTC-DRGs before any adjustments for nonmonotonicity, as discussed in 
this final rule). This resulted in 4 of the 5 low-volume quintiles 
containing 50 MS-LTC-DRGs (Quintiles 1, 2, 3, and 5) and 1 low-volume 
quintiles containing

[[Page 58903]]

51 MS-LTC-DRGs (Quintile 4). As discussed earlier, for this final rule, 
we are providing the list of the composition of the low-volume 
quintiles for low-volume MS-LTC-DRGs for FY 2021 in a supplemental data 
file for public use posted via the internet on the CMS website for this 
final rule at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html in order to streamline the 
information made available to the public that is used in the annual 
development of Table 11.
    In order to determine the FY 2021 relative weights for the low-
volume MS-LTC-DRGs, consistent with our historical practice, as we 
proposed, we used the five low-volume quintiles described previously. 
We determined a relative weight and (geometric) average length of stay 
for each of the five low-volume quintiles using the methodology 
described in section VII.B.3.g. of the preamble of this final rule. We 
assigned the same relative weight and average length of stay to each of 
the low-volume MS-LTC-DRGs that make up an individual low-volume 
quintile. We note that, as this system is dynamic, it is possible that 
the number and specific type of MS-LTC-DRGs with a low-volume of 
applicable LTCH cases will vary in the future. Furthermore, we note 
that we continue to monitor the volume (that is, the number of 
applicable LTCH cases) in the low-volume quintiles to ensure that our 
quintile assignments used in determining the MS-LTC-DRG relative 
weights result in appropriate payment for LTCH cases grouped to low-
volume MS-LTC-DRGs and do not result in an unintended financial 
incentive for LTCHs to inappropriately admit these types of cases.
g. Steps for Determining the FY 2021 MS-LTC-DRG Relative Weights
    In this final rule, as we proposed in the FY 2021 IPPS/LTCH PPS 
proposed rule (85 FR 32807), we are continuing to use our current 
methodology to determine the FY 2021 MS-LTC-DRG relative weights.
    In summary, to determine the FY 2021 MS-LTC-DRG relative weights, 
as we proposed, we grouped applicable LTCH cases to the appropriate MS-
LTC-DRG, while taking into account the low-volume quintiles (as 
described previously) and cross-walked no-volume MS-LTC-DRGs (as 
described later in this section). After establishing the appropriate 
MS-LTC-DRG (or low-volume quintile), as we proposed, we calculated the 
FY 2021 relative weights by first removing cases with a length of stay 
of 7 days or less and statistical outliers (Steps 1 and 2). Next, as we 
proposed, we adjusted the number of applicable LTCH cases in each MS-
LTC-DRG (or low-volume quintile) for the effect of SSO cases (Step 3). 
After removing applicable LTCH cases with a length of stay of 7 days or 
less (Step 1) and statistical outliers (Step 2), which are the SSO-
adjusted applicable LTCH cases and corresponding charges (Step 3), as 
we proposed, we calculated ``relative adjusted weights'' for each MS-
LTC-DRG (or low-volume quintile) using the HSRV method.
    Step 1--Remove cases with a length of stay of 7 days or less.
    The first step in our calculation of the FY 2021 MS-LTC-DRG 
relative weights is to remove cases with a length of stay of 7 days or 
less. The MS-LTC-DRG relative weights reflect the average of resources 
used on representative cases of a specific type. Generally, cases with 
a length of stay of 7 days or less do not belong in an LTCH because 
these stays do not fully receive or benefit from treatment that is 
typical in an LTCH stay, and full resources are often not used in the 
earlier stages of admission to an LTCH. If we were to include stays of 
7 days or less in the computation of the FY 2021 MS-LTC-DRG relative 
weights, the value of many relative weights would decrease and, 
therefore, payments would decrease to a level that may no longer be 
appropriate. We do not believe that it would be appropriate to 
compromise the integrity of the payment determination for those LTCH 
cases that actually benefit from and receive a full course of treatment 
at an LTCH by including data from these very short stays. Therefore, 
consistent with our existing relative weight methodology, in 
determining the FY 2021 MS-LTC-DRG relative weights, as we proposed, we 
removed LTCH cases with a length of stay of 7 days or less from 
applicable LTCH cases. (For additional information on what is removed 
in this step of the relative weight methodology, we refer readers to 67 
FR 55989 and 74 FR 43959.)
    Step 2--Remove statistical outliers.
    The next step in our calculation of the FY 2021 MS-LTC-DRG relative 
weights is to remove statistical outlier cases from the LTCH cases with 
a length of stay of at least 8 days. Consistent with our existing 
relative weight methodology, as we proposed, we continued to define 
statistical outliers as cases that are outside of 3.0 standard 
deviations from the mean of the log distribution of both charges per 
case and the charges per day for each MS-LTC-DRG. These statistical 
outliers are removed prior to calculating the relative weights because 
we believe that they may represent aberrations in the data that distort 
the measure of average resource use. Including those LTCH cases in the 
calculation of the relative weights could result in an inaccurate 
relative weight that does not truly reflect relative resource use among 
those MS-LTC-DRGs. (For additional information on what is removed in 
this step of the relative weight methodology, we refer readers to 67 FR 
55989 and 74 FR 43959.) After removing cases with a length of stay of 7 
days or less and statistical outliers, we were left with applicable 
LTCH cases that have a length of stay greater than or equal to 8 days. 
In this final rule, we refer to these cases as ``trimmed applicable 
LTCH cases.''
    Step 3--Adjust charges for the effects of SSOs.
    As the next step in the calculation of the FY 2021 MS-LTC-DRG 
relative weights, consistent with our historical approach, as we 
proposed, we adjusted each LTCH's charges per discharge for those 
remaining cases (that is, trimmed applicable LTCH cases) for the 
effects of SSOs (as defined in Sec.  412.529(a) in conjunction with 
Sec.  412.503). Specifically, as we proposed, we made this adjustment 
by counting an SSO case as a fraction of a discharge based on the ratio 
of the length of stay of the case to the average length of stay for the 
MS-LTC-DRG for non-SSO cases. This has the effect of proportionately 
reducing the impact of the lower charges for the SSO cases in 
calculating the average charge for the MS-LTC-DRG. This process 
produces the same result as if the actual charges per discharge of an 
SSO case were adjusted to what they would have been had the patient's 
length of stay been equal to the average length of stay of the MS-LTC-
DRG.
    Counting SSO cases as full LTCH cases with no adjustment in 
determining the FY 2021 MS-LTC-DRG relative weights would lower the FY 
2021 MS-LTC-DRG relative weight for affected MS-LTC-DRGs because the 
relatively lower charges of the SSO cases would bring down the average 
charge for all cases within a MS-LTC-DRG. This would result in an 
``underpayment'' for non-SSO cases and an ``overpayment'' for SSO 
cases. Therefore, as we proposed, we continued to adjust for SSO cases 
under Sec.  412.529 in this manner because it would result in more 
appropriate payments for all LTCH PPS standard Federal payment rate 
cases. (For additional information on this step of the relative weight 
methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)

[[Page 58904]]

    Step 4--Calculate the FY 2021 MS-LTC-DRG relative weights on an 
iterative basis.
    Consistent with our historical relative weight methodology, as we 
proposed, we calculated the FY 2021 MS-LTC-DRG relative weights using 
the HSRV methodology, which is an iterative process. First, for each 
SSO-adjusted trimmed applicable LTCH case, we calculated a hospital-
specific relative charge value by dividing the charge per discharge 
after adjusting for SSOs of the LTCH case (from Step 3) by the average 
charge per SSO-adjusted discharge for the LTCH in which the case 
occurred. The resulting ratio is then multiplied by the LTCH's case-mix 
index to produce an adjusted hospital-specific relative charge value 
for the case. We used an initial case-mix index value of 1.0 for each 
LTCH.
    For each MS-LTC-DRG, we calculated the FY 2021 relative weight by 
dividing the SSO-adjusted average of the hospital-specific relative 
charge values for applicable LTCH cases for the MS-LTC-DRG (that is, 
the sum of the hospital-specific relative charge value, as previously 
stated, divided by the sum of equivalent cases from Step 3 for each MS-
LTC-DRG) by the overall SSO-adjusted average hospital-specific relative 
charge value across all applicable LTCH cases for all LTCHs (that is, 
the sum of the hospital-specific relative charge value, as previously 
stated, divided by the sum of equivalent applicable LTCH cases from 
Step 3 for each MS-LTC-DRG). Using these recalculated MS-LTC-DRG 
relative weights, each LTCH's average relative weight for all of its 
SSO-adjusted trimmed applicable LTCH cases (that is, its case-mix) was 
calculated by dividing the sum of all the LTCH's MS-LTC-DRG relative 
weights by its total number of SSO-adjusted trimmed applicable LTCH 
cases. The LTCHs' hospital-specific relative charge values (from 
previous) are then multiplied by the hospital-specific case-mix 
indexes. The hospital-specific case-mix adjusted relative charge values 
are then used to calculate a new set of MS-LTC-DRG relative weights 
across all LTCHs. This iterative process continued until there was 
convergence between the relative weights produced at adjacent steps, 
for example, when the maximum difference was less than 0.0001.
    Step 5--Determine a FY 2021 relative weight for MS-LTC-DRGs with no 
applicable LTCH cases.
    Using the trimmed applicable LTCH cases, consistent with our 
historical methodology, we identified the MS-LTC-DRGs for which there 
were no claims in the March 2020 update of the FY 2019 MedPAR file and, 
therefore, for which no charge data was available for these MS-LTC-
DRGs. Because patients with a number of the diagnoses under these MS-
LTC-DRGs may be treated at LTCHs, consistent with our historical 
methodology, we generally assign a relative weight to each of the no-
volume MS-LTC-DRGs based on clinical similarity and relative costliness 
(with the exception of ``transplant'' MS-LTC-DRGs, ``error'' MS-LTC-
DRGs, and MS-LTC-DRGs that indicate a principal diagnosis related to a 
psychiatric diagnosis or rehabilitation (referred to as the 
``psychiatric or rehabilitation'' MS-LTC-DRGs), as discussed later in 
this section of this final rule). (For additional information on this 
step of the relative weight methodology, we refer readers to 67 FR 
55991 and 74 FR 43959 through 43960.)
    Consistent with our existing methodology, as we proposed, we cross-
walked each no-volume MS-LTC-DRG to another MS-LTC-DRG for which we 
calculated a relative weight (determined in accordance with the 
methodology as previously described). Then, the ``no-volume'' MS-LTC-
DRG is assigned the same relative weight (and average length of stay) 
of the MS-LTC-DRG to which it was cross-walked (as described in greater 
detail in this section of this rule).
    Of the 767 MS-LTC-DRGs for FY 2021, we identified 375 MS-LTC-DRGs 
for which there were no trimmed applicable LTCH cases. This number 
includes the 11 ``transplant'' MS-LTC-DRGs, the 2 ``error'' MS-LTC-
DRGs, and the 15 ``psychiatric or rehabilitation'' MS-LTC-DRGs, which 
are discussed in this section of this rule, such that we identified 347 
MS-LTC-DRGs that for which, as we proposed, we assigned a relative 
weight using our existing ``no-volume'' MS-LTC-DRG methodology (that 
is, 375-11-2-15 = 347). As we proposed, we assigned relative weights to 
each of the 347 no-volume MS-LTC-DRGs based on clinical similarity and 
relative costliness to 1 of the remaining 392 (767-375 = 392) MS-LTC-
DRGs for which we calculated relative weights based on the trimmed 
applicable LTCH cases in the FY 2019 MedPAR file data using the steps 
described previously. (For the remainder of this discussion, we refer 
to the ``cross-walked'' MS-LTC-DRGs as one of the 392 MS-LTC-DRGs to 
which we cross-walked each of the 347 ``no-volume'' MS-LTC-DRGs.) Then, 
as we generally proposed, we assigned the 347 no-volume MS-LTC-DRGs the 
relative weight of the cross-walked MS-LTC-DRG. (As explained in Step 
6, when necessary, we made adjustments to account for nonmonotonicity.)
    We cross-walked the no-volume MS-LTC-DRG to a MS-LTC-DRG for which 
we calculated relative weights based on the March 2020 update of the FY 
2019 MedPAR file, and to which it is similar clinically in intensity of 
use of resources and relative costliness as determined by criteria such 
as care provided during the period of time surrounding surgery, 
surgical approach (if applicable), length of time of surgical 
procedure, postoperative care, and length of stay. (For more details on 
our process for evaluating relative costliness, we refer readers to the 
FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 48543).) We believe in 
the rare event that there would be a few LTCH cases grouped to one of 
the no-volume MS-LTC-DRGs in FY 2021, the relative weights assigned 
based on the cross-walked MS-LTC-DRGs would result in an appropriate 
LTCH PPS payment because the crosswalks, which are based on clinical 
similarity and relative costliness, would be expected to generally 
require equivalent relative resource use.
    Then we assigned the relative weight of the cross-walked MS-LTC-DRG 
as the relative weight for the no-volume MS-LTC-DRG such that both of 
these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and the cross-
walked MS-LTC-DRG) have the same relative weight (and average length of 
stay) for FY 2021. We note that, if the cross-walked MS-LTC-DRG had 25 
applicable LTCH cases or more, its relative weight (calculated using 
the methodology as previously described in Steps 1 through 4) is 
assigned to the no-volume MS-LTC-DRG as well. Similarly, if the MS-LTC-
DRG to which the no-volume MS-LTC-DRG was cross-walked had 24 or less 
cases and, therefore, was designated to 1 of the low-volume quintiles 
for purposes of determining the relative weights, we assigned the 
relative weight of the applicable low-volume quintile to the no-volume 
MS-LTC-DRG such that both of these MS-LTC-DRGs (that is, the no-volume 
MS-LTC-DRG and the cross-walked MS-LTC-DRG) have the same relative 
weight for FY 2021. (As we noted previously, in the infrequent case 
where nonmonotonicity involving a no-volume MS-LTC-DRG resulted, 
additional adjustments as described in Step 6 are required in order to 
maintain monotonically increasing relative weights.)
    As discussed earlier, for this final rule, we are providing the 
list of the no-volume MS-LTC-DRGs and the MS-LTC-DRGs to which each was 
cross-walked (that is, the cross-walked MS-LTC-DRGs) for FY 2021 in a 
supplemental data file for public use

[[Page 58905]]

posted via the internet on the CMS website for this rule at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html in order to streamline the information 
made available to the public that is used in the annual development of 
Table 11.
    To illustrate this methodology for determining the relative weights 
for the FY 2021 MS-LTC-DRGs with no applicable LTCH cases, we are 
providing the following example, which refers to the no-volume MS-LTC-
DRGs crosswalk information for FY 2021 (which, as previously stated, we 
are providing in a supplemental data file posted via the internet on 
the CMS website for this final rule).
    Example: There were no trimmed applicable LTCH cases in the FY 2019 
MedPAR file that we are using for this final rule for MS-LTC-DRG 061 
(Acute Ischemic Stroke with Use of Thrombolytic Agent with MCC). We 
determined that MS-LTC-DRG 070 (Nonspecific Cerebrovascular Disorders 
with MCC) is similar clinically and based on resource use to MS-LTC-DRG 
061. Therefore, we assigned the same relative weight (and average 
length of stay) of MS-LTC-DRG 70 of 0.8730 for FY 2021 to MS-LTC-DRG 
061 (we refer readers to Table 11, which is listed in section VI. of 
the Addendum to this final rule and is available via the internet on 
the CMS website).
    Again, we note that, as this system is dynamic, it is entirely 
possible that the number of MS-LTC-DRGs with no volume will vary in the 
future. Consistent with our historical practice, as we proposed, we 
used the most recent available claims data to identify the trimmed 
applicable LTCH cases from which we determined the relative weights in 
the final rule.
    For FY 2021, consistent with our historical relative weight 
methodology, as we proposed, we established a relative weight of 0.0000 
for the following transplant MS-LTC-DRGs: Heart Transplant or Implant 
of Heart Assist System with MCC (MS-LTC-DRG 001); Heart Transplant or 
Implant of Heart Assist System without MCC (MS-LTC-DRG 002); Liver 
Transplant with MCC or Intestinal Transplant (MS-LTC-DRG 005); Liver 
Transplant without MCC (MS-LTC-DRG 006); Lung Transplant (MS-LTC-DRG 
007); Simultaneous Pancreas/Kidney Transplant (MS-LTC-DRG 008); 
Simultaneous Pancreas/Kidney Transplant with Hemodialysis (MS-LTC-DRG 
019); Pancreas Transplant (MS-LTC-DRG 010); Kidney Transplant (MS-LTC-
DRG 652); Kidney Transplant with Hemodialysis with MCC (MS-LTC-DRG 
650), and Kidney Transplant with Hemodialysis without MCC (MS LTC DRG 
651). This is because Medicare only covers these procedures if they are 
performed at a hospital that has been certified for the specific 
procedures by Medicare and presently no LTCH has been so certified. At 
the present time, we include these 11 transplant MS-LTC-DRGs in the 
GROUPER program for administrative purposes only. Because we use the 
same GROUPER program for LTCHs as is used under the IPPS, removing 
these MS-LTC-DRGs would be administratively burdensome. (For additional 
information regarding our treatment of transplant MS-LTC-DRGs, we refer 
readers to the RY 2010 LTCH PPS final rule (74 FR 43964).) In addition, 
consistent with our historical policy, as we proposed, we established a 
relative weight of 0.0000 for the 2 ``error'' MS-LTC-DRGs (that is, MS-
LTC-DRG 998 (Principal Diagnosis Invalid as Discharge Diagnosis) and 
MS-LTC-DRG 999 (Ungroupable)) because applicable LTCH cases grouped to 
these MS-LTC-DRGs cannot be properly assigned to an MS-LTC-DRG 
according to the grouping logic.
    Additionally, as we proposed, we established a relative weight of 
0.0000 for the following ``psychiatric or rehabilitation'' MS-LTC-DRGs: 
MS-LTC-DRG 876 (O.R. Procedure with Principal Diagnoses of Mental 
Illness); MS-LTC-DRG 880 (Acute Adjustment Reaction & Psychosocial 
Dysfunction); MS-LTC-DRG 881 (Depressive Neuroses); MS-LTC-DRG 882 
(Neuroses Except Depressive); MS-LTC-DRG 883 (Disorders of Personality 
& Impulse Control); MS-LTC-DRG 884 (Organic Disturbances & Mental 
Retardation); MS-LTC-DRG 885 (Psychoses); MS-LTC-DRG 886 (Behavioral & 
Developmental Disorders); MS-LTC-DRG 887 (Other Mental Disorder 
Diagnoses); MS-LTC-DRG 894 (Alcohol/Drug Abuse or Dependence, Left 
Ama); MS-LTC-DRG 895 (Alcohol/Drug Abuse or Dependence, with 
Rehabilitation Therapy); MS-LTC-DRG 896 (Alcohol/Drug Abuse or 
Dependence, without Rehabilitation Therapy with MCC); MS-LTC-DRG 897 
(Alcohol/Drug Abuse or Dependence, without Rehabilitation Therapy 
without MCC); MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and MS-LTC-
DRG 946 (Rehabilitation without CC/MCC). As we proposed, we established 
a relative weight 0.0000 for these 15 ``psychiatric or rehabilitation'' 
MS LTC DRGs because the blended payment rate and temporary exceptions 
to the site neutral payment rate will not be applicable for any LTCH 
discharges occurring in FY 2021, and as such payment under the LTCH PPS 
will be no longer be made in part based on the LTCH PPS standard 
Federal payment rate for any discharges assigned to those MS-DRGs.
    Step 6--Adjust the FY 2021 MS-LTC-DRG relative weights to account 
for nonmonotonically increasing relative weights.
    The MS-DRGs contain base DRGs that have been subdivided into one, 
two, or three severity of illness levels. Where there are three 
severity levels, the most severe level has at least one secondary 
diagnosis code that is referred to as an MCC (that is, major 
complication or comorbidity). The next lower severity level contains 
cases with at least one secondary diagnosis code that is a CC (that is, 
complication or comorbidity). Those cases without an MCC or a CC are 
referred to as ``without CC/MCC.'' When data do not support the 
creation of three severity levels, the base MS-DRG is subdivided into 
either two levels or the base MS-DRG is not subdivided. The two-level 
subdivisions may consist of the MS-DRG with CC/MCC and the MS-DRG 
without CC/MCC. Alternatively, the other type of two-level subdivision 
may consist of the MS-DRG with MCC and the MS-DRG without MCC.
    In those base MS-LTC-DRGs that are split into either two or three 
severity levels, cases classified into the ``without CC/MCC'' MS-LTC-
DRG are expected to have a lower resource use (and lower costs) than 
the ``with CC/MCC'' MS-LTC-DRG (in the case of a two-level split) or 
both the ``with CC'' and the ``with MCC'' MS-LTC-DRGs (in the case of a 
three-level split). That is, theoretically, cases that are more severe 
typically require greater expenditure of medical care resources and 
would result in higher average charges. Therefore, in the three 
severity levels, relative weights should increase by severity, from 
lowest to highest. If the relative weights decrease as severity 
increases (that is, if within a base MS-LTC-DRG, an MS-LTC-DRG with CC 
has a higher relative weight than one with MCC, or the MS-LTC-DRG 
``without CC/MCC'' has a higher relative weight than either of the 
others), they are nonmonotonic. We continue to believe that utilizing 
nonmonotonic relative weights to adjust Medicare payments would result 
in inappropriate payments because the payment for the cases in the 
higher severity level in a base MS-LTC-DRG (which are generally 
expected to have higher resource use and costs) would be lower than the 
payment for cases in a lower severity level within the same

[[Page 58906]]

base MS-LTC-DRG (which are generally expected to have lower resource 
use and costs). Therefore, in determining the FY 2021 MS-LTC-DRG 
relative weights, consistent with our historical methodology, as we 
proposed, we continued to combine MS-LTC-DRG severity levels within a 
base MS-LTC-DRG for the purpose of computing a relative weight when 
necessary to ensure that monotonicity is maintained. For a 
comprehensive description of our existing methodology to adjust for 
nonmonotonicity, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS 
final rule (74 FR 43964 through 43966). Any adjustments for 
nonmonotonicity that were made in determining the FY 2021 MS-LTC-DRG 
relative weights in this final rule by applying this methodology are 
denoted in Table 11, which is listed in section VI. of the Addendum to 
this final rule and is available via the internet on the CMS website.
    Step 7--Calculate the FY 2021 MS-LTC-DRG reclassification and 
recalibration budget neutrality factor.
    In accordance with the regulations at Sec.  412.517(b) (in 
conjunction with Sec.  412.503), the annual update to the MS-LTC-DRG 
classifications and relative weights is done in a budget neutral manner 
such that estimated aggregate LTCH PPS payments would be unaffected, 
that is, would be neither greater than nor less than the estimated 
aggregate LTCH PPS payments that would have been made without the MS-
LTC-DRG classification and relative weight changes. (For a detailed 
discussion on the establishment of the budget neutrality requirement 
for the annual update of the MS-LTC-DRG classifications and relative 
weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR 
26881 and 26882).)
    The MS-LTC-DRG classifications and relative weights are updated 
annually based on the most recent available LTCH claims data to reflect 
changes in relative LTCH resource use (Sec.  412.517(a) in conjunction 
with Sec.  412.503). To achieve the budget neutrality requirement at 
Sec.  412.517(b), under our established methodology, for each annual 
update, the MS-LTC-DRG relative weights are uniformly adjusted to 
ensure that estimated aggregate payments under the LTCH PPS would not 
be affected (that is, decreased or increased). Consistent with that 
provision, as we proposed, we updated the MS-LTC-DRG classifications 
and relative weights for FY 2021 based on the most recent available 
LTCH data for applicable LTCH cases, and continued to apply a budget 
neutrality adjustment in determining the FY 2021 MS-LTC-DRG relative 
weights.
    In this final rule, to ensure budget neutrality in the update to 
the MS-LTC-DRG classifications and relative weights under Sec.  
412.517(b), as we proposed, we continued to use our established two-
step budget neutrality methodology.
    To calculate the normalization factor for FY 2021, as we proposed 
in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32811), we grouped 
applicable LTCH cases using the FY 2021 Version 38 GROUPER, and the 
recalibrated FY 2021 MS-LTC-DRG relative weights to calculate the 
average case-mix index (CMI); we grouped the same applicable LTCH cases 
using the FY 2020 GROUPER Version 37 and MS-LTC-DRG relative weights 
and calculated the average CMI; and computed the ratio by dividing the 
average CMI for FY 2020 by the average CMI for FY 2021. That ratio is 
the normalization factor. Because the calculation of the normalization 
factor involves the relative weights for the MS-LTC-DRGs that contained 
applicable LTCH cases to calculate the average CMIs, any low-volume MS-
LTC-DRGs are included in the calculation (and the MS-LTC-DRGs with no 
applicable LTCH cases are not included in the calculation).
    To calculate the budget neutrality adjustment factor, we simulated 
estimated total FY 2021 LTCH PPS standard Federal payment rate payments 
for applicable LTCH cases using the FY 2021 normalized relative weights 
and GROUPER Version 38; simulated estimated total FY 2021 LTCH PPS 
standard Federal payment rate payments for applicable LTCH cases using 
the FY 2020 MS-LTC-DRG relative weights and the FY 2020 GROUPER Version 
37; and calculated the ratio of these estimated total payments by 
dividing the simulated estimated total LTCH PPS standard Federal 
payment rate payments using the FY 2020 MS-LTC-DRG relative weights and 
the GROUPER Version 37 by the simulated estimated total LTCH PPS 
standard Federal payment rate payments using the FY 2021 MS-LTC-DRG 
relative weights and the GROUPER Version 38. The resulting ratio is the 
budget neutrality adjustment factor. The calculation of the budget 
neutrality factor involves the relative weights for the LTCH cases used 
in the payment simulation, which includes any cases grouped to low-
volume MS-LTC-DRGs or to MS-LTC-DRGs with no applicable LTCH cases, and 
generally does not include payments for cases grouped to a MS-LTC-DRG 
with no applicable LTCH cases. (Occasionally, a few LTCH cases (that 
is, those with a covered length of stay of 7 days or less), which are 
removed from the relative weight calculation in step 2 that are grouped 
to a MS-LTC-DRG with no applicable LTCH cases are included in the 
payment simulations used to calculate the budget neutrality factor. 
However, the number and payment amount of such cases have a negligible 
impact on the budget neutrality factor calculation).
    In this final rule, to ensure budget neutrality in the update to 
the MS-LTC-DRG classifications and relative weights under Sec.  
412.517(b), as we proposed, we continued to use our established two-
step budget neutrality methodology. Therefore, in this final rule, in 
the first step of our MS-LTC-DRG budget neutrality methodology, for FY 
2021, as we proposed, we calculated and applied a normalization factor 
to the recalibrated relative weights (the result of Steps 1 through 6 
discussed previously) to ensure that estimated payments are not 
affected by changes in the composition of case types or the changes to 
the classification system. That is, the normalization adjustment is 
intended to ensure that the recalibration of the MS-LTC-DRG relative 
weights (that is, the process itself) neither increases nor decreases 
the average case-mix index.
    To calculate the normalization factor for FY 2021 (the first step 
of our budget neutrality methodology), we used the following three 
steps: (1.a.) Use the most recent available applicable LTCH cases from 
the most recent available data (that is, LTCH discharges from the FY 
2019 MedPAR file) and group them using the FY 2021 GROUPER (that is, 
Version 38 for FY 2021) and the recalibrated FY 2021 MS-LTC-DRG 
relative weights (determined in Steps 1 through 6 discussed previously) 
to calculate the average case-mix index; (1.b.) group the same 
applicable LTCH cases (as are used in Step 1.a.) using the FY 2020 
GROUPER (Version 37) and FY 2020 MS-LTC-DRG relative weights and 
calculate the average case-mix index; and (1.c.) compute the ratio of 
these average case-mix indexes by dividing the average CMI for FY 2021 
(determined in Step 1.a.) by the average case-mix index for FY 2020 
(determined in Step 1.b.). As a result, in determining the MS-LTC-DRG 
relative weights for FY 2021, each recalibrated MS-LTC-DRG relative 
weight is multiplied by the normalization factor of 1.25890 (determined 
in Step 1.c.) in the first step of the budget neutrality methodology, 
which produced ``normalized relative weights.''
    In the second step of our MS-LTC-DRG budget neutrality methodology, 
we calculated a second budget neutrality

[[Page 58907]]

factor consisting of the ratio of estimated aggregate FY 2021 LTCH PPS 
standard Federal payment rate payments for applicable LTCH cases (the 
sum of all calculations under Step 1.a. stated previously) after 
reclassification and recalibration to estimated aggregate payments for 
FY 2021 LTCH PPS standard Federal payment rate payments for applicable 
LTCH cases before reclassification and recalibration (that is, the sum 
of all calculations under Step 1.b. stated previously).
    That is, for this final rule, for FY 2021, under the second step of 
the budget neutrality methodology, as we proposed, we determined the 
budget neutrality adjustment factor using the following three steps: 
(2.a.) Simulate estimated total FY 2021 LTCH PPS standard Federal 
payment rate payments for applicable LTCH cases using the normalized 
relative weights for FY 2021 and GROUPER Version 38 (as described 
previously); (2.b.) simulate estimated total FY 2021 LTCH PPS standard 
Federal payment rate payments for applicable LTCH cases using the FY 
2020 GROUPER (Version 37) and the FY 2020 MS-LTC-DRG relative weights 
in Table 11 of the FY 2020 IPPS/LTCH PPS final rule available on the 
internet, as described in section VI. of the Addendum of that final 
rule; and (2.c.) calculate the ratio of these estimated total payments 
by dividing the value determined in Step 2.b. by the value determined 
in Step 2.a. In determining the FY 2021 MS-LTC-DRG relative weights, 
each normalized relative weight is then multiplied by a budget 
neutrality factor of 0.9995082 (the value determined in Step 2.c.) in 
the second step of the budget neutrality methodology to achieve the 
budget neutrality requirement at Sec.  412.517(b).
    Accordingly, in determining the FY 2021 MS-LTC-DRG relative weights 
in this final rule, consistent with our existing methodology, as we 
proposed, we applied a normalization factor of 1.25890 and a budget 
neutrality factor of 0.9995082. Table 11, which is listed in section 
VI. of the Addendum to this final rule and is available via the 
internet on the CMS website, lists the MS-LTC-DRGs and their respective 
relative weights, geometric mean length of stay, and five-sixths of the 
geometric mean length of stay (used to identify SSO cases under Sec.  
412.529(a)) for FY 2021.

C. Changes to the LTCH PPS Payment Rates and Other Changes to the LTCH 
PPS for FY 2021

1. Overview of Development of the LTCH PPS Standard Federal Payment 
Rates
    The basic methodology for determining LTCH PPS standard Federal 
payment rates is currently set forth at 42 CFR 412.515 through 412.533 
and 412.535. In this section, we discuss the factors that we used to 
update the LTCH PPS standard Federal payment rate for FY 2021, that is, 
effective for LTCH discharges occurring on or after October 1, 2020 
through September 30, 2021. Under the dual rate LTCH PPS payment 
structure required by statute, beginning with discharges in cost 
reporting periods beginning in FY 2016, only LTCH discharges that meet 
the criteria for exclusion from the site neutral payment rate are paid 
based on the LTCH PPS standard Federal payment rate specified at Sec.  
412.523. (For additional details on our finalized policies related to 
the dual rate LTCH PPS payment structure required by statute, we refer 
readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 
49623).)
    Prior to the implementation of the dual payment rate system in FY 
2016, all LTCH discharges were paid similarly to those now exempt from 
the site neutral payment rate. That legacy payment rate was called the 
standard Federal rate. For details on the development of the initial 
standard Federal rate for FY 2003, we refer readers to the August 30, 
2002 LTCH PPS final rule (67 FR 56027 through 56037). For subsequent 
updates to the standard Federal rate (FYs 2003 through 2015)/LTCH PPS 
standard Federal payment rate (FY 2016 through present) as implemented 
under Sec.  412.523(c)(3), we refer readers to the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42445 through 42446).
    In this FY 2021 IPPS/LTCH PPS final rule, we present our policies 
related to the annual update to the LTCH PPS standard Federal payment 
rate for FY 2021.
    The update to the LTCH PPS standard Federal payment rate for FY 
2021 is presented in section V.A. of the Addendum to this rule. The 
components of the annual update to the LTCH PPS standard Federal 
payment rate for FY 2021 are discussed in this section, including the 
statutory reduction to the annual update for LTCHs that fail to submit 
quality reporting data for FY 2021 as required by the statute (as 
discussed in section VII.C.2.c. of the preamble of this final rule). As 
we proposed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32812), 
we also made an adjustment to the LTCH PPS standard Federal payment 
rate to account for the estimated effect of the changes to the area 
wage level for FY 2021 on estimated aggregate LTCH PPS payments, in 
accordance with Sec.  412.523(d)(4) (as discussed in section V.B. of 
the Addendum to this final rule).
    In addition, as discussed in the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41532 through 41537), we eliminated the 25-percent threshold 
policy in a budget neutral manner. The budget neutrality requirements 
are codified in the regulations at Sec.  412.523(d)(6). Under these 
regulations, a temporary, one-time factor is applied to the standard 
Federal payment rate in FY 2019 and FY 2020, and a permanent, one-time 
factor in FY 2021. These factors as established in the correction to 
the FY 2019 IPPS/LTCH PPS final rule (83 FR 41536) are--
     For FY 2019, a temporary, one-time factor of 0.990878;
     For FY 2020, a temporary, one-time factor of 0.990737; and
     For FY 2021 and subsequent years, a permanent, one-time 
factor of 0.991249.
    Therefore, in determining the FY 2021 LTCH PPS standard Federal 
payment rate, as we proposed, we--
     Removed the temporary, one-time factor of 0.990737 for the 
estimated cost of the elimination of the 25-percent threshold policy in 
FY 2020 by applying a factor of (1/0.990737);
     Applied a permanent, one-time factor of 0.991249 for the 
estimated cost of the elimination of the 25-percent threshold policy in 
FY 2021;
2. FY 2021 LTCH PPS Standard Federal Payment Rate Annual Market Basket 
Update
 a. Overview
    Historically, the Medicare program has used a market basket to 
account for input price increases in the services furnished by 
providers. The market basket used for the LTCH PPS includes both 
operating and capital related costs of LTCHs because the LTCH PPS uses 
a single payment rate for both operating and capital-related costs. We 
adopted the 2013-based LTCH market basket for use under the LTCH PPS 
beginning in FY 2017 (81 FR 57100 through 57102). As discussed in 
section VII.D. of the preamble of this final rule, as we proposed, we 
are rebasing and revising the 2013-based LTCH market basket to reflect 
a 2017 base year. For additional details on the historical development 
of the market basket used under the LTCH

[[Page 58908]]

PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53467 through 53476), and for a complete discussion of the LTCH market 
basket and a description of the methodologies used to determine the 
operating and capital-related portions of the 2013-based LTCH market 
basket, we refer readers to section VII.D. of the preamble of the FY 
2017 IPPS/LTCH PPS proposed and final rules (81 FR 25153 through 25167 
and 81 FR 57086 through 57099, respectively).
    Section 3401(c) of the Affordable Care Act provides for certain 
adjustments to any annual update to the LTCH PPS standard Federal 
payment rate and refers to the timeframes associated with such 
adjustments as a ``rate year.'' We note that, because the annual update 
to the LTCH PPS policies, rates, and factors now occurs on October 1, 
we adopted the term ``fiscal year'' (FY) rather than ``rate year'' (RY) 
under the LTCH PPS beginning October 1, 2010, to conform with the 
standard definition of the Federal fiscal year (October 1 through 
September 30) used by other PPSs, such as the IPPS (75 FR 50396 through 
50397). Although the language of sections 3004(a), 3401(c), 10319, and 
1105(b) of the Affordable Care Act refers to years 2010 and thereafter 
under the LTCH PPS as ``rate year,'' consistent with our change in the 
terminology used under the LTCH PPS from ``rate year'' to ``fiscal 
year,'' for purposes of clarity, when discussing the annual update for 
the LTCH PPS standard Federal payment rate, including the provisions of 
the Affordable Care Act, we use ``fiscal year'' rather than ``rate 
year'' for 2011 and subsequent years.
b. Annual Update to the LTCH PPS Standard Federal Payment Rate for FY 
2021
    CMS has used an estimated market basket increase to update the LTCH 
PPS. As previously noted, for FY 2021 we rebased and revised the 2013-
based LTCH market basket to reflect a 2017 base year. The 2017-based 
LTCH market basket is primarily based on the Medicare cost report data 
submitted by LTCHs and, therefore, specifically reflects the cost 
structures of only LTCHs. As we proposed, we used data from cost 
reports beginning in FY 2017 because these data are the latest 
available complete data at the time of rulemaking for purposes of 
calculating cost weights for the market basket. We believe that the 
2017-based LTCH market basket appropriately reflects the cost structure 
of LTCHs, as discussed in greater detail in section VII.D. of the 
preamble of this final rule. In this final rule, as we proposed in the 
FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32812--32813), we used the 
2017-based LTCH market basket to update the LTCH PPS standard Federal 
payment rate for FY 2021.
    Section 1886(m)(3)(A) of the Act provides that, beginning in FY 
2010, any annual update to the LTCH PPS standard Federal payment rate 
is reduced by the adjustments specified in clauses (i) and (ii) of 
subparagraph (A). Clause (i) of section 1886(m)(3)(A) of the Act 
provides for a reduction, for FY 2012 and each subsequent rate year, by 
the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) 
of the Act (that is, ``the multifactor productivity (MFP) 
adjustment''). Clause (ii) of section 1886(m)(3)(A) of the Act provided 
for a reduction, for each of FYs 2010 through 2019, by the ``other 
adjustment'' described in section 1886(m)(4)(F) of the Act; therefore, 
it is not applicable for FY 2021.
    Section 1886(m)(3)(B) of the Act provides that the application of 
paragraph (3) of section 1886(m) of the Act may result in the annual 
update being less than zero for a rate year, and may result in payment 
rates for a rate year being less than such payment rates for the 
preceding rate year.
c. Adjustment to the LTCH PPS Standard Federal Payment Rate Under the 
Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    In accordance with section 1886(m)(5) of the Act, the Secretary 
established the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP). The reduction in the annual update to the LTCH PPS standard 
Federal payment rate for failure to report quality data under the LTCH 
QRP for FY 2014 and subsequent fiscal years is codified under 42 CFR 
412.523(c)(4). The LTCH QRP, as required for FY 2014 and subsequent 
fiscal years by section 1886(m)(5)(A)(i) of the Act, applies a 2.0 
percentage point reduction to any update under Sec.  412.523(c)(3) for 
an LTCH that does not submit quality reporting data to the Secretary in 
accordance with section 1886(m)(5)(C) of the Act with respect to such a 
year (that is, in the form and manner and at the time specified by the 
Secretary under the LTCH QRP) (Sec.  412.523(c)(4)(i)). Section 
1886(m)(5)(A)(ii) of the Act provides that the application of the 2.0 
percentage points reduction may result in an annual update that is less 
than 0.0 for a year, and may result in LTCH PPS payment rates for a 
year being less than such LTCH PPS payment rates for the preceding 
year. Furthermore, section 1886(m)(5)(B) of the Act specifies that the 
2.0 percentage points reduction is applied in a noncumulative manner, 
such that any reduction made under section 1886(m)(5)(A) of the Act 
shall apply only with respect to the year involved, and shall not be 
taken into account in computing the LTCH PPS payment amount for a 
subsequent year. These requirements are codified in the regulations at 
Sec.  412.523(c)(4). (For additional information on the history of the 
LTCH QRP, including the statutory authority and the selected measures, 
we refer readers to section VIII.C. of the preamble of this final 
rule.)
d. Annual Market Basket Update Under the LTCH PPS for FY 2021
    Consistent with our historical practice and our proposal, we 
estimate the market basket increase and the MFP adjustment based on 
IGI's forecast using the most recent available data. In the proposed 
rule (85 FR 32813), we proposed to establish an annual update to the 
LTCH PPS standard Federal payment rate for FY 2021 of 2.5 percent based 
on the best available data at that time (that is, the estimated LTCH 
PPS market basket increase of 2.9 percent less the MFP adjustment of 
0.4 percentage point). Consistent with our historical practice, we also 
proposed to use a more recent estimate of the market basket and the MFP 
adjustment, if appropriate, in the final rule to establish an annual 
update to the LTCH PPS standard Federal payment rate for FY 2021.
    For this final rule, based on IGIs second-quarter 2020 forecast, 
the FY 2021 full market basket estimate for the LTCH PPS using the 
2017-based LTCH market basket is 2.3 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 (2.3 percent) for FY 2021, relative to the proposed rule 
(2.9 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.
    For FY 2021, section 1886(m)(3)(A)(i) of the Act requires that any 
annual update to the LTCH PPS standard Federal payment rate be reduced 
by the productivity adjustment (``the MFP adjustment'') described in 
section 1886(b)(3)(B)(xi)(II) of the Act. (We note that sections 
1886(m)(3)(A)(ii) and 1886(m)(4)(F) of the Act required an additional 
reduction each year only for FYs 2010 through 2019.) (For additional 
details on our established methodology

[[Page 58909]]

for adjusting the market basket increase by the MFP adjustment, we 
refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771).)
    In the FY 2021 IPPS/LTCH PPS proposed rule, 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 10-year moving average growth of MFP for FY 
2021 is -0.1 percentage point. This MFP 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 LTCH 
market basket on a quarterly basis. Therefore, IGI's second quarter 
2020 forecast is the most recent forecast of the LTCH 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 this 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 would have 
resulted in a 0.1 percentage point increase in the FY 2021 annual 
update to the LTCH PPS standard Federal payment rate. However, under 
section 1886(m)(3)(A)(i) of the Act, the Secretary is required to 
reduce (not increase) any annual update to the LTCH PPS standard 
Federal payment rate by 10-year moving average of changes in annual 
economy-wide private nonfarm business multi-factor productivity. 
Accordingly, we will be applying a 0.0 percentage point MFP adjustment 
to the market basket update. Therefore, the annual market basket update 
to the LTCH PPS standard Federal payment rate for FY 2021 is 2.3 
percent (that is, the FY 2021 full market basket estimate for the LTCH 
PPS with 0.0 percentage point adjustment made for MFP).
    For FY 2021, section 1886(m)(5) of the Act requires that, for LTCHs 
that do not submit quality reporting data as required under the LTCH 
QRP, any annual update to an LTCH PPS standard Federal payment rate, 
after application of the adjustments required by section 1886(m)(3) of 
the Act, shall be further reduced by 2.0 percentage points. Therefore, 
for LTCHs that fail to submit quality reporting data under the LTCH 
QRP, the 2.3 percent annual market basket update to the LTCH PPS 
standard Federal payment rate for FY 2021 will be reduced by 2.0 
percentage points required by section 1886(m)(5) of the Act.
    In this FY 2021 IPPS/LTCH PPS final rule, in accordance with the 
statute, under the authority of section 123 of the BBRA as amended by 
section 307(b) of the BIPA, consistent with our proposal, we are 
establishing an annual market basket update to the LTCH PPS standard 
Federal payment rate for FY 2021 of 2.3 percent (that is, the most 
recent estimate of the LTCH PPS market basket increase of 2.3 percent 
less the MFP adjustment of 0.0 percentage point).
    While we have historically implemented the payment updates to the 
LTCH PPS in individual amendments to the regulations, given existing 
statutory provisions affecting the LTCH update are constant going 
forward, in the proposed rule we proposed to revise Sec.  412.523(c)(3) 
by adding a new paragraph (xvii), which would specify that the LTCH PPS 
standard Federal payment rate for FY 2021 and subsequent fiscal years 
is the LTCH PPS standard Federal payment rate for the previous LTCH PPS 
payment year updated by the market basket (as determined by CMS), less 
a multifactor productivity adjustment (as determined by CMS), and 
further adjusted, as appropriate, as described in Sec.  412.523(d) 
(including the application of the adjustment factor for the cost of the 
elimination of the 25-percent threshold policy under Sec.  
412.523(d)(6) as previously discussed) rather than codifying specific 
numerical updates annually as was our historical practice. For LTCHs 
that fail to submit quality reporting data under the LTCH QRP, under 
Sec.  412.523(c)(3)(xvi) in conjunction with Sec.  412.523(c)(4), we 
proposed to further reduce the annual update to the LTCH PPS standard 
Federal payment rate by 2.0 percentage points, in accordance with 
section 1886(m)(5) of the Act.
    We did not receive any comments on this proposal. Therefore we are 
finalizing it as proposed without modification. Accordingly, as we 
proposed, we are establishing an annual update to the LTCH PPS standard 
Federal payment rate of 0.3 percent (that is, 2.3 percent minus 2.0 
percentage points) for FY 2021 for LTCHs that fail to submit quality 
reporting data as required under the LTCH QRP. We note that, consistent 
with historical practice, as we proposed, we adjusted the FY 2021 LTCH 
PPS standard Federal payment rate by an area wage level budget 
neutrality factor in accordance with Sec.  412.523(d)(4) (as discussed 
in section V.B.5. of the Addendum to this final rule).

D. Rebasing and Revising of the LTCH Market Basket

1. Background
    The input price index (that is, the market basket) that was used to 
develop the LTCH PPS for FY 2003 was the ``excluded hospital with 
capital'' market basket. That market basket was based on 1997 Medicare 
cost report data and included data for Medicare-participating IRFs, 
IPFs, LTCHs, cancer hospitals, and children's hospitals. Although the 
term ``market basket'' technically describes the mix of goods and 
services used in providing hospital care, this term is also commonly 
used to denote the input price index (that is, cost category weights 
and price proxies combined) derived from that mix. Accordingly, the 
term ``market basket,'' as used in this section, refers to an input 
price index.
    Beginning with rate year (RY) 2007, LTCH PPS payments were updated 
using a 2002-based market basket reflecting the operating and capital 
cost structures for IRFs, IPFs, and LTCHs (hereafter referred to as the 
rehabilitation, psychiatric, and long-term care (RPL) market basket). 
We

[[Page 58910]]

excluded cancer and children's hospitals from the RPL market basket 
because their payments are based entirely on reasonable costs subject 
to rate-of-increase limits established under the authority of section 
1886(b) of the Act, which are implemented in regulations at 42 CFR 
413.40. Those types of hospitals are not paid under a PPS. Also, the 
2002 cost structures for cancer and children's hospitals are noticeably 
different from the cost structures for freestanding IRFs, freestanding 
IPFs, and LTCHs. A complete discussion of the 2002-based RPL market 
basket can be found in the RY 2007 LTCH PPS final rule (71 FR 27810 
through 27817).
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51756), we finalized 
the rebasing and revising of the 2002-based RPL market basket by 
creating and implementing a 2008-based RPL market basket. We also 
discussed the creation of a stand-alone LTCH market basket and received 
several public comments, all of which supported deriving a standalone 
LTCH market basket (76 FR 51756 through 51757). In the FY 2013 IPPS/
LTCH PPS final rule, we finalized the adoption of a stand-alone 2009-
based LTCH-specific market basket that reflects the cost structures of 
LTCHs only (77 FR 53467 through 53479). In the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57085 through 57099), we finalized the rebasing and 
revising of the 2009-based LTCH market basket to reflect a 2013 base 
year (the 2013-based LTCH market basket).
    For FY 2021, we proposed to rebase and revise the 2013-based LTCH 
market basket to reflect a 2017 base year (85 FR 32814). The proposed 
2017-based LTCH market basket is primarily based on Medicare cost 
report data for LTCHs for 2017, which are for cost reporting periods 
beginning on and after October 1, 2016, and before October 1, 2017. We 
proposed to use data from cost reports beginning in FY 2017 because 
these data are the latest available complete data for purposes of 
calculating cost weights for the market basket at the time of 
rulemaking.
    In the following discussion, we provide an overview of the proposed 
LTCH market basket, describe the proposed methodologies for developing 
the operating and capital portions of the 2017-based LTCH market 
basket, and provide information on the proposed price proxies. We then 
describe any comments received, responses to these comments, and our 
final policies for this final rule.
2. Overview of the 2017-Based LTCH Market Basket
    Similar to the 2013-based LTCH market basket, the proposed 2017-
based LTCH market basket is a fixed-weight, Laspeyres-type price index. 
A Laspeyres price index measures the change in price, over time, of the 
same mix of goods and services purchased in the base period. Any 
changes in the quantity or mix (that is, intensity) of goods and 
services purchased over time are not measured. The index itself is 
constructed using three steps. First, a base period is selected (in the 
proposed rule, we proposed to use 2017 as the base period) and total 
base period expenditures are estimated for a set of mutually exclusive 
and exhaustive spending categories, with the proportion of total costs 
that each category represents being calculated. These proportions are 
called ``cost weights'' or ``expenditure weights.'' Second, each 
expenditure category is matched to an appropriate price or wage 
variable, referred to as a ``price proxy.'' In almost every instance, 
these price proxies are derived from publicly available statistical 
series that are published on a consistent schedule (preferably at least 
on a quarterly basis). Finally, the expenditure weight for each cost 
category is multiplied by the level of its respective price proxy. The 
sum of these products (that is, the expenditure weights multiplied by 
their price levels) for all cost categories yields the composite index 
level of the market basket in a given period. Repeating this step for 
other periods produces a series of market basket levels over time. 
Dividing an index level for a given period by an index level for an 
earlier period produces a rate of growth in the input price index over 
that timeframe. As previously noted, the market basket is described as 
a fixed-weight index because it represents the change in price over 
time of a constant mix (quantity and intensity) of goods and services 
needed to furnish hospital services. The effects on total expenditures 
resulting from changes in the mix of goods and services purchased 
subsequent to the base period are not measured. For example, a hospital 
hiring more nurses to accommodate the needs of patients would increase 
the volume of goods and services purchased by the hospital, but would 
not be factored into the price change measured by a fixed-weight 
hospital market basket. Only when the index is rebased would changes in 
the quantity and intensity be captured, with those changes being 
reflected in the cost weights. Therefore, we rebase the market basket 
periodically so that the cost weights reflect a recent mix of goods and 
services that hospitals purchase (hospital inputs) to furnish inpatient 
care.
3. Development of the 2017-Based LTCH Market Basket Cost Categories and 
Weights
    We invited public comments on our proposed methodology, discussed 
in this section of this rule, for deriving the proposed 2017-based LTCH 
market basket.
a. Use of Medicare Cost Report Data
    We proposed a 2017-based LTCH market basket that consists of seven 
major cost categories and a residual derived from the 2017 Medicare 
cost reports (CMS Form 2552-10, OMB Control Number 0938-0050) for 
LTCHs. The seven cost categories are Wages and Salaries, Employee 
Benefits, Contract Labor, Pharmaceuticals, Professional Liability 
Insurance (PLI), Home Office/Related Organization Contract Labor, and 
Capital. The residual category reflects all remaining costs not 
captured in the seven cost categories. The 2013-based LTCH market 
basket did not use the Medicare cost reports to calculate the Home 
Office/Related Organization Contract Labor cost weight.
    Medicare cost report data include costs for all patients, including 
Medicare, Medicaid, and private payer. Because our goal is to measure 
cost shares for facilities that serve Medicare beneficiaries, and are 
reflective of case mix and practice patterns associated with providing 
services to Medicare beneficiaries in LTCHs, we proposed to limit our 
selection of Medicare cost reports to those from LTCHs that have a 
Medicare average length of stay (LOS) that is within a comparable range 
of their total facility average LOS. We define the Medicare average LOS 
based on data reported on the Medicare cost report (CMS Form 2552-10, 
OMB Control Number 0938-0050) Worksheet S-3, Part I, line 14. We 
believe that applying the LOS edit results in a more accurate 
reflection of the structure of costs for Medicare covered days as our 
proposed edit excludes those LTCHs that had an average total facility 
LOS that was much different than the average Medicare LOS. For the 
2013-based LTCH market basket, we used the cost reports submitted by 
LTCHs with Medicare average LOS within 25 percent (that is, 25 percent 
higher or lower) of the total facility average LOS for the hospital. 
Based on our analysis of the 2017 Medicare cost reports, for the 
proposed 2017-based LTCH market basket, we proposed to again use the 
cost reports submitted by LTCHs with

[[Page 58911]]

Medicare average LOS within 25 percent (that is, 25 percent higher or 
lower) of the total facility average LOS for the hospital. The universe 
of LTCHs had an average Medicare LOS of 26 days, an average total 
facility LOS of 31 days, and aggregate Medicare utilization (as 
measured by Medicare inpatient LTCH days as a percentage of total 
facility inpatient LTCH days) of 49 percent in 2017. Applying the 
proposed trim excludes 9 percent of LTCH providers and results in a 
subset of LTCH Medicare cost reports with an average Medicare LOS of 25 
days, average facility LOS of 27 days, and aggregate Medicare 
utilization (based on days) of 58 percent. The 9 percent of providers 
that are excluded from the proposed 2017-based LTCH market basket had 
an average Medicare LOS of 27 days, average facility LOS of 70 days, 
and aggregate Medicare utilization of 15 percent.
    We proposed to use the cost reports for LTCHs that meet this 
requirement to calculate the costs for the seven major cost categories 
(Wages and Salaries, Employee Benefits, Contract Labor, Professional 
Liability Insurance, Pharmaceuticals, Home Office/Related Organization 
Contract Labor, and Capital) for the market basket. For comparison, the 
2013-based LTCH market basket utilized the Bureau of Economic Analysis 
Benchmark Input-Output data rather than Medicare cost report data to 
derive the Home Office/Related Organization Contract Labor cost weight. 
A more detailed discussion of this methodological change is provided in 
section VII.D.3.a.(6). of the preamble of this final rule.
(1) Wages and Salaries Costs
    We proposed to derive Wages and Salaries costs as the sum of 
routine inpatient salaries, ancillary salaries, and a proportion of 
overhead (or general service cost center) salaries as reported on 
Worksheet A, column 1. Because overhead salary costs are attributable 
to the entire LTCH, we proposed to only include the proportion 
attributable to the Medicare allowable cost centers. For the 2017-based 
LTCH market basket, we proposed that routine and ancillary Wages and 
Salaries costs would be equal to salary costs as reported on Worksheet 
A, column 1, lines 30 through 35, 50 through 76 (excluding 52, 61, and 
75), 90 through 91, and 93. Then, we proposed to estimate the 
proportion of overhead salaries that are attributed to Medicare 
allowable costs centers by multiplying the ratio of these routine and 
ancillary Wages and Salaries to total salaries (Worksheet A, column 1, 
line 200) times total overhead salaries (Worksheet A, column 1, lines 4 
through 18). A similar methodology was used to derive Wages and 
Salaries costs in the 2013-based LTCH market basket.
(2) Employee Benefits Costs
    Similar to the 2013-based LTCH market basket, we proposed to 
calculate Employee Benefits costs using Worksheet S-3, part II data. 
Specifically, we proposed to use data from Worksheet S-3, part II, 
column 4, lines 17, 18, 20, and 22, to derive Employee Benefits costs. 
The completion of Worksheet S-3, part II is only required for IPPS 
hospitals. For 2017, we found that approximately 20 percent of LTCHs 
voluntarily reported these data, which has fallen from the roughly 35 
percent that reported these data for 2013. Our analysis of the 
Worksheet S-3, part II data submitted by these LTCHs indicates that we 
continue to have a large enough sample to enable us to produce a 
reasonable Employee Benefits cost weight. Specifically, we found that 
when we recalculated the cost weight after weighting to reflect the 
characteristics of the universe of LTCHs (type of control (nonprofit, 
for-profit, and government) and by region), the recalculation did not 
have a material effect on the resulting cost weight. Therefore, we 
proposed to use Worksheet S-3, part II data (as was done for the 2013-
based LTCH market basket) to calculate the Employee Benefits cost 
weight in the proposed 2017-based LTCH market basket.
    We note that, effective with the implementation of CMS Form 2552-
10, OMB Control Number 0938-0050, we began collecting Employee Benefits 
and Contract Labor data on Worksheet S-3, part V, which is applicable 
to LTCHs. However, approximately 17 percent of LTCHs reported data on 
Worksheet S-3, part V for 2017, with most of these providers also 
reporting data on Worksheet S-3, part II. Because a greater percentage 
of LTCHs continue to report data on Worksheet S-3, part II than 
Worksheet S-3, part V for 2017, we did not propose to use the Employee 
Benefits and Contract Labor data reported on Worksheet S-3, part V to 
calculate the Employee Benefits cost weight in the proposed 2017-based 
LTCH market basket. We continue to encourage all providers to report 
these data on Worksheet S-3, Part V.
(3) Contract Labor Costs
    Contract Labor costs are primarily associated with direct patient 
care services. Contract Labor costs for services such as accounting, 
billing, and legal are estimated using other government data sources as 
described in this section of this final rule. Approximately 44 percent 
of LTCHs voluntarily reported Contract Labor costs on Worksheet S-3, 
part II, which was similar to the percentage obtained from 2013 
Medicare cost reports. Only about 18 percent of LTCHs reported Contract 
Labor costs data on Worksheet S-3, part V.
    As was done for the 2013-based LTCH market basket, we proposed to 
derive the Contract Labor costs for the proposed 2017-based LTCH market 
basket using voluntarily reported data from Worksheet S-3, part II. Our 
analysis of these data indicates that we have a large enough sample to 
enable us to produce a reasonable Contract Labor cost weight. 
Specifically, we found that when we recalculated the cost weight after 
weighting to reflect the characteristics of the universe of LTCHs (type 
of control (nonprofit, for-profit, and government) and by region), the 
recalculation did not have a material effect on the resulting cost 
weight. Therefore, we proposed to use data from Worksheet S-3, part II, 
column 4, lines 11 and 13 to calculate the Contract Labor cost weight 
in the proposed 2017-based LTCH market basket.
(4) Pharmaceuticals Costs
    We proposed to calculate Pharmaceuticals costs using nonsalary 
costs for the pharmacy cost center (line 15) and drugs charged to 
patients cost center (line 73). We proposed to estimate these costs 
using total pharmaceutical costs reported on Worksheet B, part I, 
column 0, lines 15 and 73 and then removing a portion of these costs 
attributable to salaries. We proposed to estimate the proportion of 
costs for removal as Worksheet A, column 1, lines 15 and 73 divided by 
the sum of Worksheet A, columns 1 and 2, lines 15 and 73. A similar 
methodology was used for the 2013-based LTCH market basket.
(5) Professional Liability Insurance Costs
    We proposed that Professional Liability Insurance (PLI) costs 
(often referred to as malpractice costs) be equal to premiums, paid 
losses and self-insurance costs reported on Worksheet S-2, part I, 
columns 1 through 3, line 118. A similar methodology was used for the 
2013-based LTCH market basket.
(6) Home Office/Related Organization Contract Labor Costs
    For the 2017-based LTCH market basket, we proposed to determine the 
Home Office/Related Organization Contract Labor costs using Medicare

[[Page 58912]]

cost report data. Specifically, we proposed to calculate the Home 
Office/Related Organization Contract Labor costs using data reported on 
Worksheet S-3, part II, column 4, lines 14, 1401, 1402, 2550, and 2551 
for those LTCH providers reporting total salaries on Worksheet S-3, 
part II, line 1.
    The 2013-based LTCH market basket used the 2007 Benchmark Input-
Output (I-O) expense data published by the Bureau of Economic Analysis 
(BEA) to derive these costs (81 FR 57089). A more detailed explanation 
of the general methodology using the BEA I-O data is provided in 
section VII.D.3.c. of the preamble of this final rule. We calculated 
the Home Office/Related Organization Contract Labor cost weight using 
expense data for North American Industry Classification System (NAICS) 
code 55, Management of Companies and Enterprises (81 FR 57098). We 
believe the proposed methodology for the 2017-based LTCH market basket 
is a technical improvement over the prior methodology because it 
represents more recent data that is representative compositionally and 
geographically of LTCHs.
(7) Capital Costs
    We proposed that Capital costs be equal to Medicare allowable 
capital costs as reported on Worksheet B, part II, column 26, lines 30 
through 35, 50 through 76 (excluding 52, 61, and 75), 90 through 91 and 
93. A similar methodology was used for the 2013-based LTCH market 
basket.
b. Final Major Cost Category Computation
    After we derive costs for the major cost categories for each 
provider using the Medicare cost report data as previously described, 
we proposed to trim the data for outliers. For each of the seven major 
cost categories, we first proposed to divide the calculated costs for 
the category by total Medicare allowable costs calculated for the 
provider to obtain cost weights for the universe of LTCH providers. For 
the 2017-based LTCH market basket (similar to the 2013-based LTCH 
market basket), we proposed that total Medicare allowable costs would 
be equal to the total costs as reported on Worksheet B, part I, column 
26, lines 30 through 35, 50 through 76 (excluding 52, 61 and 75), 90 
through 91, and 93.
    For the Wages and Salaries, Employee Benefits, Contract Labor, 
Pharmaceuticals, Professional Liability Insurance, and Capital cost 
weights, after excluding cost weights that are less than or equal to 
zero, we proposed to then remove those providers whose derived cost 
weights fall in the top and bottom 5 percent of provider specific 
derived cost weights to ensure the exclusion of outliers. After the 
outliers have been excluded, we sum the costs for each category across 
all remaining providers. We proposed to divide this by the sum of total 
Medicare allowable costs across all remaining providers to obtain a 
cost weight for the 2017-based LTCH market basket for the given 
category. This trimming process is done for each cost weight 
separately.
    For the Home Office/Related Organization Contract Labor cost 
weight, we proposed to apply a 1-percent top only trimming methodology. 
This allows all providers' Medicare allowable costs to be included, 
even if their Home Office/Related Organization Contract Labor costs 
were zero. We believe, as the Medicare cost report data (Worksheet S-2, 
part I, line 140) indicate, that not all LTCHs have a home office. 
LTCHs without a home office can incur these expenses directly by having 
their own staff, for which the costs would be included in the Wages and 
Salaries and Employee Benefits cost weights. Alternatively, LTCHs 
without a home office could also purchase related services from 
external contractors for which these expenses would be captured in the 
residual ``All Other'' cost weight. We believe this 1-percent top-only 
trimming methodology is appropriate as it addresses outliers while 
allowing providers with zero Home Office/Related Organization Contract 
Labor costs to be included in the Home Office/Related Organization 
Contract Labor cost weight calculation. If we applied both the top and 
bottom 5 percent trimming methodology, we would exclude providers who 
have zero Home Office/Related Organization Contract Labor costs.
    Finally, we proposed to calculate the residual ``All Other'' cost 
weight that reflects all remaining costs that are not captured in the 
seven cost categories listed.
    We received no comments on the proposed methodology to derive the 
major cost weights using the Medicare cost reports and therefore are 
finalizing this methodology without modification. We refer readers to 
Table E1 for the resulting proposed and final cost weights for these 
major cost categories.
[GRAPHIC] [TIFF OMITTED] TR18SE20.227


[[Page 58913]]


    The Wages and Salaries cost weight calculated from the Medicare 
cost reports for the 2017-based LTCH market basket is approximately 1 
percentage point higher than the Wages and Salaries cost weight for the 
2013-based LTCH market basket, while the Contract Labor cost weight is 
1.5 percentage point lower. The 2017-based Pharmaceuticals cost weight 
also is roughly 1.5 percentage point lower than the cost weight for the 
2013-based LTCH market basket.
    As we did for the 2013-based LTCH market basket, we proposed to 
allocate the Contract Labor cost weight to the Wages and Salaries and 
Employee Benefits cost weights based on their relative proportions 
under the assumption that Contract Labor costs are comprised of both 
Wages and Salaries and Employee Benefits. The Contract Labor allocation 
proportion for Wages and Salaries is equal to the Wages and Salaries 
cost weight as a percent of the sum of the Wages and Salaries cost 
weight and the Employee Benefits cost weight. This rounded percentage 
is 87 percent. Therefore, we proposed to allocate 87 percent of the 
Contract Labor cost weight to the Wages and Salaries cost weight and 13 
percent to the Employee Benefits cost weight.
    We received no comments on the proposed methodology to allocate the 
Contract Labor cost weight to the Wages and Salaries cost weight and 
Employee Benefits cost weight and therefore, are finalizing this 
methodology without modification. We refer readers to Table E2 that 
shows the proposed and final Wages and Salaries and Employee Benefits 
cost weights after Contract Labor cost weight allocation for both the 
2017-based LTCH market basket and the 2013-based LTCH market basket.
[GRAPHIC] [TIFF OMITTED] TR18SE20.228

    After the allocation of the Contract Labor cost weight, the 2017-
based Wages and Salaries cost weight is 0.2 percentage point lower and 
the Employee Benefits cost weight is 0.5 percentage point lower, 
relative to the respective cost weights for the 2013-based LTCH market 
basket. As a result, in the 2017-based LTCH market basket, the 
compensation cost weight is 0.7 percentage point lower than the 
Compensation cost weight for the 2013-based LTCH market basket.
c. Derivation of the Detailed Operating Cost Weights
    To further divide the residual ``All Other'' cost weight estimated 
from the 2017 Medicare cost report data into more detailed cost 
categories, we proposed to use the 2012 Benchmark I-O ``Use Tables/
Before Redefinitions/Purchaser Value'' for NAICS 622000, Hospitals, 
published by the Bureau of Economic Analysis (BEA). These data are 
publicly available at the following website: https://www.bea.gov/industry/input-output-accounts-data. For the 2013-based LTCH market 
basket, we used the 2007 Benchmark I-O data, the most recent data 
available at the time (81 FR 57089).
    The BEA Benchmark I-O data are scheduled for publication every 5 
years with the most recent data available for 2012. The 2012 Benchmark 
I-O data are derived from the 2012 Economic Census and are the building 
blocks for BEA's economic accounts. Therefore, they represent the most 
comprehensive and complete set of data on the economic processes or 
mechanisms by which output is produced and distributed.\451\ BEA also 
produces Annual I-O estimates. However, while based on a similar 
methodology, these estimates reflect less comprehensive and less 
detailed data sources and are subject to revision when benchmark data 
becomes available. Instead of using the less detailed Annual I-O data, 
we proposed to inflate the 2012 Benchmark I-O data forward to 2017 by 
applying the annual price changes from the respective price proxies to 
the appropriate market basket cost categories that are obtained from 
the 2012 Benchmark I-O data. We repeated this practice for each year. 
Then, we calculated the cost shares that each cost category represents 
of the 2012 data inflated to 2017. These resulting 2017 cost shares 
were applied to the residual ``All Other'' cost weight to obtain the 
detailed cost weights for the proposed 2017-based LTCH market basket. 
For example, the cost for Food: Direct Purchases represents 4.9 percent 
of the sum of the residual ``All Other'' 2012 Benchmark I-O Hospital 
Expenditures inflated to 2017. Therefore, the Food: Direct Purchases 
cost weight represents 4.9 percent of the proposed 2017-based LTCH 
market basket's residual ``All Other'' cost category (28.3 percent), 
yielding a ``final'' Food: Direct Purchases proposed cost weight of 1.4 
percent in the proposed 2017-based LTCH market basket (0.049 x 28.3 
percent = 1.4 percent).
---------------------------------------------------------------------------

    \451\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------

    Using this methodology, we proposed to derive 17 detailed LTCH 
market basket cost category weights from the 2017-based LTCH market 
basket residual ``All Other'' cost weight (28.3 percent). These 
categories are: (1) Electricity; (2) Fuel, Oil, and Gasoline; (3) Food: 
Direct Purchases; (4) Food: Contract Services; (5) Chemicals; (6) 
Medical Instruments; (7) Rubber and Plastics; (8) Paper and Printing 
Products; (9) Miscellaneous Products; (10) Professional Fees: Labor-
Related; (11) Administrative and Facilities Support Services; (12) 
Installation, Maintenance, and Repair Services; (13) All Other Labor-
Related Services; (14) Professional Fees: Nonlabor-Related; (15) 
Financial Services; (16) Telephone Services; and (17) All Other 
Nonlabor-Related Services. We note that for the 2013-based LTCH market 
basket, we had a Water and Sewerage cost weight. For the 2017-based 
LTCH market basket, we proposed to include Water and

[[Page 58914]]

Sewerage costs in the Electricity cost weight due to the small amount 
of costs in this category.
    For the 2013-based LTCH market basket, we used the I-O data for 
NAICS 55 Management of Companies to derive the Home Office/Related 
Organization Contract Labor cost weight, which were classified in the 
Professional Fees: Labor-related and Professional Fees: Nonlabor-
related cost weights. As previously discussed, we proposed to use the 
Medicare cost report data to derive the Home Office/Related 
Organization Contract Labor cost weight, which we would further 
classify into the Professional Fees: Labor-related or Professional 
Fees: Nonlabor-related categories which we discuss in section VII.D.6. 
of the preamble of this final rule.
    We received no comments on the proposed methodology to derive the 
detailed operating cost weights and therefore are finalizing this 
methodology without modification.
d. Derivation of the Detailed Capital Cost Weights
    As described in section VII.D.3.b. of the preamble of this final 
rule, we proposed a Capital-related cost weight of 9.9 percent as 
calculated from the 2017 Medicare cost reports for LTCHs after applying 
the proposed trims as previously described. We proposed to then 
separate this total Capital-related cost weight into more detailed cost 
categories. Using 2017 Medicare cost reports, we are able to group 
Capital-related costs into the following categories: Depreciation, 
Interest, Lease, and Other Capital-Related costs, as shown in Table E3. 
For each of these categories, we proposed to determine what proportion 
of total Capital-related costs the category represents using the data 
reported by the LTCH on Worksheet A-7, which is the same methodology 
used for the 2013-based LTCH market basket.
    We also proposed to allocate lease costs across each of the 
remaining detailed Capital-related cost categories as was done in the 
2013-based LTCH market basket. This would result in three primary 
Capital-related cost categories in the proposed 2017-based LTCH market 
basket: Depreciation, Interest, and Other Capital-Related costs. Lease 
costs are unique in that they are not broken out as a separate cost 
category in the proposed 2017-based LTCH market basket. Rather, we 
proposed to proportionally distribute these costs among the cost 
categories of Depreciation, Interest, and Other Capital-Related, 
reflecting the assumption that the underlying cost structure of leases 
is similar to that of Capital-related costs in general. As was done for 
the 2013-based LTCH market basket, we proposed to assume that 10 
percent of the lease costs as a proportion of total Capital-related 
costs (63.0 percent) represents overhead and to assign those costs to 
the Other Capital-Related cost category accordingly. Therefore, we are 
assuming that approximately 6.3 percent (63.0 percent x 0.1) of total 
Capital-related costs represent lease costs attributable to overhead, 
and we proposed to add this 6.3 percentage points to the 6.7 percent 
Other Capital-Related cost category weight. We are also proposing to 
distribute the remaining lease costs (56.7 percent, or 63.0 percent 
less 6.3 percentage points) proportionally across the three cost 
categories (Depreciation, Interest, and Other Capital-Related) based on 
the proportion that these categories comprise of the sum of the 
Depreciation, Interest, and Other Capital-Related cost categories 
(excluding lease expenses). For example, the Other Capital-Related cost 
category represented 18.2 percent of all three cost categories 
(Depreciation, Interest, and Other Capital-Related) prior to any lease 
expenses being allocated. This 18.2 percent is applied to the 56.7 
percent of remaining lease expenses so that another 10.3 percentage 
points of lease expenses as a percent of total Capital-related costs is 
allocated to the Other Capital-Related cost category. Therefore, the 
resulting proposed Other Capital-Related cost weight is 23.3 percent 
(6.7 percent + 6.3 percent + 10.3 percent). This is the same 
methodology used for the 2013-based LTCH market basket. The proposed 
allocation of these lease expenses are shown in Table E3.
    Finally, we proposed to further divide the Depreciation and 
Interest cost categories. We proposed to separate Depreciation cost 
category into the following two categories: (1) Building and Fixed 
Equipment and (2) Movable Equipment. We also proposed to separate the 
Interest cost category into the following two categories: (1) 
Government/Nonprofit; and (2) For profit.
    To disaggregate the Depreciation cost weight, we needed to 
determine the percent of total depreciation costs for LTCHs (after the 
allocation of lease costs) that are attributable to Building and Fixed 
equipment, which we hereafter refer to as the ``fixed percentage.'' We 
proposed to use depreciation and lease data from Worksheet A-7 of the 
2017 Medicare cost reports, which is the same methodology used for the 
2013-based LTCH market basket. Based on the 2017 LTCH Medicare cost 
report data, we have determined that depreciation costs for building 
and fixed equipment account for 44 percent of total depreciation costs, 
while depreciation costs for movable equipment account for 56 percent 
of total depreciation costs. As previously mentioned, we proposed to 
allocate lease expenses among the Depreciation, Interest, and Other 
Capital-Related cost categories. We determined that leasing building 
and fixed equipment expenses account for 88 percent of total leasing 
expenses, while leasing movable equipment expenses account for 12 
percent of total leasing expenses. We proposed to sum the depreciation 
and leasing expenses for building and fixed equipment, as well as sum 
the depreciation and leasing expenses for movable equipment. This 
results in the proposed Building and Fixed Equipment Depreciation cost 
weight (after leasing costs are included) representing 76 percent of 
total depreciation costs and the Movable Equipment Depreciation cost 
weight (after leasing costs are included) representing 24 percent of 
total depreciation costs.
    To disaggregate the Interest cost weight, we determine the percent 
of total interest costs for LTCHs that are attributable to government 
and nonprofit facilities, which we hereafter refer to as the 
``nonprofit percentage,'' because price pressures associated with these 
types of interest costs tend to differ from those for for-profit 
facilities. We proposed to use interest costs data from Worksheet A-7 
of the 2017 Medicare cost reports for LTCHs, which is the same 
methodology used for the 2013-based LTCH market basket. The nonprofit 
percentage determined using this method is 21 percent.
    We received no comments on the proposed methodology to derive the 
detailed capital cost weights and therefore are finalizing this 
methodology without modification. Table E3 provides the proposed and 
final detailed capital cost shares obtained from the Medicare cost 
reports. Ultimately, these detailed capital cost shares are applied to 
the total Capital-related cost weight determined in section VII.D.3.b. 
of the preamble of this final rule to separate the total Capital-
related cost weight of 9.9 percent into more detailed cost categories 
and weights.

[[Page 58915]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.229

e. 2017-Based LTCH Market Basket Cost Categories and Weights
    Table E4 shows the cost categories and weights for the proposed and 
final 2017-based LTCH market basket compared to the 2013-based LTCH 
market basket.
BILLING CODE 4120-01-P

[[Page 58916]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.230

BILLING CODE 4120-01-C
4. Selection of Price Proxies
    After developing the proposed cost weights for the 2017-based LTCH 
market basket, we selected the most appropriate wage and price proxies 
currently available to represent the rate of price change for each 
expenditure category. For the majority of the cost weights, we base the 
price proxies on U.S. Bureau of Labor Statistics (BLS) data and group 
them into one of the following BLS categories:
     Employment Cost Indexes. Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) 
as price proxies

[[Page 58917]]

for input price indexes because they are not affected by shifts in 
occupation or industry mix, and because they measure pure price change 
and are available by both occupational group and by industry. The 
industry ECIs are based on the NAICS and the occupational ECIs are 
based on the Standard Occupational Classification System (SOC).
     Producer Price Indexes. Producer Price Indexes (PPIs) 
measure the average change over time in the selling prices received by 
domestic producers for their output. The prices included in the PPI are 
from the first commercial transaction for many products and some 
services (https://www.bls.gov/ppi/).
     Consumer Price Indexes. Consumer Price Indexes (CPIs) 
measure the average change over time in the prices paid by urban 
consumers for a market basket of consumer goods and services (https://www.bls.gov/cpi/). CPIs are only used when the purchases are similar to 
those of retail consumers rather than purchases at the producer level, 
or if no appropriate PPIs are available.
    We evaluate the price proxies using the criteria of reliability, 
timeliness, availability, and relevance:
     Reliability. Reliability indicates that the index is based 
on valid statistical methods and has low sampling variability. Widely 
accepted statistical methods ensure that the data were collected and 
aggregated in a way that can be replicated. Low sampling variability is 
desirable because it indicates that the sample reflects the typical 
members of the population. (Sampling variability is variation that 
occurs by chance because only a sample was surveyed rather than the 
entire population.)
     Timeliness. Timeliness implies that the proxy is published 
regularly, preferably at least once a quarter. The market baskets are 
updated quarterly, and therefore, it is important for the underlying 
price proxies to be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
(at least quarterly, whenever possible) helps to ensure that we are 
using the most recent data available to update the market basket. We 
strive to use publications that are disseminated frequently, because we 
believe that this is an optimal way to stay abreast of the most current 
data available.
     Availability. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly available 
because this will help ensure that our market basket updates are as 
transparent to the public as possible. In addition, this enables the 
public to be able to obtain the price proxy data on a regular basis.
     Relevance. Relevance means that the proxy is applicable 
and representative of the cost category weight to which it is applied.
    We believe that the CPIs, PPIs, and ECIs that we have selected meet 
these criteria. Therefore, we believe that they continue to be the best 
measure of price changes for the cost categories to which they would be 
applied.
    Table E7 lists all price proxies that we proposed to use for the 
2017-based LTCH market basket. In this section of this rule is a 
detailed explanation of the price proxies we proposed for each cost 
category weight.
a. Price Proxies for the Operating Portion of the 2017-Based LTCH 
Market Basket
(1) Wages and Salaries
    We proposed to continue to use the ECI for Wages and Salaries for 
All Civilian workers in Hospitals (BLS series code CIU1026220000000I) 
to measure the wage rate growth of this cost category. This is the same 
price proxy used in the 2013-based LTCH market basket (81 FR 57092).
(2) Employee Benefits
    We proposed to continue to use the ECI for Total Benefits for All 
Civilian workers in Hospitals to measure price growth of this category. 
This ECI is calculated using the ECI for Total Compensation for All 
Civilian workers in Hospitals (BLS series code CIU1016220000000I) and 
the relative importance of wages and salaries within total 
compensation. This is the same price proxy used in the 2013-based LTCH 
market basket (81 FR 57092).
(3) Electricity
    We proposed to continue to use the PPI Commodity Index for 
Commercial Electric Power (BLS series code WPU0542) to measure the 
price growth of this cost category. This is the same price proxy used 
in the 2013-based LTCH market basket (81 FR 57092).
(4) Fuel, Oil, and Gasoline
    Similar to the 2013-based LTCH market basket, for the 2017-based 
LTCH market basket, we proposed to use a blend of the PPI Industry for 
Petroleum Refineries and the PPI Commodity for Natural Gas. Our 
analysis of the Bureau of Economic Analysis' 2012 Benchmark I-O data 
(use table before redefinitions, purchaser's value for NAICS 622000 
[Hospitals]), shows that Petroleum Refineries expenses account for 
approximately 90 percent and Natural Gas expenses account for 
approximately 10 percent of Hospitals' (NAICS 622000) total Fuel, Oil, 
and Gasoline expenses. Therefore, we proposed to use a blend of 90 
percent of the PPI Industry for Petroleum Refineries (BLS series code 
PCU324110324110) and 10 percent of the PPI Commodity Index for Natural 
Gas (BLS series code WPU0531) as the price proxy for this cost 
category. The 2013-based LTCH market basket used a 70/30 blend of these 
price proxies, reflecting the 2007 I-O data (81 FR 57092). We believe 
that these two price proxies continue to be the most technically 
appropriate indices available to measure the price growth of the Fuel, 
Oil, and Gasoline cost category in the 2017-based LTCH market basket.
(5) Professional Liability Insurance
    We proposed to continue to use the CMS Hospital Professional 
Liability Index as the price proxy for PLI costs in the proposed 2017-
based LTCH market basket. To generate this index, we collect commercial 
insurance medical liability premiums for a fixed level of coverage 
while holding non-price factors constant (such as a change in the level 
of coverage). This is the same proxy used in the 2013-based LTCH market 
basket (81 FR 57092).
(6) Pharmaceuticals
    We proposed to continue to use the PPI Commodity for 
Pharmaceuticals for Human Use, Prescription (BLS series code 
WPUSI07003) to measure the price growth of this cost category. This is 
the same proxy used in the 2013-based LTCH market basket (81 FR 57092).
(7) Food: Direct Purchases
    We proposed to continue to use the PPI Commodity for Processed 
Foods and Feeds (BLS series code WPU02) to measure the price growth of 
this cost category. This is the same price proxy used in the 2013-based 
LTCH market basket (81 FR 57092).
(8) Food: Contract Purchases
    We proposed to continue to use the CPI for Food Away From Home (BLS 
series code CUUR0000SEFV) to measure the price growth of this cost 
category. This is the same proxy used in the 2013-based LTCH market 
basket (81 FR 57092).
(9) Chemicals
    Similar to the 2013-based LTCH market basket, we proposed to use a 
four-part blended PPI as the proxy for the chemical cost category in 
the 2017-based LTCH market basket. The proposed blend is composed of 
the PPI Industry for Industrial Gas Manufacturing, Primary Products 
(BLS

[[Page 58918]]

series code PCU325120325120P), the PPI Industry for Other Basic 
Inorganic Chemical Manufacturing (BLS series code PCU32518-32518-), the 
PPI Industry for Other Basic Organic Chemical Manufacturing (BLS series 
code PCU32519-32519-), and the PPI Industry for Other Miscellaneous 
Chemical Product Manufacturing (BLS series code PCU325998325998). We 
note that the four part blended PPI used in the 2013-based LTCH market 
basket is composed of the PPI Industry for Industrial Gas Manufacturing 
(BLS series code PCU325120325120P), the PPI Industry for Other Basic 
Inorganic Chemical Manufacturing (BLS series code PCU32518-32518-), the 
PPI Industry for Other Basic Organic Chemical Manufacturing (BLS series 
code PCU32519-32519-), and the PPI Industry for Soap and Cleaning 
Compound Manufacturing (BLS series code PCU32561-32561-). For the 2017-
based LTCH market basket, we proposed to derive the weights for the 
PPIs using the 2012 Benchmark I-O data. The 2013-based LTCH market 
basket used the 2007 Benchmark I-O data to derive the weights for the 
four PPIs (81 FR 57092).
    We note that in the 2012 I-O data, the share of total chemicals 
expenses that the Soap and Cleaning Compound Manufacturing (NAICS 
325610) represents decreased relative to the 2007 I-O data (from 5 
percent to 2 percent), while the share of the total chemicals expenses 
that the All Other Chemical Product and Preparation manufacturing 
(NAICS 3259A0) categories represents increased (from 5 percent to 7 
percent). As a result, we proposed to remove the PPI Industry for Soap 
and Cleaning Compound Manufacturing from the proposed blend for the 
2017-based LTCH market basket and replace it with the PPI Industry for 
Other Miscellaneous Chemical Product Manufacturing.
    We did not receive comments on the proposed methodology to derive 
the blended Chemicals price proxy using the 2012 Benchmark I-O and 
therefore are finalizing this methodology without modification. Table 
E5 shows the weights for each of the four PPIs used to create the 
proposed and final blended Chemical proxy for the 2017-based LTCH 
market basket compared to the 2013-based blended Chemical proxy.
[GRAPHIC] [TIFF OMITTED] TR18SE20.231

(10) Medical Instruments
    We proposed to continue to use a blend of two PPIs for the Medical 
Instruments cost category. The 2012 Benchmark I-O data shows an 
approximate 57/43 split between Surgical and Medical Instruments and 
Medical and Surgical Appliances and Supplies for this cost category. 
Therefore, we proposed a blend composed of 57 percent of the commodity-
based PPI Commodity for Surgical and Medical Instruments (BLS series 
code WPU1562) and 43 percent of the PPI Commodity for Medical and 
Surgical Appliances and Supplies (BLS series code WPU1563). The 2013-
based LTCH market basket used a 50/50 blend of these PPIs based on the 
2007 Benchmark I-O data (81 FR 57093).
(11) Rubber and Plastics
    We proposed to continue to use the PPI Commodity for Rubber and 
Plastic Products (BLS series code WPU07) to measure price growth of 
this cost category. This is the same proxy used in the 2013-based LTCH 
market basket (81 FR 57093).
(12) Paper and Printing Products
    We proposed to continue to use the PPI Commodity for Converted 
Paper and Paperboard Products (BLS series code WPU0915) to measure the 
price growth of this cost category. This is the same proxy used in the 
2013-based LTCH market basket (81 FR 57093).
(13) Miscellaneous Products
    We proposed to continue to use the PPI Commodity for Finished Goods 
Less Food and Energy (BLS series code WPUFD4131) to measure the price 
growth of this cost category. This is the same proxy used in the 2013-
based LTCH market basket (81 FR 57093).
(14) Professional Fees: Labor-Related
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. This 
is the same proxy used in the 2013-based LTCH market basket (81 FR 
57093).
(15) Administrative and Facilities Support Services
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Office and Administrative Support (BLS 
series code CIU2010000220000I) to measure the price growth of this 
category. This is the same proxy used in the 2013-based LTCH market 
basket (81 FR 57093).
(16) Installation, Maintenance, and Repair Services
    We proposed to continue to use the ECI for Total Compensation for 
All Civilian workers in Installation, Maintenance, and Repair (BLS 
series code CIU1010000430000I) to measure the price growth of this cost 
category. This is the same proxy used in the 2013-based LTCH market 
basket (81 FR 57093).
(17) All Other: Labor-Related Services
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Service Occupations (BLS series code

[[Page 58919]]

CIU2010000300000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2013-based LTCH market basket (81 FR 
57093).
(18) Professional Fees: Nonlabor-Related
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. This 
is the same proxy used in the 2013-based LTCH market basket (81 FR 
57093).
(19) Financial Services
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Financial Activities (BLS series code 
CIU201520A000000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2013-based LTCH market basket (81 FR 
57093).
(20) Telephone Services
    We proposed to continue to use the CPI for Telephone Services (BLS 
series code CUUR0000SEED) to measure the price growth of this cost 
category. This is the same proxy used in the 2013-based LTCH market 
basket (81 FR 57093).
(21) All Other: Nonlabor-Related Services
    We proposed to continue to use the CPI for All Items Less Food and 
Energy (BLS series code CUUR0000SA0L1E) to measure the price growth of 
this cost category. This is the same proxy used in the 2013-based LTCH 
market basket (81 FR 57093).
    We received no comments on the proposed price proxies for the 
operating portion of the 2017-based LTCH market basket and therefore 
are finalizing the use of these price proxies without modification.
b. Price Proxies for the Capital Portion of the Proposed 2017-Based 
LTCH Market Basket
(1) Capital Price Proxies Prior to Vintage Weighting
    We proposed to continue to use the same price proxies for the 
capital-related cost categories as were applied in the 2013-based LTCH 
market basket, which are provided in Table E7 and described in this 
section of this rule. Specifically, we proposed to proxy:
     Depreciation: Building and Fixed Equipment cost category 
by BEA's Chained Price Index for Nonresidential Construction for 
Hospitals and Special Care Facilities (BEA Table 5.4.4. Price Indexes 
for Private Fixed Investment in Structures by Type).
     Depreciation: Movable Equipment cost category by the PPI 
Commodity for Machinery and Equipment (BLS series code WPU11).
     Nonprofit Interest cost category by the average yield on 
domestic municipal bonds (Bond Buyer 20-bond index).
     For-profit Interest cost category by the average yield on 
Moody's Aaa bonds (Federal Reserve).
     Other Capital-Related cost category by the CPI-U for Rent 
of Primary Residence (BLS series code CUUS0000SEHA).
    We believe these are the most appropriate proxies for LTCH capital-
related costs that meet our selection criteria of relevance, 
timeliness, availability, and reliability. We are also proposing to 
continue to vintage weight the capital price proxies for Depreciation 
and Interest in order to capture the long-term consumption of capital. 
This vintage weighting method is similar to the method used for the 
2013-based LTCH market basket and is described in section 
VII.D.4.b.(2). of the preamble of this final rule.
    We received no comments on the proposed price proxies for the 
capital portion of the 2017-based LTCH market basket and therefore are 
finalizing the use of these price proxies without modification.
(2) Vintage Weights for Price Proxies
    Because capital is acquired and paid for over time, capital-related 
expenses in any given year are determined by both past and present 
purchases of physical and financial capital. The vintage-weighted 
capital-related portion of the proposed 2017-based LTCH market basket 
is intended to capture the long-term consumption of capital, using 
vintage weights for depreciation (physical capital) and interest 
(financial capital). These vintage weights reflect the proportion of 
capital-related purchases attributable to each year of the expected 
life of building and fixed equipment, movable equipment, and interest. 
We proposed to use vintage weights to compute vintage-weighted price 
changes associated with depreciation and interest expenses.
    Capital-related costs are inherently complicated and are determined 
by complex capital-related purchasing decisions, over time, based on 
such factors as interest rates and debt financing. In addition, capital 
is depreciated over time instead of being consumed in the same period 
it is purchased. By accounting for the vintage nature of capital, we 
are able to provide an accurate and stable annual measure of price 
changes. Annual nonvintage price changes for capital are unstable due 
to the volatility of interest rate changes and, therefore, do not 
reflect the actual annual price changes for LTCH capital-related costs. 
The capital-related component of the proposed 2017-based LTCH market 
basket reflects the underlying stability of the capital-related 
acquisition process.
    The methodology used to calculate the vintage weights for the 
proposed 2017-based LTCH market basket is the same as that used for the 
2013-based LTCH market basket with the only difference being the 
inclusion of more recent data. To calculate the vintage weights for 
depreciation and interest expenses, we first need a time series of 
capital-related purchases for building and fixed equipment and movable 
equipment. We found no single source that provides an appropriate time 
series of capital-related purchases by hospitals for all of the 
previously mentioned components of capital purchases. The early 
Medicare cost reports did not have sufficient capital-related data to 
meet this need. Data we obtained from the American Hospital Association 
(AHA) do not include annual capital-related purchases. However, the AHA 
does provide a consistent database of total expenses back to 1963. 
Consequently, we proposed to use data from the AHA Panel Survey and the 
AHA Annual Survey to obtain a time series of total expenses for 
hospitals. We proposed to use data from the AHA Panel Survey 
supplemented with the ratio of depreciation to total hospital expenses 
obtained from the Medicare cost reports to derive a trend of annual 
depreciation expenses for 1963 through 2017. We proposed to separate 
these depreciation expenses into annual amounts of building and fixed 
equipment depreciation and movable equipment depreciation as previously 
determined. From these annual depreciation amounts we derive annual 
end-of-year book values for building and fixed equipment and movable 
equipment using the expected life for each type of asset category. 
While data are not available that are specific to LTCHs, we believe 
this information for all hospitals serves as a reasonable proxy for the 
pattern of depreciation for LTCHs.
    To continue to calculate the vintage weights for depreciation and 
interest expenses, we also needed to account for the expected lives for 
building and fixed equipment, movable equipment, and interest for the 
proposed 2017-based LTCH market basket. We proposed to calculate the 
expected lives using Medicare cost report data for LTCHs.

[[Page 58920]]

The expected life of any asset can be determined by dividing the value 
of the asset (excluding fully depreciated assets) by its current year 
depreciation amount. This calculation yields the estimated expected 
life of an asset if the rates of depreciation were to continue at 
current year levels, assuming straight-line depreciation. Using this 
proposed method, we determined the average expected life of building 
and fixed equipment to be equal to 18 years, and the average expected 
life of movable equipment to be equal to 9 years. For the expected life 
of interest, we believe that vintage weights for interest should 
represent the average expected life of building and fixed equipment 
because, based on previous research described in the FY 1997 IPPS final 
rule (61 FR 46198), the expected life of hospital debt instruments and 
the expected life of buildings and fixed equipment are similar. We note 
that for the 2013-based LTCH-specific market basket, we derived an 
expected average life of building and fixed equipment of 18 years and 
an expected average life of movable equipment of 8 years (81 FR 57094).
    Multiplying these expected lives by the annual depreciation amounts 
results in annual year-end asset costs for building and fixed equipment 
and movable equipment. Then we calculated a time series, beginning in 
1964, of annual capital purchases by subtracting the previous year's 
asset costs from the current year's asset costs.
    For the building and fixed equipment and movable equipment vintage 
weights, we proposed to use the real annual capital-related purchase 
amounts for each asset type to capture the actual amount of the 
physical acquisition, net of the effect of price inflation. These real 
annual capital-related purchase amounts are produced by deflating the 
nominal annual purchase amount by the associated price proxy as 
previously provided. For the interest vintage weights, we proposed to 
use the total nominal annual capital-related purchase amounts to 
capture the value of the debt instrument (including, but not limited 
to, mortgages and bonds). Using these capital-related purchase time 
series specific to each asset type, we proposed to calculate the 
vintage weights for building and fixed equipment, for movable 
equipment, and for interest.
    The vintage weights for each asset type are deemed to represent the 
average purchase pattern of the asset over its expected life (in the 
case of building and fixed equipment and interest, 18 years, and in the 
case of movable equipment, 9 years). For each asset type, we used the 
time series of annual capital-related purchase amounts available from 
2017 back to 1964. These data allow us to derive thirty-seven 18-year 
periods of capital-related purchases for building and fixed equipment 
and interest, and forty-six 9-year periods of capital-related purchases 
for movable equipment. For each 18-year period for building and fixed 
equipment and interest, or 9-year period for movable equipment, we 
proposed to calculate annual vintage weights by dividing the capital-
related purchase amount in any given year by the total amount of 
purchases over the entire 18-year or 9-year period. This calculation is 
done for each year in the 18-year or 9-year period and for each of the 
periods for which we have data. Then we proposed to calculate the 
average vintage weight for a given year of the expected life by taking 
the average of these vintage weights across the multiple periods of 
data.
    We received no comments on the proposed methodology to derive the 
vintage weights for the 2017-based LTCH market basket and therefore are 
finalizing these vintage weights without modification.
    The vintage weights for the capital-related portion of the proposed 
and final 2017-based LTCH market basket and the 2013-based LTCH market 
basket are presented in Table E6.

[[Page 58921]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.232

    The process of creating vintage-weighted price proxies requires 
applying the vintage weights to the price proxy index where the last 
applied vintage weight in Table E6 is applied to the most recent data 
point. We have provided on the CMS website an example of how the 
vintage weighting price proxies are calculated, using example vintage 
weights and example price indices. The example can be found at the 
following link: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip file titled ``Weight Calculations 
as described in the FY 2010 IPPS proposed rule.''
c. Summary of Price Proxies of the Proposed 2017-Based LTCH Market 
Basket
    Table E7 shows both the operating and capital price proxies for the 
proposed and final 2017-based LTCH market basket.

[[Page 58922]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.233


[[Page 58923]]


5. FY 2021 Market Basket Update for LTCHs
    For FY 2021 (that is, October 1, 2020 through September 30, 2021), 
we proposed to use an estimate of the proposed 2017-based LTCH market 
basket to update payments to LTCHs based on the best available data. 
Consistent with historical practice, we estimated the LTCH market 
basket update for the LTCH PPS based on IHS Global, Inc.'s (IGI's) 
forecast using the most recent available data. IGI is a nationally 
recognized economic and financial forecasting firm with which we 
contract to forecast the components of the market baskets and 
multifactor productivity (MFP).
    Based on IGI's fourth quarter 2019 forecast with history through 
the third quarter of 2019, the projected market basket update for FY 
2021 is 2.9 percent. Therefore, consistent with our historical practice 
of estimating market basket updates based on the best available data, 
we proposed a market basket update of 2.9 percent for FY 2021. 
Furthermore, because the proposed FY 2021 annual update is based on the 
most recent market basket estimate for the 12-month period (currently 
2.9 percent), we also proposed that if more recent data became 
subsequently available (for example, a more recent estimate of the 
market basket update), we would use such data, if appropriate, to 
determine the FY 2021 annual update in the final rule. (The proposed 
annual update to the LTCH PPS standard payment rate for FY 2021 is 
discussed in greater detail in section V.A.2. of the Addendum to the 
proposed rule.)
    Based on the more recent data available for this FY 2021 IPPS/LTCH 
final rule (that is, IGI's second quarter 2020 forecast of the 2017-
based LTCH market basket with historical data through the first quarter 
of 2020), we estimate that the FY 2021 market basket update is 2.3 
percent. We note that the fourth quarter 2019 forecast was developed 
prior to the economic impacts of the Coronavirus disease 2019 (COVID-
19) pandemic. This lower update (2.3 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.
    Using the current 2013-based LTCH market basket and IGI's second 
quarter 2020 forecast for the market basket components, the FY 2021 
market basket update would be 2.4 percent (before taking into account 
any statutory adjustment). Therefore, the update based on the 2017-
based LTCH market basket is currently 0.1 percentage point lower. This 
lower update is primarily due to the lower Pharmaceuticals cost weight 
in the 2017-based market basket (6.2 percent) compared to the 2013-
based LTCH market basket (7.6 percent). This is partially offset by the 
higher cost weights associated with All Other Services (such as 
Professional Fees and Installation, Maintenance, and Repair Services) 
for the 2017-based LTCH market basket relative to the 2013-based LTCH 
market basket. Table E8 compares the 2017-based LTCH market basket and 
the 2013-based LTCH market basket percent changes.
[GRAPHIC] [TIFF OMITTED] TR18SE20.234

    Over the time period covering FY 2016 through FY 2019, the average 
growth rate of the 2017-based LTCH market basket is roughly 0.1 
percentage point lower than the 2013-based LTCH market basket. The 
lower growth rate is primarily a result of the lower Pharmaceuticals 
cost weight in the 2017-based market basket compared to the 2013-based 
LTCH market basket. Historically, the price growth of pharmaceutical 
costs has exceeded the price growth rates for most of the other market 
basket cost categories. Therefore, a lower Pharmaceuticals cost weight 
would, all else equal, result in a lower market basket update. As 
previously stated, the Pharmaceuticals cost weights for the 2017-based 
LTCH market basket and the 2013-based LTCH market basket are based on 
the 2017 and 2013

[[Page 58924]]

Medicare cost report data for LTCHs, respectively.
6. FY 2021 Labor-Related Share
    As discussed in section V.B. of the Addendum to this final rule, 
under the authority of section 123 of the BBRA as amended by section 
307(b) of the BIPA, we established an adjustment to the LTCH PPS 
payments to account for differences in LTCH area wage levels (Sec.  
412.525(c)). The labor-related portion of the LTCH PPS standard Federal 
payment rate, hereafter referred to as the labor-related share, is 
adjusted to account for geographic differences in area wage levels by 
applying the applicable LTCH PPS wage index. The labor-related share is 
determined by identifying the national average proportion of total 
costs that are related to, influenced by, or vary with the local labor 
market. As discussed in more detail in this section of this rule and 
similar to the 2013-based LTCH market basket, we classify a cost 
category as labor-related and include it in the labor-related share if 
the cost category is defined as being labor-intensive and its cost 
varies with the local labor market. As stated in the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42642), the labor-related share for FY 2020 was 
defined as the sum of the FY 2020 relative importance of Wages and 
Salaries; Employee Benefits; Professional Fees: Labor-Related Services; 
Administrative and Facilities Support Services; Installation, 
Maintenance, and Repair Services; All Other: Labor-related Services; 
and a portion of the Capital-Related Costs from the 2013-based LTCH 
market basket.
    We propose to continue to classify a cost category as labor-related 
if the costs are labor-intensive and vary with the local labor market. 
Given this, based on our definition of the labor-related share and the 
cost categories in the proposed 2017-based LTCH market basket, we 
proposed to include in the labor-related share for FY 2021 the sum of 
the FY 2021 relative importance of Wages and Salaries; Employee 
Benefits; Professional Fees: Labor-Related; Administrative and 
Facilities Support Services; Installation, Maintenance, and Repair 
Services; All Other: Labor-related Services; and a portion of the 
Capital-Related cost weight from the proposed 2017-based LTCH market 
basket.
    Similar to the 2013-based LTCH market basket, the proposed 2017-
based LTCH market basket includes two cost categories for nonmedical 
Professional fees (including but not limited to, expenses for legal, 
accounting, and engineering services). These are Professional Fees: 
Labor-related and Professional Fees: Nonlabor-related. For the proposed 
2017-based LTCH market basket, we proposed to estimate the labor-
related percentage of non-medical professional fees (and assign these 
expenses to the Professional Fees: Labor-related services cost 
category) based on the same method that was used to determine the 
labor-related percentage of professional fees in the 2013-based LTCH 
market basket.
    As was done for the 2013-based LTCH market basket, we proposed to 
determine the proportion of legal, accounting and auditing, 
engineering, and management consulting services that meet our 
definition of labor-related services based on a survey of hospitals 
conducted by CMS in 2008. We notified the public of our intent to 
conduct this survey on December 9, 2005 (70 FR 73250) and did not 
receive any public comments in response to the notice (71 FR 8588). A 
discussion of the composition of the survey and post-stratification can 
be found in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43850 through 
43856). Based on the weighted results of the survey, we determined that 
hospitals purchase, on average, the following portions of contracted 
professional services outside of their local labor market:
     34 percent of accounting and auditing services.
     30 percent of engineering services.
     33 percent of legal services.
     42 percent of management consulting services.
    For the proposed 2017-based LTCH market basket, we proposed to 
apply each of these percentages to the respective 2012 Benchmark I-O 
cost category underlying the professional fees cost category to 
determine the Professional Fees: Nonlabor-related costs. The 
Professional Fees: Labor-related costs were determined to be the 
difference between the total costs for each Benchmark I-O category and 
the Professional Fees: Nonlabor-related costs. This is the same 
methodology that we used to separate the 2013-based LTCH market basket 
professional fees category into Professional Fees: Labor-related and 
Professional Fees: Nonlabor-related cost categories.
    In the proposed 2017-based LTCH market basket, nonmedical 
professional fees that were subject to allocation based on these survey 
results represent approximately 5.6 percent of total costs (and are 
limited to those fees related to Accounting & Auditing, Legal, 
Engineering, and Management Consulting services). Based on our survey 
results, we proposed to apportion approximately 3.6 percentage points 
of the 5.6 percentage point figure into the Professional Fees: Labor-
related share cost category and designate the remaining approximately 
2.0 percentage points into the Professional Fees: Nonlabor-related cost 
category.
    In addition to the professional services as previously listed, for 
the 2017-based LTCH market basket, we proposed to allocate a proportion 
of the Home Office/Related Organization Contract Labor cost weight, 
calculated using the Medicare cost reports as previously stated, into 
the Professional Fees: Labor-related and Professional Fees: Nonlabor-
related cost categories. We proposed to classify these expenses as 
labor-related and nonlabor-related as many facilities are not located 
in the same geographic area as their home office and, therefore, do not 
meet our definition for the labor-related share that requires the 
services to be purchased in the local labor market.
    Similar to the 2013-based LTCH market basket, we proposed for the 
2017-based LTCH market basket to use the Medicare cost reports for 
LTCHs to determine the home office labor-related percentages. The 
Medicare cost report requires a hospital to report information 
regarding their home office provider. Using information on the Medicare 
cost report, we compared the location of the LTCH with the location of 
the LTCH's home office. We proposed to classify a LTCH with a home 
office located in their respective labor market if the LTCH and its 
home office are located in the same Metropolitan Statistical Area 
(MSA). Then we determine the proportion of the Home Office/Related 
Organization Contract Labor cost weight that should be allocated to the 
labor-related share based on the percent of total Home Office/Related 
Organization Contract Labor costs for those LTCHs that had home offices 
located in their respective local labor markets of total Home Office/
Related Organization Contract Labor costs for LTCHs with a home office. 
We determined a LTCH's and its home office's MSA using their zip code 
information from the Medicare cost report. Using this methodology, we 
determined that 4 percent of LTCHs' Home Office/Related Organization 
Contract Labor costs were for home offices located in their respective 
local labor markets. Therefore, we proposed to allocate 4 percent of 
the Home Office/Related Organization Contract Labor cost weight (0.1 
percentage point = 1.9 percent x 4 percent) to the Professional Fees: 
Labor-related cost weight and 96 percent of the Home Office/Related 
Organization Contract Labor cost weight to the Professional Fees: 
Nonlabor-related cost weight (1.8 percentage points = 1.9 percent x 96 
percent). For

[[Page 58925]]

the 2013-based LTCH market basket, we used a similar methodology but we 
relied on provider counts rather than Home Office/Related Organization 
Contract Labor costs to determine the labor-related percentage.
    In summary, based on the two allocations mentioned earlier, we 
proposed to apportion 3.7 percentage points of the professional fees 
and Home Office/Related Organization Contract Labor cost weights into 
the Professional Fees: Labor-Related cost category. This amount was 
added to the portion of professional fees that we already identified as 
labor-related using the I-O data such as contracted advertising and 
marketing costs (approximately 0.8 percentage point of total costs) 
resulting in a Professional Fees: Labor-Related cost weight of 4.5 
percent.
    We received no comments on our proposed methodology to derive the 
Professional Fees: Labor-Related cost weight and therefore are 
finalizing this methodology without modification.
    As previously stated, we proposed to include in the labor-related 
share the sum of the relative importance of Wages and Salaries; 
Employee Benefits; Professional Fees: Labor-Related; Administrative and 
Facilities Support Services; Installation, Maintenance, and Repair 
Services; All Other: Labor-related Services; and a portion of the 
Capital-Related cost weight from the proposed 2017-based LTCH market 
basket. The relative importance reflects the different rates of price 
change for these cost categories between the base year (2017) and FY 
2021. Based on IGI's fourth quarter 2019 forecast of the proposed 2017-
based LTCH market basket, the sum of the FY 2021 relative importance 
for Wages and Salaries, Employee Benefits, Professional Fees: Labor-
related, Administrative and Facilities Support Services, Installation 
Maintenance & Repair Services, and All Other: Labor-related Services is 
63.6 percent. The portion of Capital costs that is influenced by the 
local labor market is estimated to be 46 percent, which is the same 
percentage applied to the 2013-based LTCH market basket. Since the 
relative importance for Capital is 9.5 percent of the proposed 2017-
based LTCH market basket in FY 2021, we took 46 percent of 9.5 percent 
to determine the proposed labor-related share of Capital for FY 2021 of 
4.4 percent. Therefore, we proposed a total labor-related share for FY 
2021 of 68.0 percent (the sum of 63.6 percent for the operating cost 
and 4.4 percent for the labor-related share of Capital).
    Based on IGI's second quarter 2020 forecast of the 2017-based LTCH 
market basket, the sum of the FY 2021 relative importance for Wages and 
Salaries, Employee Benefits, Professional Fees: Labor-related, 
Administrative and Facilities Support Services, Installation 
Maintenance & Repair Services, and All Other: Labor-related Services is 
63.7 percent. The portion of Capital costs that is influenced by the 
local labor market is estimated to be 46 percent, which is the same 
percentage applied to the 2013-based LTCH market basket. Since the 
relative importance for Capital is 9.5 percent of the 2017-based LTCH 
market basket in FY 2021, we took 46 percent of 9.5 percent to 
determine the labor-related share of Capital for FY 2021 of 4.4 
percent. Therefore, using more recent data, the total labor-related 
share for FY 2021 is 68.1 percent (the sum of 63.7 percent for the 
operating cost and 4.4 percent for the labor-related share of Capital).
    We received several comments on the proposed FY 2021 labor-related 
share.
    Comment: A few commenters opposed the proposed increase to the 
labor-related share for FY 2021. One commenter stated that the data 
does not support this increase and that it will result in reduced 
reimbursements for facilities with an area wage index below 1.0. One 
commenter requested that CMS reconsider putting this adjustment off for 
a year to allow LTCHs the opportunity to manage through the challenging 
COVID pandemic.
    Response: We proposed our detailed methodology for deriving the 
2017-based LTCH market basket cost weights, which are primarily based 
on Medicare cost reports submitted by LTCHs. We believe the rebasing 
and revising of the LTCH market basket is a technical improvement as it 
reflects a more recent cost structure for LTCHs as well as current 
price pressures. Likewise, we believe the calculation of the labor-
related share should also reflect this technical improvement by being 
based on more recent data.
    After consideration of public comments, we are finalizing a FY 2021 
labor-related share of 68.1 percent.
    Table E9 shows the FY 2021 labor-related share using the 2017-based 
LTCH market basket relative importance and the FY 2020 labor-related 
share using the 2013-based LTCH market basket.

[[Page 58926]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.235

    The total difference between the FY 2021 labor-related share using 
the 2017-based LTCH market basket and the FY 2020 labor-related share 
using the 2013-based LTCH market basket is 1.8 percentage points (68.1 
percent and 66.3 percent, respectively). This difference is 
attributable to: (1) Revision to the base year cost weights (0.8 
percentage point); (2) revision to starting point of calculation of 
relative importance (base year) from 2013 to 2017 (0.6 percentage 
point); and (3) using an updated IGI forecast and reflecting an 
additional year of inflation (0.4 percentage point). The 0.8-percentage 
point difference in the base year cost weights is primarily due to the 
incorporation of the 2012 I-O data which shows an increase in the 
Professional Fees: Labor-Related services.
    We note that the use of the Medicare cost report to derive the Home 
Office/Related Organization Contract Labor cost weight has -0.1 
percentage point impact, meaning if we were to use the I-O data to 
derive the Home Office/Related Organization Contract Labor cost weight, 
the labor-related share would be 0.1 percentage point higher. The 
impact of using the Medicare cost report data to calculate the Home 
Office/Related Organization Contract Labor cost weight is minimal 
because if we were to instead use the I-O data to derive this weight, 
it would also increase the residual ``All Other'' cost weight from 28.3 
percent (using the Medicare cost report data to calculate the Home 
Office/Related Organization Contract Labor cost weight) to 30.2 percent 
(using the I-O data to calculate the Home Office/Related Organization 
Contract labor cost weight). The higher residual ``All Other'' cost 
weight then leads to relatively higher cost weight for Administrative 
and Facilities Support Services which is also reflected in the labor-
related share.

VIII. Quality Data Reporting Requirements for Specific Providers and 
Suppliers

    In section VIII. of the preamble of the FY 2021 IPPS/LTCH PPS 
proposed rule (85 FR 32830 through 32852), we discussed the following 
Medicare quality reporting systems:
     In section VIII.A., the Hospital IQR Program;
     In section VIII.B., the PCHQR Program; and
     In section VIII.C., the LTCH QRP.
    In addition, in section VIII.D. of the preamble of that proposed 
rule (85 FR 32852 through 32858), we proposed changes to the Medicare 
and Medicaid Promoting Interoperability Programs (previously known as 
the Medicare and Medicaid EHR Incentive Programs) for eligible 
hospitals and critical access hospitals (CAHs).

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background and History of the Hospital IQR Program
    The Hospital IQR Program strives to put patients first by ensuring 
they are empowered to make decisions about their own healthcare along 
with their clinicians using information from data-driven insights that 
are increasingly aligned with meaningful quality measures. We support 
technology that reduces burden and allows clinicians to focus on 
providing high quality healthcare for their patients. We also support 
innovative approaches to improve quality, accessibility, and 
affordability of care, while paying particular attention to improving 
clinicians' and beneficiaries' experiences when interacting with CMS 
programs. In combination with other efforts across the Department of 
Health and Human Services, we believe the Hospital IQR Program 
incentivizes hospitals to improve healthcare quality and value, while 
giving patients the tools and information needed to make the best 
decisions for themselves.
    We seek to promote higher quality and more efficient healthcare for 
Medicare beneficiaries. This effort is supported by the adoption of 
widely-agreed upon quality and cost measures. We have worked with 
relevant stakeholders to define measures in almost every care setting 
and currently measure some aspect of care for almost

[[Page 58927]]

all Medicare beneficiaries. These measures assess clinical processes, 
patient safety and adverse events, patient experiences with care, care 
coordination, and clinical outcomes, as well as cost of care. We have 
implemented quality measure reporting programs for multiple settings of 
care. To measure the quality of hospital inpatient services, we 
implemented the Hospital IQR Program, previously referred to as the 
Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) 
Program. We refer readers to the FY 2010 IPPS/LTCH PPS final rule (74 
FR 43860 through 43861) and the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50180 through 50181) for detailed discussions of the history of the 
Hospital IQR Program, including the statutory history, and to the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50217 through 50249), the FY 2016 
IPPS/LTCH PPS final rule (80 FR 49660 through 49692), the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57148 through 57150), the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38326 through 38328 and 82 FR 38348), the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41538 through 41609), and the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42448 through 42509) for the measures 
we have previously adopted for the Hospital IQR Program measure set for 
the FY 2022 payment determination and subsequent years. We also refer 
readers to 42 CFR 412.140 for Hospital IQR Program regulations.
2. Retention of Previously Adopted Hospital IQR Program Measures for 
Subsequent Payment Determinations
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53512 through 53513) for our finalized measure retention policy. In the 
FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32830), we did not propose 
any changes to this policy.
3. Removal Factors for Hospital IQR Program Measures
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41540 through 41544) for a summary of the Hospital IQR Program's 
removal factors.
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32830), we did 
not propose any changes to our policies regarding measure removal.
4. Considerations in Expanding and Updating Quality Measures
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53510 through 53512) for a discussion of the previous considerations we 
have used to expand and update quality measures under the Hospital IQR 
Program. We also refer readers to the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41147 through 41148), in which we describe the Meaningful 
Measures Initiative, our objectives under this framework for quality 
measurement, and the quality topics that we have identified as high 
impact measurement areas that are relevant and meaningful to both 
patients and providers. In the FY 2021 IPPS/LTCH PPS proposed rule (85 
FR 32830), we did not propose any changes to these policies.
5. New Measures for the Hospital IQR Program Measure Set
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32830), we did 
not propose to adopt any new measures.
6. Summary of Previously Finalized Hospital IQR Program Measures for 
the FY 2022 Payment Determination
    This table summarizes the previously finalized Hospital IQR Program 
Measures for the FY 2022 Payment Determiniation:
BILLING CODE 4120-01-P

[[Page 58928]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.236


[[Page 58929]]


7. Summary of Previously Finalized Hospital IQR Program Measures for 
the FY 2023 Payment Determination
    This table summarizes previously finalized Hospital IQR Program 
measure set for the FY 2023 Payment Determination:
[GRAPHIC] [TIFF OMITTED] TR18SE20.237

8. Summary of Previously Finalized Hospital IQR Program Measures for 
the FY 2024 Payment Determination and Subsequent Years
    This tables summarizes the previously finalized Hospital IQR 
Program measure set for the FY 2024 Payment Determination and 
Subsequent Years

[[Page 58930]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.238

[GRAPHIC] [TIFF OMITTED] TR18SE20.239


[[Page 58931]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.240

BILLING CODE 4120-01-C
9. Form, Manner, and Timing of Quality Data Submission
a. Background
    Sections 1886(b)(3)(B)(viii)(I) and (b)(3)(B)(viii)(II) of the Act 
state that the applicable percentage increase for FY 2015 and each 
subsequent year shall be reduced by one quarter- of such applicable 
percentage increase (determined without regard to sections 
1886(b)(3)(B)(ix), (xi), or (xii) of the Act) for any subsection (d) 
hospital that does not submit data required to be submitted on measures 
specified by the Secretary in a form and manner, and at a time, 
specified by the Secretary. In order to successfully participate in the 
Hospital IQR Program, hospitals must meet specific procedural, data 
collection, submission, and validation requirements.\452\ Previously, 
the applicable percentage increase for FY 2007 and each subsequent 
fiscal year until FY 2015 was reduced by 2.0 percentage points for 
subsection (d) hospitals failing to submit data in accordance with the 
previously discussed description. In accordance with the statute, the 
FY 2021 payment determination will begin the seventh year that the 
Hospital IQR Program will reduce the applicable percentage increase by 
one-quarter of such applicable percentage increase.
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    \452\ On March 27, 2020, CMS granted certain reporting 
requirement exceptions and extensions for subsection (d) hospitals 
under the Hospital IQR Program. CMS, ``Exceptions and Extensions for 
Quality Reporting Requirements for Acute Care Hospitals, PPS-Exempt 
Cancer Hospitals, Inpatient Psychiatric Facilities, Skilled Nursing 
Facilities, Home Health Agencies, Hospices, Inpatient Rehabilitation 
Facilities, Long-Term Care Hospitals, Ambulatory Surgical Centers, 
Renal Dialysis Facilities, and MIPS Eligible Clinicians Affected by 
COVID-19'' (Mar. 27, 2020) https://www.cms.gov/files/document/guidance-memo-exceptions-and-extensions-quality-reporting-and-value-based-purchasing-programs.pdf. Submitting such data is therefore not 
required under the Hospital IQR Program and a hospital that does not 
submit excepted data will not experience a reduction in APU on that 
basis.
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b. Maintenance of Technical Specifications for Quality Measures
    For each Hospital IQR Program payment determination, we require 
that hospitals submit data on each specified measure in accordance with 
the measure's specifications for a particular period of time. We refer 
readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41538) in which 
we summarized how the Hospital IQR Program maintains the technical 
measure specifications for quality measures and the subregulatory 
process for

[[Page 58932]]

incorporation of nonsubstantive updates to the measure specifications 
to ensure that measures remain up-to-date. We did not propose any 
changes to these policies.
    The data submission requirements, Specifications Manual, and 
submission deadlines are posted on the QualityNet website at: http://www.QualityNet.org/ (and any other successor CMS-designated websites). 
The technical specifications used for electronic clinical quality 
measures (eCQMs) are contained in the CMS Annual Update for the 
Hospital Quality Reporting Programs (Annual Update). We generally 
update the measure specifications on an annual basis through the Annual 
Update, which includes code updates, logic corrections, alignment with 
current clinical guidelines, and additional guidance for hospitals and 
electronic health record (EHR) vendors to use in order to collect and 
submit data on eCQMs from hospital EHRs. For example, for the CY 2020 
reporting period/FY 2022 payment determination, hospitals submitted 
eCQM data using the May 2019 Annual Update and any applicable addenda. 
The Annual Update and implementation guidance documents are available 
on the Electronic Clinical Quality Improvement (eCQI) Resource Center 
website at: https://ecqi.healthit.gov/. Hospitals must register and 
submit quality data through the QualityNet Secure Portal (also referred 
to as the Hospital Quality Reporting (HQR) System). There are 
safeguards in place in accordance with the HIPAA Privacy and Security 
Rules to protect patient information submitted through this website. 
See 45 CFR parts 160 and 164, subparts A, C, and E.
c. Procedural Requirements
    The Hospital IQR Program's procedural requirements are codified in 
regulation at 42 CFR 412.140. We refer readers to these codified 
regulations for participation requirements, as further explained by the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811) and the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57168). We did not propose any 
changes to these procedural requirements.
d. Data Submission Requirements for Chart-Abstracted Measures
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536 
through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811) 
for details on the Hospital IQR Program data submission requirements 
for chart-abstracted measures. We did not propose any changes to the 
data submission requirements for chart-abstracted measures.
e. Reporting and Submission Requirements for eCQMs
(1) Background
    For a discussion of our previously finalized reporting and 
submission requirements for eCQMs, we refer readers to the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50807 through 50810; 50811 through 
50819), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50241 through 
50253; 50256 through 50259; and 50273 through 50276), the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49692 through 49698; and 49704 through 
49709), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57150 through 
57161; and 57169 through 57172), the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38355 through 38361; 38386 through 38394; 38474 through 38485; 
and 38487 through 38493), the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41567 through 41575; 83 FR 41602 through 41607), and the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42501 through 42506). Current reporting and 
submission requirements were established in the FY 2018 IPPS/LTCH PPS 
final rule. In that final rule (82 FR 38368 through 38361), we 
finalized eCQM reporting and submission requirements such that 
hospitals were required to report only one, self-selected calendar 
quarter of data for four self-selected eCQMs for the CY 2018 reporting 
period/FY 2020 payment determination. Those reporting requirements were 
extended to the CY 2019 reporting period/FY 2021 payment determination 
in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41603 through 41604), as 
well as to the CY 2020 reporting period/FY 2022 payment determination 
and the CY 2021 reporting period/FY 2023 payment determination in the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42501 through 42503).
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42503 through 
42505), we also finalized that for the CY 2022 reporting period/FY 2024 
payment determination, hospitals would be required to report one, self-
selected calendar quarter of data for: (a) Three self-selected eCQMs, 
and (b) the Safe Use of Opioids--Concurrent Prescribing eCQM (Safe Use 
eCQM), for a total of four eCQMs.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to 
progressively increase, over a 3-year period, the number of quarters 
for which hospitals are required to report eCQM data, from the current 
requirement of one self-selected quarter of data to four quarters of 
data. We believe that increasing the number of quarters for which 
hospitals are required to report eCQM data will produce more 
comprehensive and reliable quality measure data for patients and 
providers. Increasing the number of reported quarters has several 
benefits. Primarily, a single quarter of data is not enough to capture 
trends in performance over time. Evaluating multiple quarters of data 
would provide a more reliable and accurate picture of overall 
performance. Further, reporting multiple quarters of data would provide 
hospitals with a more continuous information stream to monitor their 
levels of performance. Ongoing, timely data analysis can better 
identify a change in performance that may necessitate investigation and 
potentially corrective action.
    The current policy requiring more limited reporting was established 
due to stakeholder feedback about challenges in reporting data, and to 
give hospitals more time to gain experience with reporting (including 
upgrading systems and training to support eCQM reporting) (82 FR 78355 
through 78361). That policy, as well as the changes we proposed, are 
consistent with our stated goal to create a gradual shift to more 
robust eCQM reporting (82 FR 38356). Taking an incremental approach 
over a 3-year period would give hospitals and their vendors time to 
plan in advance and build upon and utilize investments already made in 
their EHR infrastructures. We refer readers to section XI.B.7. of the 
preamble of this final rule for a discussion of the increased 
collection of information burden associated with this provision. We 
also refer readers to section VIII.D.6.b of the preamble of this final 
rule for similar provisions under the Promoting Interoperability 
Program.
(2) Reporting and Submission Requirements for eCQMs for the CY 2021 
Reporting Period/FY 2023 Payment Determination
    In the FY 2021 IPPS/LTCH PPS proposed rule, for the CY 2021 
reporting period/FY 2023 payment determination, we proposed to increase 
the amount of data required while keeping the number of eCQMs required 
the same. Specifically, in the proposed rule, we proposed that 
hospitals report two self-selected calendar quarters of data for each 
of the four self-selected eCQMs for the CY 2021 reporting period/FY 
2023 payment determination (85 FR 32837).

[[Page 58933]]

(3) Reporting and Submission Requirements for eCQMs for the CY 2022 
Reporting Period/FY 2024 Payment Determination
    In the FY 2021 IPPS/LTCH PPS proposed rule, for the CY 2022 
reporting period/FY 2024 payment determination, we proposed to increase 
the amount of data required while keeping the number and type of eCQMs 
required the same. Specifically, in the proposed rule, we proposed to 
require that hospitals report three self-selected calendar quarters of 
data for the CY 2022 reporting period/FY 2024 payment determination for 
each required eCQM: (a) Three self-selected eCQMs; and (b) the Safe Use 
of Opioids eCQM (85 FR 32837).
(4) Reporting and Submission Requirements for eCQMs for the CY 2023 
Reporting Period/FY 2025 Payment Determination and Subsequent Years
    In the FY 2021 IPPS/LTCH PPS proposed rule, for the CY 2023 
reporting period/FY 2025 payment determination and beyond, we proposed 
to further increase the amount of data required while keeping the 
number and type of eCQMs required the same. Specifically, in the 
proposed rule, we proposed to require that hospitals report four 
calendar quarters of data beginning with the CY 2023 reporting period/
FY 2025 payment determination and for subsequent years for each 
required eCQM: (a) Three self-selected eCQMs; and (b) the Safe Use of 
Opioids eCQM (85 FR 32837).
    Due to the duplicative nature of comments received on the proposals 
to progressively increase, over a 3-year period, the number of quarters 
for which hospitals are required to report eCQM data, from the current 
requirement of one self-selected quarter of data to four quarters of 
data, we are responding to all comments received on the proposals in 
section VII.A.9.e.4. of this final rule below.
    In addition, the 21st Century Cures Act final rule that appeared in 
the May 1, 2020 Federal Register (85 FR 25642 through 25961) finalized 
a number of updates to the 2015 Edition of health IT certification 
criteria (``2015 Edition Cures Update''). We also refer readers to the 
CY 2021 Payment Policies Under the Physician Fee Schedule Proposed Rule 
published August 17, 2020, where we proposed to expand flexibility 
under the Hospital IQR Program to allow hospitals to use either: (1) 
Technology certified to the 2015 Edition criteria for CEHRT as was 
previously finalized for reporting eCQMs in the FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41537 through 41608) and for reporting hybrid 
measures in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42507), or (2) 
technology certified to the 2015 Edition Cures Update standards as 
finalized in the 21st Century Cures Act final rule (85 FR 25642 through 
25961) and sought public comment on our proposal (85 FR 50271).
    Comment: Many commenters supported our proposal to increase the 
number of quarters for which hospitals are required to report eCQM 
data. Some commenters specifically appreciated CMS's plan to phase in 
the requirement over 3 years because they believe a progressive 
increase will give hospitals and their vendors sufficient time to 
implement the proposal without being overly burdensome. Other 
commenters stated the proposal will improve the accuracy and 
reliability of data, provide a more accurate picture of overall 
hospital performance, increase hospital accountability, and reduce the 
likelihood that hospitals will report only their top-performing 
quarter. Commenters also stated the proposal would enable hospitals and 
other stakeholders to successfully monitor performance trends, 
particularly through the CMS Hospital Compare site, or successor 
websites, and enhance patient outcomes.
    Response: We thank the commenters for their support.
    Comment: A few commenters recommended that we phase in the 
increased requirements at a faster rate, such as over a 2-year period 
instead of a 3-year period.
    Response: We thank the commenters for their recommendations. We 
considered a faster implementation timeline in developing our proposal, 
but ultimately determined to propose to progressively increase the 
number of required quarters of eCQM data over a 3-year period in order 
to continue to give hospitals and their vendors time to plan in advance 
and build upon and utilize investments already made in their EHR 
infrastructure (85 FR 32837). We believe this approach effectively 
balances the burdens associated with increased reporting of eCQM data 
and the benefits of providing that quality data to patients and 
consumers.
    Comment: Many commenters did not support the proposal to require 
additional quarters of eCQM data in light of the impact of the COVID-19 
public health emergency (PHE) on hospitals and requested that eCQM 
reporting and submission requirements for the CY 2021 reporting period/
FY 2023 payment determination remain at one self-selected calendar 
quarter of data for each of the four self-selected eCQMs. Commenters 
noted that the COVID-19 PHE has shifted focus away from normal 
operations, increased burden, and strained hospital resources, 
particularly impacting staffing and technology. A few commenters 
indicated that the COVID-19 PHE has limited hospitals' ability to make 
the IT investments needed to report additional quarters of data. 
Commenters stated that internal resources have been reallocated or 
reassigned, that current IT investments are focused on caring for 
COVID-19 patients via telehealth, and that hospitals are already 
experiencing burdens or costs associated with implementing additional 
regulations on information blocking and interoperability. In addition, 
commenters stated that hospitals are complying with numerous federal 
and state data reporting requirements related to COVID-19 lab testing, 
patient volumes, and bed capacity, which are constantly evolving. The 
commenters stated that, while the duration of the COVID-19 PHE remains 
uncertain, hospitals expect to be operating in this challenging 
environment well into CY 2021. Given these challenges, commenters 
requested that reporting and submission requirements for the CY 2021 
reporting period/FY 2023 payment determination remain at one self-
selected calendar quarter of data so that hospitals may choose the 
fourth quarter, providing time for EHR upgrades. A few commenters 
expressed concern that the proposal could cause hospitals to lose their 
entire annual payment update (\1/4\ for the IQR, and \3/4\ for the 
Promoting Interoperability Program) for failing to meet an eCQM mandate 
that their EHR vendors cannot deliver due to the pandemic and other 
competing federal EHR-related mandates. Another commenter stated that 
the COVID-19 PHE's impact on hospital volumes may render data less 
reliable. A commenter suggested that CMS continue to monitor the COVID-
19 PHE and the extent to which hospitals have recovered to inform the 
exact timeframe to begin increasing eCQM reporting requirements.
    Response: We thank the commenters for their comments and recognize 
the burden that the COVID-19 PHE has had on the healthcare system. In 
response to the significant impact of the COVID-19 PHE on hospitals, we 
issued an array of temporary regulatory waivers and exceptions 
affecting a wide cross-section of Medicare participation, eligibility, 
and payment requirements, in an effort to reduce burden, provide 
flexibility to hospitals, and help hospitals maximize their capacity to

[[Page 58934]]

focus on patient care.\453\ These waivers and exceptions reduce 
hospital paperwork burden and reporting requirements, increase 
flexibility for surge capacity and patient quarantine, allow providers 
to expand access to telehealth, and enable hospitals to enhance their 
workforces, among other benefits. In relation to the Hospital IQR 
Program, we issued a nationwide extraordinary circumstances exception 
(ECE) that excepted certain data reporting requirements and extended 
numerous deadlines.\454\ Additionally, under the Hospital IQR Program 
ECE Policy, hospitals may request an exception if they are unable to 
fulfill program requirements due to extraordinary circumstances not 
within their control. We refer readers to eCQM ECE resources on 
QualityNet and 42 CFR 412.140(c)(2) for more information.
---------------------------------------------------------------------------

    \453\ See https://www.cms.gov/about-cms/emergency-preparedness-response-operations/current-emergencies/coronavirus-waivers.
    \454\ See https://www.cms.gov/files/document/guidance-memo-exceptions-and-extensions-quality-reporting-and-value-based-purchasing-programs.pdf.
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    As noted previously, our current policy for eCQM reporting requires 
hospitals to report only one, self-selected calendar quarter of data 
for four self-selected eCQMs for the CY 2020 reporting period/FY 2022 
payment determination. Calendar year 2021 will be the fifth year that 
hospitals have submitted eCQM data, and current reporting and 
submission requirements were established in the FY 2018 IPPS/LTCH PPS 
final rule. In that final rule (82 FR 38361), we finalized a policy 
that eCQM reporting would be required for one self-selected quarter of 
data for 4 self-selected eCQMs, rather than finalizing our proposal to 
require reporting on the first three calendar quarters of data for 6 
eCQMs in the FY 2018 proposed rule (82 FR 20050 through20051) or 
continuing our previously finalized policy to require hospitals to 
submit one full calendar year of data for 8 eCQMs (81 FR 57152). We 
made this change due to stakeholder concerns about the challenges 
associated with collecting and reporting eCQM data (82 FR 38355 through 
38361). We believed it was important to give stakeholders more time to 
build and refine their EHR systems and gain experience reporting eCQMs 
(82 FR 38356). At that time, we stated our intention to gradually 
transition toward more robust eCQM reporting (82 FR 38356), and we 
reiterated that intention in a subsequent final rule (84 FR 42502).
    As stated in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32836), 
we believe that increasing the number of quarters for which hospitals 
are required to report eCQM data will produce more comprehensive 
quality measure data for patients and providers and that submitting and 
evaluating multiple quarters of data would provide a more reliable and 
accurate picture of hospital performance.
    Internal review of Hospital IQR Program eCQM submissions data 
revealed that approximately 97 percent of eligible hospitals 
successfully submitted one quarter of eCQM data for four self-selected 
eCQMs for CY 2018 (84 FR 42458). We believe that hospitals have had 
adequate time to prepare for providing two quarters of data, especially 
given that hospitals may select to report the third and fourth quarters 
of CY 2021, allowing them to use the first half of CY 2021 to continue 
to prepare. After holding eCQM reporting and submission policies 
constant for a number of years in order to give hospitals and their 
vendors additional time to improve eCQM reporting capabilities, and 
stating our intention to transition to more robust reporting, we 
believe that it is time to increase the level of reporting in order to 
capture additional quarters of data. As we noted in the proposed rule, 
we believe that a single quarter of data is not enough to capture 
trends in performance over time. Our goal in proposing to progressively 
increase the number of quarters of data to be collected over 3 years 
was to strike an appropriate balance between increasing eCQM reporting 
and providing hospitals with the necessary time to implement such 
changes.
    If hospitals are concerned that their annual payment update may be 
impacted because vendors will be unable to meet the regulatory 
requirements related to the reporting of electronic clinical quality 
measures, we emphasize that hospitals may be eligible for an ECE under 
the IQR program as described above and further below.
    Comment: A commenter did not support the proposal to increase the 
number of self-selected quarters of eCQM data that hospitals must 
submit for the CY 2021 reporting period/FY 2023 payment determination. 
The commenter noted that given the unknown future of the impact of the 
COVID-19 PHE, any increase of eCQM submissions in CY 2021 could have a 
significant detrimental impact on small, rural hospitals, particularly 
because many of these hospitals do not find the current eCQMs to be 
meaningful to their quality improvement. The commenter stated that 
because mandatory reporting on the Safe Use of Opioid--Concurrent 
Prescribing eCQM begins in CY 2021, it would be beneficial to evaluate 
the usefulness and challenges of extracting this data after one quarter 
rather than requiring two quarters. The commenter also recommended that 
CMS enhance their eCQM data submission tools so that testing of 
submission files is available sooner and hospitals can resolve issues 
prior to the start of the reporting period.
    Response: We wish to note to the commenter that, as previously 
finalized, for the CY 2021 reporting period/FY 2023 payment 
determination, hospitals will continue to report on four self-selected 
eCQMs and that reporting on the Safe Use of Opioids--Concurrent 
Prescribing eCQM (Safe Use eCQM) will not be required until the CY 2022 
reporting period/FY 2024 payment determination (84 FR 42503 through 
42505). The Safe Use eCQM will be included in the eCQM subset, 
beginning with the CY 2021 reporting period/FY 2023 payment 
determination (84 FR 42459) and under our proposal, a hospital may 
voluntarily select to report on the Safe Use eCQM on two quarters of 
data at that time.
    With respect to the usefulness and challenges of extracting this 
data after one quarter rather than requiring two quarters, we believe 
that our proposal further advances our goal of incrementally increasing 
the use of EHR data for quality measurement and improvement and is 
responsive to the feedback of some stakeholders urging a faster 
transition to full electronic reporting (84 FR 42503). In fact, past 
stakeholder feedback has included the concern that rural hospitals 
specifically have trouble meeting the minimum reporting threshold when 
the measurement period is one quarter (84 FR 42502). We also believe 
that reporting of the Safe Use eCQM will provide valuable information 
on the area of high-risk prescribing to providers, and further our 
efforts to combat the negative impacts of the opioid crisis. Further, 
regarding the challenges of data extraction, the Safe Use eCQM was 
developed with implementation feasibility and ease in mind. Testing 
showed that 96 percent of the data elements required to calculate the 
performance rate are: (1) Collected during routine care; (2) 
extractable from structured fields in the electronic health systems of 
test sites; and (3) likely to be accurate. (84 FR 42454).
    The meaningfulness of eCQMs to small, rural hospitals, rural health 
and healthcare remains one of our priorities. In 2016, we established 
an agency-wide Rural Health Council and in 2017 we launched the 
Meaningful Measures Initiative and included Improving

[[Page 58935]]

Access for Rural Communities as an initiative. Additionally, in 2017, 
we tasked the National Quality Forum (NQF) to establish a Measure 
Applications Partnership (MAP) Rural Health Workgroup to identify a 
core set of the best available rural-relevant measures to address the 
needs of the rural population and provide recommendations from a rural 
perspective regarding measuring and improving access to care.\455\ When 
selecting eCQMs for inclusion in the measure set we have, and will 
continue to, consider the recommendations from the rural providers to 
ensure eCQMs are meaningful to quality improvement for small, rural 
hospitals.
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    \455\ Measures Application Partnership, ``A Core Set of Rural-
Relevant Measures and Measuring and Improving Access to Care: 2018 
Recommendations from the MAP Rural Health Workgroup'' (Aug. 31, 
2018), available at https://www.qualityforum.org/Publications/2018/08/MAP_Rural_Health_Final_Report_-_2018.aspx.
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    As for the commenter's recommendation for eCQM submission tool 
enhancement, we appreciate the commenter's feedback and will take these 
recommendations into consideration as we assess how to advance eCQM 
reporting in the Hospital IQR Program. We also note that the eCQM 
Annual Updates (which include the eCQM specifications, educational 
materials, value sets, code systems, direct reference codes, 
terminology, etc.) are released in the spring for the next year's 
reporting period. For example, the CY 2021 reporting period/FY 2023 
payment determination information was released and posted on the eCQI 
Resource Center in the spring of 2020. This timeframe for updates was 
adopted in an effort to support EHR system upgrades and development as 
hospitals and vendors prepare for the next reporting period. We also 
note that testing becomes available via the HQR System when the 
submission period opens in the Fall before the Spring eCQM submission 
deadline.
    As to concerns regarding the future of the impact of the COVID-19 
PHE, as noted above, we issued a nationwide ECE that excepted certain 
data reporting requirements and extended numerous deadlines. We will 
continue to monitor the impact that the COVID-19 PHE has on hospitals, 
including small, rural hospitals, and will issue additional exceptions 
as necessary. Additionally, if, due to COVID-19 or any other external 
circumstance, any hospital--including small, rural hospitals, believes 
that reporting would have a significant detrimental impact, they can 
apply for an ECE.
    Comment: Many commenters requested that CMS adopt a more 
incremental approach for increasing the eCQM reporting requirements. A 
few of the numerous alternative approaches recommended by commenters 
included postponing the proposed increase in data reporting for one 
calendar year, postponing the increase until the COVID-19 PHE has 
abated and hospital volumes return to pre-pandemic levels, and 
increasing the number of calendar quarters of data to be reported by 
one quarter every other year.
    Response: As noted previously, after delaying increased 
requirements and setting reduced eCQM requirements for a number of 
years, we believe that increasing the level of reporting in order to 
capture additional quarters of data at this time is in line with our 
goals to gradually increase the robustness of eCQM data (82 FR 38356 
and 84 FR 42502). We believe our proposal to progressively increase the 
number of quarters of eCQM data to be collected over a 3-year period 
strikes an appropriate balance between increasing eCQM reporting and 
providing hospitals with the necessary time to implement such changes. 
We also refer readers to our response above about exceptions during the 
COVID-19 PHE. We understand the desire to postpone the increased 
reporting requirements until the pandemic has abated and hospital 
volumes return to pre-pandemic levels. We note that we proposed 
requiring hospitals to report only two quarters of data for the CY 2021 
reporting period/FY 2023 payment determination. We will continue to 
monitor the impact that the COVID-19 PHE has on hospitals and will 
issue additional exceptions as necessary. For calendar year 2021, in 
the absence of an exception, hospitals will be required to report two 
quarters of data by the end of the submission period (that is, by the 
end of February 2022). We note that hospitals may choose to report data 
from the third and fourth quarters of CY 2021, which may have higher 
volumes. We will continue to monitor the effects of the PHE on 
hospitals to ensure our policies remain feasible.
    Comment: Several commenters raised concerns about the accuracy, 
reliability, and validity of eCQM data. A commenter stated the data 
produced by chart-abstracted measures and eCQMs vary significantly. A 
few commenters recommended that CMS adopt a more incremental approach 
to increasing eCQM reporting requirements, or delay its proposal 
altogether until at least CY 2023, to balance benefits with burdens and 
better ensure reliability and validity for measurement. A commenter 
stated it would be premature for CMS to require electronic reporting 
before all measures are fully electronically specified and field 
tested. The commenter emphasized the need for providers to have 
detailed electronic specifications in advance in order to adequately 
prepare their reporting systems. Another commenter encouraged CMS to 
evaluate how each additional quarter of data improves accuracy and 
reliability prior to further increasing the number of required 
quarters.
    Response: We understand the commenters' concern about data 
reliability and validity and wish to emphasize that all types of 
quality measures in the Hospital IQR Program, including eCQMs, undergo 
testing during the measure development process for feasibility, 
validity, and reliability. We recognize that EHR-based extraction 
methodology for eCQMs is different from the data collection methodology 
for chart-abstracted measures, and that measure rates may vary 
depending on methodology (80 FR 49643-49644). For example, eCQMs 
utilize data from structured fields within the EHR system, while chart-
abstracted measures allow data to be collected from unstructured 
sources such as a clinician's progress notes. For these reasons, we 
also use a validation process to address concerns about reliability and 
validity of eCQM data. As stated in the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32846), we have conducted an eCQM validation pilot (OMB 
Control #0938-1022) and completed eCQM data validation from the CY 2017 
reporting period and the CY 2018 reporting period. Based on our review 
of the CY 2017 and CY 2018 eCQM data submitted for validation, and on 
the finding that over half of the measures validated had agreement 
rates of 80 percent or better, we believe the accuracy of eCQM data is 
sufficient for continued use of the measures in the Hospital IQR 
Program and to begin increasing the quarters of data used for the 
program. As described in section VIII.A.10. of the preamble of this 
final rule, we are continuously working to improve the eCQM validation 
process and balance reporting burden. We expect to gain a better 
understanding of how to increase the accuracy of eCQM data by 
continuing to analyze that process and the results. Additionally, we 
believe that the reporting of additional quarters of data by hospitals 
will help to increase the reliability of the data. We note that eCQM 
measure specifications for Hospital IQR Program measures can be found 
on the eCQI

[[Page 58936]]

Resource Center,\456\ which provides information, tools, and standards 
for eCQMs. The measure specifications are typically available about 
eight months prior to the beginning of the calendar year reporting 
period.
---------------------------------------------------------------------------

    \456\ The eCQI Resource Center is available at: https://ecqi.healthit.gov/.
---------------------------------------------------------------------------

    Comment: A few commenters expressed concern about the amount of 
time that may be required for a hospital or their vendor to internally 
validate the data and/or create and review CCN files prior to data 
submission to CMS. A commenter stated the proposal amends more modest, 
previously finalized policies that hospitals relied on for planning and 
resource allocation purposes.
    Response: We recognize that increasing the number of quarters of 
eCQM data to be reported can impact a hospital's resource use and refer 
readers to section XI.B.7 of the preamble of this final rule 
(information collection requirements) for a detailed discussion of our 
burden estimates associated with eCQM reporting and submission. We 
believe the long-term benefits associated with reporting a full year of 
electronic data will outweigh the burdens and that increasing the 
number of quarters for which hospitals are required to report eCQM data 
will produce more comprehensive and reliable quality information for 
patients and providers. We stated our intention in the FY 2018 IPPS/
LTCH PPS final rule to gradually transition toward more robust eCQM 
reporting (82 FR 38356). We reiterated this stated goal to 
incrementally increase the use of EHR data for quality measurement in a 
subsequent final rule (84 FR 42502). We believe that taking an 
incremental approach to increasing eCQM reporting over a 3-year period 
will help to ease the burdens associated with reporting larger amounts 
of data and will provide hospitals and vendors with additional time to 
plan and sufficiently allocate resources for more robust eCQM 
reporting.
    Comment: A commenter did not support the proposal because they 
believed it contradicted the trend to make the program simpler. Another 
commenter stated there is a high burden on hospitals due to 
duplications of effort in reporting the same measures in both chart-
abstracted and eCQM formats.
    Response: We disagree with the commenter that the proposal 
contradicts our efforts to make the program simpler. Since October of 
2017, we have undertaken an ambitious effort to reduce regulatory 
burden on the healthcare industry, lower health care costs, and enhance 
patient care by streamlining the quality reporting programs through the 
Meaningful Measures initiative. We refer readers to the FY 2019 IPPS/
LTCH PPS final rule for a broader discussion of the Meaningful Measures 
framework (83 FR 41147). In part due to the adoption of this framework, 
the number of measures for the Hospital IQR Program has been scaled 
down significantly, from 65 measures in the FY 2018 payment 
determination, to 23 measures for the FY 2024 payment determination. We 
note that the Hospital IQR Program currently includes only two chart-
abstracted measures (PC-01-Elective Delivery, NQF #0469, and Sepsis-
Severe Sepsis and Septic Shock: Management Bundle, NQF #0500) and that 
these measures do not overlap with the program's eCQMs. In recent 
years, we have also improved alignment between Hospital IQR Program's 
reporting requirements and other quality programs, such as the 
Promoting Interoperability (PI) program. For example the Hospital IQR 
Program and Promoting Interoperability Program now have the same eCQMs 
and data submission requirements. We will continue to look across all 
quality programs to identify areas for further streamlining and 
opportunities to reduce any remaining duplication.
    Comment: A commenter did not support the proposed expansion of eCQM 
reporting or public reporting until problems with validation of eCQM 
data are addressed. The commenter stated that hospitals participating 
in eCQM data validation continue to report unresolved concerns, such as 
an inability to authenticate validation results provided for 2017 and 
2018 because mismatches on the validation reports were not specifically 
identified. The commenter stated hospitals and vendors need a better 
understanding of the cause of mismatches and how to correct them in 
advance of any public reporting and recommended CMS make improvements 
to the validation procedures and reports. A few commenters requested 
that CMS provide additional transparency into the eCQM validation 
process before increasing the number of quarters required to be 
reported, such as information on eCQM agreement rates, national eCQM 
scores, the effect of invalidated data on national and hospital-
specific scores, comparisons of the current eCQM data to previously 
collected chart-abstracted data, and an analysis of how eCQM scores are 
affected by using the chart-abstracted measure specifications and 
algorithms for validation. Additionally, the commenters requested that 
CMS provide analysis of how self-selection of individual eCQMs by each 
hospital affects the national averages and the number of hospitals 
reporting each measure.
    Response: We appreciate the feedback about hospitals' experience 
with the eCQM validation process. The specifications for eCQMs contain 
logic statements and value sets tailored to electronic data sources, 
and as such, measure specifications and algorithms for chart-abstracted 
measures are not used for eCQM validation. In other words, we recognize 
that the information for eCQMs and chart-abstracted measures is pulled 
from different places and do not use chart-abstracted measure 
specifications or algorithms for eCQM validation. Based on our review 
of the CY 2017 and CY 2018 eCQM data submitted for validation, and on 
the finding that the majority of eCQM data was reported with agreement 
rates of 80 percent or better, we believe the accuracy of eCQM data is 
sufficient for continued use of the measures in the Hospital IQR 
Program and to begin increasing the quarters of data used for the 
program. We are continuously working to improve eCQM validation and are 
finalizing several changes to that process in section VIII.A.10 of this 
final rule. Our decision to extend the educational review process 
established for chart-abstracted measure validation to eCQM validation 
may be of particular interest to stakeholders. We also refer commenters 
to eCQM validation resources on QualityNet.\457\ As we make further 
refinements to eCQM validation policies and practices, we will take the 
commenters' concerns and suggestions for additional transparency into 
account. We address concerns related to public reporting of eCQM data 
in section VIII.A.12.b of the preamble of this final rule.
---------------------------------------------------------------------------

    \457\ eCQM Data Validation Resources are available on QualityNet 
at: https://www.qualitynet.org/search?q=validation.
---------------------------------------------------------------------------

    Comment: A few commenters stated that the required updates to EHRs 
to modify eCQMs often take significant implementation resources before 
hospitals are able to report eCQM data. The commenters expressed 
concern that the proposed increase in data reporting requirements would 
shorten the timeframe for hospitals to make and validate required 
measure logic changes, which would require hospitals to expend 
additional resources in order to finish changes on time. The commenters

[[Page 58937]]

requested that CMS provide hospitals with 18 months to implement 
changes.
    Response: We disagree that there is not enough time to implement 
changes in eCQM data reporting requirements for existing eCQMs, which 
are related to, but separate from, adding new eCQMs in EHRs. We note 
that the eCQM specifications are typically available about eight months 
prior to the beginning of the calendar year reporting period. Once the 
eCQM updates are implemented in hospital EHRs, reporting an additional 
quarter of data should not require the same level of effort as 
reporting one initial quarter of data because hospitals should not need 
to update the eCQM specifications each quarter. Thus, we do not expect 
hospitals to experience a significant amount of added burden reporting 
three additional quarters of data over a 3-year period. We do thank the 
commenters for their feedback and will take this information into 
account when modifying the eCQM measure set in future rulemaking. We 
note that we did not propose to modify, remove, or add any eCQM 
measures to the Hospital IQR Program in the FY 2021 IPPS/LTCH PPS 
proposed rule. However as noted above, in the CY 2021 Payment Policies 
Under the Physician Fee Schedule Proposed Rule published August 17, 
2020, we are proposing to update CEHRT requirements to allow for 
additional flexibility (85 FR 50271). We believe this flexibility 
should be helpful to hospitals as they navigate the timing of the 
changes, because hospitals would be able use either: (1) Technology 
certified to the 2015 Edition criteria for CEHRT as was previously 
finalized for reporting eCQMs in the FY 2019 IPPS/LTCH PPS final rule 
(83 FR 41537-41608) and for reporting hybrid measures in the FY 2020 
IPPS/LTCH PPS final rule (84 FR 42507), or (2) technology certified to 
the 2015 Edition Cures Update standards as finalized in the 21st 
Century Cures Act final rule (85 FR 25642 through 25961).
    Comment: A few commenters expressed concern about variation in 
readiness and eCQM reporting capabilities across hospitals. Commenters 
recommended that CMS work with stakeholders to identify underlying 
structural problems and barriers to successful reporting; consider a 
process by which hospitals could request and receive a one-year 
extension, if needed, to increase their eCQM reporting to four calendar 
quarters; or take a more incremental approach to increasing eCQM 
reporting requirements.
    Response: As stated previously, we reduced or delayed eCQM 
reporting requirements for a number of years, as compared to reporting 
requirements for other Hospital IQR Program measures, to give hospitals 
and their vendors additional time to upgrade IT systems, improve data 
mapping and other capabilities, and increase staff training for eCQM 
reporting. In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to 
progressively increase the number of quarters of data to be collected 
over three years to continue to give providers time to gain experience 
with eCQM reporting and submission. We believe that gradually 
increasing the number of quarters for which hospitals are required to 
report eCQM data will produce more comprehensive and reliable quality 
measure data for patients and providers, and we believe it is time for 
such an increase. We also refer stakeholders to a discussion about our 
ECE policies in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49695, 
49713) as well as eCQM ECE resources on QualityNet. These resources 
discuss changes to the Hospital IQR Program ECE policy to provide 
flexibility for hospitals undergoing extraordinary hardships related to 
reporting eCQM data. While we are able to grant exceptions via our ECE 
policy, we note that granting an extension for eCQM reporting under an 
ECE policy is not operationally feasible. We will continue to work with 
stakeholders to identify any structural issues or barriers to 
successful reporting.
    Comment: Several commenters requested clarification about the data 
submission process associated with increasing the number of quarters of 
data required to be reported. Specifically, commenters asked CMS to 
clarify the timing of submission deadlines and the ability of hospitals 
to report non-consecutive quarters of data. A commenter requested that 
CMS clarify that until all four quarters of data are required, the 
hospital will be able to self-select which quarters it reports on.
    Response: In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57172), we 
finalized the alignment of the Hospital IQR Program eCQM submission 
deadline with that of the Promoting Interoperability Program--the end 
of two months following the close of the calendar year--for the CY 2017 
reporting period/FY 2019 payment determination and subsequent years. We 
did not propose any changes to the Hospital IQR Program eCQM submission 
deadlines in the FY 2021 IPPS/LTCH PPS proposed rule. We note that in 
this final rule, the Promoting Interoperability Program is finalizing a 
proposal that the submission period for the Promoting Interoperability 
Program would continue to be the 2 months following the close of the 
respective calendar year (85 FR 32857). Thus, the data submission 
deadline for eCQM data under the Hospital IQR Program, regardless of 
how many quarters of data are required to be reported for a given 
calendar year, will continue to be the end of 2 months following the 
close of the respective calendar year. In the FY 2021 IPPS/LTCH PPS 
proposed rule, we proposed to require that hospitals report two self-
selected calendar quarters of data for each of the four self-selected 
eCQMs for the CY 2021 reporting period/FY 2023 payment determination 
and that hospitals report three self-selected calendar quarters of data 
for the CY 2022 reporting period/FY 2024 payment determination for each 
required eCQM: (a) Three self-selected eCQMs; and (b) the Safe Use of 
Opioids eCQM (85 FR 32837). Thus hospitals would self-select the 
quarters it reported on until all four quarters were required. The 
ability self-select quarters would permit hospitals to submit non-
consecutive quarters of data.
    Comment: Two commenters stated that changing IT systems in a given 
year, or partnering with new entities with different medical record 
systems to coordinate care, could make eCQM data submission challenging 
for hospitals. They asked CMS to provide flexibility and guidance for 
those hospitals. Another commenter asked if hospitals would be required 
to submit numerator and denominator data, noting that a requirement to 
submit combined files would be a major issue for any hospital that 
converts to a different electronic health record (EHR) system.
    Response: We refer readers to the FY 2016 IPPS/LTCH PPS final rule, 
in which we indicated that hospitals may also use abstraction or may 
pull the data from non-certified sources and then input these data into 
CEHRT to capture and report QRDA I files (80 FR 49706). The ability to 
abstract or pull data from non-certified sources to then input this 
data into CEHRT reinforces the importance of ensuring the system is 
properly mapped for consistent and correctly captured data for accurate 
program reporting. We also expanded the ECE policy to include requests 
related to the submission of eCQM data if a hospital experiences a 
hardship that prevents it from eCQM reporting. Specifically, in the FY 
2016 IPPS/LTCH PPS final rule, we finalized a policy, effective 
starting with the FY 2018 payment determination, to allow hospitals to 
utilize the existing ECE form (OMB control number 0938-1022 (expiration 
date December 31, 2022)) to request an exception to the Hospital IQR 
Program's eCQM reporting requirement

[[Page 58938]]

for the applicable program year based on hardships preventing hospitals 
from electronically reporting (80 FR 49695, 49713). We stated that such 
hardships could include, but are not limited to, infrastructure 
challenges (hospitals must demonstrate that they are in an area without 
sufficient internet access or face insurmountable barriers to obtaining 
infrastructure) or unforeseen circumstances, such as vendor issues 
outside of the hospital's control (including a vendor product losing 
certification (80 FR 49695, 49713)). We assess a hospital's request on 
an individual basis to determine if an exception is merited (80 FR 
49695, 49713). We also refer stakeholders to additional eCQM ECE 
resources on QualityNet.\458\
---------------------------------------------------------------------------

    \458\ See https://www.qualitynet.org/inpatient/measures/ecqm/participation#tab2.
---------------------------------------------------------------------------

    Comment: A commenter requested clarification on alignment of the 
timeline for eCQM reporting and submission and the timeline for the 
transition from the Quality Data Model (QDM) common data layout (CDL) 
to QI Core FHIR clinical quality language (CQL) based specifications 
for eCQMs. The commenter stated their belief that the proposal to 
increase the data reporting period was intended to facilitate the 
transition to QI Core FHIR CQL specifications in 2022 to 2024 and noted 
that an underlying change in standards for certified EHR technology and 
the potential impact on workflows would require a slower transition. 
The commenter recommends that CMS transition to four quarters of 
reporting in CY 2021 if the transition to QI CORE FHIR CQL will take 
place after 2024, because the eCQMs available for the program are 
established, eligible hospitals should be able to capture the data with 
little additional burden, and a full year of data is more meaningful.
    Response: In the FY 2020 IPPS/LTCH PPS final rule, we explained 
that we were investigating and testing the potential uses of the FHIR 
standard \459\ for EHR-based quality measure data reporting, but noted 
it was not required at the time. (84 FR 42471). We do not have a 
defined timeline for new eCQMs that would be written using QI-Core as 
the data model. We interpret the comment to mean that the commenter 
believes a transition to the QI Core FHIR CQL in the 2022 to 2024 
timeframe would necessitate a slower transition to the requirement to 
report a full year of eCQM data. We will take this concern into 
consideration as we continue to evaluate a transition to the QI Core 
FHIR CQL and note that any modifications to eCQMs would be made through 
notice and comment rulemaking per our policies to provide an 
opportunity for public comment on the proposal. In the meantime, we 
refer stakeholders to the QI Core Implementation Guide for more 
information on QDM to QI Core R4 Draft Mapping.\460\
---------------------------------------------------------------------------

    \459\ FHIR, developed by Health Level Seven International (HL7), 
is designed to enable information exchange to support the provision 
of healthcare in a wide variety of settings. The specification 
builds on and adapts modern, widely used RESTful practices to enable 
the provision of integrated healthcare across a wide range of teams 
and organizations. Additional information is available at: https://www.hl7.org/fhir/overview.html.
    \460\ The current version of the implementation guide may be 
found at: http://hl7.org/fhir/us/qicore/qdm-to-qicore.html.
---------------------------------------------------------------------------

    Comment: Several commenters expressed concerns about the eCQM data 
submission process and described challenges in reporting eCQM data 
through the QualityNet Secure Portal. Commenters stated that the CMS 
system regularly experiences technical difficulties with a single 
quarter of data and expressed concern that submission of larger files 
will strain the system, resulting in multiple submission attempts by 
hospitals and further increasing burden. A commenter stated that some 
hospitals that voluntary reported in 2019 found their data to be 
incomplete and had to institute changes to ensure complete and timely 
claims data. Another commenter noted the inability of the QualityNet 
Secure Portal to receive test submissions until the second half of each 
calendar year, and expressed concern that hospitals will not be able to 
test, correct, and submit their Q1 or Q2 data until sometime in Q3 or 
Q4 (or later). Commenters urged CMS to improve the capacity of the 
QualityNet Secure Portal, including improving the capacity to receive 
test and production QRDA I files and send submission summary and 
performance reports, before considering additional eCQM data reporting 
requirements.
    Response: We thank the commenters for their feedback. The legacy 
Hospital Quality Reporting (HQR) System began transitioning to the Next 
Generation of the HQR System for eCQM reporting with the CY 2019 
reporting period to improve the experience for program stakeholders. We 
will continue to make changes to improve the system's usability. The 
feedback generated by the HQR System improves data quality and supports 
a submitter's efforts to achieve successful data submission. We note 
that we continue to improve the eCQM reporting process. Recent 
improvements include a new HQR System Home Page, refined eCQM user 
interfaces (UI), and an updated HQR quality data file submission 
platform. An export of episode of care measure outcomes is now 
available for users within 24 hours of submission, which allows users 
to sort and filter data, improving the overall reporting process and 
driving data quality by providing timely, confidential feedback.\461\
---------------------------------------------------------------------------

    \461\ A Comma Separated Values (CSV) file allows data to be 
exported and saved in a spreadsheet format for easy viewing and use 
of the data.
---------------------------------------------------------------------------

    Comment: A few commenters asked CMS to clarify the number of files 
required, whether eCQMs should be reported as separate reports, and if 
CMS would provide clear instructions to help hospitals develop and 
submit large data files.
    Response: We refer readers to the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49705 through 49708) and the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57169 through 57170) for our previously adopted eCQM file format 
specifications, which require that hospitals: (1) Must submit eCQM data 
via the Quality Reporting Document Architecture Category I (QRDA I) 
file format; (2) may use third parties to submit QRDA I files on their 
behalf; and (3) may either use abstraction or pull the data from 
noncertified sources in order to then input these data into CEHRT for 
capture and reporting QRDA I files. We have also clarified that 
hospitals can continue to meet the reporting requirements by submitting 
data via QRDA I files, zero denominator declaration, or case threshold 
exemption (82 FR 38387). More specifically regarding the use of QRDA I 
files, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57169 through 
57170), we stated that we expect QRDA I files to reflect data for one 
patient per file per quarter.
    In order to fulfill these requirements, hospitals are expected to 
report QRDA I, patient-level files representative of their patient 
population for the specified reporting quarter. With regard to the 
comment on the submission of larger QRDA I files, the maximum QRDA I 
patient file size remains 10MB. We are maintaining our established 
submission format of one patient, per file, per quarter, which includes 
all patient encounters, eCQMs and applicable data elements for those 
measures. Maintaining this process is intended to reduce provider 
burden through the preservation of established file requirements so 
that submitters are familiar and experienced with eCQM reporting.
    In addition, users are able to submit multiple quarters of patient 
data within one batch file to the HQR System, with

[[Page 58939]]

a maximum of 14,999 QRDA I files in a batch. Hospitals are encouraged 
to submit the volume of batches needed to fully represent their patient 
population for the specified reporting quarter. The HQR System will 
break down the information that identifies which quarter of data is 
being submitted. When the submitters generate the reports within the 
HQR System, they will see the data for the specified quarter.
    Comment: A few commenters requested additional clarity regarding 
the acceptable level of structural data errors in eCQM files. The 
commenters stated some errors cannot be retroactively resolved, which 
could impact hospitals' ability to successfully report all quarters if 
a certain threshold of error is not accepted.
    Response: We thank the commenters for this feedback. The QRDA I 
file format is the required format to submit eCQM data for the Hospital 
IQR and Promoting Interoperability Programs (80 FR 49706; 80 FR 49759 
through 49760). A number of resources, such as the Implementation 
Checklist eCQM Annual Update, CMS Implementation Guide and sample 
files, and eCQM Data Element Repository (provides clarification, 
definitions and clinical focus for all eCQM data elements) are 
available on the eCQI Resource Center to aid data submitters and their 
Health IT Vendors to prevent structural data errors.\462\ We encourage 
submitters to test early and often to prevent or reduce the likelihood 
of structural errors in production data that would generate conformance 
statements clarifying why the patient file is being rejected. Hospitals 
are expected to continue working with their health IT vendor to resolve 
any structural data issues and resubmit the QRDA I files to achieve 
successful submission.
---------------------------------------------------------------------------

    \462\ See the eCQI Resource Center at: https://ecqi.healthit.gov/.
---------------------------------------------------------------------------

    Comment: A few commenters recommended that CMS monitor 
implementation of the proposal, such as soliciting feedback from 
hospitals to learn about reporting challenges and to ensure that the 
proposal does not impose substantial additional administrative burdens 
during the COVID-19 PHE. A commenter recommended that CMS work with 
stakeholders to ensure eCQM data provides actionable insights that 
support performance improvement, considering the burden required to 
report it.
    Response: We thank the commenters for their suggestions. We plan to 
monitor the implementation of the increased reporting requirements for 
eCQM data and welcome continued feedback from stakeholders through 
webinars, listservs, and help desk questions.
    Comment: A commenter expressed concern about reporting fourth 
quarter data due to complexities caused by changes in ICD-10 codes, 
measures specifications, and value sets. The commenter indicated that 
resolving these issues constrains hospitals to two quarters of workable 
data. Another commenter stated that reporting data on all four calendar 
quarters would be problematic because vendor updates incorporating eCQM 
specification changes into EHR systems generally do not occur until 
mid-year, with the deadline for eCQM reporting for a year occurring 
during the first calendar quarter of the subsequent year. The commenter 
believes that to avoid confusion, vendor updates to the eCQM 
specifications should not take place prior to that data submission.
    Response: The eCQM Annual Updates (which include the eCQM 
specifications, educational materials, value sets, code systems, direct 
reference codes, terminology, etc.) are typically released in the 
spring for the subsequent year's reporting period. For example, we 
posted this information on the eCQI Resource Center in the spring of 
2020 applicable for the CY 2021 reporting period/FY 2023 payment 
determination. We have used this timeframe in an effort to support EHR 
system upgrades and development as hospitals and vendors prepare for 
the next reporting period. Any updates to the value sets, code systems 
(including ICD-10 codes), implementation guides, or other materials can 
be found on the eCQI Resource Center, which functions as the one-stop 
shop for the most current information to support electronic clinical 
quality improvement. Historically, hospitals have voluntarily submitted 
or been required to report on at least one quarter of eCQM data by the 
identified submission deadline. Since mandatory eCQM reporting for the 
Hospital IQR Program began with the CY 2016 reporting period [80 FR 
49693 through 49698], a growing number of hospitals have voluntarily 
and successfully reported two or more quarters of data prior to the 
submission period deadline, including the fourth quarter of data.
    After consideration of comments received, we are finalizing our 
proposal as proposed to progressively increase, over a 3-year period, 
the number of quarters for which hospitals are required to report eCQM 
data, from the current requirement of one self-selected quarter of data 
to four quarters of data. Specifically, for the CY 2021 reporting 
period/FY 2023 payment determination, hospitals will be required to 
report two self-selected calendar quarters of data for each of the four 
self-selected eCQMs. For the CY 2022 reporting period/FY 2024 payment 
determination, hospitals will be required to report three self-selected 
calendar quarters of data for each required eCQM: (a) Three self-
selected eCQMs; and (b) the Safe Use of Opioids eCQMs. For the CY 2023 
reporting period/FY 2025 payment determination and subsequent years, 
hospitals will be required to report four calendar quarters of data for 
each required eCQM: (a) Three self-selected eCQMs; and (b) the Safe Use 
of Opioids eCQMs. In addition, we are clarifying that until hospitals 
are required to report all four quarters of data beginning with the CY 
2023 reporting period/FY 2025 payment determination, they may submit 
either consecutive or non-consecutive self-selected quarters of data. 
We also refer readers to section VIII.D. of this final rule where we 
are also finalizing similar polices under the PI Program.
(3) Continuation of Certification Requirements for eCQM Reporting
(a) Requiring Use of 2015 Edition Certification Criteria
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41604 through 
41607), to align the Hospital IQR Program with the Promoting 
Interoperability Program, we finalized a policy to require hospitals to 
use the 2015 Edition certification criteria for certified EHR 
technology (CEHRT) for the CY 2019 reporting period/FY 2021 payment 
determination and subsequent years. While we did not propose any 
changes to this policy in the FY 2021 IPPS/LTCH PPS proposed rule, as 
stated above, we did propose changes to this policy in the CY 2021 
Payment Policies Under the Physician Fee Schedule Proposed Rule 
published August 17, 2020. To reiterate, the 21st Century Cures Act 
final rule that appeared in the May 1, 2020 Federal Register (85 FR 
25642 through 25961) finalized a number of updates to the 2015 Edition 
of health IT certification criteria (``2015 Edition Cures Update''). In 
general, health IT developers have up to 24 months from May 1, 2020 to 
make technology certified to the updated and/or new criteria available 
to their customers. In the CY 2021 Payment Policies Under the Physician 
Fee Schedule Proposed Rule published August 17, 2020, specifically, we 
proposed to expand flexibility under the Hospital IQR Program to allow 
hospitals to use either: (1) Technology certified to

[[Page 58940]]

the 2015 Edition criteria for CEHRT as was previously finalized for 
reporting eCQMs in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41537-
41608) and for reporting hybrid measures in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42507), or (2) technology certified to the 2015 
Edition Cures Update standards as finalized in the 21st Century Cures 
Act final rule (85 FR 25642 through 25961) and sought public comment on 
our proposal (85 FR 50271).
(b) Requiring EHR Technology To Be Certified to All Available eCQMs
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42505 through 
42506), we finalized the requirement that EHRs be certified to all 
available eCQMs used in the Hospital IQR Program for the CY 2020 
reporting period/FY 2022 payment determination and subsequent years. We 
did not propose any changes to this policy in the FY 2021 IPPS/LTCH PPS 
proposed rule. However, as mentioned above, we refer readers to the CY 
2021 Payment Policies Under the Physician Fee Schedule Proposed Rule 
published August 17, 2020, where we proposed to expand flexibility 
under the Hospital IQR Program to allow hospitals to use either: (1) 
Technology certified to the 2015 Edition criteria for CEHRT as was 
previously finalized for reporting eCQMs in the FY 2019 IPPS/LTCH PPS 
final rule (83 FR 41537-41608) and for reporting hybrid measures in the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42507), or (2) technology 
certified to the 2015 Edition Cures Update standards as finalized in 
the 21st Century Cures Act final rule (85 FR 25642 through 25961) and 
sought public comment on our proposal (85 FR 50271).
(4) File Format for EHR Data, Zero Denominator Declarations, and Case 
Threshold Exemptions
    We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49705 through 49708) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57169 through 57170) for our previously adopted eCQM file format 
requirements. Under these requirements, hospitals: (1) Must submit eCQM 
data via the Quality Reporting Document Architecture Category I (QRDA 
I) file format as was previously required; (2) may use third parties to 
submit QRDA I files on their behalf; and (3) may either use abstraction 
or pull the data from non-certified sources in order to then input 
these data into CEHRT for capture and reporting QRDA I files. Hospitals 
can continue to meet the reporting requirements by submitting data via 
QRDA I files, zero denominator declaration, or case threshold exemption 
(82 FR 38387).
    More specifically regarding the use of QRDA I files, in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57169 through 57170), we stated that we 
expect QRDA I files to reflect data for one patient per file per 
quarter, and that they contain the following four key elements that are 
utilized to identify the file:
     CMS Certification Number (CCN).
     CMS Program Name.
     EHR Patient ID.
     Reporting period specified in the Reporting Parameters 
Section per the CMS Implementation Guide for the applicable reporting 
year, which is published on the eCQI Resource Center website at https://ecqi.healthit.gov/QRDA.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to add EHR 
Submitter ID to the four key elements listed, as previously discussed, 
as a fifth key element for file identification beginning with the CY 
2021 reporting period/FY 2023 payment determination (85 FR 32837). An 
EHR Submitter ID is the ID that is assigned by QualityNet to submitter 
entities upon registering into the system and will be used to upload 
QRDA I files. For vendors, the EHR Submitter ID is the Vendor ID; for 
hospitals, the EHR, Submitter ID is the hospital's CCN. Particularly 
for situations when a hospital uses one or more vendors to submit QRDA 
I files via the QualityNet Secure Portal (also referred to as the 
Hospital Quality Reporting (HQR) System), this additional element would 
prevent the risk of a previously submitted file by a different vendor 
unintentionally being overwritten. Therefore, hospitals would be 
required to submit the following elements to identify the QRDA 1 file:
     CMS Certification Number (CCN).
     CMS Program Name.
     EHR Patient ID.
     Reporting period specified in the Reporting Parameters 
Section.
     EHR Submitter ID.
    Comment: A few commenters supported our proposal to add EHR 
Submitter ID to the four key elements listed as a fifth key element for 
file identification. A commenter asked CMS to adopt a standard to keep 
the QRDA file formats and quality metrics consistent for the duration 
of the 3 year reporting period, stating that it can take 6-10 months to 
implement file format or metrics changes, which may lead to data 
inconsistencies.
    Response: We thank the commenters for their support. We will take 
the request related to the consistency of the QRDA file formats and 
quality metrics into consideration for future rulemaking.
    After consideration of the public comments received, we are 
finalizing our proposal as proposed to add EHR Submitter ID as the 
fifth key element for file identification beginning with the CY 2021 
reporting period/FY 2023 payment determination.
(5) Submission Deadlines for eCQM Data
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50256 through 50259), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49705 
through 49709), and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57169 
through 57172) for our previously adopted policies to align eCQM data 
reporting periods and submission deadlines for both the Hospital IQR 
and Medicare Promoting Interoperability Programs. In the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57172), we finalized the alignment of the 
Hospital IQR Program eCQM submission deadline with that of the Medicare 
Promoting Interoperability Program--the end of 2 months following the 
close of the calendar year--for the CY 2017 reporting period/FY 2019 
payment determination and subsequent years. We note the submission 
deadline may be moved to the next business day if it falls on a weekend 
or federal holiday. In the FY 2021 IPPS/LTCH PPS proposed rule, we did 
not propose any changes to the eCQM submission deadlines. Even though 
hospitals will be required to gradually increase the number of quarters 
of eCQM data submitted, the submission deadline does not change. 
Hospitals must still submit eCQM data by the end of the data submission 
time period regardless of how many quarters of data are required to be 
reported for a given calendar year. That time period will continue to 
be the 2 months following the close of the respective calendar year. 
For example, for the CY 2021 reporting period/FY 2023 payment 
determination, hospitals should submit data by Monday, February 28, 
2022.
f. Data Submission and Reporting Requirements for Hybrid Measures
(1) Background
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38350 through 
38355), we finalized voluntary reporting of the Hybrid Hospital-Wide 
Readmission (HWR) measure for the CY 2018 reporting period. For data 
submission and reporting requirements under the 2018 Voluntary 
Reporting Period, we finalized that the 13 core clinical data elements 
and six linking variables for

[[Page 58941]]

the Hybrid HWR measure be submitted using the QRDA I file format, and 
that hospitals voluntarily reporting data for the Hybrid HWR measure 
could use EHR technology certified to the 2014 Edition, the 2015 
Edition, or a combination thereof (82 FR 38394 through 38397). In the 
FY 2020 IPPS/LTCH PPS final rule, we finalized the adoption of the 
Hybrid HWR measure for the Hospital IQR Program (84 FR 42465 through 
42481) as well as a number of requirements related to data submission 
and reporting requirements for hybrid measures under the Hospital IQR 
Program (84 FR 42506 through 42508). We adopted the Hybrid HWR measure 
into the Hospital IQR Program in a stepwise fashion, first accepting 
data submissions for the Hybrid HWR measure during two voluntary 
reporting periods (84 FR 42479). Beginning with the FY 2026 payment 
determination, hospitals are required to report on this measure (84 FR 
42479).
(2) Certification and File Format Requirements
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42507), we finalized 
a requirement that hospitals use EHR technology certified to the 2015 
Edition to submit data on the Hybrid HWR measure. In addition, we 
finalized that the core clinical data elements and linking variables 
identified in hybrid measure specifications must be submitted using the 
QRDA I file format. In order to ensure that the data have been 
appropriately connected to the encounter, the core clinical data 
elements specified for risk adjustment need to be captured in relation 
to the start of an inpatient encounter. The QRDA I file standard 
enables the creation of an individual patient-level quality report that 
contains quality data for one patient for one or more quality measures.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to continue 
the policy that requires hospitals to use EHR technology certified to 
the 2015 Edition to submit data on the Hybrid HWR measure and expand 
this requirement to apply to any future hybrid measure adopted into the 
Hospital IQR Program's measure set (85 FR 32838). We also clarified 
that core clinical data elements and linking variables must be 
submitted using the QRDA I file format for future hybrid measures in 
the program. We invited public comment on our proposals.
    As discussed above, the 21st Century Cures Act final rule finalized 
a number of updates to the 2015 Edition of health IT certification 
criteria. Since publication of the FY 2021 IPPS/LTCH PPS proposed rule, 
we proposed in the CY 2021 PFS proposed rule to allow hospitals to 
continue to use technology certified to the 2015 Edition criteria for 
CEHRT or to use technology certified to the 2015 Edition Cures Update 
standards (85 FR 50271). If finalized, this would mean that hospitals 
could continue to use their current edition or update to the updated 
edition when made available by their vendor.
    Comment: A few commenters supported the proposal but asked CMS to 
monitor the experience of voluntarily reporting the Hybrid Hospital-
Wide Readmission measure and make amendments in future rulemaking, as 
necessary. Those commenters noted hospitals' limited experience with 
reporting the hybrid readmission measure and stated that electronic 
health record vendors are still building out the functionality for 
reporting.
    Response: We thank the commenters for their support and will 
continue to monitor the experience of reporting the hybrid measure to 
determine if modifications in future rulemaking are necessary.
    Comment: A commenter requested clarification regarding whether the 
proposal requires a specific functionality in CEHRT or certification 
criteria in order to be compliant with the hybrid measure reporting 
requirements or if the proposal is a general requirement for the 
hospital to have CEHRT capable of reporting eCQMs.
    Response: Our proposal in the FY 2021 IPPS/LTCH PPS proposed rule 
requires hospitals to use EHR technology certified to the 2015 Edition 
to submit data on the Hybrid Hospital-Wide Readmission measure and any 
future hybrid measures adopted into the Hospital IQR Program measure 
set. However as mentioned above, since publication of that rule, we 
have made another proposal expanding flexibilities to allow hospitals 
to use either the 2015 Edition or the 2015 Edition Cures Update in the 
CY 2021 PFS proposed rule (85 FR 50271) and refer readers to that rule 
for additional detail. If finalized, this would mean that hospitals 
could use either: (1) Technology certified to the 2015 Edition criteria 
for CEHRT as was previously finalized for reporting hybrid measures (84 
FR 42507), or (2) technology certified to the 2015 Edition Cures Update 
standards as finalized in the 21st Century Cures Act final rule.
    Comment: A commenter expressed concern about the addition of any 
new hybrid measures until hospitals have recovered from the COVID-19 
PHE and urged CMS to limit the number of hybrid measures introduced 
within the program in years where it increases the number of calendar 
quarters required for reporting.
    Response: We did not propose any additional measures in the FY 2021 
IPPS/LTCH PPS proposed rule, but will take the commenter's concerns 
into consideration for future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposals as proposed to continue the policy that 
requires hospitals to use EHR technology certified to the 2015 Edition 
to submit data on the Hybrid HWR measure and expand this requirement to 
apply to any future hybrid measure adopted into the Hospital IQR 
Program's measure set. However, as noted above, we refer readers to our 
proposal in the CY 2021 PFS proposed rule to allow hospitals to use 
either: (1) Technology certified to the 2015 Edition criteria for CEHRT 
for reporting eCQMs and hybrid measures or (2) technology certified to 
the 2015 Edition Cures Update standards as finalized in the 21st 
Century Cures Act final rule (85 FR 50271).
(3) Additional Submission Requirements
    In the FY 2020 IPPS/LTCH PPS final rule, we finalized allowing 
hospitals to meet the hybrid measure reporting and submission 
requirements by submitting any combination of data via QRDA I files, 
zero denominator declarations, and/or case threshold exemptions (84 FR 
42507). We also finalized applying similar zero denominator declaration 
and case threshold exemption policies to hybrid measure reporting as we 
allow for eCQM reporting (84 FR 42507 through 42508). We did not 
propose any changes to the hybrid measure reporting and submission 
requirement supporting any combination of data via QRDA I files, zero 
denominator declaration, and/or case threshold exemptions. We note that 
the ONC 21st Century Cures Act final rule revises the clinical quality 
measurement criterion at Sec.  170.315(c)(3) to refer to CMS QRDA 
Implementation Guides and removes the Health Level 7 (HL7[supreg]) QRDA 
standard requirements (85 FR 25645). Based on our data, the majority of 
Hospital IQR Program participants already use the CMS QRDA I 
Implementation Guide for Hospital Quality Reporting for submission of 
eCQMs to the Hospital IQR Program. Under our proposal in the CY 2021 
PFS proposed rule, discussed above, hospitals would have the 
flexibility to use either: (1) Technology certified to the 2015 Edition 
criteria for CEHRT for reporting eCQMs and hybrid measures, or (2) 
technology certified to the 2015

[[Page 58942]]

Edition Cures Update standards as finalized in the 21st Century Cures 
Act final rule (85 FR 50271). As with eCQM reporting, we encourage all 
hospitals and their health IT vendors to submit QRDA I files early, and 
to use one of the pre-submission testing tools for electronic 
reporting, such as submitting test files to the Hospital Quality 
Reporting (HQR) System, to allow additional time for testing and to 
make sure all required data files are successfully submitted by the 
deadline.\463\
---------------------------------------------------------------------------

    \463\ We recently decommissioned the Pre-Submission Validation 
Application (PSVA) tool within the HQR System because the system 
itself now performs the same functions that the PSVA tool previously 
did.
---------------------------------------------------------------------------

(4) Submission Deadlines for Hybrid Measures
    We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42508), where we finalized submission deadlines for hybrid measures. We 
did not propose any changes to these policies.
g. Sampling and Case Thresholds for Chart-Abstracted Measures
    We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50221), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53537), the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50819), and the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49709) for details on our sampling and case thresholds for the FY 2016 
payment determination and subsequent years. We did not propose any 
changes to this policy.
h. HCAHPS Administration and Submission Requirements
    We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50220), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through 
51643), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 through 
53538), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50819 through 
50820) for details on previously-adopted HCAHPS submission 
requirements. We also refer hospitals and HCAHPS Survey vendors to the 
official HCAHPS website at: http://www.hcahpsonline.org for new 
information and program updates regarding the HCAHPS Survey, its 
administration, oversight, and data adjustments. We did not propose any 
changes to these policies in this final rule.
i. Data Submission Requirements for Structural Measures
    There are no remaining structural measures in the Hospital IQR 
Program.
j. Data Submission and Reporting Requirements for CDC NHSN HAI Measures
    For details on the data submission and reporting requirements for 
Healthcare-Associated Infection (HAI) measures reported via the CDC's 
National Healthcare Safety Network (NHSN), we refer readers to the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51629 through 51633; 51644 through 
51645), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50821 through 50822), and the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50259 through 50262). The data 
submission deadlines are posted on the QualityNet website.
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41547 through 41553), in which we finalized the removal of five of 
these measures (CLABSI, CAUTI, Colon and Abdominal Hysterectomy SSI, 
MRSA Bacteremia, and CDI) from the Hospital IQR Program. As a result, 
hospitals will not be required to submit any data for those measures 
under the Hospital IQR Program following their removal beginning with 
the CY 2020 reporting period/FY 2022 payment determination. However, 
the five CDC NHSN HAI measures are included in the HAC Reduction and 
Hospital VBP Programs and reported via the CDC NHSN portal (83 FR 41474 
through 41477; 83 FR 41449 through 41452). We further note that the HCP 
measure remains in the Hospital IQR Program and will continue to be 
reported via NHSN. We did not propose any changes to these policies.
10. Validation of Hospital IQR Program Data
a. Background
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53539 through 53553), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822 
through 50835), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50262 
through 50273), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49710 
through 49712), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 
through 57181), the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 
through 38403), and the FY 2019 IPPS/LTCH PPS final rule (83 FR 41607 
through 41608) for detailed information on validation processes for 
chart-abstracted measures and eCQMs, and previous updates to these 
processes for the Hospital IQR Program.
    Validation for chart-abstracted measures has been updated over 
recent years as the number of chart-abstracted measures has been 
reduced. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41562 through 
41567), we removed four clinical process of care measures,\464\ and 
noted that for the CY 2021 reporting period/FY 2023 payment 
determination and subsequent years, only one clinical process of care 
measure (SEP-1) remains in the program for chart-abstracted validation 
(83 FR 41608).
---------------------------------------------------------------------------

    \464\ In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41562 
through 41567), we removed three clinical process-of-care measures 
(IMM-2, ED-1, and VTE-6) for the CY 2019 reporting period/FY 2021 
payment determination and subsequent years, and one clinical process 
of care measure (ED-2) for the CY 2020 reporting period/FY 2022 
payment determination and subsequent years.
---------------------------------------------------------------------------

    We adopted the process for validating eCQM data in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57173 through 57181). Validation of 
eCQM data was finalized for the FY 2020 payment determination and 
subsequent years (starting with the validation of CY 2017 eCQM data 
that would impact FY 2020 payment determinations). We refer readers to 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 through 38403), in 
which we finalized several updates to the processes and procedures for 
validation of CY 2017 eCQM data for the FY 2020 payment determination, 
validation of CY 2018 eCQM data for the FY 2021 payment determination, 
and eCQM data validation for subsequent years.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to 
incrementally combine the validation processes for chart-abstracted 
measure data and eCQM data and related policies in a stepwise process 
(85 FR 32839). To accomplish this, we proposed to: (1) Update the 
quarters of data required for validation for both chart-abstracted 
measures and eCQMs; (2) expand targeting criteria to include hospital 
selection for eCQMs; (3) change the validation pool from 800 hospitals 
to 400 hospitals; (4) remove the current exclusions for eCQM validation 
selection, (5) require electronic file submissions for chart-abstracted 
measure data; (6) align the eCQM and chart-abstracted measure scoring 
processes; and (7) update the educational review process to address 
eCQM validation results. We believe these proposals would ultimately 
streamline the validation process and reduce the total number of 
hospitals selected for validation. These are discussed in detail in the 
following sections.

[[Page 58943]]

b. Submission Quarters
(1) Current Policy
    Currently, we require hospitals selected for chart-abstracted 
measures to submit data from the Q3 and Q4 of the calendar year, 3 
years before the payment determination and the Q1 and Q2 of the 
calendar year, 2 years before the payment determination (FY 2014 IPPS/
LTCH final rule (78 FR 50822 through 50823). This is because there is a 
lag associated with validation. In general, validation is a year 
behind. Validation results affecting a certain FY payment determination 
are based on measures submitted for the prior payment determination. 
For example, validation results affecting the FY 2024 payment 
determination are based on measures submitted for the FY 2023 payment 
determination (CY 2021 discharge period with data submission completing 
in CY 2022).
    For validation affecting the FY 2023 payment determination, 
hospitals must submit data to validate chart-abstracted measures from 
the Q3 and Q4 of CY 2020 and the Q1 and Q2 of CY 2021. These are data 
originally submitted for the FY 2022 program payment determination. 
Depending on whether a hospital is selected as a random or targeted 
hospital, CMS requests data between 1 and 5 months following the data 
reporting submission deadline for a given reporting quarter. Following 
this request, hospitals have 30 days to submit randomly selected 
medical records to the Clinical Data Abstraction Center (CDAC), and 
after submission, CMS validates the data in preparation to make the 
associated payment determination. Under the current policy, hospitals 
selected for eCQM validation for a given payment determination year are 
required to provide medical records for a sample of cases occurring 
during one of the self-selected calendar quarters of the year 3 years 
before that payment determination (82 FR 38399 through 38400). For 
example, for validation affecting the FY 2023 payment determination 
period, hospitals selected during CY 2021 for eCQM validation are 
required to submit data from one self-selected quarter out of the 4 
calendar quarters of 2020, that is Q1 through Q4 of CY 2020 (82 FR 
38398 through 38403). These requirements are illustrated in the 
following table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.241

    To support the transition to a combined validation process for both 
chart-abstracted measures and eCQMs, we proposed to shift the quarters 
of data used for both chart-abstracted measure validation and eCQM 
validation in an incremental manner in order to align the two over 
time.
(2) Quarters Required for Validation Affecting the FY 2023 Payment 
Determination
    In order to align the quarters of data used for chart-abstracted 
measure validation and eCQM validation, we proposed to first change the 
period for validation affecting the FY 2023 payment determination. 
Instead of validating chart-abstracted measure data from Q3 2020-Q2 
2021, we proposed to validate measure data only from the Q3 and Q4 of 
CY 2020 for validation affecting the FY 2023 payment determination for 
chart-abstracted measures (illustrated in Table: 2 that follows) as a 
transition year. Specifically, this means that we would not require 
facilities to submit data for chart-abstracted measure validation for 
the Q1 and Q2 of CY 2021 for validation affecting the FY 2023 payment 
determination. We would use measure data from only two quarters (Q3 and 
Q4 of CY 2020) for hospitals selected under both the random and 
targeted chart-abstracted measure validation. We note that this 
proposal only affects chart-abstracted measure validation; we would 
continue to validate the self-selected quarter of eCQM data submitted 
during 2020 for validation affecting the FY 2023 payment determination 
as previously finalized.
[GRAPHIC] [TIFF OMITTED] TR18SE20.242

    Comment: Several commenters supported using Q3 and Q4 2020 data for 
validation affecting the FY 2023 payment determination.
    Response: We thank these commenters for their support.
    Comment: A commenter recommended that CMS not increase the number 
of quarters required for validation at this time because many hospitals 
are responding to the COVID-19 PHE, and therefore, may not have 
sufficient resources to submit this data.
    Response: We acknowledge that many hospitals may be affected by the 
COVID-19 PHE. However, we note that for validation affecting the FY 
2023 payment determination (that is, the first payment determination 
affected by these changes), we are only requiring submission of chart-
abstracted measure validation for two quarters (specifically, Q3 and Q4 
of CY 2020), which represents a reduction in the number of quarters 
that hospitals were previously required to submit; the previous 
requirement was four quarters. We note that there are no changes to the 
number of quarters of CY 2020 data required to be submitted for eCQM 
validation

[[Page 58944]]

affecting FY 2023 payment determination. Furthermore, we have granted 
an exception to medical record submission requirements for eCQM 
validation for CY 2019 discharges (submission would have been required 
in 2020) because of the COVID-19 PHE \465\ which we believe further 
reduces validation related burden.
---------------------------------------------------------------------------

    \465\ https://www.cms.gov/files/document/guidance-memo-exceptions-and-extensions-quality-reporting-and-value-based-purchasing-programs.pdf.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our proposal as proposed to validate measure data only from 
the Q3 and Q4 of CY 2020 for validation affecting the FY 2023 payment 
determination for chart-abstracted measures as a transition year.
(3) Quarters Required for Validation Affecting the FY 2024 Payment 
Determination and Subsequent Years
    For validation affecting the FY 2024 payment determination and 
subsequent years, we proposed to use Q1-Q4 data of the applicable 
calendar year for validation of both chart-abstracted measures and 
eCQMs. For example, the quarters required for validation affecting the 
FY 2024 payment determination would occur as displayed in the following 
table.
[GRAPHIC] [TIFF OMITTED] TR18SE20.243

    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32840), we stated 
that we believe aligning the quarters of submission data used for both 
chart-abstracted measures and eCQM validation will allow hospitals 
selected for validation to more easily track and meet validation 
requirements, such as medical records requests from the CDAC.
    We invited the public to comment on our proposal to incrementally 
align the quarters used for chart-abstracted measure and eCQM 
validation as previously discussed.
    Comment: A commenter supported use of Q1-Q4 data for validation 
affecting FY 2024 payment determination and subsequent years because 
this would streamline the process and reduce hospital burden.
    Response: We thank the commenter for this support.
    Comment: A few commenters requested that CMS require fewer quarters 
for validation. A commenter expressed concern that requiring four 
quarters of data for validation of both chart-abstracted measures and 
eCQMs would be too high a burden. This commenter recommended that CMS 
require no more than two quarters for validation.
    Response: While we agree with these commenters that restricting 
data validation to fewer calendar quarters may lead to some reduction 
to provider burden, we do not believe restricting data validation to 
fewer than two quarters would be consistent with our goals or approach, 
which has been designed to increase opportunities to detect poor 
reporting (77 FR 53540). Additionally, requiring fewer quarters of data 
for validation, which would reduce sample size, would impede the 
calculation of statistically significant validation scores needed to 
make payment determinations. We also note that the proposed increase in 
quarters for eCQM validation would occur in a gradual manner; hospitals 
would be validated on 2 quarters of CY 2021 eCQM data for validation 
affecting the FY 2024 payment determination, on 3 quarters of CY 2022 
eCQM data for validation affecting the FY 2025 payment determination, 
and 4 quarters of CY 2023 eCQM data for validation affecting the FY 
2026 payment determination and for subsequent years.
    After consideration of the public comments that we received, we are 
finalizing our proposal as proposed to use Q1 through Q4 data of the 
applicable calendar year of both chart-abstracted measures and eCQMs 
for validation affecting FY 2024 payment determination and subsequent 
years.
c. Combination of Chart-Abstracted Measure and eCQM Validation 
Beginning With Validation Affecting the FY 2024 Payment Determination
    As noted previously, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57173), we finalized a separate validation process for eCQMs in the 
Hospital IQR Program. In addition to validating the chart-abstracted 
measures, we began validating an additional pool of up to 200 randomly 
selected hospitals for eCQMs (81 FR 57173).
    Upon alignment of validation quarters as in section 
VIII.A.10.b.(2). of the preamble of this final rule, we wish to combine 
the validation process for both chart-abstracted measures and eCQMs. 
Therefore, in the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to 
remove the separate process for eCQM validation, beginning with the 
validation affecting the FY 2024 payment determination (for validation 
commencing in CY 2022 using data from the CY 2021 reporting period) (85 
FR 32840). Instead, beginning with validation affecting the FY 2024 
payment determination and subsequent years, we proposed to incorporate 
eCQMs into the existing validation process for chart-abstracted 
measures such that there would be one pool of hospitals selected 
through random selection and one pool of hospitals selected using 
targeting criteria, for both chart-abstracted measures and eCQMs. Under 
the aligned validation process, a single hospital would be selected for 
validation of both eCQMs and chart-abstracted measures and would be 
expected to submit data for both chart-abstracted measures and eCQMs. 
For specific data submission requirements, we refer readers to section 
VIII.A.10.e of

[[Page 58945]]

the preamble of this final rule ``Number of Cases Required for 
Validation.''
    Comment: Several commenters supported alignment of validation 
processes between chart-abstracted measures validation, eCQM 
validation, and HAC Reduction Program validation. These commenters 
observed that this would reduce burden by improving coordination and 
allow hospitals to dedicate resources to patient care.
    Response: We thank these commenters for their support.
    Comment: A few commenters recommended that CMS delay combining the 
validation processes citing concerns about the current COVID-19 PHE.
    Response: We acknowledge that currently many hospitals are being 
adversely affected by the COVID-19 PHE, and we do not wish to further 
burden these hospitals. However, our proposal to combine the eCQM and 
chart-abstracted validation processes begins with validation affecting 
the FY 2024 payment determination (that is, validation commencing in CY 
2022 using data from the CY 2021 reporting period). We believe that 
this provides sufficient time for hospitals to prepare for the combined 
process.
    Comment: A commenter requested that due to increased data 
submission requirements associated with having to submit chart-
abstracted measure data, eCQM data, and HAC Reduction Program data, CMS 
extend the data submission timeframe to provide copies of the medical 
records from 30 days to 60 days.
    Response: We do not believe that our proposals significantly 
increase the data submission requirements. We note that up until 
validation affecting the FY 2022 payment determination, when the HAC 
Reduction Program and Hospital IQR Program split validation approaches 
(83 FR 41482), hospitals selected for validation were already reporting 
HAC and chart-abstracted measure data. Furthermore, up through 
validation affecting the FY 2022 payment determination, hospitals 
reported a total of five chart-abstracted measures for validation (83 
FR 41608); whereas, for validation affecting the FY 2023 payment 
determination and subsequent years, hospitals will only be reporting 
one chart-abstracted measure for validation (82 FR 38400). Because 
hospitals have previously been able to report these higher volumes of 
measures within the previously established validation data submission 
timeframe of 30-days (76 FR 51645 for chart-abstracted and 81 FR 57179 
for eCQMs), we believe that the 30-day period continues to be 
appropriate.
    Comment: A few commenters expressed concern regarding the effect of 
combining the HAC Reduction Program validation and the Hospital IQR 
Program's eCQM and chart-abstracted measure validation processes on 
payment determinations.
    Response: We interpret the comment to mean that commenters are 
concerned that failing validation for the Hospital IQR Program or the 
HAC Reduction Program could lead to penalties under both programs. We 
are combining and aligning the hospital pool for the validation 
selection processes for the Hospital IQR Program and the HAC Reduction 
Program only. To be clear, these two programs will retain distinct and 
separate processes for validating submitted data, scoring, and applying 
any payment impacts to hospitals that fail validation. Failing Hospital 
IQR Program validation will not directly affect validation under the 
HAC Reduction Program, or vice versa.
    Comment: A commenter recommended against adopting a combined 
validation process because of the belief that a consolidated process 
would be more burdensome than individual processes due to the multiple 
measure types affected by the new process.
    Response: We are clarifying here that we are combining and aligning 
the hospital pool for the validation selection processes for the 
Hospital IQR Program and the HAC Reduction Program only. To be clear, 
these two programs will retain distinct and separate processes for 
validating submitted data, scoring, and applying any payment impacts to 
hospitals that fail validation. We refer readers to section 
VIII.A.10.f.2 below where we discuss the Hospital IQR Program 
validation process and section IV.M.6 where we discuss the HAC 
Reduction Program validation process in more detail. While there may be 
some instances of increased burden for specific hospitals, we disagree 
with the commenter that this approach is more burdensome for the 
majority of hospitals. Under previously established validation 
requirements, hospitals selected for validation were already required 
to submit medical records for both clinical process of care and HAI 
measures. While our proposed policy would add the requirement for 
hospitals selected for validation to also submit medical records for 
eCQMs, the number of requested medical records for eCQM cases (eight 
cases per quarter over two quarters for a total of 16 cases for 
validation affecting the FY 2024 payment determination) remains low 
relative to clinical process of care cases (8 cases per quarter, over 
four quarters) and HAI cases (10 cases per quarter, over four 
quarters), that will be required for validation affecting the FY 2024 
payment determination. Combining and aligning the hospital pool for 
validation between the programs would reduce burden by 400 hospitals 
per year starting with validation affecting the FY 2024 payment 
determination. This is supported by the majority of comments that we 
received in response to this proposal, which indicate that most 
hospitals believe that the combined process will be less burdensome. In 
addition, as discussed further below, we also proposed to reduce the 
overall number of hospitals selected for validation from 800 to up to 
400, which reduces the overall validation burden.
(1) Targeted Selection of Hospitals for Validation
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53552 through 53553) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50834) where we finalized targeted chart-abstracted measure validation 
for a supplemental sample of hospitals in addition to random 
validation. The supplemental sample of hospitals includes all hospitals 
that failed validation in the previous year and a random sample of 
hospitals meeting certain targeting criteria. These criteria are as 
follows:
     Any hospital with abnormal or conflicting data patterns. 
One example of an abnormal data pattern would be if a hospital has 
extremely high or extremely low values for a particular measure. As 
described in the FY 2013 IPPS/LTCH PPS final rule, we define an 
extremely high or low value as one that falls more than 3 standard 
deviations from the mean which is consistent with the Hospital OQR 
Program (76 FR 74485). An example of a conflicting data pattern would 
be if two records were identified for the same patient episode of care 
but the data elements were mismatched for primary diagnosis. Primary 
diagnosis is just one of many fields that should remain constant across 
measure sets for an episode of care. Other examples of fields that 
should remain constant across measure sets are patient age and sex. Any 
hospital not included in the base validation annual sample and with 
statistically significantly more abnormal or conflicting data patterns 
per record than would be expected based on chance alone (p < .05), 
would be included in the population of hospitals targeted in the 
supplemental sample.
     Any hospital with rapidly changing data patterns. For this 
targeting criterion, we define a rapidly changing

[[Page 58946]]

data pattern as a hospital which improves its quality for one or more 
measure sets by more than 2 standard deviations from 1 year to the 
next, and also has a statistically significant difference in 
improvement (one-tailed p < .05) (77 FR 53553).
     Any hospital that submits data to NHSN after the Hospital 
IQR Program data submission deadline has passed.
     Any hospital that joined the Hospital IQR Program within 
the previous 3 years, and which has not been previously validated.
     Any hospital that has not been randomly selected for 
validation in any of the previous 3 years.
     Any hospital that passed validation in the previous year, 
but had a two-tailed confidence interval that included 75 percent.
     Any hospital which failed to report to NHSN at least half 
of actual HAI events detected as determined during the previous year's 
validation effort.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed that 
beginning with validation affecting the FY 2024 payment determination, 
the existing targeting criteria would apply to all applicable 
hospitals, capturing both measure types (that is, chart-abstracted 
measures and eCQMs) (85 FR 32841). In other words, we proposed to 
expand targeted validation to include eCQMs, not just chart-abstracted- 
measures. We stated that doing so will facilitate the proposed 
combination of chart-abstracted and eCQM validation such that hospitals 
selected under this combined targeting approach would be validated for 
both chart-abstracted and eCQMs.
    Additionally, we clarified that a hospital that has been granted an 
Extraordinary Circumstances Exception could still be selected for 
validation (chart-abstracted measures and eCQMs) under the targeting 
criteria. We invited public comment on our proposal.
    Comment: Several commenters supported aligning hospital selection 
for eCQMs, HAC Reduction Program, and Hospital IQR Program chart-
abstracted measure validation, including applying the existing targeted 
criteria.
    Response: We thank these commenters for their support.
    Comment: Several commenters expressed concern regarding the 
proposal to allow hospitals granted ECEs to be selected for validation. 
A commenter observed that ECEs represent potential operational 
disruptions to hospitals which could impact validation. A commenter 
recommended that CMS retain this exclusion. Another commenter 
recommended that CMS defer validation for hospitals that have been 
granted an ECE until the first validation period following the 
expiration of the ECE.
    Response: The validation process requires hospitals to submit 
charts to support data they submitted during an applicable reporting 
period. If a hospital was granted an ECE and did not report data for 
the applicable reporting period, the hospital would not submit data on 
any cases and, therefore, there would be no cases for the hospital to 
support through submission of medical charts for validation. This would 
not affect the hospital's validation score. In the case that validation 
is occurring during a period excepted by an ECE applicable to data 
submitted prior (that is, validation requests that are sent to 
hospitals during an ECE period for data reporting periods that occurred 
prior to the ECE), we believe that the importance of ensuring the 
validity of publicly reported data (which reflects care provided prior 
to the extraordinary circumstance) may be sufficient to require 
hospitals to submit charts for validation during that period. However, 
we acknowledge the commenters' concern and will consider extending the 
validation data submission period in future rulemaking.
    After consideration of the public comments, we are finalizing our 
proposal as proposed to apply our existing targeting criteria to all 
applicable hospitals, capturing both measure types (that is, chart-
abstracted measures and eCQMs).
(2) Number of Hospitals
    In the FYs 2013 and 2014 IPPS/LTCH PPS final rules (77 FR 53551 
through 53554 and 78 FR 50833), we finalized that for chart-abstracted 
measure validation, we take an annual sample from 400 randomly selected 
hospitals and from up to 200 hospitals selected using targeting 
criteria. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 through 
57178), we finalized that for eCQMs, we take an annual sample of up to 
200 randomly selected hospitals that have not been selected for chart-
abstracted measure validation. Under these existing policies, we may 
validate data from up to a total of 800 hospitals for a given year for 
both chart-abstracted measures and eCQMs.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to change 
the hospital selection policies to reduce the total number of hospitals 
selected for validation from up to 800 hospitals to up to 400 
hospitals, beginning with validation affecting the FY 2024 payment 
determination (85 FR 32841). We proposed that up to 200 hospitals would 
be selected randomly and up to 200 would be selected using targeted 
criteria. Here, we summarize and respond to general comments. Detailed 
descriptions on proposals to effectuate that reduction and related 
comments and responses follow further below.
    Comment: Several commenters supported the reduction from 800 
hospitals to up to 400 hospitals to be selected for validation. Some of 
these commenters observed that this would reduce administrative burden 
and others observed that it would allow hospitals to focus resources on 
patient focused activities.
    Response: We thank these commenters for their support.
    Comment: Several commenters expressed concern that reducing the 
number of hospitals selected for validation may lead to too small a 
sample size to ensure data validity.
    Response: We recognize that a smaller sample size may impact the 
reliability of the data. However, as we noted in the proposed rule, 
based on the expected percentage of hospitals passing validation (which 
we estimated at 96 percent based on values from validation affecting 
the FY 2018, FY 2019, and FY 2020 payment determinations, which were 
96.4 percent, 95.8 percent, and 96.2 percent respectively), our power 
calculation indicates that with a pool of up to 200 hospitals, we can 
be highly confident that at least 94.8 percent of all hospitals in the 
Hospital IQR Program population are achieving the requisite reliability 
score. We will continue to monitor the number of hospitals passing 
validation and if the pass rate falls to a level where we can no longer 
be confident in the reliability scores of hospitals in the Hospital IQR 
Program population, we will address this issue in future rulemaking.
    Comment: A few commenters recommended further reducing the number 
of selected hospitals to further reduce burden, especially due to the 
burden of COVID-19 on hospitals.
    Response: Because the minimum sample size required to assess the 
percentage of hospitals in the Hospital IQR Program depends on the 
expected percentage of hospitals that fail validation, we do not 
believe that we can reduce the number of selected hospitals below the 
proposed amount of up to 400 at this time. However, we will continue to 
evaluate the number of hospitals required to be statistically confident 
that hospitals in the Hospital IQR Program population are achieving the 
requisite reliability score.
(a) Number of Hospitals Under Random Selection
    Instead of taking an annual sample from 400 randomly selected 
hospitals as

[[Page 58947]]

previously finalized, we proposed to reduce the number of hospitals 
selected at random for validation to up to 200 hospitals, beginning 
with validation affecting the FY 2024 payment determination (measure 
data collected during CY 2021 and submitted during CY 2022 for the FY 
2023 payment determination). We proposed these changes in conjunction 
with the HAC Reduction Program and refer readers to section IV.M. of 
this final rule for those proposals. We believe that reducing the total 
number of hospitals selected for chart-abstracted measure validation 
each year to ``up to 200'' would maintain a sufficient sample size for 
a statistically meaningful estimate of hospitals' reporting accuracy 
and help streamline the process for both programs.
    One of our goals for the annual random sample is to estimate the 
total percentage of hospitals in the Hospital IQR Program that have 
been reporting unreliable data. The basic premise behind random 
sampling is that one can learn something about all hospitals by 
gathering data on just a subset of hospitals (77 FR 53552). The minimum 
sample size required to assess the percentage of hospitals in the 
Hospital IQR Program that have been reporting unreliable data depends 
on the expected percentage of hospitals that fail validation. Because a 
very high percentage of Hospital IQR Program hospitals pass validation 
(96.4 percent for the FY 2018 payment determination, 95.8 percent for 
the FY 2019 payment determination, and 96.2 percent for the FY 2020 
payment determination), we believe that we can reduce burden on 
hospitals by selecting fewer hospitals for the base annual random 
sample without adversely affecting our estimate of this percentage. 
Using an estimated passing rate of 96 percent, our power calculations 
indicate that with a pool of up to 200 hospitals, we can be highly 
confident that at least 94.8 percent of all hospitals in the Hospital 
IQR Program population are achieving the requisite reliability score.
    In addition, in the FY 2019 IPPS/LTCH PPS final rule, we finalized 
removal of five healthcare associated infection measures \466\ from the 
Hospital IQR Program and incorporated the same measures into the HAC 
Reduction Program (83 FR 41547 through 41553). Because of this, in the 
FY 2019 IPPS/LTCH PPS final rule, we also created validation policies 
under the HAC Reduction Program (83 FR 41479 through 41483). Following 
the transfer of NHSN HAI measure validation to the HAC Reduction 
Program, we are proposed that both the Hospital IQR Program and the HAC 
Reduction Program use a single random hospital sample of up to 200 
hospitals beginning with validation affecting the FY 2024 payment 
determination. In other words, hospitals would be randomly selected and 
this pool of up to 200 hospitals would be validated under both 
programs.
---------------------------------------------------------------------------

    \466\ CAUTI, CDI, CLABSI, Colon and Abdominal Hysterectomy SSI, 
and MRSA Bacteremia.
---------------------------------------------------------------------------

    In the FY 2021 IPPS/LTCH PPS proposed Rule, we proposed to change 
the Hospital IQR Program policy from an exact number of hospitals 
selected for random validation (that is, 400) to a range (that is, up 
to 200) (85 FR 32842). This is because there are some hospitals that 
are eligible for the HAC Reduction Program, but which do not also 
participate in the Hospital IQR Program. Over 95 percent of hospitals 
that are eligible for the HAC Reduction Program also participate in the 
Hospital IQR Program. The small proportion of hospitals that do not 
participate in the Hospital IQR Program would be included in the single 
pool from which hospitals could be randomly selected; however, if such 
a hospital were selected for validation, it would not be required to 
submit data for validation under the Hospital IQR Program. Therefore, 
selecting a single sample for both programs could potentially result in 
a number totaling less than 200 hospitals for validation of Hospital 
IQR Program chart-abstracted data because hospitals that are eligible 
for the HAC Reduction Program, but do not participate in the Hospital 
IQR Program would not be validated in the Hospital IQR Program. This is 
consistent with the previously finalized Hospital IQR Program chart-
abstracted validation process, for which hospitals were subject to both 
chart-abstracted measure validation as well as HAI measure validation 
(83 FR 41608). The only difference is that HAI measure validation has 
since moved to the HAC Reduction Program and, hence, the HAI validation 
performance will be accounted for under the HAC Reduction Program.
    We stated our belief that this proposal will simplify validation 
for hospitals under both programs and enable us to continue validating 
Hospital IQR Program chart-abstracted data without increasing the total 
number of hospitals selected for validation across both programs. We 
also refer readers to section IV.M. of the preamble of this final rule 
for more detail on the validation proposals for the HAC Reduction 
Program. Again, we note that this proposal is being made in conjunction 
with that in the HAC Reduction Program, and finalization of this 
proposal in the Hospital IQR Program would be contingent on the HAC 
Reduction Program proposal also being finalized.
    We invited public comment on this proposal.
    Comment: A commenter requested clarification regarding how the HAC 
Reduction Program validation process would apply to hospitals selected 
for Hospital IQR Program validation. This commenter observed that the 
validation process for the HAC Reduction Program is described in a 
separate rule section and noted that this could lead to confusion 
regarding how the two processes interact.
    Response: We are clarifying here that we are combining and aligning 
the hospital pool for the validation selection processes for the 
Hospital IQR Program and the HAC Reduction Program only. To be clear, 
these two programs will retain distinct and separate processes for 
validating submitted data, scoring, and applying any payment impacts to 
hospitals that fail validation. The Hospital IQR Program will validate 
these hospitals' data using the methodology laid out in this section; 
the HAC Reduction Program will validate these hospitals' data using the 
methodology described in section IV.M of the preamble of this final 
rule.
    After consideration of the public comments, we are finalizing our 
proposal as proposed to change the Hospital IQR Program policy from an 
exact number of hospitals selected for random validation (that is, 400) 
to a range (that is, up to 200). We refer readers to section M.6 of 
this final rule where we are also finalizing similar policies under the 
HAC Reduction Program.
(b) Exclusion Criteria
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38399), we finalized 
exclusion criteria, applied before the random selection of up to 200 
hospitals for eCQM validation. The exclusion criteria include any 
hospital--
     Selected for chart-abstracted measure validation;
     That has been granted an Extraordinary Circumstances 
Exception (ECE); and
     That does not have at least five discharges for at least 
one reported eCQM included among their QRDA I file submissions (81 FR 
57174 and 82 FR 38399).
    Hospitals meeting one or more of these exclusion criteria are not 
eligible for selection for eCQM validation each year (82 FR 38399).

[[Page 58948]]

    In the FY 2021 IPPS/LTCH PPS proposed rule, in conjunction with our 
proposal to combine chart-abstracted measure and eCQM validation, we 
proposed to remove all of the previously finalized exclusion criteria 
(as previously referenced) beginning with validation affecting the FY 
2024 payment determination and for subsequent years (85 FR 32842). 
Since a separate sample of hospitals for eCQM validation will no longer 
need to be identified, the previously finalized exclusion criteria for 
eCQM validation hospital selection will no longer be needed. We invited 
public comment on our proposal to remove the previously finalized 
exclusion criteria. We stated that finalization of this proposal would 
be contingent on finalization of our proposal to combine chart-
abstracted measure and eCQM validation.
    Comment: A few commenters requested clarification regarding how the 
existing exclusion criteria, particularly the exclusion of hospitals 
from selection for eCQM validation if they have been granted an ECE, 
apply to the consolidated validation process.
    Response: We refer readers to the FY 2016 IPPS/LTCH PPS Final Rule 
(80 FR 49695) for our policies regarding ECEs for eCQM issues. Our 
regulations at 42 CFR 412.140 state that CMS may grant an exception 
with respect to quality data reporting requirements in the event of 
extraordinary circumstances beyond the control of the hospital. 
Specific requirements for submission of a request for an exception are 
available on QualityNet.org. In the FY 2016 IPPS/LTCH PPS Final Rule, 
we stated that our targeting criteria permits that a hospital may be 
selected for chart-abstracted validation even if it has been granted an 
ECE with respect to one or more chart-abstracted measures for the 
applicable data collection period (81 FR 57174). Our previous policy 
was that if a hospital was granted an ECE with respect to eCQM 
reporting for the applicable eCQM reporting period, the hospital would 
be excluded from the eCQM validation sample due to its inability to 
supply data for validation (81 FR 57174). In the FY 2021 IPPS/LTCH PPS 
proposed rule (85 FR 32842), we proposed to remove this exclusion in 
light of our proposal to combine chart-abstracted measure and eCQM 
validation. While such hospitals may be unable to supply eCQM data, we 
believe they would continue to be able to supply HAI and chart-
abstracted measure data for validation of these measures. We note that 
hospitals that have been granted ECEs for any general reason have not 
previously been automatically excluded from being selected for chart-
abstracted or HAI measure data validation (77 FR 53552 through 53553), 
and this continues to be the case. However, because the consolidated 
validation process will apply across multiple data types, we no longer 
believe that these exclusions are necessary. A hospital affected by an 
ECE related to eCQM reporting may be unable to supply data regarding 
eCQMs however, we believe it would still be able to supply data for 
validation of the HAIs and chart-abstracted measures as they have been 
required to under our existing policies.
    Comment: A commenter requested that CMS clarify whether a hospital 
would be excluded from validation if it did not have at least five 
discharges for at least one reported eCQM included among its QRDA I 
file submissions.
    Response: We do not believe this or any of the other previously 
established exclusion criteria are needed because these exclusion 
criteria were established for hospitals that may not have data for eCQM 
validation. Because we are finalizing our proposal to combine chart-
abstracted measure and eCQM validation in section VIII.A.10.f, below, 
we believe that even if hospitals do not have data to submit for eCQM 
validation, they should have data to submit for chart-abstracted 
measure validation, and therefore, should be eligible to be selected 
for validation. After consideration of the public comments, we are 
finalizing our proposal as proposed to remove all of the previously 
finalized exclusion criteria beginning with validation affecting the FY 
2024 payment determination and for subsequent years.
(c) Number of Hospitals Selected Under Targeted Selection
    We refer readers to FY 2013 IPPS/LTCH PPS final rule (77 FR 53552 
through 53553) where we previously established that we would select up 
to 200 hospitals for chart-abstracted measures data validation using 
the targeting criteria described in section VIII.A.11.c. of the 
preamble of this final rule. The Hospital IQR Program does not 
currently have a policy for targeted selection of hospitals for eCQM 
validation.
    In the FY 2021 IPPS/LTCH PPS proposed rule, while we did not 
propose any changes to the number of hospitals selected using targeting 
criteria (see sections VIII.A.3.c.(1) and VIII.A.10.a. of this final 
rule), we proposed to combine chart-abstracted measure and eCQM 
validation and to decrease the number of randomly selected hospitals 
(85 FR 32842 through 32843); we also refer readers to sections 
VIII.A.3.c.(1) and VIII.A.10.a above where these are discussed. If 
these proposals are both finalized, the total number of hospitals 
selected for validation (for both chart-abstracted measures and eCQMs) 
would be at maximum 400 (up to 200 hospitals randomly selected + up to 
200 hospitals using targeting criteria). The current and proposed 
validation hospital numbers and measure types are illustrated in the 
tables that follow:

[[Page 58949]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.244

    Under the aligned validation process we are finalizing in this 
final rule, the Hospital IQR Program would validate a pool of up to 400 
hospitals (up to 200 randomly selected and up to 200 selected using the 
targeting criteria), across both measure types.
d. Use of Electronic File Submissions for Chart-Abstracted Measure 
Medical Records Requests Beginning With Validation Affecting the FY 
2024 Payment Determination
    Currently, hospitals may choose to submit paper copies of medical 
records for chart-abstracted measure validation (75 FR 50226), or they 
may submit copies of medical records for validation by securely 
transmitting electronic versions of medical information (78 FR 50834 
and 79 FR 50269). Submission of electronic versions can either entail 
downloading or copying the digital image of the medical record onto CD, 
DVD, or flash drive (78 FR 50835), or submission of PDFs using a secure 
file transmission process after logging into the QualityNet Secure 
Portal (also referred to as the Hospital Quality Reporting (HQR) 
System) (79 FR 50269). We reimburse hospitals at $3.00 per chart (78 FR 
50956). Neither paper copies nor submission of CD, DVD, or flash drive 
is applicable for eCQMs since that data is required to be submitted 
electronically via Secure File Transfer (81 FR 57174 through 57178).
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to 
discontinue the option for hospitals to send paper copies of, or CDs, 
DVDs, or flash drives containing medical records for validation 
affecting the FY 2024 payment determination (that is, beginning with 
data submission for Q1 of CY 2021) (85 FR 32843). We proposed to 
require hospitals to instead submit only electronic files when 
submitting copies of medical records for validation of chart-abstracted 
measures, beginning with validation affecting the FY 2024 payment 
determination (that is, Q1 of CY 2021) and for subsequent years. Under 
this proposal, hospitals would be required to submit PDF copies of 
medical records using direct electronic file submission via a CMS-
approved secure file transmission process. We would continue to 
reimburse hospitals at $3.00 per chart, consistent with the current 
reimbursement amount for electronic submissions of charts.
    We strive to provide the public with accurate quality data while 
maintaining alignment with hospital recordkeeping practices. We 
appreciate that hospitals have rapidly adopted EHR systems as their 
primary source of information about patient care, which can facilitate 
the process of producing electronic copies of medical records (78 FR 
50834). Additionally, we monitor the medical records submissions to the 
CMS Clinical Data Abstraction Center (CDAC) contractor, and have found 
that almost two-thirds of hospitals already use the option to submit 
PDF copies of medical records as electronic files. In our assessment 
based on this monitoring, we believe requiring electronic file 
submissions can be a more effective and efficient process for hospitals 
selected for validation. Requiring electronic file submissions reduces 
the burden of not only coordinating numerous paper-based pages of 
medical records, but also of having to then ship the papers or physical 
digital media storage to the CDAC. Therefore, we believe it is 
appropriate to require that hospitals use electronic file submissions 
via a CMS-approved secure file transmission process. We invited public 
comment on our proposal.
    Comment: Several commenters supported the proposal to require 
hospitals to submit only electronic files when submitting copies of 
medical records for validation of chart-abstracted measures. A 
commenter noted that requiring electronic files will reduce 
administrative burden.
    Response: We thank the commenters for their support and agree that 
the proposal will reduce administrative burden.
    Comment: A few commenters supported the proposal, but expressed 
concern that requiring electronic file submissions for chart-abstracted 
measure validation will be burdensome given the COVID-19 public health 
emergency (PHE) and asked CMS to delay this requirement. A commenter 
expressed concern that the influenza season and potential increased 
COVID-19 case counts in fall 2020 would make it more difficult for 
facilities to implement such a change and asked that the proposal be 
delayed by one year. In the meantime, the commenter suggested reducing 
the reimbursement rate for the paper-based submissions to encourage 
electronic submissions and reduce the cost to CMS of administering the 
program.
    Response: We appreciate the commenters support for the proposal and 
recognize that some organizations do not submit validation data 
electronically and therefore will need to update their processes if 
they are selected for validation. However, we believe that the relative 
security of electronic submission versus mailing paper records 
outweighs the effort of updating processes. Furthermore, we believe 
that the reduced effort of printing, packaging, and mailing records

[[Page 58950]]

will offset the burden of updating processes and reduce the impact of 
potential shipping delays on validation Based on our monitoring of 
medical record submissions to the CMS Clinical Data Abstraction Center 
(CDAC) contractor, we believe requiring electronic file submissions is 
a more effective and efficient process and will reduce burden for 
hospitals selected for validation, which we believe to be especially 
critical during the COVID-19 PHE and a potential increase in volume of 
influenza cases. We appreciate the commenter's suggestion to reduce 
reimbursement for paper charts to incentivize transition to electronic 
records, however, we believe that the efficiencies of electronic data 
submission outweigh any benefits to delaying this change.
    Comment: A commenter expressed concern that PDF copies of some 
patient files may take a long time to upload to Secure File Transfer 
and cause the application to time out. The commenter suggested a work 
around should any upload errors occur. Another commenter stated their 
belief that PDF files cannot be easily extracted without further 
processing or formatting and that interoperability requires that 
information be exchanged using common data standards to facilitate 
coordinated care and improved outcomes. This commenter encouraged CMS 
to develop and implement an industry-wide open application program 
interface (API) standard.
    Response: We appreciate the commenters' concerns and will monitor 
the PDF upload process, and if needed, modify the process or consider 
improvements for future rulemaking. We believe that requiring PDF file 
submissions will ultimately decrease burden.
    Comment: A commenter asked if the format for CMS's validation 
request to hospitals will be modified and if all communication between 
the hospital and CMS for the validation process will be electronic.
    Response: We have not proposed any changes to the formats of the 
validation request or other communications in the validation process.
    After consideration of the public comments, we are finalizing our 
proposal as proposed to require hospitals to submit only electronic 
files when submitting copies of medical records for validation of 
chart-abstracted measures, beginning with validation affecting the FY 
2024 payment determination (that is, Q1 of CY 2021) and for subsequent 
years. Under this policy, hospitals would be required to submit PDF 
copies of medical records using direct electronic file submission via a 
CMS approved secure file transmission process. We will continue to 
reimburse hospitals at $3.00 per chart, consistent with the current 
reimbursement amount for electronic submissions of charts.
e. Number of Cases Required for Validation
(1) Chart-Abstracted Measures
    We refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57179 through 57180) where we established a process in which the CDAC 
contractor requests selected hospitals to submit eight randomly 
selected medical records on a quarterly basis from which data are 
abstracted (for a total of 32 records per year). Once the CDAC 
contractor receives the data, it re-abstracts the measures which were 
submitted by the hospitals for the Hospital IQR Program and calculates 
the percentage of matching measure numerators and denominators for each 
measure within each chart submitted by the hospital. Each selected case 
may have multiple measures included in the validation. We did not 
propose any changes to the number of cases required from each selected 
hospital for chart-abstracted measure validation.
(2) eCQMs
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 through 
38399), we finalized that selected hospitals must submit eight cases 
per reported quarter to complete eCQM data validation. We consider a 
sample of eight cases per quarter to be the minimum sample size needed 
to accurately ascertain the quality of the reported data (82 FR 38399). 
Each selected case may have multiple measures included in the 
validation.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we did not propose any 
changes to this policy. However, we refer readers to section 
VIII.A.10.e. of the preamble (Reporting and Submission Requirements for 
eCQMs) of this final rule for more details on our finalized proposal to 
increase the number of quarters for which hospitals are required to 
report eCQM data: From one self-selected quarter of data to four 
quarters of data progressively over several years. With the 
finalization of the increased eCQM reporting quarters, hospitals 
selected for validation will be required to submit: (1) A total of 16 
requested cases from 2 calendar quarters of CY 2021 eCQM data (8 cases 
x 2 quarters) for validation affecting the FY 2024 payment 
determination; (2) a total of 24 requested cases from 3 quarters of CY 
2022 eCQM data (8 cases x 3 quarters) for validation affecting the FY 
2025 payment determination; and (3) a total of 32 requested cases over 
4 quarters of data (8 cases x 4 quarters), starting with validation of 
CY 2023 eCQM data, for validation affecting the FY 2026 payment 
determination and for subsequent years. This means that for eCQM 
validation, hospitals will have to submit validation data for each 
quarter of their self-selected eCQM submission quarters.
f. Scoring Processes
(1) Current Scoring Process
    Currently, there are two separate processes for payment 
determinations related to validation requirements--one for chart-
abstracted measure validation and another for eCQM validation.
    For chart-abstracted measure validation scoring, under the current 
process, the CDAC contractor requests that hospitals submit eight 
randomly selected medical records on a quarterly basis from which data 
are abstracted and submitted by the hospital to the Clinical Data 
Warehouse (for a total of 32 records per year per hospital). Once the 
CDAC contractor receives the data, it re-abstracts the same data 
submitted by the hospitals and calculates the percentage of matching 
measure numerators and denominators for each measure within each chart 
submitted by the hospital (81 FR 57179 through 57180). Each selected 
case may have multiple measures included in the validation score. 
Specifically, one patient may meet the numerator and denominator 
criteria for multiple measures, and therefore, would generate multiple 
measures in the validation score. Consistent with previous years, each 
quarter and clinical topic is treated as a stratum for variance 
estimation purposes. Approximately 4 months after each quarter's 
validation submission deadline, validation results for chart-abstracted 
measures for the quarter are posted on the QualityNet Secure Portal 
(also referred to as the Hospital Quality Reporting (HQR) System). At 
the end of the year, the validation score is calculated by combining 
the data from all four quarters into one agreement rate for each 
hospital. At this point, we calculate a confidence interval around the 
agreement rate for each hospital using a normal distribution 
assumption. The upper bound of the confidence interval is calculated as 
the final validation score. A hospital must attain at least a 75 
percent validation score based upon all four quarters of chart-
abstracted data validation to pass the validation requirement. The 
overall

[[Page 58951]]

validation score from the chart-abstracted measure is used to determine 
whether a hospital has met the validation requirement under the 
Hospital IQR Program for purposes of the annual payment update. 
Specifically, if a hospital fails chart-abstracted validation (because 
the validation score was below 75 percent), it would receive an 
applicable annual reduction to the hospital's IPPS market basket update 
(APU) for failing to meeting all Hospital IQR Program requirements.
    eCQM validation is different, because the accuracy of eCQM data 
submitted for validation (as measured by the agreement rate) does not 
currently affect a hospital's payment determination as described in the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 57181). As finalized in the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38398 through 38399), selected 
hospitals must submit eight cases, per self-selected quarter to 
complete eCQM data validation. Because the reporting quarter is self-
selected, validation occurs on an annual basis using all 8 cases that 
are submitted. For hospitals to receive their full APU, they must 
provide at least 75 percent of requested eCQM medical records in a 
timely and complete manner (82 FR 38398 through 38401). Hospitals 
receive eCQM validation results through email communications on an 
annual basis.\467\
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    \467\ https://qualitynet.org/inpatient/data-management/ecqm-data-validation.
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(2) Weighted Scoring
    To support the transition to a combined validation process for both 
chart-abstracted measures and eCQMs, in the FY 2021 IPPS/LTCH PPS 
proposed rule (85 FR 32844), we proposed to provide one combined 
validation score starting with validation affecting the FY 2024 payment 
determination and for subsequent years. Specifically, this single score 
would reflect a weighted combination of a hospital's validation 
performance for chart-abstracted measures and eCQMs. Since eCQMs are 
not currently validated for accuracy, we proposed that the eCQM portion 
of the combined agreement rate would be multiplied by a weight of zero 
percent and chart-abstracted measure agreement rate would be weighted 
at 100 percent for validation affecting the FY 2024 payment 
determination and subsequent years (that is, starting with the CY 2021 
discharge data submitted for FY 2023 payment determination and 
validation affecting the FY 2024 payment determination). The agreement 
rate and associated confidence interval would be calculated based on 
the validation data collected from each hospital for each fiscal year. 
The validation score associated with the combined agreement rate would 
be the upper bound of the calculated confidence interval. For more 
detailed information on the confidence interval, please refer to the 
Chart-Abstracted Data validation page of QualityNet: https://www.qualitynet.org/inpatient/data-management/chart-abstracted-data-validation. Under this policy, however, in the absence of an eCQM score 
that reflects reporting accuracy, hospitals would continue to be 
required to successfully submit at least 75 percent of the requested 
medical records for eCQM validation. Submission of requested medical 
records at or in excess of this threshold would meet the eCQM 
validation requirements. Under this proposal, hospitals would continue 
to receive their total validation score annually.
    As we move forward, we will determine when eCQM measure data are 
ready for accuracy scoring for validation. We have progressively 
increased the number of eCQM validation cases (from 8 cases for 
validation affecting FY 2023 payment determination, to 16 cases for 
validation affecting FY 2024 payment determination, to 24 cases for 
validation affecting FY 2025 payment determination, and to 32 cases for 
validation affecting FY 2026 payment determination and beyond). The 
additional cases collected and validated under the proposal will 
support the calculation of a statistically robust validation score. We 
anticipate increasing the eCQM validation score weighting in the future 
to include eCQM measures accuracy as part of the overall validation 
score. Any adjustments in the weighting and scoring would be proposed 
through future rulemaking. We invited public comments on our proposal.
    Comment: A few commenters supported the proposal to provide a 
single weighted validation score in which the eCQM portion of the score 
would be multiplied by a weight of zero percent and chart-abstracted 
measure agreement rate would be weighted at 100 percent. A few of these 
commenters encouraged CMS to continue weighting the eCQM score at zero 
until hospitals have become accustomed to reporting more than one self-
selected quarter of data and to the updated validation process.
    Response: We thank commenters for their support and plan to 
determine when eCQM measure data are ready for accuracy scoring for 
validation as we move forward. Any adjustments to the validation 
process, including weighting or the method for calculating scores, 
would be proposed through future rulemaking.
    Comment: A commenter opposed the proposal to weigh the eCQM portion 
of the combined agreement rate at zero percent and the chart-abstracted 
measure portion of the agreement rate at 100 percent. The commenter 
argued that such a weighting would formalize that eCQMs can be less 
accurate measures, and therefore, would not serve the purpose of 
validation. The commenter recommended developing a validation process 
and scoring system that consistently identifies and educates on 
measurement errors regardless of whether these errors are in chart-
abstracted data or electronically captured in the EHR.
    Response: Currently, the accuracy of eCQM data submitted for 
validation does not affect a hospital's payment determination as 
described in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57181). The 
proposal to weight the eCQM portion of the combined agreement rate at 
zero percent takes this existing policy into account and is therefore 
not a change in policy regarding the scoring of eCQM data for accuracy. 
Therefore, we disagree with commenters that we are formalizing that 
eCQMs can be less accurate measures, rather we believe that it 
continues to serve to allow hospitals and their vendors to become 
proficient in collecting and reporting eCQM data. We appreciate the 
commenter's recommendation and anticipate increasing the eCQM 
validation score weighting in the future to include eCQM accuracy as 
part of the overall validation score. We reiterate that any adjustments 
in the weighting and scoring of validation scores would be proposed 
through future rulemaking. We refer readers to section VIII.A.10.h.ii 
below where we are finalizing an educational review process for eCQMs, 
which will provide an opportunity for hospitals to ask questions and 
better understand their eCQM validation results in addition to the 
established educational review procedures for chart-abstracted 
measures.
    Comment: A few commenters expressed concern that CMS would increase 
the weight of the eCQM validation score without ensuring the eCQM 
validation process has a level of rigor and transparency comparable to 
that of validation of chart-abstracted measures. These commenters 
recommended improving the eCQM validation process by (1) providing more 
detailed information in validation

[[Page 58952]]

reports about the causes of a mismatch; (2) developing transparent, 
consistent criteria for where in medical records CMS's validators look 
for information; and (3) gradually increasing any requirement for eCQM 
accuracy slowly over time. Several commenters provided specific 
recommendations regarding the eCQM validation process including: (1) 
Developing a process based on QRDA I data; (2) accounting for mid-year 
eCQM specification changes; (3) publishing eCQM validation data; and 
(4) ensuring that the team validating eCQM data understands the 
differences between eCQM abstraction and chart abstraction. A commenter 
recommended that CMS convene stakeholders to address the issue of eCQM 
validation.
    Response: We acknowledge commenters' concerns and thank them for 
their recommendations. We refer readers to section VIII.A.12.b.(1). 
below, where we discuss our eCQM validation development in more detail. 
We are continually working to improve our validation processes 
including developing improved validation reports. Furthermore, our 
intent is to increase requirements for eCQM accuracy gradually over 
time from our current weighting of zero percent. Additionally, we note 
that we provide the same information to hospitals and to our validation 
team regarding measure specifications, and therefore we believe that we 
have provided sufficient information regarding where within medical 
records abstractors look for information. We will take these concerns 
and suggestions into consideration as we continue to evaluate and 
develop our eCQM validation policies and processes. We reiterate that 
any adjustments in the weighting and validation scoring would be 
proposed through future rulemaking. We believe that the expanded 
educational review process described in section VIII.A.10.h.ii. below 
will increase the transparency of the eCQM validation process which 
will allow stakeholders to better comment on the rigor of this process 
at such a time as we propose to increase the weight.
    Comment: A few commenters requested that CMS delay its proposal to 
provide a combined validation score for eCQM and chart-abstracted 
measure validation. These commenters noted that, unlike chart-
abstracted measure validation, eCQM validation does not currently 
account for the accuracy of the submissions, rather eCQM validation is 
scored based on submission of the data. These commenters recommended 
delaying the proposal to combine eCQM and chart-abstracted measure 
validation until an eCQM validation process that incorporates accuracy 
of eCQM data is developed and validated.
    Response: We acknowledge that our proposed policy does not 
currently reflect validation of eCQMs' accuracy, but believe that our 
proposal adequately addresses the commenters' concerns by weighing the 
eCQM portion of the combined agreement rate at zero percent for the 
time being. We refer readers to section VIII.A.12.b.(1). below, where 
we discuss our eCQM validation development in more detail. Based on our 
experience, we believe a gradual, step-wise approach is beneficial. As 
we move forward, we will use the results of these eCQM validation 
efforts to inform future policy-making for when eCQM measure data are 
ready for accuracy scoring for validation and when an increase in 
weighting is warranted. Thus, we do not believe we should delay our 
proposal.
    After consideration of the public comments, we are finalizing our 
proposal as proposed to provide one combined validation score starting 
with validation affecting the FY 2024 payment determination and for 
subsequent years. Specifically, this single score would reflect a 
weighted combination of a hospital's validation performance for chart-
abstracted measures and eCQMs. Since eCQMs are not currently validated 
for accuracy, the eCQM portion of the combined agreement rate will be 
multiplied by a weight of zero percent and chart-abstracted measure 
agreement rate will be weighted at 100 percent for validation affecting 
the FY 2024 payment determination and subsequent years (that is, 
starting with the CY 2021 discharge data submitted for FY 2023 payment 
determination and validation affecting the FY 2024 payment 
determination).
g. Summary
    Our validation proposals are summarized in the following table:
    [GRAPHIC] [TIFF OMITTED] TR18SE20.245
    
h. Educational Review Process
(1) Chart-Abstracted Measures
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50260), we 
established an educational review process for validation of chart-
abstracted measures. The process was subsequently updated in the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38402 through 38403). In this 
process, hospitals may request an educational review if they believe 
they have been scored incorrectly or if they have questions about their 
validation results. As noted previously, approximately 4 months after 
each quarter's validation submission deadline, validation results for 
chart-abstracted measures for the quarter are posted on the QualityNet 
Secure Portal (also referred to as the Hospital Quality

[[Page 58953]]

Reporting (HQR) System). Hospitals have 30 calendar days following the 
date validation results are posted to identify any potential CDAC or 
CMS errors for the first three quarters of validation results and 
contact the Validation Support Contractor (VSC) to request an 
educational review. Upon receipt of an educational review request, we 
review the data elements identified in the request, as well as the 
written justifications provided by the hospital. We provide the results 
of an educational review, outlining the findings of whether the scores 
were correct or incorrect, to the requesting hospital through a CMS-
approved secure file transmission process (82 FR 38402). We note that 
at the end of the year, the validation score is calculated by combining 
the data from all four quarters into one agreement rate for each 
hospital.
    If an educational review yields incorrect CMS validation results 
for chart-abstracted measures, we use the corrected quarterly score, as 
recalculated during the educational review process to compute the final 
confidence interval (82 FR 38402). We use the revised score identified 
through an educational review when determining whether or not a 
hospital failed validation (82 FR 38402). Corrected scores, however, 
are only used if they indicate that the hospital performed more 
favorably than previously determined (82 FR 38402).\468\ We note that 
corrections only occur to calculations, not to the underlying measure 
data (82 FR 38402). A detailed description of the educational review 
process for validation of chart-abstracted measures is also available 
on the QualityNet website. We did not propose any changes to our 
educational review process for chart-abstracted measures.
---------------------------------------------------------------------------

    \468\ Hospitals may still request reconsideration even if an 
educational review determined that a hospital was scored correctly. 
Hospitals that fail Hospital IQR Program requirements, including 
validation, may request reconsideration after receiving notification 
of their payment determination for the applicable fiscal year.
---------------------------------------------------------------------------

(2) Educational Review Process for eCQMs for Validation Affecting the 
FY 2023 Payment Determination and Subsequent Years
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32845), we 
proposed to extend a similar process established for chart-abstracted 
measure validation educational reviews to eCQM validation beginning 
with validation affecting the FY 2023 payment determination and 
subsequent years (that is, starting with data from CY 2020). While we 
proposed and are finalizing combining the hospital pool and generating 
a single score for both eCQM and chart-abstracted measure data 
validation, these underlying processes would still remain distinct 
because the underlying data being validated is distinct. We believe 
that expanding the educational review process to incorporate eCQMs 
would allow hospitals to better understand the processes and data for 
eCQM validation. Under our proposal, hospitals may request an 
educational review if they believe they have been scored incorrectly or 
if they have questions about their validation of eCQMs. Specifically, a 
hospital would have 30 calendar days to contact the VSC to solicit a 
written explanation of the validation performance following the date 
that the validation results were provided to the hospital. Because 
hospitals receive eCQM validation results on an annual basis, however, 
they would have the opportunity to request an educational review once 
annually following receipt of their results. Upon receipt of an 
educational review request, we would review the requested data elements 
and written justifications provided by the hospital. We also proposed 
to provide the results of the eCQM validation educational review to the 
requesting hospital, outlining the findings of whether the scores were 
correct or incorrect, through a CMS-approved secure file transmission 
process.
    We invited public comment on our proposal.
    Comment: Several commenters supported the proposal to extend the 
educational review process established for chart-abstracted measure 
validation to eCQM validation.
    Response: We thank the commenters for their support.
    After consideration of the public comments, we are finalizing our 
proposal as proposed to extend a similar process established for chart-
abstracted measure validation educational reviews to eCQM- validation 
beginning with validation affecting the FY 2023 payment determination 
and subsequent years (that is, starting with data from CY 2020).
11. Data Accuracy and Completeness Acknowledgement (DACA) Requirements
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53554) for previously adopted details on DACA requirements. We did not 
propose any changes to this policy.
12. Public Display Requirements
a. Background
    Section 1886(b)(3)(B)(viii)(VII) of the Act requires the Secretary 
to report quality measures of process, structure, outcome, patients' 
perspectives on care, efficiency, and costs of care that relate to 
services furnished in inpatient settings in hospitals on the internet 
website of CMS. Section 1886(b)(3)(B)(viii)(VII) of the Act also 
requires that the Secretary establish procedures for making information 
regarding measures available to the public after ensuring that a 
hospital has the opportunity to review its data before they are made 
public. Our current policy is to report data from the Hospital IQR 
Program as soon as it is feasible on CMS websites such as the Hospital 
Compare and/or its successor website after a 30-day preview period (78 
FR 50776 through 50778). We refer readers to the FY 2008 IPPS/LTCH PPS 
final rule (72 FR 47364), the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50230), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650), the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53554), the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50836), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277), 
the FY 2016 IPPS/LTCH PPS final rule (80 FR 49712 through 49713), the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38403 through 38409), and the 
FY 2019 IPPS/LTCH PPS final rule (83 FR 41538 through 41539) for 
details on public display requirements. The Hospital IQR Program 
quality measures are typically reported on the Hospital Compare website 
at: http://www.medicare.gov/hospitalcompare, or on other CMS websites 
such as: https://data.medicare.gov, or their successor websites.
b. Public Reporting of eCQM Data
(1) Background
    The Hospital IQR Program initiated voluntary reporting of eCQM data 
in the FY 2014 IPPS/LTCH PPS final rule, for the CY 2014 reporting 
period/FY 2016 payment determination (78 FR 50807 through 50810). At 
that time, we noted our belief that electronic collection and reporting 
of quality data using health IT would ultimately simplify and 
streamline quality reporting (78 FR 50807). Based on our ongoing 
experience with eCQMs, we continue to believe this. We also believe 
that electronic reporting furthers CMS and HHS policy goals to promote 
quality through performance measurement and, in the long-term, will 
both improve the accuracy of the data and reduce

[[Page 58954]]

reporting burden for providers. We expect that over time, hospitals 
will continue to leverage EHRs to capture, calculate, and 
electronically submit quality data, build and refine their EHR systems, 
and gain more familiarity with reporting eCQM data (78 FR 50807).
    Since the FY 2014 IPPS/LTCH PPS final rule, the Hospital IQR 
Program's eCQM reporting requirements have evolved. In the FY 2016 
IPPS/LTCH PPS final rule, the reporting of eCQM data became required 
(rather than voluntary) under the Hospital IQR Program, beginning with 
the CY 2016 reporting period/FY 2018 payment determination (80 FR 49693 
through 49698). At the time of publication of this final rule, 
hospitals will have completed the reporting of eCQM data for the CY 
2019 reporting period/FY 2021 payment determination by the March 2, 
2020 submission deadline, the fourth year of required eCQM reporting.
    Most recently, in the FY 2020 IPPS/PPS LTCH final rule, we 
finalized the Hospital IQR Program's reporting requirements for the CY 
2022 reporting period/FY 2024 payment determination, to require that 
hospitals report one self-selected calendar quarter of data for: (a) 
three self-selected eCQMs; and (b) the Safe Use of Opioids--Concurrent 
Prescribing eCQM (Safe Use eCQM), for a total of four eCQMs (84 FR 
42503). We refer readers to section VIII.A.10.e of the preamble of this 
final rule where we discuss our finalized proposal to progressively 
increase the quarters of eCQM data, beginning with the CY 2021 
reporting period/FY 2023 payment determination.
    As eCQM reporting for the Hospital IQR Program continues to advance 
and hospitals have gained several years of experience with successfully 
collecting and reporting eCQM data, we believe it is important to 
further our policy goals of leveraging EHR-based quality measure 
reporting in order to incentivize data accuracy, promote 
interoperability, increase transparency, and reduce long-term provider 
burden by providing public access to the reported eCQM data. 
Originally, as we incorporated eCQMs into the Hospital IQR Program on a 
voluntary basis, we stated that we would need time to assess the data 
submitted by hospitals to determine the optimal timing and transition 
strategy for publicly reporting eCQM data (78 FR 50813). We finalized 
that eCQM data reported for the Hospital IQR Program would only be 
publicly reported if we determine the data are accurate enough to be 
reported (78 FR 50818). In the FY 2016 IPPS/LTCH PPS final rule when we 
made the reporting of eCQMs required rather than voluntary, we stated 
that any data submitted electronically would not be posted on the 
Hospital Compare website at that time, and that we would address public 
reporting in future rulemaking, after the conclusion and assessment of 
the validation pilot (80 FR 49698).
    The eCQM validation pilot was completed in 2015 and was addressed 
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 through 57174). 
Building upon the validation pilot, we adopted procedures to begin the 
required validation of eCQM data under the Hospital IQR Program in the 
FY 2017 IPPS/LTCH PPS final rule, and stated that the first validation 
of eCQM data would occur in spring 2018 to validate data from the CY 
2017 reporting period. As finalized in the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 57180 through 57181), the validation process for eCQMs was 
established as an incremental process to ensure hospitals are able to 
successfully report the medical records that correspond to the data 
used for eCQM measure reporting. Scoring for eCQM validation is 
different, because the accuracy of eCQM data submitted for validation 
currently does not affect a hospital's payment determination.
    Our validation of eCQM data submitted from CY 2017 and CY 2018 has 
demonstrated that hospitals are capable of reporting eCQM measure data. 
Since the eCQM validation pilot, we have completed eCQM data validation 
from the CY 2017 reporting period and the CY 2018 reporting period, and 
worked with stakeholders to develop a more fulsome understanding of the 
eCQM data submitted. Our review of the CY 2017 and CY 2018 eCQM data 
submitted for validation included an analysis of over 1,200 patient 
episodes of care submitted by over 190 hospitals per reporting period. 
The majority of hospitals successfully submitted validation records 
within the timeline requested. The results demonstrate that over half 
of the measures validated had agreement rates of 80 percent or better. 
Agreement rates are the ratios which reflect the frequency at which a 
hospital's electronically reported medical record data matches results 
adjudicated by the Clinical Data Abstraction Center (CDAC). CMS 
calculates an agreement rate for each hospital. Our analysis 
demonstrates that hospitals continue to improve the accuracy of 
identifying patients appropriate for measure denominator inclusion, and 
tend to accurately report a wide variety of data types, including 
diagnoses, medications, and laboratory values. Based on our review of 
the CY 2017 and CY 2018 eCQM data submitted for validation, and on the 
finding that the majority of eCQM data was reported with agreement 
rates of 80 percent or better, we believe eCQM data are accurate enough 
to be publicly reported in aggregate. Because eCQM validation examines 
eCQMs on a chart-by-chart basis (as opposed to in aggregate) and 
affects payment, in section VIII.A.10.f. of the preamble of this final 
rule, we discuss the finalized proposal that eCQM validation continue 
to be based on successful submission of at least 75 percent of the 
requested medical records for eCQM validation instead of reporting 
accuracy. In the interests of providing data to the public as quickly 
as possible, and as expressed in more detail later in this section, we 
proposed to begin public reporting of eCQM data beginning in CY 2022 
using data reported for the CY 2021 reporting period/FY 2023 payment 
determination.
(2) Public Reporting Requirements of eCQMs for the CY 2021 Reporting 
Period/FY 2023 Payment Determination and Subsequent Years
    Based on our validation of eCQM data submitted from CY 2017 and CY 
2018, and in alignment with our goal to encourage data accuracy and 
transparency, in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32847), 
we proposed to publicly report eCQM data beginning with the eCQM data 
reported by hospitals for the CY 2021 reporting period/FY 2023 payment 
determination and for subsequent years. These data could be made 
available to the public as early as the fall of 2022. We refer readers 
to section VIII.A.10.f.(2). of the preamble to this final rule for a 
discussion of finalized chart-abstracted measure and eCQM validation 
weighted scoring.
    As with other Hospital IQR Program measures, hospitals would have 
the opportunity to review their data before they are made public, as 
required by section 1886(b)(3)(B)(viii)(VII) of the Act, during a 30-
day preview period in accordance with previously finalized policies (76 
FR 51608). Measure data, including eCQM data, are published on the 
Hospital Compare and/or https://data.medicare.gov websites or successor 
websites.
    We plan to continue assessing the eCQM data submitted in future 
years and will continue working to ensure that hospitals receive 
feedback on their validation results aimed at improving transparency 
and reporting accuracy. We are committed to providing data to patients, 
consumers, and providers as quickly as possible so they are empowered 
to make informed decisions

[[Page 58955]]

about their own, and their patients' healthcare.
    Understanding that it will be important for hospitals and 
stakeholders alike to know how to find the eCQM data once they are 
publicly posted, we would convey any updates to the posting locations 
through routine communication channels to hospitals, vendors, and QIOs, 
including, but not limited to, issuing memos, emails, and notices on 
the QualityNet and eCQI Resource Center websites.
    We also refer readers to section VIII.D. of the preamble of this 
final rule for a discussion of a similar proposal in the Medicare 
Promoting Interoperability Program. We solicited public comment on this 
proposal.
    Comment: A few commenters supported public reporting of eCQM data 
for the CY 2021 reporting period/FY 2023 payment determination, with 
these data available to the public as early as Fall 2022. A commenter 
stated the proposal strikes a balance between reducing the 
administrative burden for providers of collecting and reporting eCQM 
data without sacrificing the meaningfulness of quality information 
available to the public and also ensuring that CMS has a more robust 
dataset to make payment decisions. A commenter finds the proposed 
change reasonable and appropriate and agrees that the current 
submission requirement does not effectively capture performance trends. 
A few commenters appreciated the greater public disclosure of eCQM data 
and agreed that the proposed change will provide a more accurate 
picture of overall performance for hospitals.
    Response: We thank commenters for their support.
    Comment: A few commenters requested additional information about 
the proposal to begin public reporting of eCQM data and publish data on 
the Hospital Compare and/or successor websites including information on 
benchmarking for peer comparisons, data interpretation by consumers and 
hospitals, expectations for timeliness for eCQM specification and 
vendor updates, and the source of the data that would be published. A 
commenter questioned if a target will be set for each measure and if 
hospital standing will be shown by percentile. A few commenters 
expressed concerns about consumers understanding the data and 
recommended CMS educate consumers about the differences in measurement 
methods for eCQM, chart-abstracted, and claims-based measures.
    Response: We appreciate commenters' requests for additional 
information. Regarding benchmarks for peer comparisons, we remind 
readers that the Hospital IQR Program is a pay-for-reporting program, 
and therefore, there are no set performance targets. Similar to other 
publicly reported Hospital IQR Program measures, we plan to publish 
state and national rates for each eCQM that has a sufficient level of 
hospital reporting to reliably calculate and display. Similar to other 
publicly reported Hospital IQR Program measures, we plan to publish 
state and national rates for each eCQM that has a sufficient level of 
hospital reporting to reliably calculate and display. However, we do 
refer readers to the CY 2021 OPPS/ASC proposed rule where we are 
proposing a new methodology for the Overall Hospital Quality Star 
Ratings, which would use Hospital IQR Program measure data (85 FR 48996 
through 49027). As proposed, these star ratings would use CMS quality 
data, including Hospital IQR Program and eCQM data, posted on the 
Hospital Compare website to assign hospitals a star rating and would 
provide meaningful peer comparisons on overall hospital performance 
through the application of peer grouping that allows hospital scores to 
be equivalent and comparable among all hospitals (85 FR 49022 through 
49025). We encourage stakeholders to submit comments related to this 
methodology under that proposed rule.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to begin 
publicly reporting eCQM data beginning with the eCQM data reported by 
hospitals for the CY 2021 reporting period/FY 2023 payment 
determination and for subsequent years (85 FR 32847). These data could 
be made available to the public as early as the fall of 2022. We stated 
that measure data, including eCQM data, are published on the Hospital 
Compare and/or the https://data.medicare.gov website or successor 
websites (85 FR 32847). As a clarification, we plan to initially 
publish CY 2021 reporting period/FY 2023 payment determination eCQM 
data, of which there will be two quarters of data per our finalized 
policy in sectionVIII.A.9.e. of this final rule, on https://
data.medicare.gov, or its successor website, before publishing it on 
the Hospital Compare, or its successor website, sometime in the future. 
The https://data.medicare.gov website, or its successor website, 
provides the public with access to downloadable datasets to ensure the 
information is publicly available. As more eCQM data are progressively 
reported, we will then additionally display the information on the 
Hospital Compare website, or its successor website, where comparisons 
of hospital performance will be available. We believe this gradual 
approach is appropriate because it advances our goal to accelerate the 
use of eCQMs in quality reporting while supporting providers as they 
gain familiarity and success with increasing eCQM submissions.
    Regarding consumer and hospital interpretation of the eCQM data, we 
note that there are public resources available to help consumers better 
understand measurement methods for different types of measures used in 
the Hospital IQR Program, and we refer readers to general information 
about chart-abstracted measures on the medicare.gov website \469\ and 
National Quality Forum website \470\ as well as specifications and 
implementation guides for eCQMs are available on the eCQI Resource 
Center site (see https://ecqi.healthit.gov/). Additionally, when the 
eCQM data is published on the Hospital Compare and/or https://
data.medicare.gov websites, or successor websites, we will post the 
same explanations and information that we currently post regarding 
other measure data to assist hospitals and consumers in understanding 
the data.\471\ We understand the importance of publicly displaying eCQM 
data in a consumer-friendly format to provide meaningful information on 
hospital performance for patients, families, and caregivers. In 
addition to hosting consumer-friendly webinars,\472\ we also refer 
readers to the Hospital IQR Program Resources and Quality Reporting 
Center Newsletters available on the QualityNet website.\473\
---------------------------------------------------------------------------

    \469\ Medicare.gov Hospital Compare measures and current data 
collection periods. https://www.medicare.gov/HospitalCompare/data/Data-Updated.html#MG3.
    \470\ National Quality Forum, hospital inpatient quality 
measures. http://www.qualityforum.org/Home.aspx.
    \471\ Hospital Compare Data Resource. https://www.medicare.gov/hospitalcompare/Data/Data-Updated.html#%20.
    \472\ Hospital IQR Program 2020 Webinars & Calls, available at: 
https://www.qualitynet.org/inpatient/iqr/webinars.
    \473\ Hospital IQR Program Resources, available at: https://www.qualitynet.org/inpatient/iqr/resources#tab1 and Quality 
Reporting Center Newsletters, available at: https://www.qualitynet.org/inpatient/iqr/resources#tab3.
---------------------------------------------------------------------------

    We also appreciate commenters' requests for additional information 
related to eCQM specifications and vendor updates. Under the Hospital 
IQR Program, hospitals are required to submit data on each specified 
measure in accordance with the measure's specifications for a 
particular period of time (84 FR 42501). This submitted data

[[Page 58956]]

will be the source of the publicly reported eCQM data. The data 
submission requirements, Specifications Manual, and submission 
deadlines are posted on the QualityNet website at: http://www.qualitynet.org. The technical specifications used for electronic 
clinical quality measures (eCQMs) are contained in the CMS Annual 
Update for the Hospital Quality Reporting Programs (Annual Update). We 
generally update the measure specifications on an annual basis through 
the Annual Update, which includes code updates, logic corrections, 
alignment with current clinical guidelines, and additional guidance for 
hospitals and electronic health record (EHR) vendors to use in order to 
collect and submit data on eCQMs from hospital EHRs. The Annual Update 
and implementation guidance documents are available on the Electronic 
Clinical Quality Improvement (eCQI) Resource Center website at: https://ecqi.healthit.gov/. For example, for the CY 2019 reporting period/FY 
2021 payment determination, hospitals needed to submit eCQM data using 
the May 2018 Annual Update and any applicable addenda. We refer readers 
to the FY 2020 IPPS/LTCH PPS final rule for the most recent statement 
of the sub-regulatory process for eCQM specification updates (84 FR 
42501).
    Comment: Many commenters did not support public reporting of eCQM 
data due to concerns about eCQM data accuracy, generally. A commenter 
expressed concern that reporting less than 12 months of data at a time 
will not accurately reflect a hospital's performance. Another commenter 
expressed concern that the proposal to report data for a few selected 
eCQMs could result in publicly reported hospital performance based on 
as few as 12 cases.
    Response: We have previously stated that eCQM data reported for the 
Hospital IQR Program would only be publicly reported if we determined 
the data are accurate enough to be reported (78 FR 50818). We refer 
readers to section VIII.A.9.e. of this final rule where this analysis 
is discussed in more detail. Based on our review of data submitted for 
CY 2017 and CY 2018 validation, we believe eCQM data is accurate enough 
to publicly report, with the majority of eCQM data with agreement rates 
of 80 percent or better. Our review is based upon an analysis of over 
1,200 patient episodes of care submitted by over 190 hospitals per 
reporting period (85 FR 32846). As stated previously, we believe that 
public reporting of eCQM data will incentivize data accuracy and 
increase transparency. Additionally, in conjunction with this policy to 
publicly report eCQM data, in section VIII.A.9.e. of the preamble of 
this final rule, we have finalized a policy to progressively increase 
the number of quarters for which hospitals are required to report eCQM 
data. We believe that beginning to publicly report eCQM data as early 
as the fall of 2022, while progressively increasing the quarters of 
reported eCQM data, strikes the appropriate balance between the 
importance of public reporting eCQM data and stakeholder concerns 
regarding the burden associated with increasing the reporting of such 
data. We refer readers to section VIII.a.9.E. of this final rule, where 
we are finalizing a gradual approach to increasing the amount of eCQM 
data required. Taking that into account, for the CY 2021 reporting 
period/FY 2023 payment determination, we will publicly report two 
quarters of data. For the CY 2022 reporting period/FY 2024 payment 
determination, we will publicly report three quarters of data, and for 
the CY 2023 reporting period/FY 2025 payment determination and 
subsequent years, we will publicly report four quarters of eCQM data. 
The following table summarizes our finalized policy:
[GRAPHIC] [TIFF OMITTED] TR18SE20.246

    In addition, in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43881), 
we established that if a hospital has fewer than 25 eligible cases 
combined over a measure's reporting period, we would replace the 
hospital's data with a footnote indicating that the number of cases is 
too small to reliably determine how well the hospital is performing.
    Comment: Some commenters did not support public reporting of eCQM 
data due to concerns about eCQMs being compared to similar chart-
abstracted measures.
    Response: As noted in the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42502), following the removal of several chart-abstracted clinical 
process of care measures in the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41562 through 41567), the only chart-abstracted measure for which there 
was also an eCQM version was PC-01. The eCQM version of the PC-01 
measure was removed from the Hospital IQR Program in the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41569). Therefore, there are no longer any 
eCQMs that have similar chart-abstracted measures.
    Comment: A few commenters did not support public reporting of eCQM 
data from the CY 2021 reporting period/FY 2023 payment determination 
data beginning as early as Fall 2022 due to the impact of the COVID-19 
PHE on hospitals, including needing to reassign and reduce hospital 
staff, redirect resources, and concerns about increasing provider 
burden. A few commenters did not support our proposal to publicly 
report eCQM data due to concern about measure performance during the 
COVID-19 PHE. Several commenters opposed publishing data on Hospital 
Compare for the CY 2021 reporting period and recommended a delay until 
the CY 2022 reporting period or later due to the COVID-19 PHE that may 
impact the validity and reliability of data, especially when comparing 
performance across hospitals. A few commenters supported the proposal 
to publicly report eCQM data but recommended that CMS confer with 
hospitals to ensure data reporting for the CY 2021 reporting period 
will not impose unreasonable administrative burden during the COVID-19 
PHE.
    Response: We continue to closely monitor and analyze the impact 
that the unpredictable nature of the COVID-19 PHE may have on the 
national comparability of Hospital IQR Program measures as well as 
burden on hospitals. We will continue to communicate as needed through 
routine communication channels and to Medicare beneficiaries. We 
appreciate the commenters' concerns regarding the impact COVID-19 PHE 
has had on hospitals and have issued exceptions

[[Page 58957]]

related to the COVID-19 PHE in an effort to reduce burden, provide 
flexibility to hospitals, and help hospitals maximize their capacity to 
focus on patient care. Additionally, under the Hospital IQR Program ECE 
Policy, hospitals may request an exception if they are unable to 
fulfill program requirements due to extraordinary circumstances not 
within their control. The ECE policy includes requests related to the 
submission of eCQM data if a hospital experiences a hardship that 
prevents it from eCQM reporting (80 FR 49695). We refer readers to 
section VIII.A.14. for additional information. However, we do not 
believe that public reporting of reported eCQM data adds to that burden 
because public reporting will not change how hospitals submit or report 
their eCQM data nor the number of measures that will be required to be 
reported. We also note that the CY 2020 reporting period/FY 2022 
payment determination data will not be publicly reported, as we are 
finalizing our proposal to start public reporting of eCQM data with the 
CY 2021 reporting period/FY 2023 payment determination. Regarding 
opposition to publishing eCQM data on Hospital Compare for the CY 2021 
reporting period/FY 2023 payment determination and a recommendation to 
delay publishing eCQM data until the CY 2022 reporting period/FY2024 
payment determination, our plan is to initially publish CY 2021 eCQM 
data on https://data.medicare.gov, or its successor website, before 
publishing the data on Hospital Compare, or its successor website, 
sometime in the future. We will continue to communicate as needed 
through routine communication channels and to Medicare beneficiaries.
    Comment: Some commenters did not support public reporting of eCQM 
data due to the burden for some hospitals to successfully submit eCQM 
data.
    Response: We understand commenters' concern. However, we believe we 
have sufficiently mitigated potential burden for hospitals by taking an 
incremental approach to allow hospitals to become familiar with eCQM 
reporting (see section VIII.A.9.e. in the preamble of this final rule 
for a discussion of our incremental approach). After a period of 
voluntary submission, which began in the CY 2014 reporting period/FY 
2016 payment determination (78 FR 50818), hospitals have had several 
years of consistent eCQM measure submission requirements (82 FR 38361, 
83 FR 41604, 84 FR 42502). Internal reviews of Hospital IQR Program 
eCQM submission data revealed that 97 percent of eligible hospitals 
successfully submitted one quarter of eCQM data for four self-selected 
eCQMs for the CY 2018 reporting period/FY 2020 payment determination 
(84 FR 42458). Additionally, we provide numerous resources to support 
successful eCQM data reporting \474\ and host events and webinars to 
enhance understanding of eCQM reporting.\475\
---------------------------------------------------------------------------

    \474\ eCQI Resource Center, Tools and Resources. https://ecqi.healthit.gov/ecqi-tools-key-resources; eCQI Resource Center 
Measure Collaboration (MC) Workspace. https://ecqi.healthit.gov/mc-workspace-2.
    \475\ Upcoming events and webinars, eCQI Resource Center. 
https://ecqi.healthit.gov.
---------------------------------------------------------------------------

    Comment: Many commenters did not support public reporting of eCQM 
data as early as Fall 2022 and recommended a delay in public reporting 
to provide hospitals with additional time to prepare, to provide 
greater technical consistency, or until four quarters of data are 
required to be reported.
    Response: We appreciate the commenters' feedback but disagree that 
hospitals need more time to prepare for public reporting of eCQM data. 
As noted previously, CY 2021 will be the fifth year that hospitals have 
submitted eCQM data and validation of CY 2017 and CY 2018 data has 
shown that a majority of eCQM data was reported with agreement rates of 
80 percent or higher. We have therefore determined that eCQM data is 
accurate enough to begin reporting. We interpret the phrase ``greater 
technical consistency'' to refer to consistency in eCQM specification 
implementation in EHRs, consistency in the extraction of structured 
data for eCQM measure calculation, and consistency in testing to 
identify eCQM accuracy. We understand the references to be aspects of 
eCQM reporting and validation. In VIII.A.9.b., we reference the 
technical specifications for quality measures and refer readers to the 
FY 2019 IPPS/LTCH PPS final rule where we summarize how the Hospital 
IQR Program maintains the technical measure specifications for quality 
measures and the subregulatory process for incorporation of 
nonsubstantive updates to the measure specifications. We did not 
propose any changes to these policies. As described in section 
VIII.A.10. of this final rule, we are continuously working to improve 
eCQM validation and finalized several changes to that process. We 
believe the eCQM educational review process policy finalized in section 
in VIII.A.10.h.(2) of this final rule will support hospitals in better 
understanding the processes and data for eCQM validation.
    Additionally, although we appreciate commenters' concern about 
public reporting eCQM data representing fewer than four quarters of 
data, we disagree that this should inhibit the advancement of public 
reporting of eCQM data. As stated previously, we believe it is 
important to provide data to the public as soon as practicable while 
increasing the amount of eCQM data to be reported to CMS. We believe 
that beginning to publicly report eCQM data as early as the fall of 
2022, while progressively increasing the quarters of reported eCQM data 
strikes the appropriate balance between the importance of transparency 
by publicly reporting eCQM data and stakeholder concerns about using 
sufficient data for publicly reporting eCQM data.
    Comment: Many commenters did not support public reporting of eCQM 
data beginning as early as Fall 2022, citing concern that inconsistency 
in the number of cases reported and the self-selection of eCQMs 
reported across individual hospitals might not accurately depict 
hospital performance. These commenters recommended aligning the start 
of public reporting with one consistent mandated eCQM across all 
hospitals.
    Response: We refer readers to the FY 2020 IPPS/LTCH PPS final rule, 
where we previously finalized mandatory reporting of the Safe Use eCQM 
beginning with the CY 2022 reporting period/FY 2024 payment 
determination (84 FR 42503 through 42505). Therefore, beginning with 
public reporting in fall of 2023, there will be one eCQM that all 
Hospital IQR Program hospitals must submit, in addition to the other 
eCQMs they may self-select. We believe we should begin public reporting 
prior to that time (that is, fall 2022 as proposed), because our 
finalized public reporting policy advances our step-wise approach to 
achieve the goal of increased use of eCQMs in quality reporting while 
supporting providers as they gain familiarity and success with 
increasing eCQM submissions. We acknowledge the commenters' concern, 
and as detailed in section VIII.A.9.e. of the preamble of this final 
rule, we are finalizing incremental increases in eCQM data reporting 
requirements over a 3-year period. As we described previously, we plan 
to initially publish CY 2021 eCQM data, of which there will be two 
quarters of data per our finalized policy in sectionVIII.A.9.e. of this 
final rule, on https://data.medicare.gov, or its successor website, 
before publishing it on Hospital Compare, or its successor website, 
sometime in the future. The https://data.medicare.gov website, or its 
successor website, provides the public with access to downloadable 
datasets to ensure the information is publicly

[[Page 58958]]

available. As more eCQM data are progressively reported, we will then 
additionally display the information on the Hospital Compare website, 
or its successor website, where comparisons of hospital performance 
will be available. We believe these finalized policies address the 
commenters' concerns while providing flexibility for hospitals and 
their vendors to build upon and utilize investments in their EHRs.
    Comment: Many commenters did not support public reporting of eCQM 
data beginning as early as Fall 2022 due to a lack of insight on 
hospital performance individually or in comparison with other 
hospitals, and lack of analyses from prior eCQM validation efforts to 
provide useful feedback. A commenter noted that some hospitals have 
participated in eCQM audits but have not received audit results nor 
reports that compare an audited hospital to all reporting 
organizations.
    Response: We thank commenters for their feedback. As with other 
Hospital IQR Program measures, hospitals will have the opportunity to 
review their eCQM data before they are made public, as required by 
section 1886(b)(3)(B)(viii)(VII) of the Act, during a 30-day preview 
period in accordance with finalized policies (76 FR 51609). Hospitals 
will be able to obtain feedback on their individual performance from 
their EHR vendors and through feedback reports provided to them from 
the HQR system, which contain information on file history, data 
accuracy, and measure outcomes.\476\ Further, as noted previously, 
publicly reporting eCQM data on https://data.medicare.gov will provide 
hospitals with the opportunity to make comparisons to their peers 
before the information begins to also be publicly displayed on the 
Hospital Compare website, or its successor website. Additionally, we 
refer readers to the CY 2021 OPPS/ASC proposed rule where we are 
proposing a new methodology for the Overall Hospital Quality Star 
Ratings, which would use Hospital IQR Program measure data, among other 
CMS quality data, to summarize hospital quality measure results and 
provide meaningful insight on hospital performance by assigning acute 
care hospitals and facilities that provide acute inpatient and 
outpatient care in the U.S. with an overall rating between one and five 
whole stars (85 FR 48996 through 49027).
---------------------------------------------------------------------------

    \476\ CMS Hospital Quality Reporting System Now Accepting CY 
2019 eCQM Data, available at: https://ecqi.healthit.gov/cms-hospital-quality-reporting-system-now-accepting-cy-2019-ecqm-data.
---------------------------------------------------------------------------

    We interpret the commenters' inquiry about ``eCQM audits'' to refer 
to eCQM validation. We refer readers to section VIII.A.10.h. of the 
preamble of this final rule, where we finalized an education review 
process for validated eCQM data beginning with validation affecting the 
FY 2023 payment determination and subsequent years, which will provide 
hospitals with additional analyses of eCQM validation.
    Comment: Several commenters did not support our proposal to 
publicly report eCQM data for the CY 2021 reporting period and asked 
for CMS to provide hospitals the opportunity to review the data. These 
commenters recommended a dry run with one quarter and two quarters of 
data to enable hospitals to preview their performance and national 
comparison data confidentially before the data are made public. 
Commenters recommended CMS conduct reliability analyses to determine 
the minimum volume of cases needed for public reporting and make the 
analyses public. Commenters also recommended that CMS provide clear 
information about how data will be presented to the public and provide 
information on the process to dispute publicly accessible data.
    Response: We thank the commenter for the comments. As stated 
previously, the publicly reported eCQM data will first be reported on 
the https://data.medicare.gov website, or its successor website, which 
provides the public with access to downloadable datasets. As more eCQM 
data are progressively reported, we will then additionally display the 
information on the Hospital Compare website, or its successor website.
    We interpret the term ``dry run'' to reference the dry run 
provision in the Blueprint for the CMS Measures Management System, 
utilized during the first use of a measure in a CMS program or first 
results reporting.\477\ We do not believe a dry run before the start of 
public reporting is necessary and have determined that the eCQM data 
are accurate enough to begin reporting. As noted previously, the CY 
2021 reporting period/FY 2023 payment determination will be the fifth 
year that hospitals have submitted eCQM data and for each year, we have 
provided confidential feedback reports on the eCQM data file 
submissions to each individual hospital.\478\ Internal review of eCQM 
submission data revealed that 97 percent of eligible hospitals 
successfully submitted one quarter of eCQM data for four self-selected 
eCQMs for the CY 2018 reporting period/FY2020 payment determination (84 
FR 42458). We refer readers to section VIII.A.9.e. of this final rule 
where this analysis is discussed in more detail. In addition, as 
previously stated, as with other Hospital IQR Program measures, 
hospitals would have the opportunity to preview their eCQM data before 
they are made public, as required by section 1886(b)(3)(B)(viii)(VII) 
of the Act, during a 30-day preview period in accordance with 
previously finalized policies (76 FR 51608). Additionally, we refer 
readers to the CY 2021 OPPS/ASC proposed rule where we are proposing a 
new methodology for the Overall Hospital Quality Star Ratings, which 
would use Hospital IQR Program measure data (85 FR 48996 through 
49027). As proposed, these star ratings would use CMS quality data, 
including Hospital IQR Program and eCQM data, posted on the Hospital 
Compare website to assign hospitals a star rating and would provide 
meaningful peer comparisons on overall hospital performance through the 
application of peer grouping that allows hospital scores to be 
equivalent and comparable among all hospitals (85 FR 49022 through 
49025). We encourage stakeholders to submit comments related to this 
methodology under that proposed rule.
---------------------------------------------------------------------------

    \477\ Blueprint for CMS Measures Management System, https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Blueprint.pdf.
    \478\ https://www.qualityreportingcenter.com/globalassets/iqr_resources/030819/cy-2019-ecqm-ehr-reports-overview_vfinal508.pdf.
---------------------------------------------------------------------------

    We thank commenters for their recommendation to conduct measure 
reliability analyses to determine the minimum number of cases needed 
for public reporting. Validation of CY 2017 reporting period/FY 2019 
payment determination data and CY 2018 reporting period/FY 2020 payment 
determination data has shown that a majority of eCQM data was reported 
with agreement rates of 80 percent or higher. Our review is based upon 
an analysis of over 1,200 patient episodes of care submitted by over 
190 hospitals per reporting period (85 FR 32846). We refer readers to 
section VIII.A.10. of this final rule where this is discussed in more 
detail. We note that in the FY 2010 IPPS/LTCH PPS final rule (74 FR 
43881), we established that if a hospital has fewer than 25 eligible 
cases combined over a measure's reporting period, we would replace the 
hospital's data with a footnote indicating that the number of cases is 
too small to reliably

[[Page 58959]]

determine how well the hospital is performing.
    Generally speaking, measure data, including eCQM data, are 
published on the Hospital Compare and/or https://data.medicare.gov 
websites or successor websites. As discussed above, we are clarifying 
that we plan to initially publish CY 2021 reporting period/FY 2023 
payment determination eCQM data, of which there will be two quarters of 
data per our finalized policy in sectionVIII.A.9.e. of this final rule, 
on https://data.medicare.gov, or its successor website, before 
publishing it on Hospital Compare, or its successor website, sometime 
in the future. The https://data.medicare.gov website, or its successor 
website, provides the public with access to downloadable datasets to 
ensure the information is publicly available. As more eCQM data are 
progressively reported, we will then additionally display the 
information on the Hospital Compare website, or its successor website.
    Comment: Several commenters opposed publishing eCQM data on 
Hospital Compare citing concerns about data context as it pertains to 
safety net hospitals.
    Response: We thank commenters for their feedback concerning the 
public reporting of eCQM data as it pertains to safety net hospitals. 
We plan to monitor the initiation of public reporting of eCQM data and 
welcome continued feedback from all stakeholders through webinars, 
listservs, and help desk questions as information shared can be used to 
inform public reporting processes over time. We will continue to 
monitor trends in performance, including that of safety net hospitals. 
Additionally, we refer readers to the CY 2021 OPPS/ASC proposed rule, 
where we are proposing a new methodology for the Overall Hospital 
Quality Star Ratings, which would use Hospital IQR Program measure data 
(85 FR 48996 through 49027). As proposed, these star ratings would use 
CMS quality data, including Hospital IQR Program and eCQM data, posted 
on the Hospital Compare website to assign hospitals a star rating. This 
would provide meaningful peer comparisons on overall hospital 
performance through the application of peer grouping that allows 
hospital scores to be equivalent and comparable among all hospitals (85 
FR 49022 through 49025). We encourage stakeholders to submit comments 
related to this methodology under that proposed rule.
    After consideration of the public comments, we are finalizing our 
proposal as proposed to publicly report eCQM data beginning with eCQM 
data reported by hospitals for the CY 2021 reporting period/FY 2023 
payment determination and for subsequent years. As a clarification, we 
plan to initially publish CY 2021 reporting period/FY 2023 payment 
determination eCQM data, of which there will be two quarters of data 
per our finalized policy in section VIII.A.9.e. of this final rule, on 
https://data.medicare.gov, or its successor website, before publishing 
it on the Hospital Compare website, or its successor website, sometime 
in the future. We also refer readers to section VIII.D.6.c. of this 
final rule where we are also finalizing similar polices under the PI 
Program.
c. Overall Hospital Quality Star Rating
    As mentioned above, in the CY 2021 OPPS/ASC proposed rule, we 
proposed a methodology to calculate the Overall Hospital Quality Star 
Rating (Overall Star Rating) (85 FR 48996 through 49027). The Overall 
Star Rating would utilize data collected on hospital inpatient and 
outpatient measures that are publicly reported on Hospital Compare or 
its successor site through CMS quality programs, including data from 
the Hospital IQR Program. We refer readers to section XVI. Proposed 
Overall Hospital Quality Star Rating Methodology for Public Release in 
CY 2021 and Subsequent Years of that proposed rule for details.
13. Reconsideration and Appeal Procedures
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51650 through 51651), the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50836), and 42 CFR 412.140(e) for details on reconsideration and appeal 
procedures for the FY 2017 payment determination and subsequent years. 
We did not propose any changes to this policy.
14. Hospital IQR Program Extraordinary Circumstances Exceptions (ECE) 
Policy
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51651 through 51652), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836 
through 50837), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277), the 
FY 2016 IPPS/LTCH PPS final rule (80 FR 49713), the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 57181 through 57182), the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38409 through 38411), and 42 CFR 412.140(c)(2) for 
details on the current Hospital IQR Program ECE policy. We also refer 
readers to the QualityNet website at: http://www.QualityNet.org/ for 
our current requirements for submission of a request for an exception. 
We did not propose any changes to this policy.

B. Changes to the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program

1. Background
    The PPS-Exempt-Cancer Hospital Quality Reporting (PCHQR) Program is 
authorized by section 1866(k) of the Act, and it applies to hospitals 
described in section 1866(d)(1)(B)(v) (referred to as ``PPS-Exempt 
Cancer Hospitals'' or ``PCHs''). Under the PCHQR Program, PCHs must 
submit to the Secretary data on quality measures with respect to a 
program year in a form and manner, and at a time, specified by the 
Secretary.
    For additional background information, including previously 
finalized measures and other policies for the PCHQR Program, we refer 
readers to the following final rules: The FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53556 through 53561); the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50838 through 50846); the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50277 through 50288); the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49713 through 49723); the FY 2017 IPPS/LTCH PPS final rule (81 FR 57182 
through 57193); the FY 2018 IPPS/LTCH PPS final rule (82 FR 38411 
through 38425); the FY 2019 IPPS/LTCH PPS final rule (83 FR 41609 
through 41624); CY 2019 OPPS/ASC final rule with comment period (83 FR 
59149 through 59154); and the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42509 through 42524).
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to 
incorporate refinements to two existing measures in the PCHQR Program 
measure set--the Catheter-Associated Urinary Tract Infection (CAUTI) 
Outcome Measure (NQF #0138) and the Central Line-Associated Bloodstream 
Infection (CLABSI) Outcome Measure (NQF #0139). While we did not 
propose to add any new measures or remove any existing measures, we 
continue to assess the PCHQR Program measure set's alignment with the 
Meaningful Measures Initiative, which is discussed in more detail in 
I.A.2. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41147 through 41148).
2. Summary of PCHQR Program Measures for the FY 2023 Program Year
    The table in this section of this rule summarizes the PCHQR Program 
measure set for the FY 2023 program year.
BILLING CODE 4120-01-P

[[Page 58960]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.247

BILLING CODE 4120-01-C
3. Refinements to the Catheter-Associated Urinary Tract Infection 
(CAUTI) Outcome Measure (NQF #0138) and the Central Line-Associated 
Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139) Beginning 
With the FY 2023 Program Year
a. Background
    In the FY 2021 IPPS/LTCH PPS proposed rule, we provided an overview 
of the history of CAUTI and CLABSI measures in the PCHQR Program (85 FR 
32848 through 32849). Specifically, in the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53556 through 53559), we adopted the Catheter-associated 
Urinary Tract Infection (CAUTI) (NQF #0138) and Central line-associated 
Bloodstream Infection (CLABSI) (NQF #0139) measures for use in the 
PCHQR Program beginning with the FY 2014 program year, and we refer 
readers to this rule for a detailed discussion of these measures. In 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20503), we proposed to 
remove both measures from the program because we believed that removing 
the measures would reduce program costs and complexities associated 
with the use of these data by patients in decision-making. We stated 
that we believed the costs, coupled with the high technical and 
administrative burden on PCHs associated with collecting and reporting 
the measure data, outweighed the benefits of their

[[Page 58961]]

continued use. We further stated that it had become difficult for CMS 
to publicly report data on these measures due to the low volume of data 
produced and reported by the small number of PCHs that participate in 
the PCHQR Program, and that we lacked an appropriate methodology to 
publicly report these data. For these reasons, we believed that the 
measures should be removed beginning with the FY 2021 program year 
under measure removal Factor 8: The costs associated with the measures 
outweighed the benefit of their continued use in the program.
    However, after considering the comments we had received on this 
proposal and other updated information, in the CY 2019 OPPS/ASC final 
rule (83 FR 59150), we decided to retain both the CAUTI and CLABSI 
measures in the PCHQR Program. We stated that since the time we made 
our proposal, we had conducted our own analyses regarding the continued 
use of the CAUTI and CLABSI measures using updated CDC data. We also 
stated that although the CDC had previously believed that oncology unit 
locations, including those in PCHs, had a higher incidence of 
infections than other types of units in acute care hospitals, the CDC 
now believes, after controlling for location type, that oncology unit 
locations in PCHs do not have a higher incidence of infection than 
oncology units within other acute care hospitals. We stated that the 
CDC's updated analysis also produced a consistent finding that cancer 
hospital status was not a significant risk factor in any of the device-
associated HAI risk models, including those used for CAUTI and CLABSI. 
Lastly, we stated that we believe these results indicate that reporting 
PCH CAUTI and CLABSI performance measure data is just as important as 
reporting acute care hospital CAUTI and CLABSI performance measure data 
(83 FR 59151). Based on this updated information, as well as the public 
comments, we concluded that the importance of emphasizing patient 
safety in quality care delivery justified retaining the CAUTI and 
CLABSI measures in the PCHQR Program (83 FR 59151).
    We also noted in the CY 2019 OPPS/ASC PPS final rule that the CAUTI 
and CLABSI measure specifications had been recently updated to use new 
standard infection ratio (SIR) calculations that can be applied to 
cancer hospitals, including PCHs. We noted that this updated SIR 
calculation methodology is different than the methodology we are 
currently using to calculate the CAUTI and CLABSI measures. 
Additionally, the use of raw location-stratified rates in the current 
methodology had created a concern that the CAUTI and CLABSI data 
calculated under the current methodology might appear to inaccurately 
show lower performance among PCHs than the performance reported by 
acute care hospitals that are reporting CAUTI and CLABSI data using the 
updated methodology (83 FR 59151). We stated that we believed the 
updated methodology addresses this concern because the updates include 
rates that are stratified by patient care locations within PCHs, 
without the use of predictive models or comparisons in the rate 
calculations. We also stated that we intended to propose to adopt these 
updated versions of the CAUTI and CLABSI measures, and that we would 
work closely with the CDC to assess the updated risk adjusted versions 
of these measures (83 FR 59151).
b. Updates to the CAUTI and CLABSI Measures
    In the FY 2021 IPPS/LTCH PPS proposed rule, we discussed our 
proposal to refine the CAUTI and CLABSI measures by adopting the 
updated SIR calculation methodology. This updated methodology was 
developed by the CDC and calculates rates that are stratified by 
patient care locations within PCHs, without the use of predictive 
models or comparisons in the rate calculations (85 FR 32849 through 
32850).
(1) Description of the CDC Re-Baselining Efforts
    The CDC's National Healthcare Safety Network (NHSN) uses 
healthcare-associated infection (HAI) incidence data from a prior time 
period and a standard population of facilities that report data to the 
NHSN (such as all healthcare facilities of a specified type) to 
establish a HAI baseline for those facilities, including a HAI baseline 
for CAUTI and CLABSI.\479\ The NHSN then uses that baseline to 
calculate the SIR. For both of these measures, the SIR is calculated as 
a comparison of the actual number of HAIs reported by a facility with 
the number that would be predicted by the HAI baseline.\480\
---------------------------------------------------------------------------

    \479\ Centers for Disease Control and Prevention. ``Paving Path 
Forward: 2015 Rebase line.'' Available at: https://www.cdc.gov/nhsn/2015rebaseline/index.html.
    \480\ Ibid.
---------------------------------------------------------------------------

    In 2016, the CDC used 2015 HAI incidence data to update both the 
source of aggregate data and the risk adjustment methodology used to 
create the HAI baselines. As a result, the CDC established new HAI 
baselines for purposes of calculating the SIRs used to calculate HAI 
measures, including the CAUTI and CLABSI measures.\481\ The CDC's 
decision to use 2015 data was multifactorial and relied partially on 
its implementation of updated surveillance protocols and definitions as 
well as increased reporting of certain HAI types by additional 
healthcare facility types.\482\
---------------------------------------------------------------------------

    \481\ Ibid.
    \482\ Summary of CDC's Rebaseline Analysis of NHSN HAI Data. 
Updated September 7, 2018.
---------------------------------------------------------------------------

    During its re-baselining effort, the CDC determined that it could 
generate HAI baselines that produce more accurate SIR calculations for 
the 17 hospitals that enroll in NHSN as facility type ``HOSP-ONC'' (11 
PCHs and 6 other hospitals that classify themselves as cancer hospitals 
but are not PCHs for purposes of Medicare) by standardizing the new HAI 
baselines across infection type and facility type.\483\ Therefore, the 
CDC created a risk adjustment model for acute care hospitals and 
determined that it could include the 17 cancer hospitals in that risk 
adjustment model because it found that cancer hospital status was not a 
significant risk factor that would preclude their inclusion.\484\
---------------------------------------------------------------------------

    \483\ Ibid.
    \484\ Ibid.
---------------------------------------------------------------------------

    The CDC also evaluated what additional oncology-specific patient 
locations (for example, hematology/oncology ward, medical oncology ICU) 
should be adjusted for when deriving SIR calculations for hospitals in 
the acute care risk adjustment model. The CDC considered this because 
examining patient care location allows for the assessment of which 
patient populations are at higher risk for CAUTI and CLABSI incidences. 
Further, stakeholders had previously raised concerns that the omission 
of a risk adjustment for oncology-specific patient care locations in 
the SIR calculations could inaccurately appear to show lower 
performance (that is, higher SIR) on the HAI measures, including CLABSI 
and CAUTI, by PCHs and other cancer hospitals than other acute care 
hospitals; adjusting for oncology-specific patient locations as a part 
of the new risk model mitigates this concern. When the CDC stratified 
by location within the acute care hospital risk adjustment model, it 
found that in comparison to non-oncology-specific patient locations, 
the oncology-specific locations, particularly those designated as 
oncology units,\485\ produced statistically significant differences in 
HAI measure performance. As a result, the CDC further updated the acute 
care

[[Page 58962]]

risk adjustment model to stratify the HAI baselines by oncology-
specific location types.\486\
---------------------------------------------------------------------------

    \485\ A ward is a floor or section of a hospital or outpatient 
clinic where cancer patients are treated.
    \486\ Summary of CDC's Rebaseline Analysis of NHSN HAI Data. 
Updated September 7, 2018.
---------------------------------------------------------------------------

(2) CAUTI and CLABSI Results Using the Updated HAI Baselines That 
Incorporate New Risk-Adjustment
    We indicated in the FY 2021 IPPS/LTCH PPS proposed rule that the 
CDC tested the CAUTI and CLABSI measures based on the updated HAI 
baselines that incorporate the new risk adjustment described above (85 
FR 32850). According to the CDC's calculation methodology, when 
assessing the performance results for the CAUTI or CLABSI measure, a p-
value of 0.05 or less was noted to be statistically significant.\487\ 
They noted that when assessed based on the adjustment for oncology 
unit, both the CAUTI and CLABSI measures yielded p-values of 
<0.0001.\488\ This means that within the acute care hospital risk 
adjustment model, the categorization of a patient care location as an 
oncology unit is a statistically significant predictor of CAUTI and 
CLABSI incidence. Given that the majority of reporting locations within 
PCHs would be classified as oncology units, the application of this 
additional risk adjustment by location within the acute care hospital 
risk adjustment model will result in a more accurate assessment of the 
incidence of CAUTIs and CLABSIs within PCHs.
---------------------------------------------------------------------------

    \487\ NHSN's Guide to the SIR-Updated March 2019. Available at: 
https://www.cdc.gov/nhsn/2015rebaseline/index.html.
    \488\ Ibid.
---------------------------------------------------------------------------

(3) Measure Applications Partnership Analysis of the Refinements to the 
CAUTI and CLABSI Measures
    In compliance with section 1890A(a)(2) of the Act, we included the 
updated versions of the CAUTI and CLABSI outcome measures in a publicly 
available document entitled ``2019 Measures Under Consideration 
Spreadsheet.'' \489\ This is a list of quality and efficiency measures 
under consideration for use in various Medicare programs, which the 
Measure Applications Partnership (MAP) reviews. The MAP supported the 
use of both refined measures in the PCHQR Program for rulemaking.\490\
---------------------------------------------------------------------------

    \489\ 2019 Measures Under Consideration. Information available 
at: http://www.qualityforum.org/Project_Pages/MAP_Hospital_Workgroup.aspx.
    \490\ 2020 Considerations for Implementing Measures Draft 
Report--Hospitals. Available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    Regarding the CAUTI measure, the MAP indicated that because CAUTIs 
are the most common HAI, hospitals should continue working to reducing 
their incidence and prevalence across all inpatient settings. The MAP 
also determined that even though CAUTI is a chart-abstracted measure 
that is burdensome to collect, the benefit of collecting data on this 
measure outweighs that cost.\491\ In addition, the MAP acknowledged it 
is imperative to evaluate CAUTI incidence in all inpatient settings, 
including cancer hospitals. The revised version of this measure was 
endorsed by the National Quality Forum on October 23, 2019.\492\ We 
refer readers to NQF's Final Report--Spring 2019 Cycle \493\ for a more 
detailed discussion of this measure.
---------------------------------------------------------------------------

    \491\ Ibid.
    \492\ Memo CSAC Meeting--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
    \493\ Final Report--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
---------------------------------------------------------------------------

    For the CLABSI measure, the MAP also determined that even though 
the measure is chart-abstracted and burdensome to collect, the benefit 
of collecting data on this measure outweighs the cost.\494\ The MAP 
further noted that this measure is pertinent in the healthcare domain 
of patient safety and suggested that the CDC consider the differences 
in types of cancer and/or differences in types of cancer treatments 
when assessing the measure's performance in the future.\495\ Like the 
CAUTI measure, we note that the revised version of this measure was 
endorsed by the NQF on October 23, 2019.\496\ We refer readers to NQF's 
Final Report--Spring 2019 Cycle \497\ for a more detailed discussion of 
this measure.
---------------------------------------------------------------------------

    \494\ 2020 Considerations for Implementing Measures Draft 
Report--Hospitals. Available at: http://www.qualityforum.org/map/.
    \495\ Ibid.
    \496\ Memo CSAC Meeting--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
    \497\ Final Report--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
---------------------------------------------------------------------------

c. Summary of Proposal
    In the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to refine 
the CAUTI and CLABSI measures by adopting the updated measure 
specifications that use the new SIR calculation methodology, which 
calculates measure rates that are stratified by patient care locations 
(specifically, oncology units) within PCHs (85 FR 32850). We indicated 
that we believe it is important to continue to measure CAUTI and CLABSI 
incidence because of the implications these two measures have in the 
patient safety domain of healthcare. We also believe it is important to 
provide stratified performance results where appropriate for the cohort 
of patients with cancer, which is why we believe that applying the 
CDC's update of the risk-adjustment model (which will ultimately yield 
more precise SIR results) is appropriate for the CAUTI and CLABSI 
measures. Implementation of the refined, stratified measures will make 
the measures more representative of the quality of care provided at 
PCHs, particularly when performance rates are compared to other acute 
care hospitals. Further, stratified performance results will more 
accurately demonstrate the incidence of CAUTI and CLABSI for comparison 
among PCHs. In addition, implementation of the refined versions would 
address previous stakeholder requests to use a statistically 
significant method for public reporting of these measures. Lastly, 
implementing the refined versions of these measures means that the 
PCHQR Program would be utilizing the most recently NQF-endorsed 
versions of these measures.
    We invited public comment on our proposal to refine the Catheter-
associated Urinary Tract Infection (CAUTI) (NQF #0138) and Central 
line-associated Bloodstream Infection (CLABSI) (NQF #0139) measures to 
utilize the updated HAI baselines that incorporate an updated risk 
adjustment approach, as developed by the CDC, for the FY 2023 program 
year and subsequent years.
    Comment: Several commenters supported the proposed refinements to 
the CAUTI and CLABSI measures. Commenters expressed that reporting 
CAUTI and CLABSI performance data for PCHs remains no less important 
than reporting acute care hospital CAUTI and CLABSI data. Commenters 
also noted that avoiding HAIs is an appropriate goal across all 
hospitals, especially PCHs where safety concerns for patients with 
cancer and related conditions may be heightened.
    Response: We thank the commenters for their support.
    Comment: Several commenters encouraged CMS to consider future 
refinements for these measures. While the refined measures have some 
level of adjustment for oncology units, commenters stated that the 
adjustments are not detailed enough to account for patients who suffer 
from significantly complex, high risk cancers. Further, while 
Standardized Infection Ratios (SIRs) and Adjusted Ranking Metrics 
(ARMs) are among the best benchmarking tools available, commenters 
requested that CMS base

[[Page 58963]]

SIRs and ARMs solely on cancer hospitals with inpatient units. If the 
calculation of SIRs and ARMs includes all acute care hospitals, 
commenters asked that CMS report these scores by individual NHSN 
locations to maximize interpretability and utility for quality 
improvement purposes. Commenters also cautioned against reporting 
comparisons between the cancer hospitals and all acute care hospitals. 
Specifically, commenters indicated that cancer hospital patient 
populations have a greater propensity to be immunocompromised and, 
consequently, comparisons between other types of hospitals and cancer 
hospitals would not be appropriate as rates in cancer hospitals would 
generally trend higher. Lastly, commenters indicated that not all PPS-
Exempt and other cancer hospitals are homogenous in their services, 
patient populations, and case mixes. They stated that some hospitals 
may not generate enough data to report on a quarterly basis and that a 
more granular presentation of data, such as comparing similar units 
across hospitals, may enhance insights for consumers.
    Response: We thank the commenters for their feedback. Regarding the 
concern about the refinements to the measures being insufficient to 
account for complex, high risk forms of cancer, we believe that the 
updated measure specifications that use the new SIR calculation 
methodology will allow for a more representative comparison of 
performance of the CAUTI and CLABSI measures in PCH settings. We will 
remain vigilant of data trends and continue to work cooperatively with 
the CDC to monitor whether or not additional refinements are warranted 
after an evaluation of a years' worth of performance data. We will pay 
particular attention to PCHs' ability to collect and report sufficient 
data, as we are cognizant of the issues commenters raised around 
generating enough data for quarterly reporting. We want to clarify that 
for the refined versions of the CAUTI and CLABSI measures, we only 
intend to calculate Standardized Infection Ratios (SIRs) and not 
Adjusted Ranking Metrics (ARMs) as commenters mentioned. As such, 
pertaining to the inclusion of acute care hospitals scores in the 
calculation of SIR rates, for the PCHQR Program, we intend to calculate 
and report PCH scores. Further, to the point of level of granularity of 
data for PCHs, we intend to report hospital-level SIRs that are 
calculated using a risk model that is applied at the individual 
location level (that is, oncology units). Lastly, we recognize the 
importance of comparability among PCHs (for example comparison of 
oncology units). Likewise, we will publicly report data that reflects 
the performance of the PCHQR Program participants. That stated, while 
we currently do not display comparative data of PCHs to acute care 
facilities for any of the measures in the PCHQR Program's measure set, 
we continue to believe the ability to compare data across hospitals is 
important for those who wish to examine general performance trends for 
the CAUTI and CLABSI measures.
    Comment: A commenter expressed concern that the updated risk-
adjustment model does not account for the impact of COVID-19. The 
commenter agreed that stratifying data by patient care location would 
yield a more statistically significant predictor of CAUTIs and CLABSIs. 
However, the commenter asserted that this stratification would not take 
into consideration COVID-19 surge conditions. Specifically, increased 
demand on emergency departments (EDs) and intensive care units (ICUs) 
have required hospitals--especially those located in COVID-19 
``hotspots''--to transfer patients to other departments or units within 
the hospital. The commenter also noted that COVID-19 contributed to an 
increase in CLABSIs in acute care facilities, due in large part to a 
surge in hospital capacity, with most infections occurring among 
patients diagnosed with COVID-19. As such, the commenter shared concern 
that the increase in CLABSIs may impose a greater burden on hospitals 
located in hotspots.
    Response: We appreciate the commenter's feedback. We note that the 
updated risk model adjusts for several risk factors that have been 
found to be significantly associated with differences in infection 
incidence. Additionally, the CDC is collecting an optional data element 
regarding a patient's concurrent COVID-19 infection. While this data 
element is not included in the updated risk model, it can be utilized 
to indicate confirmed COVID-19 infection for patients with HAIs. Data 
reported for this element will enable a better understanding of the 
possible association between COVID-19 and HAIs. That stated, it is also 
important to note that COVID-19 status is not available for every 
hospitalized patient with a CAUTI or CLABSI incident, which will limit 
analysis opportunities, therefore determination of associated risk may 
not be possible. Regarding increased demand on hospital units and 
potential reporting burden surge for hospitals in hot spots, we note 
that we will not require hospitals to begin data collection for the 
refined CAUTI and CLABSI measures until CY 2021. Recognizing the 
potential for COVID-19 to impact data collection in CY 2021, we will 
closely monitor the reporting capacity of participating PCHs and if 
COVID-19 poses issues.
    After consideration of the public comments received, we are 
finalizing our proposal to refine the Catheter-associated Urinary Tract 
Infection (CAUTI) (NQF #0138) and Central line-associated Bloodstream 
Infection (CLABSI) (NQF #0139) measures to utilize the updated HAI 
baselines that incorporate an updated risk adjustment approach, as 
developed by the CDC, for the FY 2023 program year and subsequent 
years.
4. Maintenance of Technical Specifications for Quality Measures
    We maintain and periodically update technical specifications for 
the PCHQR Program measures. The specifications may be found on the 
QualityNet website at https://www.qualitynet.org/pch. We also refer 
readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50281), where we 
adopted a policy under which we use a subregulatory process to make 
nonsubstantive updates to measures used for the PCHQR Program. We did 
not propose any changes to our processes for maintaining technical 
specifications for PCHQR Program measures.
5. Public Display Requirements
a. Background
    Under section 1866(k)(4) of the Act, we are required to establish 
procedures for making the data submitted under the PCHQR Program 
available to the public. Such procedures must ensure that a PCH has the 
opportunity to review the data that are going to be made public with 
respect to that PCH, prior to such data being made public. Section 
1866(k)(4) of the Act also provides that the Secretary must report 
quality measures of process, structure, outcome, patients' perspectives 
on care, efficiency, and costs of care that relate to services 
furnished in such hospitals on the CMS website.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57191 through 
57192), we finalized that although we would continue to use rulemaking 
to establish what year we would first publicly report data on each 
measure, we would publish the data as soon as feasible during that 
year. We also stated that our intent is to make the data available on 
at least a yearly basis, and that the time period for PCHs to review 
their data before the data are made public would

[[Page 58964]]

be approximately 30 days in length. We announce the exact data review 
and public reporting timeframes on a CMS website and/or on our 
applicable listservs.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42520 through 
42523), we finalized that we would begin to publicly display data on a 
number of PCH measures as soon as is practicable due to planned website 
improvements that we stated could delay our ability to begin the public 
display. In October 2019, we began to publicly report data on the 
following four HAI measures: (1) Specific Surgical Site Infection (SSI) 
Outcome Measure (NQF #0753); (2) NHSN Facility-wide Inpatient Hospital-
onset Methicillin resistant Staphylococcus aureus Bacteremia Outcome 
Measure (NQF #1716); (3) NHSN Facility-wide Inpatient Hospital-onset 
Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717); and 
(4) NHSN Influenza Vaccination Coverage Among Healthcare Personnel (NQF 
#0431).
    In the table that follows, we summarize our current public display 
requirements for the PCHQR Program measures. The PCHQR measures' 
performance data is made publicly available on the Hospital Compare 
website or its successor. https://www.medicare.gov/hospitalcompare/cancer-measures.html.
[GRAPHIC] [TIFF OMITTED] TR18SE20.248

b. Public Display of the Refined Versions of the CAUTI and CLABSI 
Measures
    As described in section VIII.B.3.b. of the preamble of the FY 2021 
IPPS/LTCH PPS proposed rule, we proposed to adopt refined versions of 
the CAUTI and CLABSI measures in the PCQHR Program beginning with the 
FY 2023 program year (85 FR 32851). We also proposed that we would 
begin publicly reporting the refined versions of the CAUTI and CLABSI 
measures in the fall of 2022 and that we would not publicly report the 
current versions of those measures because, as described above, the 
refined versions of the measures more accurately capture the quality of 
care furnished at PCHs (85 FR 32851).
    We invited public comment on these proposals.
    Comment: Commenters supported the proposal to begin publicly 
reporting the refined measures in the fall of 2022. Commenters 
encouraged CMS to evaluate the inpatient volumes of each cancer 
hospital when determining specific time periods for public reporting, 
realizing that some cancer hospitals may have insufficient inpatient 
volumes to generate quarterly SIRs. Commenters also suggested that 
Hospital Compare provide comparisons of CAUTI and CLABSI rates among 
the PPS-exempt cancer hospitals themselves.
    Response: We thank the commenters for their support. We recognize 
the importance of being able to provide sufficient data and will 
monitor performance trends prior to publicly reporting data on the 
refined CAUTI and CLABSI measures. We also reiterate that we intend to 
publicly report the CAUTI and CLABSI performance data for the PCHs 
participating in the PCHQR Program to enable data comparisons among 
PCHs.
    After consideration of the public comments received, we are 
finalizing our proposal to begin publicly reporting the refined CAUTI 
and CLABSI measures in the fall of 2022. We are also finalizing our 
proposal to not publicly report the current versions of the measures.
6. Form, Manner, and Timing of Data Submission
    Data submission requirements and deadlines for the PCHQR Program 
are posted on the QualityNet website. We did not propose any updates to 
our previously finalized data submission requirements and deadlines.

[[Page 58965]]

7. Extraordinary Circumstances Exceptions (ECE) Policy Under the PCHQR 
Program
    We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41623 through 41624), for a discussion of the Extraordinary 
Circumstances Exceptions (ECE) policy under the PCHQR Program. We did 
not propose any changes to this policy.

C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

1. Background
    The Long-Term Care Hospital Quality Reporting Program (LTCH QRP) is 
authorized by section 1886(m)(5) of the Act, and it applies to all 
hospitals certified by Medicare as long-term care hospitals (LTCHs). 
Under the LTCH QRP, the Secretary must reduce by 2 percentage points 
the annual payment update to the LTCH PPS standard Federal rate for 
discharges for an LTCH during a fiscal year if the LTCH has not 
complied with the LTCH QRP requirements specified for that fiscal year. 
For more information on the background for the LTCH QRP, we refer 
readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51743 through 
51744), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614), the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50853), the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50286), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49723 
through 49725), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57193), the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38425 through 38426), the FY 
2019 IPPS/LTCH PPS final rule (83 FR 41624), and the FY 2020 IPPS/LTCH 
PPS final rule (84 FR 42524).
2. General Considerations Used for the Selection of Quality Measures 
for the LTCH QRP
    For a detailed discussion of the considerations we historically use 
for the selection of LTCH QRP quality, resource use, and other 
measures, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49728). For further information on how measures are considered for 
removal, we refer readers to the regulations at 42 CFR 412.560(b)(3).
3. Quality Measures Currently Adopted for the FY 2022 LTCH QRP
    The LTCH QRP currently has 17 measures for the FY 2022 LTCH QRP, 
which are set out in the following table:
[GRAPHIC] [TIFF OMITTED] TR18SE20.249

    Furthermore, LTCHs are required to report additional standardized 
patient assessment data beginning with the FY 2022 LTCH QRP. For more 
information on the reporting of this additional standardized patient 
assessment data, we refer readers to the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42536 through 42590).
    There were no proposals or updates to finalize for the LTCH QRP.
4. Form, Manner, and Timing of Data Submission Under the LTCH QRP
    We refer readers to the regulations at 42 CFR 412.560(b) for 
information regarding the current policies for reporting LTCH QRP data.
    For more details about the required reporting periods of measures 
or standardized patient assessment data during the first and subsequent 
years upon adoption, please refer to the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42588 through 42590).
5. Policies Regarding Public Display of Measure Data for the LTCH QRP
    CMS is not finalizing any policies regarding the public display of 
measure data at this time.
6. Miscellaneous Comments
    The proposed rule contained no LTCH QRP proposals. However, we 
received several comments on the LTCH QRP.
    Comment: A few commenters expressed support for CMS's actions to

[[Page 58966]]

alleviate burden on providers arising from the COVID-19 Public Health 
Emergency (PHE.) A commenter was concerned about the reliability and 
accuracy of the measures due to the exempted data and urged CMS to 
conduct thorough analyses to ensure measure performance. Another 
commenter supported the idea to expand ICD-10-CM codes to capture 
additional Social Risk Factors (SRF) data.
    Response: We appreciate the commenters' support and feedback. 
However, we consider these comments to be outside the scope of the 
current rulemaking. We refer providers to our June 23, 2020 
announcement at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Spotlight-Announcements that, effective July 1, 2020 LTCHs 
must resume reporting their quality data.

D. Changes to the Medicare and Medicaid Promoting Interoperability 
Programs

1. Background
a. Statutory Authority for the Medicare and Medicaid Promoting 
Interoperability Programs
    The HITECH Act (Title IV of Division B of the ARRA, together with 
Title XIII of Division A of the ARRA) authorizes incentive payments 
under Medicare and Medicaid for the adoption and meaningful use of 
certified electronic health record technology (CEHRT). Incentive 
payments under Medicare were available to eligible hospitals and CAHs 
for certain payment years (as authorized under sections 1886(n) and 
1814(l) of the Act, respectively) if they successfully demonstrated 
meaningful use of CEHRT, which included reporting on clinical quality 
measures using CEHRT. Incentive payments were available to Medicare 
Advantage (MA) organizations under section 1853(m)(3) of the Act for 
certain affiliated hospitals that successfully demonstrate meaningful 
use of CEHRT. In accordance with the timeframe set forth in the 
statute, these incentive payments under Medicare generally are no 
longer available, except for Puerto Rico eligible hospitals. For more 
information on the Medicare incentive payments available to Puerto Rico 
eligible hospitals, we refer readers to the FY 2019 IPPS/LTCH PPS final 
rule (83 FR 41672 through 41675).
    Sections 1886(b)(3)(B)(ix) and 1814(l)(4) of the Act also establish 
downward payment adjustments under Medicare, beginning with FY 2015, 
for eligible hospitals and CAHs that do not successfully demonstrate 
meaningful use of CEHRT for certain associated EHR reporting periods. 
Section 1853(m)(4) of the Act establishes a negative payment adjustment 
to the monthly prospective payments of a qualifying MA organization if 
its affiliated eligible hospitals are not meaningful users of CEHRT, 
beginning in 2015.
    Section 1903(a)(3)(F)(i) of the Act establishes 100 percent Federal 
financial participation (FFP) to States for providing incentive 
payments to eligible Medicaid providers (described in section 
1903(t)(2) of the Act) to adopt, implement, upgrade, and meaningfully 
use CEHRT. However, we previously established that in accordance with 
section 1903(t)(5)(D) of the Act, in no case may any Medicaid eligible 
hospital receive an incentive after CY 2021 (Sec.  495.310(f), 75 FR 
44319). Therefore, December 31, 2021 is the last date that States could 
make Medicaid Promoting Interoperability Program payments to Medicaid 
eligible hospitals (other than pursuant to a successful appeal related 
to CY 2021 or a prior year) (84 FR 42591 through 42592). For additional 
discussion or context around the discontinuation of the Medicaid 
Promoting Interoperability Program, we refer readers to the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41676 through 41677) and the CY 2019 
PFS/QPP final rule (83 FR 59704 through 59706).
2. EHR Reporting Period
a. EHR Reporting Period in CY 2022 for Eligible Hospitals and CAHs
    Under the definitions of ``EHR reporting period'' and ``EHR 
reporting period for a payment adjustment year'' at 42 CFR 495.4, the 
EHR reporting period in CY 2021 is a minimum of a continuous 90-day 
period in CY 2021 for new and returning participants in the Promoting 
Interoperability Programs. Eligible hospitals and CAHs may select an 
EHR reporting period of a minimum of any continuous 90-day period in CY 
2021 (from January 1, 2021 through December 31, 2021).
    For CY 2022, in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32853), we proposed an EHR reporting period of a minimum of any 
continuous 90-day period in CY 2022 for new and returning participants 
(eligible hospitals and CAHs) in the Medicare Promoting 
Interoperability Program. We stated that we believe that adopting a 90-
day EHR reporting period in CY 2022 as in CY 2021 would be appropriate 
because it would provide programmatic consistency for hospital 
reporting for an additional year. We proposed corresponding changes to 
the definition of ``EHR reporting period for a payment adjustment 
year'' at 42 CFR 495.4. We did not propose to define an EHR reporting 
period in CY 2022 for the Medicaid Promoting Interoperability Program 
because the program will end with CY 2021 in accordance with section 
1903(t)(5)(D) of the Act (see also 42 CFR 495.310(f)) as described 
previously. For additional discussion or context around the 
discontinuation of the Medicaid Promoting Interoperability Program, we 
refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41676 
through 41677) and the CY 2019 PFS/QPP final rule (83 FR 59704 through 
59706).
    Comment: Many commenters supported the EHR reporting period 
proposal to continue the current policy of a minimum of any continuous 
90-day period for CY 2022. Commenters emphasized how it would ease 
overall provider burden and offer healthcare systems stability as they 
work to implement other recent ONC 21st Century Cures Act final rule 
and CMS Interoperability and Patient Access final rule requirements 
related to interoperability, information blocking, and patient access).
    Response: We thank commenters for supporting the CY 2022 EHR 
reporting period proposal. We agree that for CY 2022 keeping the EHR 
reporting period to a minimum of 90 days will afford eligible hospitals 
and CAHs the individual, site-specific flexibility they might need in 
order to update their EHR systems and implement new regulatory 
requirements such as in the ONC Cures Act final rule (85 FR 25642 
through 25961). We note that the 90-day EHR reporting period is a 
minimum and eligible hospitals and CAHs are encouraged to use longer 
periods, up to and including the full CY 2022.
    Comment: One commenter strongly supported the proposal as 
representative of CMS's goals for rural and small hospitals to help 
reduce provider burden, improve the use of electronic data exchange, 
and provide adequate support or flexibility in those communities 
lacking a sufficient IT workforce.
    Response: We thank the commenter for sharing their input, as we 
continue to strive toward promoting greater interoperable strategies 
among these electronic systems. We believe such goals help to enhance 
the strengthened support utilized by all inpatient-stay systems, 
including those serving rural and small hospitals.
    Comment: Several commenters encouraged CMS to consider making

[[Page 58967]]

this existing policy the standard amount of time for the EHR reporting 
period for future years or for the rest of the program. One commenter 
cited the existing systems-related workload around necessary 
assessments or functionality improvements and another concurred that 90 
days is a sufficient amount of time to capture required information 
which reflects the highest utilization numbers. While the same 
commenters expressed support for this proposal for CY 2022, they also 
stated it would be beneficial to all if it was also continued past CY 
2022.
    Response: We thank the commenters for their support and suggestion 
to continue this policy beyond CY 2022. Although our proposal was 
limited to CY 2022, we will consider the commenters' suggestion for 
future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal that for CY 2022, the EHR reporting period is a 
minimum of any continuous 90-day period in CY 2022 for new and 
returning participants (eligible hospitals and CAHs) in the Medicare 
Promoting Interoperability Program. We are finalizing, as proposed, the 
corresponding changes to the definition of ``EHR reporting period for a 
payment adjustment year'' at 42 CFR 495.4.
3. Changes to the Query of Prescription Drug Monitoring Program Measure 
Under the Electronic Prescribing Objective
a. Background
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41648 through 
41656), we adopted two new opioid measures for the Electronic 
Prescribing objective; however, we changed certain policies related to 
those measures in the subsequent FY 2020 IPPS/LTCH PPS final rule (84 
FR 42593 through 42596): (1) Query of Prescription Drug Monitoring 
Program (PDMP), which was optional in CY 2019 and CY 2020 and worth 5 
bonus points each year; and (2) Verify Opioid Treatment Agreement, 
which was optional in CY 2019 but removed entirely from the program 
starting in CY 2020.
b. Query of PDMP Measure
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42595), we finalized 
that the Query of PDMP measure is optional and eligible for 5 bonus 
points in CY 2020. We received substantial feedback from health IT 
vendors and hospitals that the flexibility currently included in the 
measure presents unintended challenges such as significant burden 
associated with IT system design and additional development needed to 
accommodate the measure and any future changes to it. Since publication 
of the FY 2020 IPPS/LTCH PPS final rule, stakeholders have continued to 
express concern that it is still too premature to require the Query of 
PDMP measure and score it based on performance in CY 2021.
    We agree with stakeholders that PDMPs are still maturing in their 
development and use. PDMPs vary among the states and are not linked at 
this time to one another or to a larger national system.\498\
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    \498\ See https://namsdl.org/topics/pdmp/ and https://www.pdmpassist.org/content/pdmp-maps-and-tables.
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    Stakeholders also mentioned the challenge posed by the frequent 
lack of integration of PDMPs into the clinical workflow. Historically, 
health care providers have had to go outside of the EHR in order to 
separately log in to and access a State PDMP. In addition, stakeholders 
noted the wide variation in whether PDMP data can be stored in the EHR. 
By integrating PDMP data into the health record, health care providers 
can improve clinical decision making by utilizing this information to 
identify potential opioid use disorders, inform the development of care 
plans, and develop effective interventions.
    ONC recently engaged in an assessment to better understand the 
current state of policy and technical factors impacting PDMP 
integration across States. This assessment explored factors like PDMP 
data integration, standards and hubs used to facilitate interstate PMDP 
data exchange, access permissions, and laws and regulations governing 
PDMP data storage. The assessment revealed ambiguous or non-existent 
policies regarding PDMP placement in health IT systems, interpretation 
of PDMP data, and PDMP access roles. One-third of hospitals have 
reported integration of PDMP queries within their EHR workflows.\499\ 
In addition, variability in standards and hubs used to facilitate 
interstate PMDP data exchange, as well as to store and report PDMP 
data, contribute to the complexity of PDMPs.
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    \499\ See ONC analysis of 2017 AHA survey data at: https://www.healthit.gov/buzz-blog/health-it/new-data-show-nearly-one-third-of-hospitals-can-access-pdmp-data-within-their-ehr.
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    The SUPPORT for Patients and Communities Act (Pub. L. 115-
271),\500\ enacted in 2018, is an important investment in combating the 
opioid epidemic. Several of the provisions of the SUPPORT for Patients 
and Communities Act address opioid use disorder prevention, recovery, 
and treatment, including increased access to evidence-based treatment 
and follow-up care, through legislative changes specific to the 
Medicare and Medicaid programs. Specifically, with respect to PDMPs, 
the SUPPORT for Patients and Communities Act included new requirements 
and federal funding for PDMP enhancement, integration, 
interoperability, and established mandatory use of PDMPs by certain 
Medicaid providers to help reduce opioid misuse and overprescribing and 
to help promote the overall effective prevention and treatment of 
opioid use disorder.
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    \500\ See https://crsreports.congress.gov/product/pdf/R/R45449.
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    Section 5042(a) of the SUPPORT for Patients and Communities Act 
added section 1944 to the Act, titled ``Requirements relating to 
qualified prescription drug monitoring programs and prescribing certain 
controlled substances.'' Subsection (f) of section 1944 of the Act 
increased Medicaid FFP during FY 2019 and FY 2020 for certain state 
expenditures to design, develop, or implement a qualified PDMP (and to 
make subsequent connections to such program). As a condition of this 
enhanced FFP, states must meet the conditions described in section 
1944(f)(2) regarding agreements with contiguous states. There are 
currently a number of states that have used, or are seeking to use, 
this enhanced FFP.
    Under section 1944(b)(1) of the Act, to be a qualified PDMP, a PDMP 
must facilitate access by a covered provider to the following 
information (at a minimum) about a covered individual, in as close to 
real-time as possible: Information regarding the prescription drug 
history of a covered individual with respect to controlled substances; 
the number and type of controlled substances prescribed to and filled 
for the covered individual during at least the most recent 12-month 
period; and the name, location, and contact information of each covered 
provider who prescribed a controlled substance to the covered 
individual during at the least the most recent 12-month period. Under 
section 1944(b)(2) of the Act, a qualified PDMP must also facilitate 
the integration of the information described in section 1944(b)(1) of 
the Act into the workflow of a covered provider, which may include the 
electronic system used by the covered provider for prescribing 
controlled substances. CMS issued additional guidance to states about 
the enhanced FFP authorized by the SUPPORT for Patients and Communities 
Act, which can be found at https://www.medicaid.gov/sites/default/files/Federal-Policy-Guidance/Downloads/faq051519.pdf.

[[Page 58968]]

    Additionally, we note that section 7162 of the SUPPORT for Patients 
and Communities Act supports PDMP integration as part of the CDC's 
grant programs aimed at efficiency and enhancement by states, including 
improvement in the intrastate and interstate interoperability of PDMPs.
    In support of efforts to expand the use of PDMPs, there are 
currently a number of federally supported activities underway aimed at 
developing a more robust and standardized approach to EHR-PDMP 
integration. Partners including CMS, CDC, ONC, and private sector 
stakeholders are focused on developing and refining standard-based 
approaches to enable effective integration into clinical workflows, 
exploring emerging technical solutions to enhance access and use of 
PDMP data, and providing technical resources to a variety of 
stakeholders to advance and scale the interoperability of health IT 
systems and PDMPs. For instance, stakeholders are working to map the 
NCPDP SCRIPT standard version 2017071 and the 2015 ASAP Prescription 
Monitoring Program Web Service standard version 2.1A to the HL7[supreg] 
FHIR[supreg] standard version R4.\501\ These mapping efforts are 
currently targeting completion by summer of 2020 after which the 
standard would be balloted. Moreover, a number of enhancements to PDMPs 
are occurring across the country, including enhancements to RxCheck 
which is a federally supported interstate exchange hub for PDMP 
data.\502\ In addition, the ONC Interoperability Standards Advisory 
includes monitoring of current and emerging standards related to PDMP 
and OUD data capture and exchange that would allow a provider to 
request a patient's medication history from a State PMDP.\503\ We 
believe these standards and technical approaches are likely to rapidly 
reach maturity and to support adoption across health care system 
stakeholders.
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    \501\ See http://hl7.org/fhir/us/meds/pdmp.html.
    \502\ See https://www.pdmpassist.org/RxCheck.
    \503\ See https://www.healthit.gov/isa/allows-a-provider-request-a-patients-medication-history-a-state-prescription-drug-monitoring.
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    In addition to monitoring activities which can provide a stronger 
technical foundation for a measure focused on PDMP use, we also 
requested comments in the FY 2020 IPPS/LTCH PPS proposed rule on 
alternative measures designed to advance clinical goals related to the 
opioid crisis (84 FR 19568 and additional comment responses in the FY 
2020 IPPS/LTCH PPS final rule in 84 FR 42593 through 42595). 
Specifically, we sought public comment on the development of potential 
measures for consideration for the Promoting Interoperability Program 
that are based on existing efforts to measure clinical and process 
improvements specifically related to the opioid epidemic, including 
opioid quality measures endorsed by the National Quality Forum (NQF) 
and CDC Quality Improvement (QI) opioid measures based on CDC 
guidelines around prescribing practices. The latter of these includes 
the use of electronically-specified CDS to support OUD prevention and 
treatment best practices and the integration of a PDMP query as a part 
of specific clinical workflows. We stated that these measures relate to 
a range of activities that hold promise in combatting the opioid 
epidemic as part of OUD prevention and treatment best practices, that 
they can be supported using CEHRT, and that they may include the use of 
PDMP queries as a tool within the broader clinical workflows. We 
continue to evaluate the comments received in response to this request 
for information, and will explore how measures such as those discussed 
may help participants to better understand the relationship between the 
measure description and the use of health IT to support the actions of 
the measures related to opioid use.
    We understand that there is wide variation across the country in 
how health care providers are implementing and integrating PDMP queries 
into health IT and clinical workflows, and that it could be burdensome 
for health care providers if we were to narrow the measure to specify a 
single approach to EHR-PDMP integration at this time. At the same time, 
we have heard extensive feedback from EHR developers that effectively 
incorporating the ability to count the number of PDMP queries in the 
EHR would require more robust certification specifications and 
standards. These stakeholders stated that health IT developers may face 
significant cost burdens under the current flexibility allowed for 
health care providers if they either fully develop numerator and 
denominator calculations for all the potential use cases and are 
required to change the specification at a later date. Stakeholders have 
noted that the costs of additional development will likely be passed on 
to health care providers without additional benefit as this development 
would be solely for the purpose of calculating the measure rather than 
furthering the clinical goal of the measure (for a summary of public 
comments discussed in last year's final rule, we refer readers to 84 FR 
42593 through 42595, continued from last year's proposed rule in 84 FR 
19556 through 19558).
    Given current efforts to improve the technical foundation for EHR-
PDMP integration, the continued implementation of the SUPPORT for 
Patients and Communities Act (in particular, its provisions specific to 
Medicaid providers and qualified PDMPs), our ongoing review of 
alternative measure approaches, and stakeholder concerns as previously 
discussed about the current readiness across states for implementation 
of the existing measure, we believe that additional time is needed 
prior to requiring a Query of PDMP measure for performance-based 
scoring. While we appreciate the concerns that stakeholders have 
shared, we believe that this measure can play an important role in 
helping to address the opioid crisis. Maintaining it as an optional 
measure with bonus points signals to the hospital and vendor community 
that this is an important measure which addresses a current gap that 
can help to spur development and innovation to reduce the barriers and 
challenges expressed to CMS.
    Therefore, we proposed for CY 2021 to maintain the Electronic 
Prescribing Objective's Query of PDMP measure as optional and worth 5 
bonus points, as well as corresponding changes to the regulation at 
Sec.  495.24(e)(5)(iii)(B) (85 FR 32853 through 32855). Continuing to 
include the measure as optional in CY 2021 would allow time for further 
progress around EHR-PDMP efforts minimizing the burden on eligible 
hospitals and CAHs reporting while still providing an opportunity for 
capable implementers to report on and earn 5 bonus points for the 
optional measure. We sought comments on our proposal to maintain the 
Query of PDMP measure in CY 2021 as optional and worth 5 bonus points.
    Comment: The majority of commenters agreed with the proposal to 
maintain the Electronic Prescribing Objective's Query of PDMP measure 
as optional and worth 5 bonus points in CY 2021. Several of the 
comments expressed support given their concerns over how current 
workflows may require providers to repeatedly log into multiple, 
separate databases in order to manually enter patient data into CEHRT 
and document completion of the measure's query. One of the commenters 
raised a concern where non-integrated state PDMPs lead to data-entry by 
hand which can increase the probability of human errors related to 
erroneous patient-matching or documentation.

[[Page 58969]]

    Response: We thank commenters for their continued support regarding 
the Query of PDMP measure. We recognize that various state programs are 
still maturing toward the development of fully fledged EHR-PDMP 
integration. We continue to collaborate with our partners in ONC, on 
how to advance standards surrounding PDMP functionality and 
integration. Keeping the Query of PDMP measure as optional for CY 2021 
would allow states and other stakeholders an additional year to make 
further progress on developing functionality to support better 
integration of PDMP use within clinical workflows.
    Comment: Two commenters who agreed with the proposal requested 
clarification that the measure would continue to require a yes/no 
response as finalized in previous rules.
    Response: We appreciate these commenters support. The measure will 
continue to require a yes/no attestation response for CY 2021.
    After consideration of the public comments we received, we are 
finalizing our proposal for CY 2021 to maintain the Electronic 
Prescribing Objective's Query of PDMP measure as optional and worth 5 
bonus points, as well as finalizing corresponding changes to the 
regulation at Sec.  495.24(e)(5)(iii)(B) as proposed.
4. Health Information Exchange Objective: Support Electronic Referral 
Loops by Receiving and Incorporating Health Information Measure
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41659 through 
41661), we established a new Support Electronic Referral Loops by 
Receiving and Incorporating Health Information measure by combining the 
Request/Accept Summary of Care measure and the Clinical Information 
Reconciliation measure. In establishing the new measure, we did not 
change the specifications or actions associated with the two combined 
measures, which address receiving an electronic summary of care record 
and conducting reconciliation of the summary of care record. However, 
the name of the measure includes the word ``incorporating,'' which is 
not always an action that is required for purposes of meeting the 
numerator of the measure. Instead, clinical information reconciliation 
must be completed using CEHRT for the following three clinical 
information sets: (1) Medication; (2) Medication Allergy; and (3) 
Current Problem List. In addition, we established that for cases in 
which the eligible hospital or CAH determines no update or modification 
is necessary within the patient record based on the electronic clinical 
information received, the eligible hospital or CAH may count the 
reconciliation in the numerator without completing a redundant or 
duplicate update to the record (83 FR 41661). Thus, we proposed to 
modify the name of the Support Electronic Referral Loops by Receiving 
and Incorporating Health Information measure to better reflect the 
actions required by the numerator and denominator (85 FR 32855). We 
proposed to replace the word ``incorporating'' with the word 
``reconciling'' such that the new name would read: Support Electronic 
Referral Loops by Receiving and Reconciling Health Information measure, 
and to codify this change at Sec.  495.24(e)(6)(ii)(B). We sought 
comments on our proposals.
    Comment: Many commenters supported the proposal to modify the 
measure's name by replacing the word ``incorporating'' with the word 
``reconciling'' to better reflect the measure's intent and reduce 
confusion on the actions required for the numerator and denominator 
calculation.
    Response: We thank the commentators for their input and agree that 
the new name, Support Electronic Referral Loops by Receiving and 
Reconciling Health Information, best reflects the measure's intent 
relating to the specific actions required in calculating the numerator 
and denominator.
    Comment: Two commenters did not believe that the name should be 
updated and stated that the measure modification could lead to 
unnecessary administrative burden and tedious documentation edits.
    Response: While the updating of the name may require edits to 
existing documentation in EHR systems or reports, we disagree that this 
update would alone outweigh the benefit of implementing programmatic 
improvements to reduce potential confusion caused by the measure's 
existing name. The measure specifications establish that no duplicative 
update is necessary within the patient record based upon the clinical 
information received, only that it must be compared against what is 
currently available (a reconciliatory act, as indicated in the 
measure's current specification sheet).\504\ In agreement with the 
majority of commenters, we see the name change as more clearly 
reflecting the existing policy that the measure is not requiring 
providers to input redundant information, but rather to review and 
reconcile what is received with what is already in the patient record.
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    \504\ See https://www.cms.gov/files/document/medicare-eh-2020-support-electronic-referral-loops-receiving-and-incorporating-information.pdf.
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    After consideration of the public comments we received, we are 
finalizing our proposal to modify the name of the Support Electronic 
Referral Loops by Receiving and Incorporating Health Information 
measure such that the new name will read: Support Electronic Referral 
Loops by Receiving and Reconciling Health Information measure. In 
addition, we are also finalizing the corresponding changes at Sec.  
495.24(e)(6)(ii)(B) as proposed.
5. Scoring Methodology for Eligible Hospitals and CAHs Attesting to CMS 
Under the Medicare Promoting Interoperability Program for an EHR 
Reporting Period in CY 2021
    The following table reflects the objectives and measures as 
finalized for CY 2021. As discussed in sections VII.D.3 and VII.D.4 in 
the preamble of this final rule, we are finalizing our proposals for CY 
2021 to include: (1) Changing the name of the Support Electronic 
Referral Loops by Receiving and Incorporating Health Information 
measure, and (2) the continuation of the optional Query of PDMP measure 
worth 5 bonus points for CY 2021.

[[Page 58970]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.250

6. Clinical Quality Measurement for Eligible Hospitals and CAHs 
Participating in the Medicare and Medicaid Promoting Interoperability 
Programs
a. Background and Current Clinical Quality Measures
    Under sections 1814(l)(3)(A), 1886(n)(3)(A), and 
1903(t)(6)(C)(i)(II) of the Act and the definition of ``meaningful EHR 
user'' under 42 CFR 495.4, eligible hospitals and CAHs must report on 
clinical quality measures (CQMs; also referred to as electronic CQMs, 
or eCQMs) selected by CMS using CEHRT, as part of being a meaningful 
EHR user under the Medicare and Medicaid Promoting Interoperability 
Programs. However, as previously established in accordance with section 
1903(t)(5)(D) of the Act, in no case may any Medicaid eligible hospital 
receive an incentive after CY 2021 (Sec.  495.310(f), 75 FR 44319). 
Therefore, December 31, 2021 is the last date that states could make 
Medicaid Promoting Interoperability Program payments to Medicaid 
eligible hospitals (other than pursuant to a successful appeal related 
to 2021 or a prior year) (84 FR 42591 through 42592).
    The following table lists the previously finalized eCQMs available 
for eligible hospitals and CAHs to report under the Medicare and 
Medicaid Promoting Interoperability Programs (84 FR 42597 through 
42599) for the reporting period in CY 2021 and subsequent years, 
including the Safe Use of Opioids--Concurrent Prescribing measure (NQF 
#3316e), finalized as mandatory for reporting beginning with CY 2022 
(84 FR 42598 through 42600).
[GRAPHIC] [TIFF OMITTED] TR18SE20.251


[[Page 58971]]


b. eCQM Reporting Periods and Criteria for the Medicare and Medicaid 
Promoting Interoperability Programs in CYs 2021, 2022, and 2023
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32856 through 
32857), consistent with a similar proposal under the Hospital IQR 
Program in the same proposed rule (85 FR 32836 through 32837), we 
proposed to progressively increase the number of quarters for which 
hospitals are required to report eCQM data, from the current 
requirement of one self-selected calendar quarter of data, to four 
calendar quarters of data, over a 3-year period. Specifically, we 
proposed to require two self-selected calendar quarters of data from CY 
2021, three self-selected calendar quarters of data from CY 2022, and 
four calendar quarters of data beginning with CY 2023. We stated that 
we believe increasing the number of quarters for which hospitals are 
required to report eCQM data would produce more comprehensive and 
reliable quality measure data for patients and providers. Taking an 
incremental approach over a 3-year period would also give hospitals and 
their vendors time to plan in advance, build upon, and utilize 
investments already made in their existing EHR infrastructure. 
Additionally, reporting multiple quarters of data would provide 
hospitals with a more continuous stream of information to monitor their 
levels of performance, as ongoing, timely data analysis can better 
identify a change in performance that may necessitate investigation, 
and potentially corrective action. We also refer readers to section 
VIII.A.9 of the preamble of this final rule for a discussion of similar 
proposals made for the Hospital IQR Program.
(1) Changes to the eCQM Reporting Period in CY 2021
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42599 through 
42600), we established the eCQM reporting periods, reporting criteria, 
and submission periods for CY 2021. We refer readers to that final rule 
for a more detailed discussion of our previously established final 
policies. Consistent with our proposal for the Hospital IQR Program in 
the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32856), we proposed to 
modify the eCQM reporting period in CY 2021 under the Medicare and 
Medicaid Promoting Interoperability Programs for eligible hospitals and 
CAHs that report CQMs electronically. Specifically, we proposed to 
require eligible hospitals and CAHs to report two self-selected 
calendar quarters of eCQM data from CY 2021, on four self-selected 
eCQMs from the set of available eCQMs, for CY 2021 as previously 
established (84 FR 42599 through 42600).
(2) Changes to the eCQM Reporting Period in CY 2022
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42600), we 
established the eCQM reporting periods, reporting criteria, and 
submission periods for CY 2022. We refer readers to that final rule for 
a more detailed discussion of our previously established final 
policies. Consistent with our proposal for the Hospital IQR Program in 
the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32856), we proposed to 
modify the eCQM reporting period in CY 2022 under the Medicare 
Promoting Interoperability Program for eligible hospitals and CAHs that 
report eCQMs electronically. Specifically, we proposed to require 
eligible hospitals and CAHs to report three self-selected calendar 
quarters of eCQM data from CY 2022, for each required eCQM as 
previously established (84 FR 42600): (a) Three self-selected eCQMs 
from the set of available eCQMs for CY 2022, and (b) the Safe Use of 
Opioids--Concurrent Prescribing eCQM.
(3) Reporting and Submission Requirements for eCQMs for CY 2023 and 
Subsequent Years
    For CY 2023 and each subsequent year, we proposed to require 
eligible hospitals and CAHs reporting CQMs for the Medicare Promoting 
Interoperability Program to report 4 calendar quarters of data from CY 
2023 and each subsequent year (85 FR 32856 through 32857) for: (a) 3 
self-selected eCQMs from the set of available eCQMs for CY 2023 and 
each subsequent year; and (b) the Safe Use of Opioids--Concurrent 
Prescribing eCQM (NQF #3316e), for a total of 4 eCQMs. As finalized in 
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42601 through 42602), 
attestation is no longer a method for reporting eCQMs for the Medicare 
Promoting Interoperability Program, beginning with the reporting period 
in CY 2023, and instead, all eligible hospitals and CAHs are required 
to submit their eCQM data electronically through reporting methods made 
available through the Hospital IQR Program. Additionally, we proposed 
that the submission period for the Medicare Promoting Interoperability 
Program would be during the 2 months following the close of the 
respective calendar year. For example, the submission period for CY 
2023 would be the 2 months following the close of CY 2023, ending 
February 28, 2024, and the same 2-month pattern would follow for each 
subsequent year.
    Comment: Many commenters supported our proposal to increase the 
number of quarters for which hospitals are required to report eCQM 
data. Some commenters specifically appreciated CMS's plan to phase in 
the requirement over three years because they believe a progressive 
approach will allow hospitals and vendors sufficient time to implement 
the proposal without being overly burdensome. Other commenters stated 
the proposal will improve accuracy and reliability of data, provide a 
more accurate picture of overall hospital performance, increase 
hospital accountability, and reduce the likelihood that hospitals will 
report only on their top-performing quarter. Commenters also stated the 
proposal would enable hospitals and other stakeholders to successfully 
monitor performance trends, particularly through the CMS Hospital 
Compare site, or successor websites, and enhance patient outcomes.
    Response: We thank the commenters for their support. We believe 
increasing eCQM reporting over a 3-year period will help to ease the 
burdens associated with reporting larger amounts of data, and will 
provide hospitals and vendors with additional time to plan and 
sufficiently allocate resources for more robust eCQM reporting. We 
believe the long-term benefits associated with reporting a full year of 
electronic data will outweigh the burdens, and that increasing the 
number of quarters for which hospitals are required to report eCQM data 
will produce more comprehensive and reliable quality information for 
patients and providers.
    Comment: A few commenters recommended that we phase in the 
increased requirements at a faster rate, such as over a 2-year period 
instead of a 3-year period.
    Response: We thank the commenters for their recommendations. We 
considered a faster implementation timeline in developing our 
proposals, but ultimately determined to propose to align with the 
Hospital IQR Program's proposal to progressively increase the number of 
required quarters of eCQM data over a 3-year period in order to 
continue to give hospitals and their vendors time to plan in advance 
and build upon and utilize investments already made in their EHR 
infrastructure (85 FR 32837). We believe this approach effectively 
balances the burdens associated with increased reporting of eCQM data 
and the benefits of providing that quality data to patients and 
consumers.

[[Page 58972]]

    Comment: Many commenters did not support the proposal to require 
additional quarters of eCQM data given the impact of the COVID-19 
public health emergency (PHE) on hospitals, and requested that eCQM 
reporting and submission requirements for the CY 2021 reporting period 
remain at one self-selected calendar quarter of data for each of the 
four self-selected eCQMs. Commenters stated that the COVID-19 PHE has 
shifted focus from normal operations toward increased burden and 
strained hospital resources, particularly impacting staffing and 
technology. A few commenters indicated that the COVID-19 PHE has 
limited hospitals' ability to make the IT investments needed to report 
additional quarters of data. Commenters stated that internal resources 
have been reallocated or reassigned, that current IT investments are 
focused on caring for COVID-19 patients via telehealth, and that 
hospitals are already experiencing burdens or costs associated with 
implementing additional regulations on information blocking and 
interoperability. Commenters also stated that hospitals are complying 
with numerous federal and state data reporting requirements related to 
COVID-19 lab testing, patient volumes, and bed capacity, which are 
constantly evolving. The commenters stated that, while the duration of 
the COVID-19 PHE remains uncertain, hospitals expect to be operating in 
this challenging environment well into CY 2021.
    Given these challenges, commenters requested that reporting and 
submission requirements for the CY 2021 reporting period remain at one 
self-selected calendar quarter of data so that hospitals may choose the 
fourth quarter, providing additional time for EHR upgrades. A few 
commenters expressed concern that the proposal could cause hospitals to 
lose their entire annual payment update for failing to meet an eCQM 
mandate that their EHR vendors cannot deliver, due to the pandemic and 
other competing federal EHR-related mandates. One commenter stated that 
the COVID-19 PHE's impact on hospital volumes may render data less 
reliable. Another commenter suggested that CMS continue to monitor the 
COVID-19 PHE, and the extent to which hospitals have recovered, to 
inform the exact timeframe to begin increasing eCQM reporting 
requirements.
    Response: We thank commenters for their comments and recognize the 
burden that the COVID-19 PHE has had on the healthcare system. In 
response to the significant impact of the COVID-19 PHE on hospitals, 
CMS issued an array of temporary regulatory waivers and exceptions 
affecting a wide cross-section of Medicare participation, eligibility, 
and payment requirements in an effort to reduce burden, provide 
flexibility to hospitals, and help hospitals maximize their capacity to 
focus on patient care.\505\ These waivers and exceptions reduce 
hospital paperwork burden and reporting requirements, increase 
flexibility for surge capacity and patient quarantine, allow providers 
to expand access to telehealth, and enable hospitals to enhance their 
workforces, among other benefits. Specific to the Promoting 
Interoperability Program, we issued a hardship exception extension, 
allowing eligible hospitals additional time to submit these 
requests.\506\
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    \505\ See https://www.cms.gov/about-cms/emergency-preparedness-response-operations/current-emergencies/coronavirus-waivers.
    \506\ See https://www.cms.gov/files/document/medicare-pi-hardship-fact-sheet-2020.pdf.
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    Our current policy for eCQM reporting requires hospitals to report 
only one, self-selected calendar quarter of data for four self-selected 
eCQMs for the CY 2020 reporting period. We believe that a single 
quarter of data is not enough to capture trends in performance over 
time, therefore our goal in proposing to progressively increase the 
number of quarters of data to be collected over 3 years was to strike 
an appropriate balance between increasing eCQM reporting and providing 
hospitals with the necessary time to implement such changes.
    Comment: A commenter did not support the proposal to increase the 
number of self-selected quarters of eCQM data that hospitals must 
support for the CY 2021 reporting period. The commenter stated that 
given the unknown future of the impact of the COVID-19 PHE, any 
increase in eCQM submissions for CY 2021 could have a significant 
detrimental impact on small, rural hospitals, particularly because many 
of these hospitals do not find the current eCQMs (including the Safe 
Use of Opioids--Concurrent Prescribing measure (NQF #3316e), finalized 
as mandatory for reporting beginning with CY 2022) to be meaningful to 
their quality improvement. The commenter stated that because mandatory 
reporting on the Safe Use of Opioids-Concurrent Prescribing measure 
(NQF #3316e) begins in CY 2022, it would be beneficial to evaluate the 
usefulness and challenges of extracting this data after one quarter, 
rather than requiring two quarters.
    Response: As previously established in rulemaking, for the CY 2021 
reporting period, hospitals will continue to report on four self-
selected eCQMs, and reporting on the Safe Use of Opioids--Concurrent 
Prescribing eCQM (Safe Use eCQM) will not be required until the CY 2022 
reporting period. The Safe Use eCQM will be included in the eCQM subset 
beginning with the CY 2021 reporting period, and a hospital may 
voluntarily select to report on the Safe Use eCQM on two quarters of 
data at that time.
    With respect to the usefulness and challenges of extracting eCQM 
data after one quarter rather than requiring two quarters, we believe 
that our proposal further advances our goal of increasing the use of 
EHR data for quality measurement and improvement. We believe that 
reporting on the Safe Use eCQM will provide valuable information in the 
area of high-risk prescribing to providers, and further our efforts to 
combat the negative impacts of the opioid crisis. Last, we appreciate 
that there may be challenges with extracting data for the Safe Use 
eCQM. Although this measure was developed being mindful that 
logistically, the implementation of the data extraction process needed 
to be feasible, we will be considerate of this feedback in future 
rulemaking.
    Regarding the meaningfulness of eCQMs in small, rural hospitals--
rural health continues to be one of our top priorities. In 2016, we 
established an agency-wide Rural Health Council, and in 2017 we 
launched the Meaningful Measures Initiative and included Improving 
Access for Rural Communities as an initiative. Additionally in 2017, we 
tasked the National Quality Forum (NQF) to establish a Measure 
Applications Partnership (MAP) Rural Health Workgroup to identify a 
core set of the best available rural-relevant measures to address the 
needs of the rural population and provide recommendations from a rural 
perspective regarding measuring and improving access to care.\507\ When 
selecting eCQMs for inclusion in the measure set, we have, and will 
continue to consider the recommendations from the rural providers to 
ensure eCQMs are meaningful to quality improvement for small, rural 
hospitals.
---------------------------------------------------------------------------

    \507\ See Measures Application Partnership, ``A Core Set of 
Rural-Relevant Measures and Measuring and Improving Access to Care: 
2018 Recommendations from the MAP Rural Health Workgroup'' (Aug. 31, 
2018), available at https://www.qualityforum.org/Publications/2018/08/MAP_Rural_Health_Final_Report_-_2018.aspx.
---------------------------------------------------------------------------

    In response to concerns regarding the future of the impact of the 
COVID-19 PHE, we will continue to monitor the impact that the COVID-19 
PHE has on

[[Page 58973]]

hospitals, including small, rural hospitals, and will issue additional 
guidance as appropriate. Please also see our previous responses, 
specifically addressing the COVID-19 PHE.
    Comment: Many commenters requested that CMS adopt a more 
incremental approach for increasing the eCQM reporting requirements. A 
few of the numerous alternative approaches recommended by commenters 
included postponing the proposed increase in data reporting for one 
calendar year, postponing the increase until the COVID-19 PHE has 
abated and hospital volumes return to pre-pandemic levels, and 
increasing the number of calendar quarters of data to be reported by 
one quarter every other year.
    Response: As noted previously, after delaying the increased eCQM 
reporting requirements for a number of years, we believe our proposal 
to progressively increase the number of quarters of eCQM data to be 
collected over a three-year period strikes an appropriate balance 
between increasing eCQM reporting and providing hospitals with the 
necessary time to implement such changes. We understand the desire to 
postpone the increased reporting requirements until the pandemic has 
abated, and hospital volumes return to pre-pandemic levels, and note 
that we proposed requiring hospitals to report only two quarters of 
data for the CY 2021 reporting period. We note that hospitals may 
choose to report data from the third and fourth quarters of CY 2021, 
which may have higher volumes, and data would not need to be reported 
until the end of the data submission period (that is, by the end of 
February 2022). Specific to the Promoting Interoperability Program's 
response to COVID-19 PHE, we issued a hardship exception extension, 
allowing eligible hospitals additional time to submit these requests. 
Please also see our previous responses, specifically addressing the 
COVID-19 PHE.
    Comment: Several commenters raised concerns about the accuracy, 
reliability, and validity of eCQM data. One commenter stated the data 
produced by chart-abstracted measures and eCQMs vary significantly. A 
few commenters recommended that CMS adopt a more incremental approach 
to increasing eCQM reporting requirements, or delay its proposal 
altogether until at least CY 2023, to balance benefits with burdens and 
better ensure reliability and validity for measurement. A commenter 
stated that it would be premature for CMS to require electronic 
reporting before all measures are fully electronically specified and 
field tested. The commenter emphasized the need for providers to have 
detailed electronic specifications in advance in order to adequately 
prepare their reporting systems. Another commenter encouraged CMS to 
evaluate how each additional quarter of data improves accuracy and 
reliability prior to further increasing the number of required 
quarters.
    Response: We understand the commenters' concern about data 
reliability and validity and wish to emphasize that all types of 
quality measures, including eCQMs, undergo testing during the measure 
development process for feasibility, validity, and reliability. We also 
recognize that EHR-based extraction methodology for eCQMs is different 
from the data collection methodology for chart-abstracted measures, and 
that measure rates may vary depending on methodology (80 FR 49643 
through 49644).
    For example, eCQMs utilize data from structured fields within the 
EHR system, while chart-abstracted measures allow data to be collected 
from unstructured sources such as a clinician's progress notes. For 
these reasons, we use a validation process to address concerns about 
reliability and validity of eCQM data. Together, alongside the Hospital 
IQR Program (as described in section VIII.A.10. of the preamble of this 
final rule), we are continuously working to improve the eCQM validation 
process and balance reporting burden. We expect to gain a better 
understanding of how to continue to increase the accuracy of eCQM data 
by continuing to analyze and improve upon that process. We do believe 
that the reporting of additional quarters of data by hospitals will 
help to increase the reliability of the data, and we also note that 
measure specifications are typically available about eight months prior 
to the beginning of the calendar year reporting period.
    Comment: A few commenters expressed concern about the amount of 
time that may be required for a hospital or their vendor to internally 
validate the data, and/or create and review CCN files prior to data 
submission to CMS. One commenter stated the proposal amends more 
modest, previously finalized policies that hospitals relied on for 
planning and resource allocation purposes.
    Response: We recognize that increasing the number of quarters of 
eCQM data to be reported can impact a hospital's resource use, and 
refer readers to section XI. B.9 of the preamble of this final rule for 
a detailed discussion on our burden estimates associated with eCQM 
reporting and submission. We believe the long-term benefits associated 
with reporting a full year of electronic data will outweigh these 
burdens and that increasing the number of quarters for which hospitals 
are required to report eCQM data will produce more comprehensive and 
reliable quality information for patients and providers. We believe 
that taking an incremental approach to increasing eCQM reporting over a 
three-year period will help to ease the burdens associated with 
reporting larger amounts of data and will provide hospitals and vendors 
with additional time to plan and sufficiently allocate resources for 
more robust eCQM reporting.
    Comment: One commenter did not support the proposal because they 
believed it contradicted the trend to make the program simpler. Another 
commenter stated there is increased burden on hospitals due to 
duplications of effort in reporting the same measures in both chart-
abstracted and eCQM formats.
    Response: We disagree with the commenter that the proposal 
contradicts our efforts to make the program simpler. Since October of 
2017, we have undertaken an ambitious effort to reduce regulatory 
burden on the healthcare industry, lower health care costs, and enhance 
patient care by streamlining the quality reporting programs through the 
Meaningful Measures initiative. We refer readers to the FY 2019 IPPS/
LTCH PPS final rule for a broader discussion of the Meaningful Measures 
framework (83 FR 41147). In recent years, we have also improved and 
continued to maintain alignment between the Promoting Interoperability 
Program and the Hospital IQR Program, such that we now have the same 
eCQMs and data submission requirements. We will continue to look across 
all quality programs to identify areas to further streamline, and 
opportunities to reduce any remaining duplicative efforts.
    Comment: One commenter did not support the proposed expansion of 
eCQM reporting or public reporting until problems with validation of 
eCQM data are addressed. The commenter stated that hospitals 
participating in eCQM data validation continue to report unresolved 
concerns, such as the inability to authenticate validation results 
provided for 2017 and 2018 because mismatches on the validation reports 
were not specifically identified. The commenter stated that hospitals 
and vendors need a better understanding of the cause of mismatches and 
how to correct them in advance of any public reporting, and recommended 
CMS make improvements

[[Page 58974]]

to the validation procedures and reports. A few commenters requested 
that CMS provide additional transparency into the eCQM validation 
process before increasing the number of quarters required to be 
reported, such as information on eCQM agreement rates, national eCQM 
scores, the effect of invalidated data on national and hospital-
specific scores, comparisons of the current eCQM data against 
previously collected chart-abstracted data, and an analysis on how eCQM 
scores are affected by using the chart-abstracted measure 
specifications and algorithms for validation. Last, commenters 
requested that CMS provide an analysis of how self-selection of 
individual eCQMs by each hospital affects national averages, and the 
number of hospitals reporting on each measure.
    Response: We appreciate the feedback from hospitals on their 
experiences with the eCQM validation process. The specifications for 
eCQMs contain logic statements and value sets tailored to electronic 
data sources, and as such, measure specifications and algorithms for 
chart-abstracted measures are not used for eCQM validation. As the 
Hospital IQR Program further describes in sectionVIII.A.10 of the 
preamble of this rule, together, we are continuously working to improve 
eCQM validation and are finalizing several changes to that process. Our 
decision to extend the educational review process established for 
chart-abstracted measure validation to eCQM validation may be of 
particular interest to stakeholders. We would also like to refer 
commenters to the eCQM validation resources available on 
QualityNet.\508\
---------------------------------------------------------------------------

    \508\ See eCQM Data Validation Resources are available on 
QualityNet at: https://www.qualitynet.org/search?q=validation.
---------------------------------------------------------------------------

    Comment: A few commenters stated that the required updates to EHRs 
to modify eCQMs often take significant implementation resources before 
hospitals are able to report eCQM data. The commenters expressed 
concern that the proposed increase in data reporting requirements would 
shorten the timeframe for hospitals to make and validate required 
measure logic changes, which would require hospitals to expend 
additional resources in order to finish changes on time. The commenters 
requested that CMS provide hospitals with 18 months to implement 
changes.
    Response: We disagree that there is not enough time to implement 
eCQM data measure reporting requirements. We note that the eCQM 
specifications are typically available around eight months prior to the 
beginning of the calendar year of the reporting period. We also believe 
that once the eCQM updates are implemented in hospital EHRs, reporting 
an additional quarter of data should not require the same level of 
effort as reporting one initial quarter of data. Thus, we do not expect 
hospitals to experience a significant amount of added burden reporting 
three additional quarters of data over a three-year period. We would 
like to note that we did not propose to modify, remove, or add any 
additional eCQM measures to the Promoting Interoperability Program in 
the FY 2021 IPPS/LTCH PPS proposed rule. We do thank the commenters for 
their feedback and will take this information into account when 
modifying and aligning the eCQM measure set in future rulemaking.
    Comment: A few commenters expressed concern about variation in 
readiness and eCQM reporting capabilities across hospitals. Commenters 
recommended that CMS work with stakeholders to identify underlying 
structural problems and barriers to successful reporting; consider a 
process by which hospitals could request and receive a one-year 
extension, if needed, to increase their eCQM reporting to four calendar 
quarters, or take a more incremental approach to increasing eCQM 
reporting requirements.
    Response: As stated previously, we have reduced the number of 
eCQMs, and delayed eCQM reporting requirements over a number of years 
in order to allow hospitals and vendors additional time to upgrade IT 
systems, improve data mapping and other capabilities, and increase 
staff training for eCQM reporting. In the FY 2021 IPPS/LTCH PPS 
proposed rule, we proposed to progressively increase the number of 
quarters of data to be collected over three years to continue to give 
providers time to gain experience with eCQM reporting and submission. 
We believe that gradually increasing the number of quarters for which 
hospitals are required to report eCQM data will produce more 
comprehensive and reliable quality measure data for patients and 
providers. We will continue to work with stakeholders to identify any 
structural issues or barriers to successful reporting.
    Comment: Several commenters requested clarification about the data 
submission process associated with increasing the number of quarters of 
data required to be reported. Specifically, commenters requested that 
CMS clarify the timing of submission deadlines and the ability of 
hospitals to report non-consecutive quarters of data. One commenter 
requested that CMS clarify that until all four quarters of data are 
required, the hospital will be able to self-select which quarters it 
reports on.
    Response: In the FY 2021 IPPS/LTCH PPS proposed rule, our proposals 
would allow hospitals to self-select the calendar quarters of data to 
report for CYs 2021 and 2022, with data submission in the two months 
following the close of the calendar year (85 FR 32856 through 32857). 
Thus, the data submission deadline for eCQM data under the Promoting 
Interoperability Program, regardless of how many quarters of data are 
required to be reported for a given calendar year, will continue to be 
by the end of the 2 months following the close of the respective 
calendar year. The ability to self-select calendar quarters would 
enable hospitals to submit non-consecutive quarters of data of their 
choice. More specifically, we proposed to require that hospitals report 
two self-selected calendar quarters of data for each of the four self-
selected eCQMs for the CY 2021 reporting period, three self-selected 
calendar quarters of data for the CY 2022 reporting period for each 
required eCQM: (a) Three self-selected eCQMs; and (b) the Safe Use of 
Opioids eCQM (85 FR 32837). Hospitals would self-select the quarters it 
reported on until all four quarters were required, as proposed for the 
CY 2023 reporting period. The ability self-select quarters would permit 
hospitals to submit non-consecutive quarters of data.
    Comment: A few commenters recommended that CMS monitor 
implementation of the proposal, such as soliciting feedback from 
hospitals to learn about reporting challenges and to ensure that the 
proposal does not impose substantial additional administrative burdens 
during the COVID-19 PHE. One commenter recommended that CMS work with 
stakeholders to ensure eCQM data provides actionable insights that 
support performance improvement, considering the burden required to 
report it.
    Response: We thank the commenters for their suggestions. We plan to 
monitor the implementation of the increased reporting requirements for 
eCQM data alongside the Hospital IQR Program, and welcome continued 
feedback from stakeholders through webinars, listservs, and help desk 
questions. Finally, see our previous discussion on our approach with 
the COVID-19 PHE.
    After consideration of the public comments we received, we are 
finalizing all of our proposals as proposed to progressively increase, 
over a 3-year period, the number of calendar

[[Page 58975]]

quarters that eligible hospitals and CAHs are required to report eCQM 
data for the Promoting Interoperability Program. For the CY 2021 
reporting period, hospitals will be required to report two self-
selected calendar quarters of data for each of the four self-selected 
eCQMs, and the quarters chosen do not need to be consecutive. For the 
CY 2022 reporting period, hospitals will be required to report three 
self-selected calendar quarters of data for each required eCQM: (a) 
Three self-selected eCQMs; and (b) the Safe Use of Opioids--Concurrent 
Prescribing eCQM. For the CY 2023 reporting period and subsequent 
years, hospitals will be required to report four calendar quarters of 
data for each required eCQM: (a) Three self-selected eCQMs; and (b) the 
Safe Use of Opioids--Concurrent Prescribing eCQM, and the submission 
period for the Medicare Promoting Interoperability Program will be the 
2 months following the close of the respective calendar year.
c. Public Reporting of eCQM Data
    Electronic reporting serves to further the CMS and HHS policy goals 
to promote quality through performance measurement and, in the long-
term, improve the accuracy of the data and reduce reporting burden for 
providers. It also promotes the continued effort to align the Promoting 
Interoperability Program with the Hospital IQR Program through 
simplifying and streamlining quality reporting. We expect that over 
time, hospitals will continue to leverage EHRs to capture, calculate, 
and electronically submit quality data, build and refine their EHR 
systems, and gain more familiarity with reporting eCQM data. As eCQM 
reporting continues to advance, and hospitals have gained several years 
of experience with successfully collecting and reporting eCQM data, it 
is important to further our policy goals of leveraging EHR-based 
quality measure reporting in order to incentivize data accuracy, 
promote interoperability, increase transparency, and reduce long-term 
provider burden by providing public access to the eCQM data being 
reported.
    Section 1886(b)(3)(B)(viii)(VII) of the Act requires the Secretary 
to report quality measures of process, structure, outcome, patients' 
perspectives on care, efficiency, and costs of care that relate to 
services furnished in inpatient settings in hospitals on the internet 
website of CMS. Section 1886(b)(3)(B)(viii)(VII) of the Act also 
requires that the Secretary establish procedures for making information 
regarding measures available to the public after ensuring that a 
hospital has the opportunity to review its data before they are made 
public. In the proposed rule, we stated that the current Hospital IQR 
Program policy is to report data as soon as it is feasible on CMS 
websites such as the Hospital Compare and/or its successor website 
after a 30-day preview period (78 FR 50776 through 50778). For 
additional information, we referred readers to section VIII.12.a. of 
the proposed rule, the Hospital IQR Program's Public Display 
Requirements.
    Section 1886(n)(4)(B) of the Act requires the Secretary to post on 
the CMS website, in an easily understandable format, a list of the 
names of the eligible hospitals and CAHs that are meaningful EHR users, 
and other relevant data as determined appropriate by the Secretary. We 
believe other relevant data could include clinical quality measure 
performance rates, and data intended to improve transparency and 
reporting accuracy, because such data would enable patients, consumers, 
and health care providers to make informed decisions about their own, 
and their patients' healthcare.
    Section 1886(n)(4)(B) of the Act also requires the Secretary to 
ensure that an eligible hospital or CAH has the opportunity to review 
the other relevant data that are to be made public with respect to the 
eligible hospital or CAH prior to such data being made public. By 
publicly reporting clinical quality measure data, this demonstrates our 
commitment to providing data to patients, consumers, and providers as 
quickly as possible to assist them in their decision-making.
    Therefore, in alignment with our goal to encourage data accuracy 
and transparency, we proposed to align with the Hospital IQR Program in 
publicly reporting eCQM data submitted by eligible hospitals and CAHs 
for the Promoting Interoperability Program starting with the CY 2021 
reporting period, and continuing through subsequent years (85 FR 
32857). We stated that this data could be made available to the public 
as early as the fall of CY 2022. We also refer readers to section 
VIII.A. of the preamble of this final rule for a discussion of a 
similar proposal under the Hospital IQR Program.
    Comment: A few commenters supported public reporting of eCQM data 
for the CY 2021 reporting period, with this data being made available 
to the public as early as Fall 2022. One commenter stated the proposal 
strikes a balance between reducing the administrative burden for 
providers of collecting and reporting eCQM data, without sacrificing 
the meaningfulness of quality information available to the public, and 
also ensuring that CMS has a more robust dataset to make payment 
decisions. One commenter found the proposed change reasonable and 
appropriate, and agrees that the current submission requirement does 
not effectively capture performance trends. A few commenters 
appreciated the greater public disclosure of eCQM data and agreed that 
the proposed change will provide a more accurate picture of overall 
performance for hospitals.
    Response: We thank commenters for their support. We believe it is 
important to provide data to the public as soon as practicable while 
increasing the amount of eCQM data to be reported to CMS. We believe 
that beginning to publicly report eCQM data as early as the fall of 
2022, while simultaneously progressively increasing the quarters of 
reported eCQM data strikes the appropriate balance between the 
importance of transparency by publicly reporting eCQM data and 
stakeholder concerns about using sufficient data for publicly reporting 
eCQM data.
    Comment: A few commenters did not support public reporting of eCQM 
data from the CY 2021 reporting period beginning as early as Fall 2022 
due to the impact of the COVID-19 PHE on hospitals, including needing 
to reassign and reduce hospital staff, redirect resources, and concerns 
about increasing provider burden. A few commenters did not support our 
proposal to publicly report eCQM data due to concern about measure 
performance during the COVID-19 PHE. Several commenters opposed 
publishing data on Hospital Compare for the CY 2021 reporting period, 
and recommended a delay until the CY 2022 reporting period or later due 
to the COVID-19 PHE that may impact the validity and reliability of 
data, especially when comparing performance across hospitals. A few 
commenters supported the proposal to publicly report eCQM data, but 
recommended that CMS confer with hospitals to ensure data reporting for 
the CY 2021 reporting period will not impose unreasonable 
administrative burden during the COVID-19 PHE.
    Response: We continue to closely monitor and analyze the impact 
that the unpredictable nature that the COVID-19 PHE may have on the 
national comparability of Promoting Interoperability Program measures, 
as well as burden on hospitals, and will continue to communicate 
through routine channels as necessary. We appreciate commenters' 
concerns regarding the impact COVID-19 PHE has had on hospitals, 
however, we do

[[Page 58976]]

not believe that public reporting of eCQM data adds to that burden, as 
public reporting will not change how hospitals submit or report their 
eCQM data, nor the number of measures that will be required to be 
reported. For clarification, CY 2020 reporting period data will not be 
publicly reported, as we are finalizing to start public reporting of 
eCQM data with the CY 2021 reporting period in Fall of 2022.
    Comment: Some commenters did not support public reporting of eCQM 
data due to the burden for some hospitals to successfully submit eCQM 
data.
    Response: We understand commenters' concerns, however, we believe 
we have sufficiently mitigated any potential burden for hospitals by 
taking an incremental approach to allow hospitals to become familiar 
with eCQM reporting, prior to publicly reporting eCQM data.
    Comment: Many commenters did not support public reporting of eCQM 
data as early as Fall 2022, and recommended a delay in public reporting 
to provide hospitals with additional time to prepare, to provide 
greater technical consistency, or until four quarters of data are 
required to be reported.
    Response: We appreciate the commenters' feedback, but disagree that 
hospitals need more time to prepare for public reporting of eCQM data. 
CY 2021 will be the fifth year of mandated reporting of eCQM data for 
hospitals, and we have determined that eCQM data is accurate enough to 
begin reporting. While we appreciate commenters' concerns about public 
reporting eCQM data representing fewer than four quarters of data, we 
disagree that this should inhibit the advancement of public reporting 
of eCQM data. We believe it is important to provide data to the public 
as soon as practicable, while simultaneously increasing the amount of 
eCQM data being reported to CMS. We believe that beginning to publicly 
report eCQM data as early as the fall of 2022, while progressively 
increasing the quarters of reported eCQM data appropriately balances 
the importance of transparency by publicly reporting eCQM data and 
stakeholder concerns about using sufficient data for publicly reporting 
eCQM data. Last, we refer commenters to section VIII.A.9.b. of the 
preamble of this final rule, where the Hospital IQR Program references 
technical specifications for quality measures, and in addition, the FY 
2019 IPPS/LTCH final rule where the Hospital IQR Program summarizes 
technical measure specifications for quality measures, and the sub-
regulatory process for incorporation of non-substantive updates to the 
measure specifications.
    Comment: Many commenters did not support public reporting of eCQM 
data beginning as early as Fall 2022, citing concern that inconsistency 
in the number of cases reported and the self-selection of eCQMs 
reported across individual hospitals might not accurately depict 
hospital performance. These commenters recommended aligning the start 
of public reporting with one consistent mandated eCQM across all 
hospitals.
    Response: We acknowledge the commenters' concerns, however, we plan 
to initially publish CY 2021 eCQM data, consisting of two self-selected 
quarters of data, on https://data.Medicare.gov or its successor 
website, before publishing it on Hospital Compare, or its successor 
website. The Data.Medicare.gov website or its successor website, 
provides the public with access to downloadable datasets to ensure the 
information is publicly available, but does not offer side-by-side 
comparison capabilities like Hospital Compare or its successor website, 
without additional data management by the user. As more eCQM data are 
progressively reported, we will then display the additional information 
on the Hospital Compare website, or its successor website, where more 
direct comparisons of hospital performance will be available. We 
believe these finalized policies address the commenters' concerns while 
providing flexibility for hospitals and their vendors to build upon and 
utilize investments in their EHRs.
    Comment: Several commenters did not support our proposal to 
publicly report eCQM data for the CY 2021 reporting period and to 
provide hospitals the opportunity to review the data. These commenters 
recommended a dry run with one quarter and two quarters of data to 
enable hospitals to preview their performance and national comparison 
data confidentially before the data are made public. Commenters 
recommended CMS conduct reliability analyses to determine the minimum 
volume of cases needed for public reporting and make the analyses 
public, provide clear information about how data will be presented to 
the public, and provide information on the process to dispute publicly 
accessible data.
    Response: We thank the commenter for their comments. We interpret 
the term ``dry run'' to reference the dry run provision in the 
Blueprint for the CMS Measures Management System, used in the first use 
of a measure in a CMS program or first results reporting.\509\ We do 
not believe a dry run before the start of public reporting is necessary 
and have determined that the eCQM data are accurate enough to begin 
reporting. In addition, hospitals would have the opportunity to preview 
their eCQM data before they are made public, as required by section 
1886(n)(4)(B) the Act, during a 30-day preview period.
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    \509\ See Blueprint for CMS Measures Management System, https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Blueprint.pdf.
---------------------------------------------------------------------------

    We thank commenters for their recommendations to conduct measure 
reliability analyses to determine the minimum number of cases needed 
for public reporting. Validation of CY 2017 and CY 2018 data has shown 
that a majority of eCQM data was reported with agreement rates of 80 
percent or higher. We refer readers to section VIII.A.10 of this final 
rule where this is discussed in more detail.
    Comment: Several commenters opposed publishing eCQM data on 
Hospital Compare citing concerns about data context as it pertains to 
safety net hospitals.
    Response: We thank commenters for their feedback concerning the 
eCQM data as it pertains to safety net hospitals. We plan to monitor 
the initiation of public reporting of eCQM data and welcome continued 
feedback from all stakeholders through webinars, listservs, and help 
desk questions. We will continue to monitor trends in performance, 
including that of safety net hospitals.
    After consideration of the public comments we received, we are 
finalizing our proposal to begin publicly reporting eCQM data submitted 
by eligible hospitals and CAHs for the Promoting Interoperability 
Program, beginning with the eCQM data reported for the CY 2021 
reporting period and for subsequent years, and we expect to begin 
publicly reporting the data in the Fall of CY 2022. Hospitals will have 
the opportunity to review their eCQM data before it is made public, as 
required by section 1886(n)(4)(B) of the Act, during a 30-day preview 
period.
7. Technical Corrections to the Regulations
a. Corrections to Regulations for Puerto Rico Eligible Hospitals 
Participating in the Medicare Promoting Interoperability Program
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41673 and 41674), we 
amended Sec.  495.104(c)(5) to specify transition factors under section 
1886(n)(2)(E)(i) of the Act for the

[[Page 58977]]

incentive payments for Puerto Rico eligible hospitals. Although our 
preamble discussion of the transition factors was accurate (83 FR 41673 
and 41674), our amendments to the regulation text included inadvertent 
technical errors. Specifically, under Sec.  495.104(c)(5)(viii), we 
inadvertently included FY 2018 twice and omitted FY 2021 (83 FR 41710 
and 41711). We proposed to correct these errors in the FY 2021 IPPS/
LTCH PPS proposed rule (85 FR 32857) by revising Sec.  
495.104(c)(5)(viii) to specify the correct transition factors for FYs 
2018 through 2021 as follows:
     1 for FY 2018.
     3/4 for FY 2019.
     1/2 for FY 2020.
     1/4 for FY 2021.
b. Corrections to Regulatory Citations
    In prior rulemaking, we adopted regulatory text at Sec.  495.20 
which cross-references ONC's certification criteria under 45 CFR 
170.314. We recently identified two typographical errors in Sec.  
495.20: specifically, paragraphs (e)(5)(iii) and (l)(11)(ii)(C)(1) 
should have cross-referenced provisions of 45 CFR 170.314, but instead 
certain numbers were inadvertently transposed in the cross-references. 
Therefore, in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32857 
through 32858), we proposed to revise Sec. Sec.  495.20(e)(5)(iii) and 
(l)(11)(ii)(C)(1) to correct these errors.
    We received no comments on these proposals and are finalizing the 
proposed revisions to Sec.  495.104(c)(5)(viii) and Sec. Sec.  
495.20(e)(5)(iii) and (l)(11)(ii)(C)(1) as proposed.
8. Future Direction of the Medicare Promoting Interoperability Program
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32858), we 
solicited public comment on several areas involving the Promoting 
Interoperability Program. This included reducing administrative burden, 
supporting continued alignment with the Quality Payment Program, 
supporting alignment with the 21st Century Cures Act final rule, 
advancing interoperability and the exchange of health information, and 
promoting innovative uses of health IT. We also solicited public 
comment on potential areas of overlap including: information blocking, 
transitioning from the Common Clinical Data Set (CCDS) to the United 
States Core Data for Interoperability (USCDI), finalization of a new 
certification criterion for a standards-based API using FHIR, and other 
updates to 2015 Edition health IT certification criteria and the ONC 
Health IT Certification Program. In maintaining our focus on how 
promoting interoperability, alignment, and simplification will reduce 
health care provider burden while allowing flexibility to pursue 
innovative applications that improve care delivery, we further 
solicited comment on how Medicare can best support these areas of 
overlap.
    Although we are not summarizing and responding to the comments we 
received in this final rule, we would like to bring attention to ONC's 
21st Century Cures Act final rule (85 FR 25642 through 25961), 
specifically, the finalized updates to the 2015 Edition certification 
criteria and the ONC Certification Program. As these updates impact 
certification criteria referenced in the CEHRT definitions for the 
Promoting Interoperability Program and the MIPS Promoting 
Interoperability performance category, we proposed to align with these 
updates in the CY 2021 PFS proposed rule (85 FR 50265 through 50272), 
where we invite our readers to review and provide public comment.
    We would like to thank commenters for the feedback, support, and 
responses we have received. We will continue to take all feedback into 
account as we develop future policies for the Promoting 
Interoperability Program.

IX. Changes for Hospitals and Other Providers

A. Changes in the Submission of Electronic Patient Records to 
Beneficiary and Family Centered Care Quality Improvement Organizations 
(BFCC-QIOs)

1. Background
    CMS' Quality Improvement Organization (QIO) Program is part of the 
HHS' national quality strategy for providing quality and patient 
centered care to Medicare beneficiaries. The mission of the QIO Program 
is to improve the effectiveness, efficiency, economy, and quality of 
services delivered to Medicare beneficiaries. We identify the core 
functions of the QIO Program as: (1) Improving quality of care for 
beneficiaries; (2) protecting the integrity of the Medicare Trust Fund 
by ensuring that Medicare pays only for services and goods that are 
reasonable and necessary and that are provided in the most appropriate 
setting; and (3) protecting beneficiaries by expeditiously addressing 
individual concerns (such as beneficiary complaints, provider-based 
notice appeals, violations of the Emergency Medical Treatment and Labor 
Act (EMTALA), and other related responsibilities). The QIO Program is 
an important resource in our effort to improve quality and efficiency 
of care for Medicare beneficiaries.
    A QIO is an organization comprised of health quality experts, 
clinicians, and consumers organized to improve the quality of care 
delivered to people with Medicare. QIOs work under the direction of 
CMS, to improve the quality of healthcare for all Medicare 
beneficiaries, and to support the Medicare program.
    Current law authorizes the QIOs to have access to the records of 
providers, suppliers, and practitioners under Medicare in order to 
perform their functions. For example, section 1154(a)(7)(C) of the Act 
requires QIOs, to the extent necessary and appropriate, to examine the 
pertinent records of any practitioner or provider of health care 
services that is providing services for which payment may be made under 
the Medicare program. Section 1156(a)(3) of the Act requires that any 
person who provides health care services payable under Medicare assure 
that services or items ordered or provided are supported by evidence of 
the medical necessity and quality as may reasonably be required by a 
reviewing QIO in the exercise of its responsibilities. Our regulations 
at 42 CFR 476.78(b) provide that health care providers that submit 
Medicare claims must cooperate in the assumption and conduct of QIO 
reviews. Under 42 CFR 476.78(b)(2), providers (defined broadly to 
include any health care facility, institution, or organization involved 
in the delivery of Medicare-covered services) and practitioners 
(defined broadly to include an individual credentialed within a 
recognized health care discipline and involved in providing the 
services of that discipline to patients) must provide patient care data 
and other pertinent data to the QIO when the QIO is collecting review 
information. In practice, this typically includes providing the QIO 
with copies of medical records for Medicare beneficiaries. In addition, 
under 42 CFR 480.111, QIOs are authorized to have access to and obtain 
records and information pertinent to the health care services furnished 
to Medicare patients, held by any institution or practitioner in the 
QIO area; QIOs may require the institution or practitioner to provide 
copies of such records or information to the QIO. In some cases, this 
access to information may include information from the records of non-
Medicare patients.
    While Sec.  480.111 does not explicitly require submission of 
electronic patient

[[Page 58978]]

records, the current regulation at Sec.  476.78(b)(2)(ii) requires 
providers and practitioners to send patient records in electronic 
format, if available, and subject to the QIO's ability to support 
receipt and transmission of the electronic version of patient records. 
The changes included in this final rule will make electronic submission 
the default method of submission, mandating all providers and 
practitioners who provide patient records to the QIO to submit them in 
electronic format unless they have an approved waiver. Providers and 
practitioners would be required to deliver patient records within 14 
calendar days of a request. We believe the QIOs have developed the 
capability to securely receive and transmit medical patient records in 
electronic format, such that requiring submission of requested patient 
records in electronic format by providers and practitioners who has the 
capability is now reasonable. This is demonstrated by the fact that 
QIOs currently submit case files and patient records to the 
Departmental Appeals Board (DAB) and the Office of Medicare Hearings 
and Appeals (OMHA) electronically. Based on these facts, it is now 
evident that all QIOs are able and capable of receiving and sending 
patient records in electronic format.
    In 2011, we established the Medicare and Medicaid EHR Incentive 
Programs (now known as the Promoting Interoperability programs) to 
encourage eligible professionals, eligible hospitals, and critical 
access hospitals (CAHs) to adopt, implement, upgrade, and demonstrate 
meaningful use of certified electronic health record technology 
(CEHRT). Beginning in 2019, all eligible professionals, eligible 
hospitals, and CAHs are required to use CEHRT to meet the requirements 
of the Medicare and Medicaid Promoting Interoperability Programs. 
Requirements for eligible hospitals, and CAHs that submit an 
attestation to CMS under the Medicare Promoting Interoperability 
Program were updated in the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41634 through 41677). Based on the National Center for Health 
Statistics' 2017 National Electronic Health Records Survey, 97 percent 
of hospitals and 80 percent of office based physicians have adopted 
certified EHRs. The use of certified EHRs would enable healthcare 
providers to electronically submit patientrecords to the QIOs. See: 
https://www.cdc.gov/nchs/fastats/electronic-medical-records.htm.
    In Sec.  476.1, ``provider'' is defined as a health care facility, 
institution, or organization, including but not limited to a hospital, 
involved in the delivery of health care services for which payment may 
be made in whole or in part under Title XVIII of the Act. The term 
``practitioner'' means an individual credentialed within a recognized 
health care discipline and involved in providing the services of that 
discipline to patients. The regulations define ``QIO review'' as a 
review performed in fulfillment of a contract with CMS, either by the 
QIO or its subcontractors. The definitions specific to 42 CFR part 480 
do not explicitly define the terms institution or practitioner but the 
context makes it clear that these terms are references to health care 
providers that are facilities and individual practitioners. The changes 
we are implementing in this final rule address submissions of patient 
records by all types of health care providers to QIOs and reimbursement 
for those submissions.
2. Changes
    In this final rule, we amend Sec. Sec.  412.115, 413.355, 476.78, 
480.111, and 484.265 to mandate providers and practitioners submit 
patient records to Beneficiary and Family Centered Care Quality 
Improvement Organizations (BFCC-QIOs) in an electronic format. This 
proposal would also update the procedures and reimbursement rates for 
patient records providers and practitioners furnish to QIOs. We define 
the term ``patient record'' at Sec.  476.78(e)(1) as all patient care 
data and other pertinent data or information relating to care or 
services provided to an individual patient, in the possession of the 
provider or practitioner, as requested by a BFCC-QIO for the purpose of 
performing one or more QIO functions. Providers in this context would 
include an institution. As discussed in more detail later in this 
section, we understand that QIOs request and receive primarily (if not 
only) records and information that is about or related to the health 
care provided to specific individuals. This broad definition would 
include any information relevant or pertinent to a particular 
individual (or services or Medicare-covered benefits provided to an 
individual) that is requested by a QIO is part of the patient record 
for that individual, even if the information is not necessarily part of 
what is traditionally understood as a medical record. We received no 
public comment on this definition of the term ``patient record'' and 
how we use the term defined this way as the basis for reimbursement for 
submission of electronic patient records.
    Under section 1866(a)(1)(F) of the Act, CMS is required to 
reimburse hospitals for the cost of providing patient records to the 
QIOs for QIO functions as discussed in this final rule. Based on 
similar requirements applicable to other providers and the history of 
litigation related to this provision, we subsequently applied this 
requirement to additional providers and suppliers under Medicare. The 
provisions governing reimbursement for sending patient records to the 
QIOs is codified at 42 CFR 476.78 and 42 CFR 480.111. In this final 
rule, we are finalizing the following changes to the reimbursement 
requirements:
     Patient records that are required to be provided to a QIO 
under Sec.  476.78(b)(2) must be delivered in electronic format, unless 
a QIO approves a waiver. Providers and practitioners who lack the 
capability to submit patient records in an electronic format may only 
submit patient records by facsimile or photocopying and mailing, after 
the QIO approves a waiver. Initial waiver requests by those providers 
that are required to execute a written agreement with a QIO are 
expected to be made at the time the provider executes a written 
agreement with the QIO. Other providers and practitioners who are not 
required to execute a written agreement with a QIO may request a waiver 
by giving the QIO notice of their lack of capability to submit patient 
records in electronic format.
     We establish reimbursement rates of $3.00 per patient 
record that is submitted to the QIO in electronic format and $0.15 per 
page for requested patient records submitted by facsimile or by 
photocopying and mailing (plus the cost of first class postage for 
mailed photocopies), after a waiver is approved by the QIO.
     We establish that these reimbursement rates are applicable 
to patient records submitted to a QIO in accordance with Sec. Sec.  
412.115, 413.355, 476.78, 480.111, and 484.265.
    We believe these changes bring the procedures and associated 
reimbursement rates for submission of patient records to a QIO up to 
date with CMS policies for promoting use of electronic health records 
and burden reduction.
    These changes are applicable to all providers and practitioners 
providing patient records to QIOs for purpose of QIO reviews under 
Sec.  476.78. In addition, these requirements are applicable to 
institutions and practitioners submitting records and information to 
the QIOs in accordance with Sec.  480.111. Specifically, such

[[Page 58979]]

institutions and practitioners must conform with the requirement 
applicable to providers and practitioners under Sec.  476.78(c) and 
(d). By the cross-references in the amended regulation text, we permit 
reimbursement by the QIOs to institutions and practitioners for 
providing records and information to the QIOs under Sec.  480.111 using 
the same manner and rates as would apply to providers and practitioners 
under Sec.  476.78(e). To align with these and other changes, we also 
amend other regulations that address submitting patient records for QIO 
reviews, specifically: Sec. Sec.  412.115, 413.355, and 484.265. We 
address these changes individually in this section of the document.
    We proposed in Sec. Sec.  412.115(c), 413.355, and 484.265 to 
revise the current text which provides for an additional payment to be 
made, respectively, to hospitals, skilled nursing facilities and home 
health agencies in accordance with Sec.  476.78 for the costs of 
photocopying and mailing medical records requested by a QIO. 
Specifically, we proposed to revise these provisions to permit an 
additional payment to a hospital, skilled nursing facility, or home 
health agency in accordance with Sec.  476.78 for the costs of sending 
requested patient records to the QIO in electronic format, by 
facsimile, or by photocopying and mailing. These changes ensure that 
reimbursement is permitted for all healthcare providers and 
practitioners, on the same basis and at the same rates as authorized 
for the submission of requested patient records to the QIO under our 
proposed revisions to Sec.  476.78.
    The previously adopted regulation at Sec.  476.78(c) described a 
photocopying reimbursement methodology for prospective payment system 
providers and included a step-by-step analysis of how CMS calculates 
provider costs of photocopying. We believe that including this 
description of how CMS determines a rate for reimbursement for 
photocopying patient records is no longer necessary in light of changes 
in technology and procedure, and proposed to remove the step-by-step 
analysis from Sec.  476.78(c). We expect that up to 20 percent of 
providers will seek waivers allowing them to submit patient records by 
facsimile or photocopying and mailing if CMS authorizes reimbursement 
for the submission of patient records in an electronic format, and that 
that number would decrease further over time. This estimate of the 
number of affected entities that will submit waiver requests is based 
on the fact that according to the 2017 Office of National Coordinator 
(ONC) and Center for Disease Control (CDC) provider and practitioner 
survey of EHR adoption and use of Certified EHR technology, 99 percent 
of hospitals and 76 percent of office based clinicians have adopted 
certified EHR technology. See: https://www.cdc.gov/nchs/fastats/electronic-medical-records.htm.
    This assumption is further supported by the number of providers 
that currently have access to CMS's esMD portal, which eliminates the 
need for healthcare providers to submit medical documentation to CMS's 
medical review contractors (such as QIOs and Regional Audit 
Contractors) by facsimile or photocopying and mailing. Therefore, we 
expect that future updates to the calculation of photocopying 
reimbursement rate would be of decreasing concern to the majority of 
stakeholders.
    At Sec.  476.78(c), we proposed that information that is required 
to be delivered to a QIO by a provider or a practitioner under Sec.  
476.78 must be delivered in an electronic format using a mechanism 
specified by the requesting QIO. We proposed that in the absence of a 
mechanism specified by the requesting QIO, the requested records may be 
submitted using any CMS approved secure mechanism. This includes 
mechanisms such as: secure file transfer (SFT), managed file transfer 
(MTF), Electronic Submission of Medical Documentation System (esMD), or 
CMS-approved internet portal, or CMS-approved physical medium for 
submitting electronic records. Under our proposal, CMS will provide a 
list of approved mechanisms for submission of records and information 
to the QIO in an electronic format when the QIO contacts the provider 
to conduct a review, or when a written agreement between the QIO and 
provider is executed. We proposed to address the amount of 
reimbursement in new paragraph (e) of Sec.  476.78, as discussed later 
in this section. CMS would not permit the QIOs to reimburse for any 
patient record submitted by facsimile or by photocopying and mailing, 
if the provider or practitioner in question does not have an approved 
waiver.
    We proposed to redesignate existing Sec.  476.78(d) as Sec.  
476.78(f), with revisions to be consistent with our proposed 
reimbursement rates. We proposed to create a new provision at Sec.  
476.78(d) to establish a process for practitioners and providers to 
request waivers of the requirements for the electronic submission of 
requested patient records to the QIOs under proposed Sec.  476.78(c). A 
QIO-approved waiver would afford a provider or practitioner who is not 
capable of submitting patient records to its QIO in an electronic 
format the opportunity to continue submitting patient records using 
facsimile or by photocopying and mailing. We proposed that providers 
who are required to execute a written agreement with a QIO, but which 
lack the capability to submit requested patient records in electronic 
format to the requesting QIO, must request a waiver of the requirement 
to submit records in an electronic format to the QIO. A request for a 
waiver by providers who are required to execute a written agreement 
with the QIO, must generally be made to the QIO when executing a 
written agreement with the QIO. However, where such a provider's lack 
of capability arises after the written agreement is executed, we 
proposed that the provider could request a waiver by notifying the QIO 
that they lack the capability to submit patient records in electronic 
format. We also proposed, at Sec.  476.78(d)(2)(ii), that the waiver 
would become part of the written agreement between the QIO and the 
provider. Upon approval of a waiver, a provider or practitioner may 
submit requested patient records by facsimile or photocopying and 
mailing. We note that the current regulations do not specifically 
provide for reimbursement for patient records submitted to the QIO by 
facsimile, but in order to encourage efficiency in patient record 
transmission, CMS has historically interpreted the provisions governing 
reimbursement for patient records submitted to the QIOs through 
photocopying and mailing to also authorize reimbursement for the 
submission of patient records by facsimile. We proposed to specifically 
incorporate our historic interpretation into the regulatory framework. 
We solicited comment on these proposals, including the requirement that 
the request for a waiver must generally be made during execution of the 
written agreement.
    Similarly, we proposed that providers, practitioners and 
institutions subject to Sec.  476.78 or Sec.  480.111 that are not 
required to execute a written agreement with the QIO, may also request 
a waiver of the requirement to submit records in electronic format to 
the QIO, by notifying the QIO that they lack the capability to submit 
patient records in an electronic format. Upon approval of the waiver, a 
provider or practitioner may submit requested patient records and 
information by photocopying and mailing. We solicited comment on this 
proposal, including

[[Page 58980]]

whether the regulation should require a written record of the waiver.
    We proposed to establish these waiver processes because we 
recognize that some practitioners and providers may lack the capacity 
to submit records to the QIOs in an electronic format. However, these 
providers and practitioners are still required to comply with QIO 
requests for records. We believe the waiver request process would not 
add extra burden on the providers and practitioners because they can 
request a waiver simply by notifying the QIO that they lack the 
capability to submit patient records in an electronic format, either 
when executing a written agreement with the QIO in accordance with 
Sec.  476.78(a) or when they are contacted by the QIO to request 
patient records. Under our proposal, such waiver requests could be made 
by whatever means the provider or practitioner uses to communicate with 
the QIO. We invited comment on these proposals.
    We also proposed to add a new paragraph (e) to Sec.  476.78. In 
Sec.  476.78(e)(1), we proposed a definition of the term ``patient 
record'' for purposes of reimbursement for submitting patient records 
to the QIO for one or more QIO functions. In Sec.  476.78(e)(2), we 
proposed to authorize QIOs to reimburse providers and practitioners for 
submitting patient records, requested by a QIO for the purpose of 
carrying out one or more QIO functions with the proposed rates of 
reimbursement based on the electronic format of submission. The QIOs 
could not reimburse for any patient record submitted by facsimile or by 
photocopying and mailing without an approved waiver. Each of these 
reimbursement rates were calculated to reflect the costs associated 
with submitting a patient record, including labor and supplies. 
Proposed Sec.  476.78(e)(2) would provide that a QIO could reimburse a 
provider or practitioner for requested patient records submitted in an 
electronic format, at the rate of $3.00 per record. We proposed that 
Sec.  476.78(e)(3) will provide that a QIO may reimburse a provider or 
practitioner, with an approved waiver in place, for requested patient 
records submitted by facsimile or photocopying and mailing at the rate 
of $0.15 per page, plus the cost of first class postage for patient 
records submitted via photocopying and mailing. We discuss the 
methodology, we proposed to use to calculate these payment rates in 
section IX.A.2.b. of the preamble of this final rule.
    For purposes of QIO reimbursement under Sec.  476.78(e), we 
proposed to define a ``patient record'' at Sec.  476.78(e)(1) as all 
patient care data and any other pertinent data or information relating 
to care or services provided to an individual patient in the possession 
of the provider or practitioner, as requested by a QIO, for the purpose 
of performing one or more QIO functions. We proposed to interpret and 
use this definition of patient record broadly. For example, this 
definition of ``patient record'' would include the policies and 
established operating procedures of a health care provider, to the 
extent that that information is pertinent to an individual patient or 
the services or Medicare-covered benefits provided to an individual 
patient, and the QIO requests that information. We also proposed at 
Sec.  476.78(e)(4) that the QIOs will only be permitted to reimburse a 
practitioner or providers once for each patient record submitted, for 
each request made by a QIO. Each request from a QIO would be reimbursed 
separately at the rates specified in Sec.  476.78(e), including for 
records that had already been provided in response to a previous 
request. However, only one reimbursement would be provided by the QIO 
for each patient record submitted, per request, even if a particular 
patient record is submitted to the QIO using multiple different 
formats, in fragments, or more than once in response to a particular 
request.
    We proposed to revise the requirements applicable to institutions 
and practitioners submitting records and information to the QIOs in 
accordance with Sec.  480.111. Specifically, we proposed to require 
such institutions and practitioners to conform with the requirement 
applicable to providers and practitioners under Sec.  476.78(c) and 
(d). By the cross-references in the regulation text, we proposed to 
permit reimbursement by the QIOs to institutions and practitioners for 
providing records and information to the QIOs under Sec.  480.111 in 
the same manner and rates as would apply to providers and practitioners 
under proposed Sec.  476.78(e). In our proposal, the reimbursement 
rates proposed under Sec.  476.78(e) will also apply to institutions 
and practitioners subject to Sec.  480.111. We proposed to replace the 
current language inSec.  480.111(d) governing the reimbursement by the 
QIO for requested patient records with a provision that refers to the 
reimbursement rates in Sec.  476.78(e).
    Therefore, if these changes are finalized, reimbursement for 
patient records submitted under Sec.  480.111 would be consistent with 
reimbursement under Sec.  476.78. This proposal would provide a 
consistent level of reimbursement from submission of patient records to 
the QIOs, across all health care providers and practitioners, that 
submit patient records to the QIO under Sec. Sec.  476.78 and 480.111. 
The goal of our proposal was to put all QIO reimbursement for patient 
records in the same section of the regulations, so that QIOs, 
providers, and practitioners know where to find the relevant 
provisions. This proposal would also help to reduce the risk of 
inconsistencies in policy application due to duplication of related QIO 
regulations in multiple sections.
    We received no comments on the definition of the term ``patient 
record'' for purposes of reimbursement by a QIO at 476.78 (e)(1) when 
submitted for one or more required QIO activities; the requirement for 
QIOs to reimburse providers and practitioners once per request for the 
submission of a patient record at 476.78 (e)(4). We are finalizing 
these changes as proposed without modification.
    We proposed redesignating the existing provisions previously under 
Sec.  476.78 (d) to a new paragraph: Sec.  476.78(f). We proposed 
revisions to the text of proposed redesignated Sec.  476.78(f) to 
provide greater consistency with our proposed reimbursement 
requirements; the proposed revisions to Sec.  476.78(b)(2)(ii) to make 
electronic submission the default method of submission and mandate that 
all providers and practitioners who provide patient records to the QIO 
to submit them in electronic format within 14 calendar days of a 
request, unless they have an approved waiver. In addition, the 
requirements for submitting patient records to the QIO in an electronic 
format unless they obtain an approved waiver from the QIO and the 
ability for the QIO to reimburse providers for electronic submission of 
patient records are applicable to all providers and practitioners under 
Sec. Sec.  412.115, 413.355; 476.78, 480.111, and 484.265. Accordingly, 
we are finalizing these provisions as proposed, without modification.
a. Required Submission of Patient Records in Electronic Format to the 
QIO, and Process for Obtaining a Waiver From Required Submission in 
Electronic Format
    Currently Sec.  476.78 requires providers and practitioners who are 
subject to QIO review activities under 42 CFR part 476 to submit 
requested patient care data and other pertinent data and information to 
the QIO. We proposed to require those submissions be made in electronic 
format in revised Sec.  476.78(c).

[[Page 58981]]

We proposed to require electronic submission because it is more 
efficient, cost effective, and timely. Based on our comparison of 
patient record submission in electronic format and submission by 
facsimile and photocopying and mailing we expect a savings of about 
$71.8 million to CMS over 5 years. These savings represent an estimated 
combination of $37.6 million cost savings from reimbursement to 
providers for sending patient records via facsimile, photocopying and 
mailing, and $34.2 million cost saving from payment to QIOs to cover 
the costs for scanning and uploading paper based patient records.
    Currently, Sec.  476.78(b)(2)(ii) requires providers and 
practitioners send secure transmission of an electronic version of 
medical information to the QIO, if available, and subject to the QIO's 
ability to support receipt and transmission of the electronic version 
of patient records. Because most providers and all QIOs have 
demonstrated the ability to send and receive patient records in 
electronic format, we proposed to mandate providers and practitioners 
to submit requested patient records and information to the QIO in 
electronic format.
    Our interoperability programs, quality reporting programs, and 
other programs are now requiring electronic submission of patient care 
data and information to CMS and its contractors. The Promoting 
Interoperability program has been successful in encouraging widespread 
adoption of EHRs by providers and practitioners. By participation in 
these CMS data transfer programs, providers, practitioners, and QIOs 
have demonstrated the capability to collect, store, and safely transmit 
EHR data electronically. Based on our years of experience administering 
the Medicare and Medicaid EHR Incentive and Promoting Interoperability 
programs, we believe that most providers and practitioners are now able 
to safely communicate patient's medical records electronically to QIOs. 
This is evidenced by the increased number of providers, practitioners, 
and QIOs that currently participate in the use of esMD, Managed File 
Transfer (MFT), and other related electronic data communication 
methods.
    On September 15, 2011, we implemented the esMD system for programs 
requiring the review of medical documentation and patient records such 
as: Medicare Fee for service payment appeals, prior authorization 
requests, and durable medical equipment requests. The esMD system is 
used by providers on a voluntary basis to transmit medical 
documentation to review contractors electronically. This medical 
documentation (including patient records) is used by CMS contractors to 
review claims and to verify providers' compliance with Medicare rules 
for documentation and payment. Medicare providers and review 
contractors believe that using the esMD system results in cost savings 
and increased efficiencies, as well as improve payment turnaround time, 
and reduce the administrative burden associated with medical 
documentation requests and responses. By 2017, about 60,579 providers 
had access and used esMD to send medical records, and up to 2.5 million 
medical records were transmitted from providers to Medicare 
contractors. See 2017 esMD Annual Report: https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/ESMD/Downloads/2017-esMD-Annual-Program-Report-10-01-2016-09-30-2017.pdf.
    Managed File Transfer (MFT) refers to a software or a service that 
manages the secure transfer of data from one computer to another 
through a network (for example, the internet). MFT software is marketed 
to corporate enterprises as an alternative to using ad-hoc file 
transfer solutions. MFT is currently available to providers and 
practitioners, and QIOs currently use MFT to transmit data to its 
clinical peer reviewers. MFT provides another good option for providers 
and practitioners to submit records and information securely to QIOs.
    Given numerous improvements in electronic data communication 
capabilities among both providers and QIOs, and the expansion in access 
to electronic data communication technology, we believe it is in the 
best interest of the Medicare program for CMS to support electronic 
data communication between the QIOs and providers and practitioners. We 
proposed to require providers and practitioners to provide patient 
records to the QIO electronically beginning in FY 2021 and for 
subsequent years. Our proposal provided for a waiver for providers and 
practitioners that lack the capability to submit patient records in 
electronic format. Lacking the capability to submit patient records in 
electronic format may have a number of causes, such as the records not 
being in an electronic format or readily convertible to an electronic 
format or the provider or practitioner suffering a loss of the 
necessary resources to submit records through the QIO-approved or CMS-
approved mechanism (such as because of a power outage). The intent of 
this policy change is to incentivize health care providers and 
practitioners subject to Sec.  476.78 to use the most efficient 
mechanisms available to submit required data to the QIOs for review 
activities, in order to minimize the time and expense required to 
satisfy their responsibilities under Sec.  476.78(b), and thereby 
minimize the expense CMS incurs in the administering the QIO program. A 
complete discussion of the anticipated impact of these proposals can be 
found section I.H.11. of Appendix A to this final rule.
    We received no comments on our proposal to require providers and 
practitioners to submit patient records in an electronic format under 
Sec.  476.78 (c) unless they have an approved waiver from a QIO 
pursuant to Sec.  476.78(d); the process for providers and 
practitioners to obtain a waiver from the requirement to submit patient 
records to the QIO in an electronic format under Sec.  476.78(d); and 
the applicability of these requirements to providers practitioners and 
institutions under Sec. Sec.  412.115, 413.355; 476.78, 480.111, and 
484.265.
    We proposed to permit providers and practitioners who cannot submit 
requested patient records and information in electronic format to 
request a waiver under Sec.  476.78(d). Under our proposal, any 
provider or practitioner that lacks the capability to submit patient 
records and information to the QIO in electronic format must obtain a 
waiver to be exempted from the requirement of submitting patient 
records and information in electronic format. Upon approval of the 
waiver, the provider or practitioner can submit requested patient 
records and information to QIO by facsimile or first class mail. We 
also proposed that requests for waivers by providers that are required 
to execute a written agreement with the QIO must generally be made to 
the QIO when executing the written agreement. Those providers and 
practitioners that are not required to execute a written agreement with 
the QIO may request a waiver to be exempted from submitting patient 
records in electronic format by notifying the QIO that they lack the 
capability to submit patient records in electronic format.
    After the waiver is approved a provider or practitioner may send 
requested patient records and information by facsimile or first class 
mail. The QIOs may reimburse providers and practitioners with approved 
waivers for requested patient records submitted by facsimile or by 
photocopying and mailing, as proposed in Sec.  476.78(e)(3). We 
proposed that a waiver would be approved by the QIO after the provider 
or practitioner has

[[Page 58982]]

demonstrated that it lacks the capability to submit patient records in 
an electronic format. Under our proposal, reimbursement would not be 
permitted for any patient record submitted to the QIO by facsimile or 
by photocopying and mailing, when the provider or practitioner does not 
have an approved waiver.
    We received no comments on the proposed waiver process at Sec.  
476.78(d) for exempting providers and practitioners from the 
requirement to submit patient records to the QIO in an electronic 
format, or on limiting reimbursement of providers and practitioners 
under Sec.  476.78(e)(3) for the submission of patient records to the 
QIO through photocopying and mailing or by facsimile to circumstances 
in which a provider or practitioner has obtained an approved waiver 
from the electronic submission requirements under Sec.  476.78(d). As a 
result, we are finalizing the proposed changes at Sec.  476.78(d) and 
Sec.  476.78(e)(3) without modification.
b. Reimbursement for Submission of Patient Records to the QIOs in 
Electronic Format
    We proposed at Sec.  476.78(e)(2) to authorize the QIOs to 
reimburse providers and practitioners, for submitting requested patient 
records to the QIO in an electronic format, starting in FY 2021. The 
regulation previously did not authorize or set a rate for reimbursement 
when providers submit patient records to the QIOs in an electronic 
format. We believe the lack of reimbursement for the submission of 
requested patient records in an electronic format discouraged providers 
and practitioners from sending patient records in an electronic format, 
which is a more efficient and cost effective method for transmitting 
patient records than facsimile or photocopying and mailing. This lack 
of reimbursement for electronic submission of patient records did not 
align with other CMS programs and policies that seek to incentivize the 
use of electronic records and the electronic transmission of 
information such as the Promoting Interoperability Program. We believe 
this change in regulation, allowing QIOs to reimburse providers and 
practitioners for submitting patient records in electronic format, 
would encourage more practitioners and providers to do so.
    In calculating the rate of reimbursement for submission of patient 
records in an electronic format, we took into consideration the labor 
rate and materials cost associated with submitting patient records in 
an electronic format. We proposed to follow steps similar to those used 
in CMS' methodology for calculating reimbursement for photocopying 
patient records for the QIOs. We calculated the proposed reimbursement 
rate for patient records submitted in electronic format as follows:
     Step 1--Calculate total salary of a medical records clerk, 
including fringe benefits, using the salary level for an experienced 
midlevel (GS-5 step 5) secretary in the Federal government as 
representative of that of a medical records clerk.
     Step 2--Calculate labor costs associated with searching 
for, downloading, and submitting electronic records.
     Step 3--Determine the number of patient records that can 
be searched, retrieved, processed, and submitted per hour.
     Step 4--Calculate the cost of active productive time of a 
medical record clerk by dividing annual salary with total productive 
hours, taking into account time spent at rest, and away from work.
     Step 5--Calculate total reimbursement for submitting 
patient records to the QIOs in electronic format by dividing the total 
productive hour cost by the total number of patient records we estimate 
a medical records clerk can process in 1 hour.
    Using this methodology, we calculated the reimbursement for 
submitting records electronically to QIO as follows:
(1) The Labor Costs Associated With Searching for, Downloading, and 
Submitting Patient Records
    Labor costs were calculated by adding the annual salary of a 
medical records clerk with the costs of fringe benefits, and dividing 
that sum with the number of patient records that can reasonably be 
expected to be processed in a year.
    In this final rule, we will continue to use the salary of a Federal 
GS-5 midlevel secretary as representative of a medical records clerk's 
salary. We will take into account increases in the payment rate for a 
midlevel secretary in the federal government for the CY 2020. Using the 
salary level for an experienced midlevel (GS-5 step 5) secretary in the 
Federal government as representative of that of a medical records 
clerk, the annual salary of the medical records clerk is estimated to 
be $39,573 according to the Office of Personnel Management's 2020 
General Schedule pay scale, with locality adjustment for the rest of 
the United States. In calculating the fringe benefits applicable to a 
medical records clerk, we used OMB Circular A-76 to calculate the 
annual fringe benefit cost, based on 36.25 percent of the GS-5 salary. 
The estimated annual fringe benefit cost is therefore $14,345 ($39,573 
* 36.25 percent). Adding the fringe benefit cost, the estimated total 
annual salary of a medical records clerk is $53,918. Assuming a full 
time equivalent of 2080 hours per year and divide the annual salary by 
the number of hours worked ($53,918/2080 hours) in a year, the total 
salary per hour of a medical records clerk would be $26 per hour.
(2) Labor Costs Associated With Searching for, Downloading, and 
Submitting Patient Records
    We assume that an average patient record request by QIO will be 
contained in a single electronic file that can be classified as one 
electronic record. This assumption is based on CMS' experience with 
current QIO transfer of electronic patient records to OMHA and the DAB. 
We estimated that it will take a medical record clerk an average of 5 
minutes to search, retrieve, process, and submit a requested patient 
record in electronic format. Using this estimate we calculate that a 
medical records clerk could search for, retrieve, process, and 
submitted a total of 12 medical records per hour.
(3) Active Productive Time of a Medical Record Clerk
    We estimate a medical records clerk is active and productive for a 
total of 1,430 hours per year (about 5.5 productive hours per day). We 
took into account the time spent by the medical records clerk at rest 
and lunch, and time away from work on annual vacation, sick, and 
holiday leave. To calculate the cost of one active productive hour we 
divide the estimated cost for annual salary and fringe benefits by the 
total number of active productive hours per year. We estimated the cost 
of one active productive hour at $38 per hour ($53,918/1430 hours).
(4) Cost of Supplies
    We estimated that there would be no cost for supplies directly 
attributable to searching, downloading, and submitting patient records 
to the QIO.
(5) Total Reimbursement Rate for Submitting Patient Records to the QIOs 
in an Electronic Format
    We estimated total cost for submitting a patient record to the QIO 
at $3 per record. This calculation was derived by dividing the total 
productive hour cost of $38 by the number of patient records that can 
processed in an hour, which is 12 records ($38/12 records = 3.17).

[[Page 58983]]

Consistent with our policy and generally accepted mathematics 
principles, we chose to round our calculations to nearest decimal. We 
believe this decision is both reasonable and supportable.
    We invited public comment on this proposed methodology for 
calculating the rate of reimbursement for processing patient records in 
an electronic format. In addition, we invited public comment on 
alternative methodologies for determining more appropriate 
reimbursement rate for the submission of patient records to the QIOs in 
an electronic format, and we intend to finalize our policy in this 
final rule based upon the public comments received.
    We received no comments regarding our proposals under Sec.  
476.78(e)(2) to allow QIOs to reimburse providers or practitioners for 
the electronic submission of patient records, or the methodology or 
content used to calculate the $3.00 reimbursement rate for the 
electronic submission of patient records. Therefore we are finalizing 
our proposals for the regulation at Sec.  476.78(e)(2) allowing QIOs to 
reimburse providers and practitioners at a flat rate of $3.00 per 
requested patient record as proposed and without modification.
c. Reimbursement Rate for Providers Submitting Patient Records by 
Photocopying and Mailing
    We proposed that the QIOs would reimburse providers with approved 
waivers for submitting patient record by photocopying and mailing. We 
proposed at Sec.  476.78(e)(3) to increase the reimbursement rate for 
submitting patient records by photocopying and mailing from $0.12 per 
page to $0.15 per page. We are updating this payment rate in accordance 
with CMS's commitment to periodically revise the photocopying 
reimbursement rate. This rate adjustment is fair, reasonable, and meets 
the current labor and material cost articulated in the established 
formula for calculating photocopying reimbursement rate. We proposed to 
use the following formula for updating the rate of reimbursement for 
photocopying and mailing records to QIO as follows:
     Step 1. CMS adds the annual salary of a photocopy machine 
operator and the costs of fringe benefits as determined in accordance 
with the principles set forth in OMB circular A-76, to establish a 
total annual salary for the photocopy machine operator.
     Step 2. CMS divides the total annual salary of the 
photocopy machine operator by the number of pages that can be 
reasonably expected to be made annually by the photocopy machine 
operator to establish the labor cost per page.
     Step 3. CMS adds to the per-page labor cost as previously 
determined in step two to the per-page costs of photocopying supplies.
    We used this methodology to determine what specific rate to propose 
for the reimbursement for sending patient records by photocopying and 
mailing patient records. We proposed to increase the per-page 
reimbursement rate to $0.15 for photocopying patient records. We 
calculated the proposed photocopying reimbursement rate by updating the 
salary, fringe benefits, and supply figures associated with 
photocopying and submitting patient records to the QIO. In accordance 
with this methodology we considered the following factors in 
calculating the proposed new rate:
(1) Labor Costs Associated With Photocopying and Submitting Patient 
Records
    Labor costs for photocopying patient records were calculated by 
adding the annual salary of a photocopy machine operator with the costs 
of fringe benefits, and dividing that sum by the number of pages that 
can reasonably be expected to be photocopied in 1 year. We proposed to 
continue to rely upon the salary of a Federal GS-5 midlevel secretary 
as representative of a photocopy machine operator's salary. Using the 
salary level for an experienced (GS-5) midlevel secretary in the 
Federal government as representative of that of a photocopy machine 
operator, the annual salary of the photocopy machine operator is 
estimated to be $39,573, according to the Office of Personnel 
Management's 2020 General Schedule pay scale. This estimate included 
the locality pay adjustment for the rest of the United States. In 
calculating the fringe benefit of we used OMB Circular A-76 to 
calculate the annual fringe benefit cost, based on 36.25 percent of the 
GS-5 salary. The annual fringe benefit cost is $14,345 ($39,573 * 36.25 
percent). Adding the fringe benefit, the estimated total annual salary 
of the photocopying operator is estimated at: $53,918. To determine the 
per-page labor cost, the total of salary ($39,573) and fringe benefits 
($14,345) costs, which amount to $53,918, was divided by 624,000 pages, 
the number of photocopies a photocopy machine operator can make in 1 
year. The estimated labor cost for photocopying 1 page of patient 
records is $0.08 ($53,918/624,000 pages).
(2) Number of Pages a Photocopy Machine Operator Can Photocopy Annually
    We estimated the total number of pages that a photocopy machine 
operator can photocopy per year based on hand feeding of documents into 
a photocopying machine. We recognize that modern technologies exist 
which support faster photocopying, such as through automatic paper 
feeds. We are aware that using an automatic paper feeds can greatly 
increase the number of pages that can be photocopied per minutes, and 
as a result, greatly decrease the cost of photocopying per page. We 
assume that not all providers and practitioners has access to modern 
technology or uses modern photocopier capable of automatic paper feed. 
Therefore, we would calculate the number of page a photocopy machine 
operator can photocopy, using the manual paper feed estimate. In 
calculating the number of pages that can be photocopied per hour using 
a manual feed, we took into consideration that recent improvements in 
photocopying machine technology has improved the speed of photocopier 
up to 8 pages per minute. In order to account for time spent by the 
photocopy machine operator in search and retrieval tasks, and time away 
from work on annual vacation, sick, and holiday leave, the total number 
of work hours per year is estimated at 1,300 (an average of 5 
productive hours per day), resulting in a total of 624,000 (1,300 hour 
x 60 minutes x 8 pages) pages per year.
(3) Costs of Photocopying Materials and Supplies
    We proposed a total estimated supply cost of $0.07 per page, based 
on a per-page paper cost of $0.06 and a per-page toner and developer 
cost of $0.01 per page. The supply cost include the cost of 
photocopying paper and toner cartridge. Using the market survey cost 
for these materials we estimated the average cost, using the average 
price and quality at the GSA material supplies rate, we estimated that 
copier paper cost of $0.06 per page for paper and $0.01 per page for 
photocopy machine toner. The paper cost was based on a cost of $32.49 
per case for recycled white photocopier paper of 5,000 sheets in a 
case. The costs of photocopier toner that yield 37,000 copies was 
estimated at $54.99 per toner cartridge. We calculated these costs 
using estimates of the costs for recycled photocopier paper and toner 
cartridges contained in the GSA supply catalogue.

[[Page 58984]]

(4) Total Reimbursement Rate for Photocopying Patient Records
    We estimate total cost of photocopying at $0.15 per page. This 
calculation was derived by adding the total estimated labor cost of 
$0.8 per page and total cost of photocopying supplies of $0.07 per 
page. Consistent with our policy and generally accepted mathematics 
principles, we chose to round our calculations to nearest decimal. We 
believe this decision is both reasonable and supportable. We invited 
public comment on this proposed methodology for calculation of the rate 
for reimbursement for sending patient records and information by 
photocopying. In addition, we invited public comment on alternative 
methodologies for determining a more appropriate photocopying 
reimbursement rate and intend to finalize a policy based upon the 
public comments received.
    Comment: A commenter suggested that CMS eliminate the reimbursement 
for patient records submitted to QIOs by photocopying and mailing. The 
commenter suggested that to encourage modernization, CMS should only 
pay for electronic submission of patient records.
    Response: We consider this comment generally supportive of the 
proposed change to require electronic submission of patient records to 
the QIO, however we disagree with the commenter's suggestion to 
eliminate reimbursement for patient records submitted to the QIOs via 
photocopying and mailing. As stated earlier in this rule, CMS believes 
that up to 20 percent of providers may lack the capacity to submit 
patient records in electronic format, and will seek a waiver from the 
requirement to submit electronically. CMS seeks to provide fair 
reimbursement to these providers and practitioners for submitting 
patient records as requested by a QIO for the purpose of performing one 
or more QIO functions via alternative modes of submission until such 
time as evidence indicates these alternative modes of submission are 
obsolete. While we are not adopting the commenter's suggestion at this 
time, we appreciate the feedback and will take this comment into 
consideration in future development of CMS's reimbursement policies and 
rates for patient records submitted to the QIOs.
    After consideration of the public comment received, we are 
finalizing the updated reimbursement rate for the submission of patient 
records to the QIOs via photocopying and mailing, of $0.15 per page for 
photocopying plus first class postage for providers with approved 
waivers from the requirement to submit patient records in electronic 
format, without modification.
d. Reimbursement Rate for Providers Submitting Patient Records by 
Facsimile
    We proposed at Sec.  476.78(e)(3) to reimburse providers and 
practitioners with approved waivers that submit patient records to the 
QIO by facsimile at the rate of $0.15 per page. The current regulations 
do not specifically provide for reimbursement for patient records 
submitted to the QIO by facsimile, but CMS has historically interpreted 
the provisions governing reimbursement for patient records submitted to 
the QIOs through photocopying and mailing to also authorize 
reimbursement for the submission of patient records by facsimile. We 
are now proposing to specifically incorporate our historic 
interpretation into the regulatory framework. According to this 
proposal the QIOs would continue to provide for reimbursement for 
patient records submitted to the QIO via facsimile, using a rate 
estimated based on the costs associated with submitting patient records 
to the QIO by facsimile. We believe the rate we proposed is fair, 
reasonable, and reflects current labor and material costs associated 
with sending patient records to the QIOs by facsimile. We calculated 
the reimbursement for submitting patient records by facsimile to the 
QIO as follows:
     Step 1. CMS adds the annual salary of a facsimile machine 
operator and the costs of fringe benefits as determined in accordance 
with the principles set forth in OMB circular A-76, to establish a 
total annual salary for the facsimile machine operator.
     Step 2. CMS divides the total annual salary of the 
facsimile machine operator by the number of pages of patient records 
that can be reasonably expected to be sent annually by facsimile. This 
calculation establishes the labor cost per page of patient records 
submitted by facsimile.
     Step 3. CMS adds to the per-page labor cost as determined 
in step two to the average cost of maintaining a dedicated phone line 
for facsimile service.
    We used this methodology to determine the specific rate of 
reimbursement we proposed for submitting patient records to the QIO by 
facsimile. Similar to our methodology for calculating a fair and 
appropriate reimbursement rate for submitting records to the QIO via 
photocopying and mailing, we calculated the proposed reimbursement rate 
for sending patient records to the QIO by facsimile as follows:
(1) Labor Costs Associated With Submitting Patient Records by Facsimile
    Labor costs were calculated by adding the annual salary of a 
facsimile machine operator with the costs of fringe benefits, and 
dividing that sum by the number of pages that a single facsimile 
operator can reasonably be expected to submit in a year. We proposed to 
rely upon the salary of a Federal GS-5 midlevel secretary as 
representative of a facsimile machine operator's salary. Using the 
salary level for an experienced (GS-5) midlevel secretary in the 
Federal government as representative of that of a facsimile machine 
operator, the annual salary of the facsimile operator is estimated to 
be $39,573 according to the Office of Personnel Management's 2020 
General Schedule pay scale, including the locality adjustment for the 
rest of the United States. In calculating the cost of fringe benefits 
we used OMB Circular A-76 to calculate the annual fringe benefit cost, 
based on 36.25 percent of the GS-5 salary. The annual estimated fringe 
benefit cost is $14,345 ($39,573 * 36.25 percent). With fringe 
benefits, we estimated total annual salary of the facsimile operator at 
$53,918.
(2) Number of Pages a Facsimile Operator Can Submit Annually
    We estimated the total number of pages that a facsimile machine 
operator could submit per year based on hand feeding of documents into 
facsimile machine. We recognize that several modern technologies exist 
which support faster faxing, such as through automatic paper feeds or 
faxing over the internet. These technologies greatly increase the 
number of pages that can be submitted by facsimile on an hourly basis, 
and as a result, greatly decrease per page cost of submitting patient 
records by facsimile. However, we took into consideration the fact that 
not all providers and practitioners have access to the internet or 
modernized facsimile machines. Therefore, we proposed to calculate the 
per page reimbursement rate using the manual paper feed as our guide. 
We estimated that a facsimile machine operator using a manual feed can 
submit 5 pages of patient records to the QIO in 1 minute. This estimate 
does not account for any delay in transmission due to poor connectivity 
or machine fault. In order to account for time spent by the facsimile 
machine operator in search and retrieval tasks, and time away from work 
on annual vacation, sick, and holiday leave, we estimated the total 
number of work

[[Page 58985]]

hours per year at 1,300 (an average of 5 productive hours per day), 
resulting in a total of 390,000 (1,300 hours x 60 minutes x 5 pages) 
pages of patient records, which a facsimile operator can submit to the 
QIO in 1 year.
    To determine the per-page labor cost for submitting patient records 
to the QIO via facsimile, we divided the total salary ($39,573) and 
fringe benefits ($14,345) costs, $53,918, by 390,000, the number of 
copies a facsimile operator can submit in a year, resulting in an 
estimated labor cost of $0.14 per page ($53,918/390,000 pages).
(3) Other Costs Associated With Sending Patient Records by Facsimile
    We proposed to reimburse the cost of a dedicated telephone line 
used for a facsimile machine at the rate of $29.99 per month, for an 
estimated total cost of $359.88 per year. Our estimate does not take 
into consideration that multiple facsimile machines can use on 
telephone line, and that a telephone line can be used for other 
purposes than transmitting records via facsimile. We estimated that 1 
cent per page ($359.88/390,000 pages) will reflect the cost of a 
dedicated telephone line used for facsimile service, based on estimated 
the estimated 390,000 pages of patient records we expect a facsimile 
machine operator could submit in a year. We estimated the cost of 
telephone line using the average per month cost for a single business 
telephone line per month based on an average drawn from comparison of 
major telecommunications service provider rates. We estimate that there 
is no reimbursable paper or material cost associated with sending 
patient records to the QIO by facsimile, as CMS does not reimburse 
providers and suppliers for the cost of machinery and overhead costs 
for submitting patient records to the QIOs.
(4) Reimbursement Rate for Sending Patient Records by Facsimile
    We estimated the total cost of or submitting patient records by 
facsimile to the QIO at $0.15 per page. This estimate was calculated by 
adding the total estimated labor cost of $0.14 per page, and total cost 
of a dedicated telephone line at $0.01 per page. Consistent with our 
policy and generally accepted mathematics principles, we chose to round 
our calculations to nearest decimal. We believe this decision is both 
reasonable and supportable. We invited public comment on this proposed 
methodology for calculating the rate for reimbursement for submitting 
patient records by facsimile. In addition, we invited public comment on 
alternative methodologies for determining an appropriate facsimile 
reimbursement rate and intend to finalize our policy based upon the 
public comments received.
    Comment: A commenter suggested that CMS eliminate the reimbursement 
for submitting patient records to QIOs via facsimile. The commenter 
suggested that to encourage modernization, CMS should only pay for 
electronic submission of patient records.
    Response: We consider this comment generally supportive of the 
proposed change to require electronic submission of patient records to 
the QIO, however we disagree with the commenter's suggestion to 
eliminate reimbursement for patient records submitted to the QIOs via 
photocopying and mailing. As stated earlier in this rule, CMS believes 
that up to 20 percent of providers may lack the capacity to submit 
patient records in electronic format, and will seek a waiver from the 
requirement to submit electronically. CMS seeks to provide fair 
reimbursement to these providers and practitioners for submitting 
patient records as requested by a QIO for the purpose of performing one 
or more QIO functions via alternative modes of submission until such 
time as evidence indicates these alternative modes of submission are 
obsolete. While we are not adopting the commenter's suggestion at this 
time, we appreciate the feedback and will take this comment into 
consideration in future development of CMS's reimbursement policies and 
rates for patient records submitted to the QIOs.
    After consideration of the public comment received, we are 
finalizing the updated reimbursement rate for the submission of patient 
records to the QIOs via facsimile of $0.15 per page for providers with 
approved waivers from the requirement to submit patient records in 
electronic format at Sec.  476.78(e)(3), without modification.

B. Revised Regulations To Prepare for Implementation of Mandatory PRRB 
Electronic Filing (42 CFR Part 405, Subpart R)

1. Background
    Congress created the Provider Reimbursement Review Board (PRRB or 
Board) in 1972 to furnish providers with an independent forum for 
resolving payment disputes typically arising from certain Medicare Part 
A final determinations (usually cost report audit appeals). (See 42 
U.S.C. 1395oo and 42 CFR 405.1801 and 405.1840 through 405.1873.) The 
Board has the full power and authority to make rules and establish 
procedures, not inconsistent with the law, regulations, and CMS 
Rulings, that are necessary or appropriate to carry out its function. 
(See 42 U.S.C. 1395oo(e) and 42 CFR 405.1868(a).)
    On average, the PRRB receives approximately 3,000 new appeals 
annually. The PRRB's docket is unique and complex, so it is imperative 
that the Board manage its docket in the most efficient manner possible. 
For example, an individual provider appeal may involve one or more 
issues; in contrast, a group appeal involves multiple providers 
appealing a common issue. (See 42 U.S.C. 1395oo(b) and 42 CFR 
405.1837.) In addition, many providers or issues may be transferred 
between the cases to create a complex web of interrelated appeals. In 
light of these complexities, it is imperative that the Board continue 
to improve the efficiencies of its processes.
    Until mid-2018, appeal documents (including documents such as 
appeal requests, transfer requests, and position papers) could only be 
filed with the PRRB on paper. Over the past decade, CMS and the Board 
have received feedback from its stakeholders requesting an electronic 
filing system. On August 16, 2018, the CMS Office of Hearings (OH) and 
the Board released the OH Case and Document Management System (OH 
CDMS). OH CDMS is a web-based portal where providers can file appeals 
and all parties can manage their cases. Besides instantaneously 
accepting submissions electronically, OH CDMS releases outgoing 
electronic correspondence and Board decisions as well. OH CDMS enables 
providers and their representatives to manage their cases in real time, 
and it allows parties to view all documents officially filed through 
the system (including viewing opposing parties' submissions). When a 
party makes a submission, whether submitting a new appeal or taking an 
action on an existing case, there is an immediate system notification 
that confirms the submission was made. All parties on the case will 
then receive an email confirming the date and time of delivery. 
Internally, the system also serves as a daily workflow management 
system for the PRRB and its staff and aids the PRRB in strategically 
managing its docket in a more efficient manner.
    The feedback we have received from active users of OH CDMS has been 
largely positive. We have also incorporated user suggestions to refine 
the system. OH CDMS offers a Help Desk, available each business day, to 
assist users with technical questions that may arise.

[[Page 58986]]

2. Technical Changes To Support Electronic Filing
    To support the use of the electronic filing system, we proposed 
technical changes throughout the regulations at 42 CFR part 405, 
subpart R. First, we proposed to update the definitions of ``date of 
receipt'' and ``reviewing entity'' at 42 CFR 405.1801(a) to indicate 
that submissions to an electronic filing system are considered received 
on the date of electronic delivery. We also proposed to add a new 
definition of ``in writing or written'' that indicates either of these 
terms means a hard copy or electronic submission. We believe these are 
common sense technical changes that reflect current practice and 
understanding. We note that we did not propose to revise the 
requirement in Sec.  405.1801(a) that the date of receipt by a party or 
affected nonparty of documents involved in proceedings before a 
reviewing entity, including the Board, is presumed to be 5 days after 
the date of issuance. Therefore, regardless of whether the Board issues 
a decision electronically or by some other means, the 5-day presumption 
regarding receipt by a party would continue to apply. We also proposed 
technical changes throughout the subpart to replace references related 
to hard copy documents such as ``mail'' and ``hand delivery'' with 
terms that apply to both hard copy and electronic submissions. We 
sought comments on these changes.
    We also proposed to update 42 CFR 405.1857, related to subpoenas, 
so that it generally conforms to the technical changes we are 
proposing. However, we proposed adding the following statement to this 
section, ``If the subpoena request is being sent to a nonparty subject 
to the subpoena, then the subpoena must be sent by certified mail.'' 
This change is to ensure that the subpoena rule is in accordance with 
section 205(d) of the Act (Issuance of subpoenas in administrative 
proceedings).
3. Intention To Revise Board Instructions To Require Mandatory 
Electronic Submissions
    As stated earlier in this preamble, the Board has the full power 
and authority to make rules and establish procedures, not inconsistent 
with the law, regulations, and CMS Rulings, that are necessary or 
appropriate to carry out its function. (See 42 U.S.C. 1395oo(e) and 42 
CFR 405.1868(a).) It is critically important that the PRRB docket 
records be fully populated within OH CDMS so that the Board and its 
stakeholders can optimally realize the technological benefits and 
efficiencies of OH CDMS. Therefore, we are proposing to amend the 
regulations at 42 CFR 405.1843 (Parties to proceedings in a Board 
appeal) to make clear that parties to a Board appeal shall familiarize 
themselves with the instructions for handling a PRRB appeal, including 
any and all requirements related to the electronic or online filing of 
documents for future mandatory filing. This change to require 
electronic submissions would transform the PRRB's docket to a more 
efficient and less costly paperless environment, and will support a 
better continuity of operations posture. Accordingly, no earlier than 
FY 2021, the PRRB may require that all new submissions (in new and 
pending appeals) be filed electronically using OH CDMS. This 
requirement would be reflected in updated Board instructions, which are 
currently published at https://www.cms.gov/Regulations-and-Guidance/Review-Boards/PRRBReview/Downloads/PRRB-Rules-August-29-2018.pdf.
    Because the Board plans to wait until at least FY 2021 to 
potentially require electronic filings, we believe that stakeholders 
would have ample time necessary to register and start using the system 
to the extent they have not already done so on a voluntary basis. 
Stakeholders can access the Electronic Filing web page located at 
https://www.cms.gov/Regulations-and-Guidance/Review-Boards/PRRBReview/Electronic-Filing to find instructions on accessing and using OH CDMS. 
We recommend that parties to PRRB appeals, who have not already, sign 
up for and begin using OH CDMS as soon as possible to allow time to 
become familiar with the system and to avoid any issues that may arise 
if signing up for the system is delayed until after use of the system 
becomes mandatory.
    It has already been approximately 21 months since the system became 
operational and available to stakeholders. In this regard, we note the 
following:
     Many providers started using the system immediately after 
OH CDMS was launched.
     OH CDMS now has over 800 registered users, and continues 
to grow. We believe that this number of users is largely representative 
of the cohort of stakeholders that will use OH CDMS.
     Over 75 percent of all new appeals have been filed 
electronically by providers using the system.
     All government contractors that participate in PRRB 
appeals (including Medicare Administrative Contractors (MACs), the Cost 
Report Audit and Appeals contractor (CRAA), and the Appeals Support 
Contractor (ASC)) use the system.
    Nevertheless, to provide additional notice to stakeholders, the 
PRRB would provide at least 120 calendar days' notice (through its 
instructions) before the exact date that electronic filing would become 
mandatory. Thus, under the final rule, the earliest the PRRB could 
publish such instructions would be October 1, 2020 and, as a result, 
the earliest effective date for mandatory usage of the system for PRRB 
appeals submissions would be November 30, 2020.
    We note that making use of OH CDMS mandatory for PRRB appeals is 
consistent with recent revisions updating the Medicare Geographic 
Classification Review Board (MGCRB) regulations that similarly permit 
the MGCRB to require the use of OH CDMS through its instructions. The 
MGCRB regulatory change was published in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56928 (August 22, 2016)) and the requirement to file 
electronically was effective for the 2020 reclassification cycle. The 
transition to mandatory electronic filing of MGCRB applications went 
smoothly, and we received positive feedback regarding OH CDMS from the 
user community.
    Finally, we note that the provisions governing contractor hearing 
officer appeals, Administrative and Judicial Review and reopenings are 
also found in part 405 subpart R. However, we did not propose changes 
to the submission procedures for these processes.
    Comment: We received largely positive feedback in the comments 
regarding OH CDMS itself, as well as support for mandatory use of OH 
CDMS. A commenter who has represented Providers before the PRRB for 
more than 35 years stated that the introduction of OH CDMS has been of 
substantial benefit and represents a great improvement over the hard 
copy filing process, and states that OH staff should be complimented on 
the design and implementation of the system. Another commenter 
applauded OH CDMS and stated that the system improves the efficient 
management of PRRB appeals, and that the proposed changes to the 
regulation are sensible and appropriate. A commenter supported the 
proposed changes that would allow the PRRB's adoption of rules 
mandating electronic filing, because OH CDMS has made it easier and 
quicker for providers to file and manage appeals, especially for group 
appeals or consolidated appeals that may include many providers and 
cost reporting periods.
    Response: The Office of Hearings (OH) appreciates the positive 
feedback,

[[Page 58987]]

especially because OH CDMS was, in large part, created in response to 
the requests of parties before the PRRB to create an electronic filing 
system.
    Comment: We received a few comments that stated that Schedules of 
Providers (SOP) for group appeals should be accepted in PDF format via 
OH CDMS, because every other document may be filed in PDF format via OH 
CDMS.
    Response: We understand the comments regarding electronic filing of 
SOPs and the Board is reviewing its Instructions regarding the filing 
requirements for SOPs and will take this feedback into consideration.
    Comment: A few commenters also stated that there should be an 
exception to mandatory electronic filing if a user is unable to access 
OH CDMS for a filing deadline due to routine maintenance of the system, 
technical difficulty in accessing the system, or interruption to the 
user's internet access. A commenter suggested that the PRRB adopt the 
process used by some federal district courts which allows email filings 
if the system is inaccessible. A commenter also stated that any day or 
portion of a day when OH CDMS is unavailable should not be counted for 
purposes of computing a deadline.
    Response: We understand the concern expressed by the commenters but 
the nature of potential issues with electronic filing is not 
significantly different from those associated with hard copy filings. 
Accordingly, we decline to make any changes to the current regulations 
because we believe they provide sufficiently flexible procedural 
processes for the Board to address any potential filing issues 
(regardless of whether such issues arise with electronic filings versus 
hard copy filings). In this regard, we note that 42 CFR 405.1801(d)(3) 
provides that deadlines may be adjusted if a reviewing entity is unable 
to conduct business in the usual manner, which would allow the PRRB to 
make allowances where appropriate, e.g., if OH CDMS were down for the 
entire last day of a deadline. Additionally, specifically with respect 
to timely filing of appeals, 42 CFR 405.1836 allows for good cause 
extension of the time limit for requesting a Board appeal, and PRRB 
Rule 1.6 provides for Accessibility Standards and allows for 
accommodations. We disagree that any day or portion of a day when OH 
CDMS is unavailable should not be counted for purposes of computing a 
deadline. We believe that while, as noted previously, exceptions to 
deadlines may be granted, the deadline dates should be clearly 
established, and shifting the deadlines for a day or portion of a day 
as the commenter proposes would be administratively impractical and 
could cause great confusion for the Board, parties, and reviewing 
entities alike.
    Comment: A commenter noted that a provider is only allowed one 
representative for all appeal-related communications. The commenter was 
concerned that if the representative organization were to terminate 
that employee, electronic correspondence from the PRRB would be 
delivered to a dead email address and no one would actually receive the 
notice. The commenter requested that the PRRB monitor for ``non-
delivery'' or ``out-of-office'' automated responses, so that the PRRB 
can send a hard copy letter to the Provider's CEO or CFO to ensure that 
a provider's appeal rights are not jeopardized by missed electronic 
communications from the PRRB.
    Response: Currently, there may only be one representative per 
appeal and the provider's designated representative is responsible for 
ensuring his/her contact information is up to date and, in turn, the 
provider is responsible for notifying the Board of any change in its 
representative. Thus, it is the responsibility of the provider and/or 
representative to notify the PRRB if the email address is no longer 
valid (for example employee departure or extended leave). We believe 
this is a reasonable procedure and, therefore, decline to make 
alterations to this procedure at this time.
    Comment: A commenter applauded the updates to functionality of OH 
CDMS that have been made since OH CDMS went live on August 16, 2018. 
However, some commenters also suggested the PRRB consider additional 
upgrades to OH CDMS, such as the functionality of ``batch uploads,'' 
before use of the system becomes mandatory. Users must manually enter 
multiple data elements for each provider, as well as separate documents 
that comprise each issue. The commenters believed that this process is 
especially time consuming for appeals that challenge rulemaking notices 
in the Federal Register, as these appeals may involve a large number of 
providers in a single submission and that, as a result, paper filing 
currently remains a distinct advantage for them for these large group 
submissions. A commenter suggested that being able to upload provider 
information as structured data would make electronic submission of 
large groups more feasible and reliable. A commenter requested that the 
OH CDMS interface be updated so that users can submit appeal in its 
final form, rather than in the discrete data entries.
    Response: We appreciate the acknowledgement of the updates made to 
OH CDMS; it has been important to receive and incorporate, as 
appropriate, user feedback we have received to make the system work 
better for both internal and external users, and will continue to do 
so. We understand the concern that parties have regarding the data 
entry requirements; however, these data points are imperative to the 
functionality of OH CDMS particularly with regards to allowing 
providers to transfer issues between cases. The information that is 
entered into the system (as opposed to uploaded via PDF) allows the 
parties and the Board to better access that information (in whole or in 
part) for reporting and other purposes. Currently, OH CDMS does not 
have the ability to pull data out of a PDF, therefore OH CDMS could not 
provide the necessary reporting and other capabilities to its users if 
appeals were to be batch uploaded as single PDF files. If in the future 
this functionality becomes cost-effectively available (and is 
functionally reliable), we will consider this functionality along with 
other improvements. Regarding Federal Register appeals, in response to 
feedback from the user community, as of January 2020, users are now 
able to select a previously-uploaded document in order to save time 
instead of being required to re-upload the document each time it is 
needed. We are also considering making similar OH CDMS enhancements for 
other uploads to facilitate the Board's requisite filing process and 
will consider all feedback received.
    Comment: Commenters were mostly positive and supportive of 
mandatory electronic filing of PRRB appeals. However, a commenter 
suggested that the PRRB should not mandate electronic filing stating 
that it does not allow users the flexibility and security that is 
required for appeals, and that paper (that is, hard copy) documents 
were the only acceptable method for filing an appeal for the first 46 
years of the Board's history. The commenter added that it would be a 
mistake to require parties to file all documents electronically during 
the Covid-19 pandemic, because hospitals are not operating under normal 
circumstances. The commenter stated that even under normal 
circumstances, it would be unreasonable to require hospitals and their 
representative to abandon their internal processes related to filing 
appeals in paper with only 60 days' notice, as early as this November.
    Response: We do not believe it is unreasonable to require hospitals 
and their representatives to use OH CDMS

[[Page 58988]]

for PRRB appeals; many courts have transitioned from paper filing to 
electronic filing, and the PRRB has received feedback over the years 
from the provider community requesting the ability to file 
electronically. We note that the proposed regulation would allow the 
PRRB to mandate electronic filing with 60 days' notice. The commenter 
raised concern about having only 60 days' notice of the mandatory use 
of OH CDMS. However, OH CDMS has been live for close to two years, and 
there have been various trainings and seminars offered for OH CDMS 
users, as well as daily Help Desk access for any issues. 
Notwithstanding, in order to ensure providers have adequate time, we 
are revising the proposed 60-day notice to require the PRRB to give at 
least 120 days' notice prior to mandatory use of OH CDMS taking effect. 
In light of the facts that there are already many registered users of 
OH CDMS and the majority of filings are now being made using OH CDMS, 
we believe that this Rule as well as the 120-day advance notice gives 
Providers and their representatives more than ample time and notice to 
register for OH CDMS (to the extent they have not already done so), and 
make any necessary internal changes to processes.
    The Covid-19 public health emergency has highlighted the need to 
have all documents submitted electronically to the PRRB. CMS has 
maximized telework for the past several months, and while PRRB staff 
have not been able to access any mail during that time, the PRRB has 
been able to successfully continue operations largely because it may 
access the records that have been filed electronically using OH CDMS. 
Likewise, the need to transition away from paper records, which are 
vulnerable to risk of fire, flood, loss etc., has become increasingly 
obvious. Finally, the Federal Government as a whole is moving towards 
all-electronic records by 2022. See Memorandum for Heads of Executive 
Departments and Agencies M-19-21 Transition to Electronic Records (June 
28, 2019), available at https://www.whitehouse.gov/wp-content/uploads/2019/06/M-19-21.pdf.
    Comment: A commenter stated that provider appeals often require 
flexibility that is not currently built into OH CDMS, which takes a 
``one-size-fits-all'' approach to appeal filings, and does not provide 
hospitals the opportunity to file an explanation of exigent 
circumstances. The commenter explained that OH CDMS requires users to 
make certain certifications to conclusively state that the appeal 
issues are not pending in any other appeal, but a user can never know 
with absolute certainty whether another party has mistakenly filed an 
appeal on the duplicate issue.
    Response: With respect to the certifications that are required to 
be made under Board Rules by the Provider's authorized representative 
when an appeal is filed, it is reasonable to expect that providers 
(whether through their authorized internal or external 
representative(s)) are responsible for knowing any appeals that have 
been filed, and ensuring that: (1) Duplicate appeals are not made; and 
(2) if they are part of a provider chain, they establish mandatory 
group appeals when required by 42 CFR 405.1837(b)(1). Additionally, 
providers are able to submit any kind of correspondence through OH CDMS 
once the appeal is established, and could provide an explanation of any 
exigent circumstances at that time.
    Comment: A commenter also stated that there are data security 
concerns with the OH CDMS user enrollment process, which requires 
applicants to provide their Social Security Number for a limited credit 
check. As data breaches can occur, the commenter urged the agency to 
reconsider requiring personal information for those seeking to file 
institutional appeals.
    Response: The OH CDMS system is integrated within the larger 
agency-wide CMS Enterprise Portal. The CMS Enterprise Portal relies on 
the enterprise identity management system (``EIDM'') to authenticate 
individual users of the system, including where those individuals 
represent institutional entities. EIDM protects the security of CMS' IT 
systems and meets CMS, HHS, and other federal government security 
requirements. In order to keep all CMS IT systems secure, and as 
required under federal IT security rules, the EIDM process identity 
proofs individual users before they can access CMS systems. CMS 
currently conducts this process by using Experian. Experian uses 
information that it has in its databases to validate the user's 
identity. Experian's credit information is not shared with CMS, only 
the positive or negative identity proofing result is shared. In 
addition, this process is not a credit check but is reflected as a 
``soft inquiry'' on the person's credit history.
    Comment: Several commenters supported mandatory use of OH CDMS, but 
suggested that CMS revise the regulatory definition of ``date of 
receipt'' at 42 CFR 405.1801(a) so that the 5-day presumption does not 
apply to decision or other documents that the PRRB or another reviewing 
entity issues electronically to providers. Several comments referred to 
42 U.S.C. 1395oo(f)(1) which sets a deadline of 60 days for the 
Secretary to reverse, affirm, or modify a PRRB decision, therefore the 
agency does not have the authority to extend this deadline by allowing 
for a 5-day presumption. One commenter explained that while the 5-day 
presumption might have been necessary when the PRRB mailed its 
decisions to providers, now that the PRRB issues all of its decisions 
electronically, the 5-day presumption is not necessary because all 
parties to the appeal are notified of the decision instantaneously. The 
commenter states that similar rules that specifically address email 
correspondence have been revised to remove the concept of ``presumptive 
receipt,'' such as Rule 6 of the Federal Rules of Civil Procedure, and 
the three-day presumption for service of email from 2001 was removed in 
2016 because of advances in technology and widespread usage of 
electronic transmissions. The commenters argued that ``notice'' of the 
PRRB decision should be based on ``actual'' receipt, which the 
commenters suggested should be considered to occur upon transmission.
    Response: The regulation at 42 CFR 405.1801(a) provides that: 
``(iii) The date of receipt by a party or affected nonparty of 
documents involved in proceedings before a reviewing entity is presumed 
to be 5 days after the date of issuance of a contractor notice or a 
reviewing entity document. This presumption, which is otherwise 
conclusive, may be overcome if it is established by a preponderance of 
the evidence that such materials were actually received on a later 
date.''
    In the proposed rule, we specifically stated we were not proposing 
any change in the regulation text defining the ``date of receipt.'' 
(``We note that we are not proposing to revise the requirement in Sec.  
405.1801(a) that the date of receipt by a party or affected nonparty of 
documents involved in proceedings before a reviewing entity, including 
the Board, is presumed to be 5 days after the date of issuance. 
Therefore, regardless of whether the Board issues a decision 
electronically or by some other means, the 5 day presumption regarding 
receipt by a party would continue to apply.'' 85 FR 32460, 32865 (May 
20, 2020)). We proposed to make limited technical changes to the 
regulation text to reflect that parties before the Board and the Board 
itself now file or issue documents in Board cases electronically.
    Congress has vested in the Secretary broad rulemaking authority to 
administer the Medicare program.''

[[Page 58989]]

Sebelius v. Auburn Reg'l Med. Ctr., 568 U.S. 145, 156 (2013); see also 
sections 1102(a) and 1871(a)(1) of the Social Security Act. Relying on 
that authority, the Secretary promulgated the regulation after notice 
and comment rulemaking. See 73 FR 30190, 30193 (May 23, 2008). The 5-
day rule continues to be within our statutory authority and is not 
being revisited in this rule. Even though the rule was originally 
conceived in the context of paper Board filings and decisions that were 
sent by regular mail, we continue to believe that the rule is useful 
and reasonable as it applies equally to providers, the MACs and the 
reviewing entities themselves and provides needed certainty about when 
the deadlines run. Among other things, it also ensures continuity on 
how to calculate the 60 days for a judicial action under 42 CFR 
405.1877, regardless of whether the final decision of the Secretary is 
a decision issued by the PRRB electronically or whether the final 
decision of the Secretary is a decision issued by the Administrator 
using regular certified mail. The present regulatory text continues to 
serve its original purposes to avoid difficult factual disputes 
regarding the date of receipt through the clarification of the meaning 
of ``is notified'' and consistent application of a single rule for 
calculating deadlines, regardless of the means of transmission of the 
document by the particular reviewing entity. As CMS explained during 
prior rulemaking, some uniform definition is ``need[ed] to dispel 
potential confusion'' about when the review period begins to run. 69 FR 
35716, 35719 (June 25, 2004). Using a presumption further ``avoid[s] 
any problem of verifying when a document or other material is actually 
received,'' (Id. at 35719) a burden on parties and courts and reviewing 
entities. The need for such consistency as a way to avoid disputes has 
not been made obsolete in the email age.
    After consideration of the public comments we received, we are 
finalizing our FY 2021 proposal to modify regulations in 42 CFR 405 
Subpart R to allow the PRRB to mandate electronic filing of appeals. We 
are modifying our proposal, however, to give 120 days' notice prior to 
mandatory use of OH CDMS taking effect, rather than the 60 days' notice 
that was proposed.

C. Revisions of Medicare Bad Debt Policy

1. Background
    Under the Medicare program, beneficiaries may be responsible for 
payments of premiums, copayments, deductibles (including blood 
deductibles), and coinsurance amounts that are related to covered 
services (42 CFR 409.80 through 409.89). The Medicare program 
recognizes that a beneficiary's failure to pay a deductible or 
coinsurance amount could lead to non-Medicare patients bearing the 
related costs of covered Medicare services, a result that is barred by 
the statutory prohibition on the cross-subsidization of the Medicare 
program by non-Medicare patients, as set out at section 
1861(v)(1)(A)(i) of the Act (see also 42 CFR 413.89(d)).
    Medicare pays beneficiaries' unpaid deductible and coinsurance 
amounts for covered services if such services are reimbursed by the 
program on the basis of reasonable cost or paid under a cost-based 
prospective payment system. Thus, the following amounts are not 
included as allowable bad debts under Medicare:
     Unpaid Medicare deductible and coinsurance amounts 
associated with furnishing non-covered services and services furnished 
to non-Medicare patients.
     Unpaid Medicare premiums and Medicare copayments \510\ 
associated with any covered service.
---------------------------------------------------------------------------

    \510\ While copayments and coinsurance amounts are both amounts 
of Medicare beneficiary cost sharing, a copayment is usually a fixed 
amount a beneficiary may be required to pay as their share of cost 
for a medical service or supply (for example, a doctor's visit, 
hospital outpatient visit, or prescription drug). Unpaid copayments 
are excluded from bad debt reimbursement. Conversely, a coinsurance 
amount is usually an amount a beneficiary may be required to pay as 
a percentage share of cost with the Medicare plan for services after 
the payment of any applicable deductible.
---------------------------------------------------------------------------

     Unpaid Medicare deductible and coinsurance amounts 
associated with any covered services paid by the program under a fee 
schedule or under a reasonable charge-based methodology including 
Program fee schedule payments made to physicians (and payments to 
providers on behalf of provider-based physicians) for professional 
services and fee schedule payments made to other practitioners.
     Unpaid Medicare deductible and coinsurance amounts 
associated with covered services paid for under a contractual capitated 
rate-based plan, such as but not limited to, a Medicare Advantage plan.
     Unpaid Medicare deductible and coinsurance amounts written 
off to charity care.
     Unpaid Medicare deductible and coinsurance amounts written 
off to a contractual allowance account.
    In accordance with section 1861(v)(1) of the Act and our 
regulations at Sec.  413.89, Medicare pays some of the uncollectible 
deductible and coinsurance amounts to certain providers, suppliers and 
other entities (hereinafter collectively referred to as ``providers'') 
eligible to receive reimbursement for bad debt of Medicare 
beneficiaries. Sections 1815(a) and 1833(e) of the Act state that no 
Medicare payments will be made to a provider unless it has furnished 
information requested by the Secretary to determine payment amounts due 
under the Medicare program. To determine if bad debt amounts are 
allowable, providers must meet the requirements at Sec.  413.89, and 
Chapter 3, Bad Debts, Charity, and Courtesy Allowances, of the Provider 
Reimbursement Manual (PRM) (CMS Pub. 15-1) (hereinafter referred to as 
PRM), https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021929, which provides further explanation 
and instruction regarding the requirements for Medicare bad debt 
reimbursement.
    The reimbursement of Medicare bad debt was not originally 
statutorily mandated; rather, it was first promulgated by CMS \511\ in 
1966 \512\ shortly after the Medicare Program's inception and was 
thereafter set forth in the regulations.\513\ Congress later 
statutorily created reimbursement limits on allowable Medicare bad debt 
under section 1861(v)(1)(T), (V) and (W) of the Act. The regulations at 
Sec.  413.89(b)(1) define ``bad debts'' as amounts considered to be 
uncollectible from accounts and notes receivable that were created or 
acquired in providing services. Accounts receivable and notes 
receivable are designations for claims arising from the furnishing of 
services, and are collectible in money in the relatively near future. 
Similar language is set forth in the PRM Sec.  302.1. To be an 
allowable Medicare bad debt, the debt must meet all of the following 
criteria (see Sec.  413.89(e) and PRM Sec.  308):
---------------------------------------------------------------------------

    \511\ To implement the Medicare statute, the Social Security 
Administration (SSA) was reorganized and the Bureau of Health 
Insurance (BHI) was established on July 30, 1965. The BHI then 
became responsible for the development of health insurance policy 
before the creation of the Health Care Financing Administration 
(HCFA), later renamed CMS. CMS Milestones 1937-2015 (July 2015).
    \512\ November 22, 1966 (31 FR 14813).
    \513\ The current Medicare bad debt regulations were originally 
proposed and finalized in 1966 and codified at Sec.  405.420.
---------------------------------------------------------------------------

     The debt must be related to covered services and derived 
from deductible and coinsurance amounts.
     The provider must be able to establish that reasonable 
collection efforts were made.

[[Page 58990]]

     The debt was actually uncollectible when claimed as 
worthless.
     Sound business judgment established that there was no 
likelihood of recovery at any time in the future.
    In 1987, Congress enacted legislation that implemented a moratorium 
prohibiting the Secretary and contractors from making changes to 
Medicare bad debt reimbursement policies that were in effect on August 
1, 1987 for hospitals. This is typically referred to as the ``Bad Debt 
Moratorium.'' (See section 4008(c) of the Omnibus Budget Reconciliation 
Act of 1987 (Pub. L. 100-203)). In section 3201 of the Middle Class Tax 
Relief and Job Creation Act of 2012 (Pub. L. 112-96), the Bad Debt 
Moratorium was repealed by Congress, effective for cost reporting 
periods beginning on or after October 1, 2012.
    Because the Bad Debt Moratorium is no longer in existence, we 
believe it is appropriate to clarify certain Medicare bad debt policies 
that have been the subject of litigation, and generated interest and 
questions from stakeholders over the past several years. Hence, in the 
FY 2021 IPPS proposed rule, we proposed to clarify, update and codify 
certain longstanding Medicare bad debt principles into the regulations 
by revising Sec.  413.89, ``Bad debts, charity, and courtesy 
allowances.'' We also solicited comments from stakeholders that we 
could consider to finalize a process to accept alternate documentation 
to the Medicaid remittance advice (RA) to determine a state's cost 
sharing liability for dual eligible beneficiaries in instances where a 
state has a Medicare cost sharing liability but does not issue the 
provider a Medicaid RA due to the state's non-recognition of a Medicare 
provider for Medicare crossover cost sharing determinations. 
Additionally, we proposed to recognize the new Accounting Standards 
Update--Topic 606 for revenue recognition and classification of 
Medicare bad debts. We also proposed technical corrections to the 
incorrect cross references in 42 CFR 412.622 and 417.536 to refer to 
the Medicare bad debt reimbursement regulation at Sec.  413.89.
    We proposed that the clarification and codification of our 
longstanding Medicare bad debt policies, where indicated herein, be 
effective for cost reporting periods beginning before, on, and after 
the effective date of this rule, because of the important public 
interest it would serve to do so as set forth in section 
1871(e)(1)(A)(ii) of the Act. Our specific proposals for revising our 
regulations, the public comments received, and implementation decisions 
are discussed in this section of this rule.
2. Revisions to Regulations
a. Reasonable Collection Effort, Non-Indigent Beneficiaries
    Providers are permitted to collect unpaid Medicare cost sharing 
amounts from beneficiaries, unless beneficiaries have been determined 
to be categorically or medically needy by State Medicaid Agencies to 
receive medical assistance from Medicaid, or determined to be indigent 
by the provider for Medicare bad debt purposes. If a beneficiary's 
Medicare cost sharing remains unpaid, in order to claim reimbursement 
from Medicare for the bad debt, providers must demonstrate that they 
have first made a reasonable effort to collect the beneficiary's unpaid 
deductible and/or coinsurance amounts. (See Sec.  413.89(e)(2) and the 
PRM Sec.  310.) This reasonable effort to collect the unpaid deductible 
and coinsurance amounts is, in part, based on the provider applying 
sound business judgment and has been a longstanding Medicare bad debt 
policy requirement articulated in the PRM since 1968. The PRM Sec.  310 
describes a ``reasonable collection effort'' and sets forth how 
providers must effectuate the reasonable collection effort, as a 
precondition to reimbursement of a provider's bad debt. We note that 
the provider's required collection efforts set forth in PRM Sec.  310 
apply only to non-indigent beneficiaries; the provider's required 
collection efforts are different for beneficiaries who have been 
determined by the provider to be indigent, including medically 
indigent, or beneficiaries enrolled in Medicaid. In the proposed rule, 
we proposed to clarify and codify the distinction between non-indigent 
beneficiaries and indigent beneficiaries for Medicare bad debt 
purposes.
    Specifically, we proposed to amend Sec.  413.89(e)(2) by adding a 
new paragraph (e)(2)(i) to define, for Medicare bad debt purposes, a 
non-indigent beneficiary as a beneficiary who has not been determined 
to be categorically or medically needy by a State Medicaid Agency to 
receive medical assistance from Medicaid, and has not been determined 
to be indigent by the provider for Medicare bad debt purposes.
    These proposals would be effective for cost reporting periods 
beginning before, on, and after the effective date of this rule because 
the difference in collection efforts required by a provider for 
indigent and non-indigent beneficiaries has existed since the 
promulgation of Medicare bad debt policy and the definition of a non-
indigent beneficiary codifies the existing meaning of the term.
    Comment: Some commenters were supportive of the proposal to codify 
the definition of a non-indigent beneficiary because it would provide 
clarity to the Medicare bad debt policies. Other commenters suggested 
that the codification of the definition for this beneficiary category 
did not serve an important interest and should not be applied 
retroactively.
    Response: We appreciate the commenters' suggestions and 
perspectives. Because the longstanding Medicare bad debt rules 
requiring a provider's reasonable collection effort are different for 
beneficiaries who are either non-indigent, beneficiaries who have been 
determined by the provider to be indigent, including medically 
indigent, or beneficiaries enrolled in Medicaid, we believe that as we 
clarify and codify these longstanding bad debt policies, it is 
important to set forth the definition of each beneficiary category so 
that it is clear which bad debt policies applied, and continue to 
apply, to each. We believe that the retroactive codification of the 
definition of a non-indigent beneficiary serves to promote a public 
interest to provide clarity because the definition has existed 
inherently in the longstanding bad debt collection effort policies that 
applied, and continue to apply, to a non-indigent beneficiary. Our 
longstanding Medicare bad debt rules in the PRM requiring a provider's 
reasonable collection effort are different for beneficiaries who are 
non-indigent and beneficiaries who have been determined by the provider 
to be indigent (including medically indigent) or beneficiaries enrolled 
in Medicaid. Providers must follow reasonable collection effort 
procedures set forth in PRM Sec.  310 for non-indigent beneficiaries, 
procedures set forth in PRM Sec.  312 for beneficiaries determined by 
the provider to be indigent, and procedures described in PRM Sec.  322 
for beneficiaries enrolled in Medicaid. Therefore, we believe that as 
we clarify and codify these longstanding bad debt policies, it is 
important to set forth the definition of each of these three 
beneficiary categories so that it is clear which bad debt collection 
effort policy applied, and continue to apply, to each. We believe that 
providers will not be burdened or harmed by the application and 
formalization of a label and definition for this beneficiary category.
    Our longstanding bad debt policies have existed in Medicare 
guidance, including the PRM, for several decades and providers and 
beneficiaries are

[[Page 58991]]

familiar with and rely upon them. The clarification and codification of 
longstanding Medicare bad debt policies into the regulations with a 
retroactive effective date does not affect prior transactions or impose 
additional duties or adverse consequences upon providers or 
beneficiaries, nor does it diminish rights of providers or 
beneficiaries. The clarification and codification of longstanding 
Medicare bad debt policies into the regulations with a retroactive 
effective date also serves an important public interest to assist 
providers and beneficiaries by avoiding confusion as to which 
longstanding policy should be applied for which cost reporting period, 
as might arise if the effective date was instead proposed for cost 
reporting periods beginning on or after the effective date of this 
rule. Failing to adopt the clarification and codification of 
longstanding Medicare bad debt policies with a retroactive effective 
date might lead some providers to believe that those policies did not 
apply to earlier cost reporting periods, and thus might cause those 
providers to resubmit previously submitted cost reports. The 
clarification and codification of longstanding Medicare bad debt 
policies into the regulations with a retroactive effective date serves 
the important public interest of promoting fairness and economy to 
providers by saving them the time and resources required for such 
resubmissions, and by saving government resources and funds from the 
taxpayer-funded Medicare Trust Fund that would be expended in review of 
cost report resubmissions. These considerations apply equally to all 
aspects of this final rule that we are finalizing with a retroactive 
effective date.
    After consideration of the public comments we received, we are 
finalizing our proposal to amend Sec.  413.89(e)(2) by adding a new 
paragraph (e)(2)(i) to define, for Medicare bad debt purposes, a non-
indigent beneficiary as a beneficiary who has not been determined to be 
categorically or medically needy by a State Medicaid Agency to receive 
medical assistance from Medicaid, and has not been determined to be 
indigent by the provider for Medicare bad debt purposes. This provision 
will be effective for cost reporting periods beginning before, on, and 
after the effective date of this rule.
(1) Issuance of a Bill for Non-Indigent Beneficiaries, PRM Section 310
    Under Medicare bad debt policy, a provider is required to 
demonstrate that it has made a reasonable effort to collect 
beneficiaries' unpaid deductibles and coinsurance amounts. PRM Sec.  
310 sets forth that to be considered a reasonable collection effort, a 
provider's effort to collect Medicare deductible and coinsurance 
amounts must be similar to the effort the provider puts forth to 
collect comparable amounts from non-Medicare patients. It must involve 
the issuance of a bill on or shortly after discharge or death of the 
beneficiary to the party responsible for the patient's personal 
financial obligations. It also includes other actions such as 
subsequent billings, collection letters and telephone calls or personal 
contacts with this party which constitute a genuine, rather than a 
token, collection effort. The provider's collection effort may include 
using or threatening to use court action to obtain payment.
    Generally, providers will have financial incentives to issue bills 
to patients as soon as possible to collect the outstanding debt and 
remove it from their financial records, or present beneficiaries' 
unpaid deductible and coinsurance amounts to Medicare after a 
reasonable collection effort period for reimbursement of the Medicare 
reimbursable amount.
    Over the past several years, we have received feedback from 
stakeholders indicating that ``shortly after'' in PRM Sec.  310 is too 
vague, as well as inquiries as to what timeframe ``shortly after'' 
means for providers to comply with the reasonable collection effort. 
Stakeholders have suggested that ``shortly after'' could be anywhere 
from 30 days to a year following the discharge or death of the 
beneficiary. The Merriam Webster definition of ``short(ly)'' \514\ is 
``not extended in time,'' ``brief,'' ``expeditious,'' or ``quick.'' 
Although the timeframe ``shortly after'' was drafted in the PRM Sec.  
310 decades ago with an eye toward affording flexibility to providers, 
inquiries from stakeholders and variances in the application of 
``shortly after'' over the years have led us to believe that a more 
definitive timeframe should be considered while still maintaining the 
greatest flexibility for providers.
---------------------------------------------------------------------------

    \514\ https://www.merriam-webster.com/dictionary/short.
---------------------------------------------------------------------------

    We believe that a timeframe of 30 or 60 days would be too short 
because it may not allow providers with varying billing practices the 
ability to issue the bill within that timeframe. A timeframe of 90 or 
120 days would afford greater flexibility, as we have found this to be 
in the upper parameters of most providers' billing practices for the 
issuances of bills to patients.
    In addition to the queries over the definition of ``shortly 
after,'' stakeholders have questioned whether the benchmark event for 
the issuance of the bill should be the ``discharge or death of the 
beneficiary,'' or some other event. Generally, Medicare fee for service 
claims must be filed with the appropriate Medicare claims processing 
contractor no later than 12 months, or 1 calendar year, after the date 
the services were furnished (42 CFR 424.44). For institutional 
providers that have a span of dates of services (that is, from X date 
through Y date), the ``through'' date (that is, the last day of 
service) is used as the date of service for the 12 month (or 1 calendar 
year) timeframe for a provider to timely submit a bill (CMS Pub. 100-
04, section 70.4). Following the processing of the claim, the provider 
receives a Medicare remittance advice evidencing the claim processing. 
Because providers have 12 months from the date of service to timely 
submit a bill to Medicare, we believe that requiring a provider to 
issue a bill for the beneficiary's unpaid cost sharing following the 
``discharge or death of the beneficiary'' is a much shorter timeframe 
and does not afford flexibility to the provider when the provider has a 
much longer timeframe of 12 months from the date a service was provided 
to bill Medicare in accordance with the billing requirements. We note 
that providers usually issue a bill to a beneficiary, or the party who 
is financially responsible for the beneficiary's personal financial 
obligations, within 120 days of death or discharge. We believe that a 
more flexible option could be to require the provider to issue a bill 
for Medicare cost sharing no later than 120 days following the 
provider's receipt of the Medicare remittance advice for the processed 
claim, because this is similar to providers' usual billing timeframes, 
or some other event as discussed herein.
    We have received suggestions from stakeholders that the benchmark 
event for the provider to issue a bill to the beneficiary for Medicare 
cost sharing should be after the provider's receipt of payment from the 
beneficiary's secondary payer,\515\ if any. In this instance, a 
beneficiary may have other insurance, secondary to Medicare, which may 
also have a coverage liability to pay for the service provided to the 
beneficiary. Secondary insurance may pay some or all of the costs left 
after the primary insurer, Medicare, has paid (for example, deductibles 
and/or coinsurance amounts). In this regard,

[[Page 58992]]

the provider must bill Medicare and the secondary payer in order to 
determine the beneficiary's accurate and outstanding Medicare cost 
sharing liability. Because there is no minimum date by which a provider 
must issue a bill to the party responsible for the beneficiary's cost 
sharing, and providers can claim Medicare bad debt in the cost 
reporting period in which the debt was deemed worthless, there is no 
disadvantage to the provider for us to adopt one or all of the 
aforementioned benchmark scenarios upon which a provider must issue a 
bill.
---------------------------------------------------------------------------

    \515\ This secondary payer is other than Medicaid for a dual 
eligible beneficiary.
---------------------------------------------------------------------------

    Longstanding Medicare bad debt policy also requires that a 
provider's reasonable collection effort include other actions such as 
subsequent billings, collection letters and telephone calls or personal 
contacts with this party which constitute a genuine, rather than token, 
collection effort.'' Additionally, a provider must furnish 
documentation to its contractor that includes the provider's bad debt 
collection policy which describes the collection process for Medicare 
and non-Medicare patients; the beneficiary's account history documents 
which show the dates of various collection actions such as the issuance 
of bills to the beneficiary, follow-up collection letters, reports of 
telephone calls and personal contact, etc.; and the beneficiary's file 
with copies of the bill(s) and follow-up notices.
    Therefore, we proposed to amend Sec.  413.89(e)(2) by adding a new 
paragraph (e)(2)(i)(A) to specify the reasonable collection effort 
requirement for a non-indigent beneficiary must be similar to the 
effort the provider, and/or the collection agency acting on the 
provider's behalf, puts forth to collect comparable amounts from non-
Medicare patients. It must involve the issuance of a bill to the 
beneficiary or the party responsible for the beneficiary's personal 
financial obligations on or before 120 days after: (1) The date of the 
Medicare remittance advice; or (2) the date of the remittance advice 
from the beneficiary's secondary payer, if any; whichever is latest. A 
provider's reasonable collection effort also includes other actions 
such as subsequent billings, collection letters and telephone calls or 
personal contacts with this party which constitute a genuine, rather 
than token, collection effort. Additionally, a provider must maintain 
and, upon request, furnish documentation to its contractor that 
includes the provider's bad debt collection policy which describes the 
collection process for Medicare and non-Medicare patients; the 
beneficiary's account history documents which show the dates of various 
collection actions such as the issuance of bills to the beneficiary, 
follow-up collection letters, reports of telephone calls and personal 
contact, etc.; and the beneficiary's file with copies of the bill(s) 
and follow-up notices.
    We proposed that these revisions, except for Sec.  
413.89(e)(2)(i)(A)(2) and (3), would be effective for cost reporting 
periods beginning before, on and after the effective date of this rule. 
The provisions proposed in Sec.  413.89(e)(2)(i)(A)(3), regarding the 
requirement to issue a bill to the beneficiary or the party responsible 
for the beneficiary's personal financial obligations based on the 
remittance advice date from Medicare or the beneficiary's secondary 
payer, if any, would be effective for cost reporting periods beginning 
on or after the effective date of this rule.
    We also proposed that Sec.  413.89(e)(2)(i)(A)(2), regarding the 
prior longstanding Medicare bad debt policy requiring the issuance of a 
bill to the beneficiary or the party responsible for the beneficiary's 
personal financial obligations on or shortly after discharge or death 
of the beneficiary, would be effective for cost reporting periods 
beginning before the effective date of this final rule.
    Comment: We received many comments in support of our attempt to 
clarify what constitutes a reasonable collection effort for non-
indigent beneficiaries and set forth the timeframe within which a 
provider must issue a bill to commence its reasonable collection 
effort. Many commenters agreed that the longstanding policy benchmark 
event, ``shortly after death or discharge of the beneficiary'' as set 
forth in the PRM, Sec.  310 was vague and subject to interpretation. 
Some commenters requested that the proposed timeframe within which to 
issue a bill to the beneficiary in proposed Sec.  413.89(e)(2)(i)(A)(3) 
also include a third circumstance of the date of the notification that 
the beneficiary's secondary payer does not cover the service furnished 
to the beneficiary.
    Response: We appreciate commenters' support of our proposals to 
clarify the timeframe within which a provider must issue a bill to a 
non-indigent beneficiary to commence its reasonable collection effort. 
We agree with providers that there may be instances when a provider's 
reasonable collection effort should commence following a notification 
of no coverage from a beneficiary's secondary payer. To keep this event 
objective, consistent and auditable we agree that the third benchmark 
timeframe, within which a provider must issue a bill to a non-indigent 
beneficiary to commence its reasonable collection effort, should be the 
date on the notification of no coverage from the beneficiary's 
secondary payer, as opposed to the more subjective and immeasurable 
date when the provider receives the notification of no coverage from 
the secondary payer.
    Comment: A few commenters requested that we further define what 
constitutes a provider's personal contacts with beneficiaries to 
collect the unpaid deductibles and coinsurance amounts, and whether 
personal contacts can include communication methods such as email and 
text message.
    Response: We appreciate commenters' inquiries and believe that a 
provider's reasonable collection effort as set forth in the PRM 
includes a provider's actions ``such as subsequent billings, collection 
letters and telephone calls or personal contacts with this party which 
constitute a genuine, rather than token, collection effort.'' We note 
that the definition of a ``personal contact'' means an encounter where 
two or more people are in visual or physical proximity to each other or 
a face-to-face encounter.\516\ We believe that a provider's reasonable 
collection effort that can include subsequent billings, collection 
letters and telephone calls or personal contacts with the beneficiary 
or responsible party, as long as the collection effort constitutes a 
genuine, rather than a token, collection effort, can also include other 
actions such as sending electronic communications (for example, emails 
and text messages) as long as they also constitute a genuine, rather 
than a token, collection effort, and are auditable and verifiable.
---------------------------------------------------------------------------

    \516\ https://www.lawinsider.com/dictionary/personal-
contact#:~:text=Personal%20contact%20means%20an%20encounter,include%2
0these%20types%20of%20contacts.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our proposal to amend Sec.  413.89(e)(2) by adding a new 
paragraph (e)(2)(i)(A)(1) through (4) to specify the reasonable 
collection effort requirement for a non-indigent beneficiary must be 
similar to the effort the provider, and/or the collection agency acting 
on the provider's behalf, puts forth to collect comparable amounts from 
non-Medicare patients. For cost reporting periods beginning before 
October 1, 2020, a provider's collection effort must involve the 
issuance of a bill to the beneficiary or the party responsible for the 
beneficiary's personal financial obligations on or shortly after 
discharge or death of the beneficiary. For cost

[[Page 58993]]

reporting periods beginning on or after October 1, 2020, a provider's 
collection effort must involve the issuance of a bill to the 
beneficiary or the party responsible for the beneficiary's personal 
financial obligations on or before 120 days after the latter of one of 
the following: (1) The date of the Medicare remittance advice that is 
produced from processing the claim for services furnished to the 
beneficiary that generates the beneficiary's cost sharing amounts; (2) 
the date of the remittance advice from the beneficiary's secondary 
payer, if any; and (3) the date of the notification that the 
beneficiary's secondary payer does not cover the service(s) furnished 
to the beneficiary. A provider's reasonable collection effort must also 
include other actions such as subsequent billings, collection letters 
and telephone calls or personal contacts with this party.
(2) 120-Day Collection Effort and Reporting Period for Writing Off Bad 
Debts
    Under Medicare bad debt policy, PRM Sec.  310.2 sets forth a 
``presumption of noncollectibility,'' which provides that if after 
reasonable and customary attempts to collect a bill, the debt remains 
unpaid more than 120 days from the date the first bill is mailed to the 
beneficiary, the debt may be deemed uncollectible.
    This means that a provider must make reasonable and customary 
attempts to collect a bill for at least 120 days from (and including) 
the date the first bill is mailed to the beneficiary (or the party 
responsible for the beneficiary's personal financial obligations), 
including when a provider uses a collection agency to collect a bill. 
If the debt remains unpaid on the 121st day from the date the first 
bill is mailed to the beneficiary, the provider can cease collection 
efforts and presume that the account is non-collectible, and designate 
the unpaid deductible and coinsurance amounts as an uncollectible bad 
debt.
    Over the past several years, questions have arisen from 
stakeholders with regard to the effect on the collection effort when a 
provider receives partial payments during the 120-day collection effort 
time period. We have always intended that when a partial payment is 
received within the required 120-day collection effort period, the 
collection effort is not completed and the 120-day time period restarts 
on the day the partial payment is received. The language in the PRM 
Sec.  310.2 supports this interpretation, as it sets forth ``if, after 
120 days, a payment is not received, the unpaid amount can be written 
off.'' We have implemented a policy that if, within the 120 days, a 
partial payment is received, the remaining uncollected amount cannot be 
written off to Medicare bad debt because the collection effort is 
active and ongoing by way of the response from the beneficiary 
submitting a payment. The partial payment received evidences the 
beneficiary's willingness to pay the debt, at least in part, and the 
provider must further engage with the beneficiary and follow up, by way 
of continuing the collection effort and sending additional collection 
letters or bills to the beneficiary for another 120-day collection 
effort time period. It is reasonable to place a date of finality on the 
collection effort time period; hence, the 120-day minimum collection 
time period. However, when partial payments are received within the 
120-day time period, it is reasonable to presume the remaining unpaid 
amount is collectible and expect the provider to continue the 
collection effort instead of presuming it to be non-collectible and 
requesting Medicare to reimburse the provider for what the beneficiary 
is actively engaging to pay. This constitutes a reasonable collection 
effort as required by Sec.  413.89(e)(2).
    Requiring the 120-day collection effort timeframe to start anew 
when a partial payment is received during the 120 days is not 
burdensome to the provider and requires little additional resources 
from the provider because the account is still open on the provider's 
accounting books, and has not yet been written off as a bad debt. 
Additionally, because ``uncollectible deductibles and coinsurance 
amounts are recognized as allowable bad debts in the reporting period 
in which the debts are determined to be worthless,'' (PRM Sec.  314), 
the provider can claim the unpaid amounts as a Medicare bad debt after 
the additional 120-day collection effort time period, provided that no 
additional payment is received that would require an extension of the 
120-day collection effort time period again.
    We proposed to amend Sec.  413.89(e)(2) by adding a new paragraph 
(e)(2)(i)(A)(5)(ii) to specify that when the provider receives a 
partial payment within the minimum 120-day required collection effort 
period, the provider must continue the collection effort and the day 
the partial payment is received is day one of the new collection 
period. For each subsequent partial payment received during a 120-day 
collection effort period, the provider must continue the collection 
effort and the day the subsequent partial payment is received is day 
one of the new collection period. The provider is permitted to end the 
collection effort at the end of a 120-day collection effort period when 
no payments have been received during those consecutive 120 days. These 
revisions would be effective for cost reporting periods beginning 
before, on and after the effective date of this final rule because we 
proposed to clarify and codify our longstanding policy pertaining to 
the required 120-day collection effort.
    We also proposed to clarify and codify into the regulations our 
longstanding policy regarding the reporting periods and recovery of bad 
debts, which specifies required procedures for when a provider recovers 
(that is, receives a payment in the current year) an amount that was 
previously claimed and paid as a Medicare bad debt, in a prior cost 
reporting period. In some cases an amount written off as a bad debt and 
reimbursed by the program in a prior cost reporting period may be 
recovered in a subsequent accounting period; in such situations, the 
recovered amount must be used to reduce the provider's reimbursable 
costs in the period in which the amount is recovered. However, the 
amount of such reduction in the period of recovery must not exceed the 
actual amount reimbursed by the program for the related bad debt in the 
applicable prior cost reporting period. Because this is has been our 
longstanding policy as set forth in the PRM and the regulations for 
several decades, we proposed to clarify this policy in the regulations 
to also apply to cost reporting periods beginning before, on and after 
the effective date of this final rule. We also proposed to amend Sec.  
413.89(f) by adding language to specify that, effective for cost 
reporting periods beginning before, on and after October 1, 2020, the 
deductible and coinsurance amounts uncollected from beneficiaries are 
to be written off and recognized as allowable bad debts in the cost 
reporting period in which the accounts are deemed to be worthless. Any 
payment on the account made by the beneficiary, or a responsible party, 
after the write-off date but before the end of the cost reporting 
period, must be used to reduce the final bad debt for the account 
claimed in that cost report.
    Comment: Some commenters were supportive of the proposal to codify 
the longstanding Medicare bad debt 120-day collection effort required 
by providers from non-indigent beneficiaries. However, many commenters 
were not supportive of our proposal to codify our longstanding 
collection effort policy requiring the provider engage in a continuous 
120-day collection effort with no payment received, as they

[[Page 58994]]

believed doing so would unnecessarily require them to keep their 
accounts receivable open for longer periods of time. Commenters were 
not supportive of a retroactive effective date for the codification of 
this provision, as they believed providers would be confused by the 
applicability of the policy for various cost reporting periods and 
suffer harm.
    Response: We respectfully disagree with commenters. Longstanding 
Medicare bad debt policy regarding the presumption of 
noncollectibility, as set forth in the PRM Sec.  310.2 supports a 
continuous 120-day period without a payment as part of a reasonable 
collection effort. Section 310.2 states that ``if, after 120 days, a 
payment is not received, the unpaid amount can be written off.'' We 
therefore have concluded that if, within the 120 days, a partial 
payment is received, the remaining uncollected amount cannot be written 
off to Medicare bad debt because the collection effort is active and 
ongoing by way of the response from the beneficiary submitting a 
payment. Our longstanding position, asserted in court cases and legal 
documents over the years, is that if the provider continues to receive 
money, then the account is not a worthless account without value. The 
account has some recovery value when payments continue to be received 
and therefore, it is appropriate for the provider to keep the account 
open for an additional collection period to attempt further collection 
efforts before presenting the unpaid amounts as a Medicare bad debt 
which is funded by the Medicare Trust Fund and comprised of taxpayer 
money. This longstanding bad debt policy has existed in Medicare 
guidance, including the PRM, for decades, and providers and 
beneficiaries are familiar with and rely upon it. The clarification and 
codification of this longstanding Medicare bad debt policy into the 
regulations with a retroactive effective date does not affect prior 
transactions or impose additional duties or adverse consequences upon 
providers or beneficiaries, nor does it diminish rights of providers or 
beneficiaries. The clarification and codification of this longstanding 
Medicare bad debt policy into the regulations with a retroactive 
effective date also serves an important public interest to assist 
providers and beneficiaries by avoiding confusion as to which 
longstanding policy should be applied for which cost reporting period, 
as might arise if the effective date was instead proposed for cost 
reporting periods beginning on or after the effective date of this 
rule. Failing to adopt the clarification and codification of 
longstanding Medicare bad debt policies with a retroactive effective 
date might lead some providers to believe that those policies did not 
apply to earlier cost reporting periods, and thus might cause confusion 
among some providers or cause others to resubmit previously submitted 
cost reports. The clarification and codification of longstanding 
Medicare bad debt policies into the regulations with a retroactive 
effective date serves the important public interest of promoting 
fairness and economy to providers by saving them the time and resources 
required for such resubmissions, and by saving government resources and 
funds from the taxpayer-funded Medicare Trust Fund that would be 
expended in review of cost report resubmissions. These considerations 
apply equally to all aspects of this final rule that we are finalizing 
with a retroactive effective date.
    After consideration of the public comments we received, we are 
finalizing our proposal to amend Sec.  413.89(e)(2) by adding a new 
paragraph (e)(2)(i)(A)(5)(i) to specify that a provider's reasonable 
collection effort requirement for a non-indigent beneficiary must also 
last at least 120 days after Sec.  413.89(e)(2)(i)(A)(2) or (3) is met 
before being written off as uncollectible under paragraph Sec.  
413.89(e)(3). We are finalizing our proposal to amend Sec.  
413.89(e)(2) by adding a new paragraph (e)(2)(i)(A)(5)(ii), effective 
for cost reporting periods beginning before, on, and after the 
effective date of this rule, to specify that a provider's reasonable 
collection effort requirement for a non-indigent beneficiary must also 
start a new 120-day collection period each time a payment is received 
within a 120-day collection period.
(3) Similar Collection Effort Required, Including Collection Agency 
Use, PRM Section 310
    Under Medicare bad debt policy, Medicare regulations at Sec.  
413.89(e)(2) require that providers engage in reasonable collection 
efforts. Our manual guidance currently states that, ``[t]o be 
considered a reasonable collection effort, a provider's effort to 
collect Medicare deductible and coinsurance amounts must be similar to 
the effort the provider puts forth to collect comparable amounts from 
non-Medicare patients.'' PRM Sec.  310. As such, a provider's 
dissimilar debt collection practices for Medicare and non-Medicare 
patient accounts do not constitute a provider's ``reasonable collection 
effort'' to claim reimbursement from Medicare for a bad debt, whether 
the collection effort from the provider is an in-house collection 
effort or if the provider elects to refer bad debt accounts to a 
collection agency for an outside collection effort. This policy has 
been the subject of dispute by stakeholders in the past and we believe 
that a clarification of the policy is necessary with incorporation of 
the PRM guidance into the regulations.
    If a provider elects to refer its non-Medicare accounts to a 
collection agency, the provider must similarly refer its Medicare 
accounts of ``like amount.'' The PRM Sec.  310.A states that where a 
collection agency is used, Medicare expects the provider to refer all 
uncollected patient charges of like amount to the agency without regard 
to class of patient. The ``like amount'' requirement may include 
uncollected charges above a specified minimum amount. Therefore, if a 
provider refers to a collection agency its uncollected non-Medicare 
patient charges which in amount are comparable to the individual 
Medicare deductible and coinsurance amounts due the provider from its 
Medicare patient, Medicare requires the provider to also refer its 
uncollected Medicare deductible and coinsurance amounts to the 
collection agency.
    When the provider uses a collection agency to perform a reasonable 
collection effort on its behalf, the provider must ensure that the 
collection agency's collection effort is similar to the effort the 
collection agency puts forth to collect comparable amounts from non-
Medicare patients. This means that for similar, comparable amounts of 
the collection accounts, the collection agency must use similar 
collection practices for both accounts.
    The collection agency's collection effort can include subsequent 
billings, collection letters, and telephone calls or personal contacts 
with the party who is financially responsible for the beneficiary's 
personal financial obligation which constitute a genuine, rather than a 
token, collection effort. The collection agency's collection effort may 
also include using or threatening to use court action to obtain 
payment. Where the collection agency does not follow the reasonable 
collection effort requirement, Medicare does not recognize the fees as 
an allowable administrative cost. Collection accounts that remain at a 
collection agency, for whatever reason, including accounts that are 
monitored passively by the collection agency, cannot be claimed by the 
provider as a Medicare bad debt. This is because during the period the 
unpaid account remains at the

[[Page 58995]]

collection agency, the provider cannot meet the fourth regulatory 
requirement in Sec.  413.89(e)(4) that ``sound business judgment 
established that there was no likelihood of recovery at any time in the 
future.'' While an account remains at a collection agency, there is 
always a likelihood of at least some recovery on the account. The 
purpose of having an account at a collection agency is to collect on 
the account, even if the account is in a passive collection status. 
Hence, the very act of having an account at a collection agency is 
deemed to be a collection effort undertaken by the provider. As such, 
the provider cannot establish that there is ``no likelihood of recovery 
at any time in the future'' for the account and the provider is unable 
to claim the account as an allowable Medicare bad debt.
    The fee charged by the collection agency is its charge for 
providing the collection service and is not considered a Medicare bad 
debt. Where a provider uses the services of a collection agency and the 
collection agency performs a reasonable collection effort, Medicare 
recognizes the fees the collection agency charges the provider as an 
allowable administrative cost. When a collection agency obtains payment 
of an account receivable, the gross amount collected reduces the 
patient's account receivable by the same amount and must be credited to 
the patient's account. The collection fee deducted by the agency is 
charged to administrative costs.
Example 1--Collection Agency Charges Percent Fee
    The provider sends a beneficiary's account of $400 to the 
collection agency and the collection agency's fee for its service is 30 
percent of the collected amount. If the collection agency collects $220 
from the beneficiary, the collection agency keeps $66 (30 percent of 
$220) as its fee for the collection services and remits $154 ($220 less 
$66) to the provider. The provider records the full amount collected by 
the collection agency ($220) in the beneficiary's account receivable 
and records the collection fee ($66) in administrative costs. Once the 
collection agency completes the required collection efforts on this 
account, returns the account back to the provider and the provider 
deems the account worthless, the provider can claim on its cost report 
the amount of $180 ($400 less $220) as a Medicare bad debt (subject to 
further statutorily mandated reductions as set forth in Sec.  
413.89(h)). The provider cannot claim the $66 collection agency fee as 
a Medicare bad debt.
Example 2--Collection Agency Charges Flat Fee
    The provider sends a beneficiary's account of $400 to the 
collection agency and the collection agency's flat fee is $100 per 
account for its services. If the collection agency collects $250 from 
the beneficiary, the collection agency keeps $100 as its fee for the 
collection services and remits $150 ($250 less $100) to the provider. 
The provider records the full amount collected by the collection agency 
($250) in the beneficiary's account receivable and records the 
collection fee ($100) in administrative costs. Once the collection 
agency completes the required collection effort on this account, 
returns the account back to the provider and the provider deems the 
account worthless, the provider can claim on its cost report the amount 
of $150 ($400 less $250) as a Medicare bad debt (subject to further 
statutory mandated reductions as set forth in Sec.  413.89(h)). The 
provider cannot claim the $100 collection agency fee as a Medicare bad 
debt.
    Therefore, we proposed to amend Sec.  413.89(e)(2) by adding a new 
paragraph (e)(2)(i)(A) to specify that a provider's effort to collect 
Medicare deductible and coinsurance amounts must be similar to the 
effort the provider puts forth to collect comparable amounts from non-
Medicare patients. A provider's dissimilar debt collection practices 
for Medicare and non-Medicare patient accounts do not constitute a 
reasonable collection effort to claim reimbursement from Medicare for a 
bad debt, whether the collection effort from the provider is an in-
house collection effort or if the provider elects to refer bad debt 
accounts to a collection agency for an outside collection effort. A 
provider may use a collection agency to perform a reasonable collection 
effort on its behalf. The provider must ensure that the collection 
agency's collection effort is similar to the effort the collection 
agency puts forth to collect comparable amounts from non-Medicare 
patients. The collection agency's collection effort can include 
subsequent billings, collection letters, and telephone calls or 
personal contacts with the responsible party which constitute a 
genuine, rather than a token, collection effort. The collection 
agency's collection effort may include using or threatening to use 
court action to obtain payment. The fee charged by the collection 
agency is its charge for providing the collection service and is not 
considered a Medicare bad debt. Where a provider uses the services of a 
collection agency and the collection agency performs a reasonable 
collection effort, Medicare recognizes the fees the collection agency 
charges the provider as an allowable administrative cost. Where the 
collection agency does not follow the reasonable collection effort 
requirement, Medicare does not recognize the fees as an allowable 
administrative cost. Collection accounts that remain at a collection 
agency, for whatever reason, including accounts that are monitored 
passively by the collection agency, cannot be claimed by the provider 
as a Medicare bad debt. When a collection agency obtains payment of an 
account receivable, the gross amount collected reduces the patient's 
account receivable by the same amount and must be credited to the 
patient's account. The collection fee deducted by the agency is charged 
to administrative costs.
    These revisions would be effective for cost reporting periods 
beginning before, on and after the effective date of this final rule 
because we are clarifying and codifying our longstanding policy.
    Comment: Some commenters suggested that CMS abandon the proposal to 
codify the requirement that accounts remaining at a collection agency 
cannot be considered for Medicare bad debt because accounts at a 
collection agency have little to no value and providers simply place 
them with collection agencies for the small possibility of a 
collection. Some commenters cited federal court decisions and asserted 
that they foreclosed our adoption of similar collection effort 
policies. Other commenters suggested that if a payment were to be made 
on an account while at a collection agency, providers could reconcile 
the amount paid and record it as a recovery on the provider's 
subsequently submitted cost report.
    Response: We appreciate commenters' suggestions but respectfully 
disagree. The current Medicare bad debt regulation requires that to be 
allowable, a bad debt must be ``actually uncollectible when claimed as 
worthless,'' and also that ``sound business judgment established that 
there was no likelihood of recovery at any time in the future.'' Sec.  
413.89(e)(3) and (4). It has been our longstanding policy that an 
account that remains at a collection agency has satisfied neither of 
these regulatory conditions, remains in a collection effort status, and 
thus cannot be claimed as a Medicare bad debt. An account that remains 
at a collection agency still holds some value for the chance of a 
recovery and there is a possibility, a likelihood, of recovery while 
the account remains there. We have also reviewed the federal court 
decisions cited in some comments and

[[Page 58996]]

do not agree that they prevent us from adopting the rules regarding 
similar collection efforts that we are finalizing.
    Comment: Some commenters suggested that further definitions be set 
forth for what constitutes a genuine, and not a token collection 
effort.
    Response: A genuine, rather than a token, collection effort is 
based on the reasonableness of a provider's effort to collect the 
unpaid Medicare deductible and coinsurance amounts from the beneficiary 
or responsible party. It entails a serious and concerted effort by the 
provider to collect the unpaid debt. The provider's genuine, rather 
than token, collection effort has been addressed in PRM Sec.  310 under 
the concept of ``reasonable collection effort'' as ``also include[ing] 
other actions such as subsequent billings, collection letters and 
telephone calls or personal contacts with this party which constitute a 
genuine, rather than a token, collection effort.'' As we have asserted 
in the past in policy statements and proceedings, a genuine collection 
effort requires the provider to engage in prompt and continuous 
collection efforts, over at least 120 days, advising the beneficiary of 
the amounts to be collected, engaging in subsequent follow up and 
billing, and may include the provider engaging a collection agency.
    After consideration of the public comments we received, we are 
finalizing our proposal to amend Sec.  413.89(e)(2) by adding a new 
paragraph (e)(2)(i)(A) to specify that a provider's effort to collect 
Medicare deductible and coinsurance amounts must be similar to the 
effort the provider puts forth to collect comparable amounts from non-
Medicare patients.
(4) Documentation Required--Reasonable Collection Effort for Non-
Indigent Beneficiaries
    Medicare's longstanding bad debt policy requires that as part of a 
provider's reasonable collection effort for beneficiaries, including 
non-indigent beneficiaries, the provider must maintain and, upon 
request, furnish to the Medicare contractor documentation of the 
provider's collection effort, whether the provider performs the 
collection effort in house or whether the provider uses a collection 
agency to perform the required collection effort on the provider's 
behalf. PRM Sec.  310.B. The documentation of the collection effort 
must include: The provider's bad debt collection policy which describes 
the collection process for Medicare and non-Medicare patients; and the 
patient account history documents which show the dates of various 
collection actions such as the issuance of bills, follow-up collection 
letters, reports of telephone calls and personal contact, etc. Unpaid 
deductible and coinsurance amounts without collection effort 
documentation are not allowable bad debts.
    Therefore, we proposed to amend Sec.  413.89(e)(2) by adding a new 
paragraph (e)(2)(i)(A)(6) to specify the requirements a provider must 
follow in order to document the provider's reasonable collection effort 
for non-indigent beneficiaries.
    Because these are clarifications of codifications of longstanding 
Medicare bad debt policy, these policies would be effective for cost 
reporting periods beginning before, on and after the effective date of 
the final rule.
    Comment: Some commenters disagreed with the proposal that 
documentation requirements for a provider's collection effort be 
codified. Some commenters suggested that documentation practices can 
vary among providers and are subject to interpretation by contractors. 
Commenters instead suggested that the documentation requirements be set 
forth in subregulatory guidance.
    Response: We appreciate commenters' concerns but respectfully 
disagree. We note that regulatory guidance exists at 42 CFR 413.20 and 
413.24 regarding providers' recordkeeping and documentation 
requirements to substantiate payment. We also note other regulations 
set forth specific documentation requirements, for example, 42 CFR 
413.75 for direct GME payments. We believe that our rules governing 
documentation requirements for a provider's reasonable collection 
effort should be similarly appropriately codified in regulations text. 
Such codification will provide clarity and should therefore minimize 
the possibility of varying interpretations that have caused some 
commenters' concerns. We also, however, believe the requirements are 
general enough to afford needed flexibility to providers.
    After consideration of the public comments we received, we are 
finalizing our proposal to amend Sec.  413.89(e)(2) by adding a new 
paragraph (e)(2)(i)(A)(6) to specify the requirements a provider must 
follow in order to document the provider's reasonable collection effort 
for non-indigent beneficiaries. Specifically, providers must maintain 
and, upon request, furnish verifiable documentation to its contractor 
that includes all of the following: (i) The provider's bad debt 
collection policy which describes the collection process for Medicare 
and non-Medicare patients, (ii) The patient account history documents 
which show the dates of various collection actions such as the issuance 
of bills to the beneficiary, follow-up collection letters, reports of 
telephone calls and personal contact, etc.; and (iii) The beneficiary's 
file with copies of the bill(s) and follow-up notices. We will evaluate 
the burden estimates for the recordkeeping requirements in all 
applicable cost reports, such as OMB Control No. 0938-0050 (Hospitals 
and Health Care Complex Cost Report), and if these recordkeeping 
activities have not been accounted for we will revise the ICR(s) via a 
Paperwork Reduction Act notice.
b. Reasonable Collection Effort, Beneficiaries Determined Indigent by 
Provider Using Required Criteria
    Under PRM Sec.  312, a provider may determine a beneficiary to be 
indigent for purposes of claiming a beneficiary's unpaid deductible 
and/or coinsurance amounts as a Medicare bad debt. A provider can 
determine a beneficiary's indigence in one of two ways: (1) When the 
beneficiary is eligible for Medicaid as either a categorically or 
medically needy individual (that is, a dual eligible Medicare 
beneficiary); or (2) the provider determines a non-dual eligible 
Medicare beneficiary, to be indigent by applying the provider's 
customary methods for determining a patient to be indigent under the 
evaluation criteria in PRM Sec.  312. A. through D. Once indigence is 
determined by the provider, and the provider concludes that there has 
been no improvement in the beneficiary's financial condition, the debt 
may be deemed uncollectible without the provider having to collect the 
unpaid Medicare cost sharing liability from beneficiaries by applying 
the requirements set forth in PRM Sec.  310 for non-indigent 
beneficiaries.
    Over the past several years, the criteria set forth in PRM Sec.  
312 regarding the determination of indigence have been the subject of 
litigation as questions have been raised as to whether the criteria are 
mandatory. In the proposed rule, we proposed to clarify and codify our 
longstanding policy and criteria set forth in PRM Sec.  312 A. through 
D. (setting for the requirements for a facility's determination of 
indigency).
    Stakeholders have questioned why PRM Sec.  312.B requires that the 
beneficiary's total resources be considered when a provider evaluates a 
beneficiary's indigence. We believe that each beneficiary's unique 
total resources must be evaluated to determine whether a beneficiary is 
indigent. This evaluation must include, but is not limited to, an 
analysis of assets (only those convertible to cash, and

[[Page 58997]]

unnecessary for the beneficiary's daily living), liabilities, and 
income and expenses, as well as any extenuating circumstances that 
would affect the determination of the beneficiary's indigence.
    Therefore, we proposed to amend Sec.  413.89(e)(2) by adding new 
paragraph (e)(2)(ii) to define an indigent non-dual eligible 
beneficiary as a Medicare beneficiary who is determined to be indigent 
by the provider and not eligible for Medicaid as categorically or 
medically needy. We also proposed to amend Sec.  413.89(e)(2) by adding 
new paragraph (e)(2)(ii)(A) to specify that to determine a beneficiary 
to be an indigent non-dual eligible beneficiary, the provider must 
apply its customary methods for determining whether the beneficiary is 
indigent under the following requirements: (1) The beneficiary's 
indigence must be determined by the provider, not by the beneficiary; 
that is, a beneficiary's signed declaration of their inability to pay 
their medical bills and/or deductibles and coinsurance amounts cannot 
be considered proof of indigence; (2) the provider must take into 
account a beneficiary's total resources which include, but are not 
limited to, an analysis of assets (only those convertible to cash and 
unnecessary for the beneficiary's daily living), liabilities, and 
income and expenses. While a provider must take into account a 
beneficiary's total resources in determining indigence, any extenuating 
circumstances that would affect the determination of the beneficiary's 
indigence must also be considered; and (3) the provider must determine 
that no source other than the beneficiary (for example, a legal 
guardian) would be legally responsible for the beneficiary's medical 
bill.
    We also proposed to amend Sec.  413.89(e)(2) by adding new 
paragraph (e)(2)(ii)(B) to specify that as part of its determination of 
indigence, the provider must maintain and furnish, upon request to its 
Medicare contractor, documentation (for example, a Policy for 
Determination of Indigence) describing the method by which indigence or 
medical indigence is determined and the beneficiary-specific 
documentation which supports the provider's documentation of each 
beneficiary's indigence or medical indigence. Once indigence is 
determined and the provider concludes that there has been no 
improvement in the beneficiary's financial status, the bad debt may be 
deemed uncollectible without applying a collection effort. Unpaid 
deductible and coinsurance amounts without the provider's documentation 
of its determination of indigence will not be considered as allowable 
bad debts.
    We proposed that these revisions would be effective for cost 
reporting periods beginning before, on and after the effective date of 
this rule because they are clarifications and codifications of 
longstanding Medicare policies.
    Comment: Some commenters were supportive of the codification of the 
definition for an indigent non-dual eligible beneficiary because it 
would provide clarity to the Medicare bad debt policies. Other 
commenters suggested that the codification of the definitions for each 
beneficiary category may cause confusion and questioned whether there 
could be an instance when a beneficiary moved from a non-indigent 
beneficiary category to an indigent beneficiary category. Some 
commenters suggested that the codification of the definition for an 
indigent non-dual eligible beneficiary did not serve an important 
interest and should not be applied retroactively.
    Response: We appreciate the commenters' comments and perspectives. 
Our longstanding Medicare bad debt rules requiring a provider's 
reasonable collection effort are different for the three categories of: 
Beneficiaries who are non-indigent; beneficiaries who have been 
determined by the provider to be indigent (including medically 
indigent); or beneficiaries enrolled in Medicaid. Therefore, we believe 
that as we clarify and codify these longstanding bad debt policies, it 
is important to set forth the definition of each of these beneficiary 
categories so that it is clear which bad debt collection effort 
policies applied to each. A beneficiary's status can change from non-
indigent to ``provider-determined indigent'' status during the cost 
reporting period, or the beneficiary could be enrolled in Medicaid; the 
provider's required reasonable collection effort is different for each 
category. We believe that we are promoting the public interest with the 
retroactive codification of the definition for an indigent non-dual 
eligible beneficiary. This definition serves to provide clarity because 
the definitions for this beneficiary category have existed implicitly 
in the longstanding bad debt collection effort policies that applied to 
them. We believe that providers will not be burdened or harmed by the 
application and formalization of a label and definition for a non-
indigent beneficiary and an indigent non-dual eligible beneficiary.
    Comment: Many commenters opposed the proposal to codify Medicare's 
longstanding bad debt policy with respect to a provider's determination 
of a patient's indigence by the required evaluation of a patient's 
total resources, including a patient's assets, income, expenses and 
liabilities. Many commenters suggested that only a patient's income be 
considered when determining whether a patient is indigent and also 
suggested that an evaluation of a patient's assets, liability and 
expenses requires additional resources and burden to the provider. Some 
commenters suggested that an evaluation of a patient's liabilities and 
expenses only serves to further qualify a patient as indigent. Some 
commenters questioned why additional parameters were required to 
evaluate a patient's indigence when the PRM sets forth that providers 
should apply its customary methods for determining the indigence of 
patients. Other commenters cited federal court decisions and objected 
to the proposal to require providers to evaluate assets, income, 
liabilities and expenses because some viewed the language in the PRM as 
suggestive requirements and not mandatory. Many commenters opposed the 
retroactive codification of this policy as proposed.
    Response: We appreciate the commenters' varied views on the 
longstanding Medicare bad debt indigence policies. In the proposed 
rule, we proposed to codify Medicare's longstanding bad debt policy 
that requires providers to evaluate a beneficiary's financial status to 
determine whether the beneficiary can be deemed to be indigent by the 
provider, permitting the provider to forgo the process to collect a 
beneficiary's unpaid deductible and coinsurance amounts. In this 
regard, a provider can deem a beneficiary indigent or medically 
indigent when the beneficiary has also been determined eligible for 
Medicaid. If the beneficiary has not been determined eligible for 
Medicaid, then the provider applies its customary methods for 
determining indigence under certain guidelines. Our longstanding policy 
has been that those guidelines require a provider to take into account 
the beneficiary's total resources to include the consideration of a 
beneficiary's assets, income, liabilities and expenses. Upon further 
review and consideration of the comments, we understand that reviewing 
a patient's liabilities and expenses may not be beneficial in instances 
when the beneficiary has already qualified for indigence upon 
evaluation of the beneficiary's income and assets because an evaluation 
of a beneficiary's liabilities and expenses would only reduce the 
income and

[[Page 58998]]

assets, which serves to further ensure a beneficiary's indigence 
determination. However, we do not agree, as some commenters suggest, 
that only a beneficiary's income, but not assets, should be evaluated 
for indigence for Medicare bad debt purposes. It is possible that a 
Medicare beneficiary may have assets that are convertible to cash, 
unnecessary for the beneficiary's daily living, and that can be used 
for the beneficiary's care, including medical cost sharing expenses. 
Therefore, we believe that evaluating a beneficiary's income and assets 
yields a more appropriate assessment of indigence. In circumstances in 
which a beneficiary may not qualify as financially indigent based on a 
review of assets and income alone, because their income is too high or 
their assets too great, a further review of the beneficiary's 
liabilities and expenses may serve to qualify them for a medical 
indigence status. Finally, we have reviewed the federal court decisions 
cited in some comments and do not agree that they prevent us from 
adopting the rules regarding total resources that we are finalizing.
    Comment: Some commenters suggested that providers be permitted to 
use presumptive eligibility tools, such as those used to qualify 
patients for federal, state and local uncompensated care or charity 
care programs, to qualify Medicare beneficiaries for indigence 
determinations for Medicare bad debt purposes.
    Response: We appreciate the commenters' suggestions to allow 
providers to determine Medicare beneficiaries to be indigent by using 
presumptive eligibility tools for Medicare bad debt purposes, which 
could also serve to reduce burden to providers when evaluating 
indigence. Commenters suggested that many presumptive eligibility tools 
utilize various factors to evaluate a patient's ability to pay for 
medical services, including but not limited to, a patient's 
demographics, zip code, credit score, or income, and could also be used 
to determine a Medicare beneficiary to be indigent for bad debt 
purposes. Although presumptive eligibility tools may reduce a 
provider's burden when evaluating indigence, we disagree that 
presumptive eligibility tools should be used to determine a Medicare 
beneficiary's indigence status for Medicare bad debt purposes. Many of 
the presumptive eligibility tools cursorily review a patient's 
financial status, based either on the patient's declaration or 
demographic presumptions, or income and presume one to be indigent. 
Because we understand that an assessment of a beneficiary's liabilities 
and expenses may serve to qualify a beneficiary for indigence, we 
believe that it is appropriate to allow a provider flexibility to 
consider a beneficiary's extenuating circumstances that would affect 
the determination of the beneficiary's indigence or medical indigence, 
which may include an analysis of the beneficiary's liabilities and 
expenses, if indigence cannot be determined with a review of the 
beneficiary's income and assets only.
    Comment: Commenters asserted that the proposal to codify the 
Medicare bad debt indigence evaluation criteria contradicts terms of 
indigence policies from other programs, such as the National Health 
Service Corps program, that commenters assert, do not permit providers 
to inquire about a patient's assets, liabilities, or expenses, and 
therefore a provider's compliance with Medicare bad debt indigence 
policy would adversely cause providers to be non-compliant with other 
indigent policies.
    Response: We appreciate commenters' concerns, however we 
respectfully disagree that a provider's compliance with Medicare bad 
debt indigence criteria for Medicare beneficiaries precludes providers 
from participating in other indigence programs. We believe that a 
provider's compliance with Medicare bad debt indigence policy, in order 
to qualify a Medicare beneficiary as indigent and claim a Medicare bad 
debt which is paid from the Medicare Trust Fund, is separate and apart 
from a provider participating in, or qualifying patients for, other 
indigence programs that may have different indigence program criteria. 
As commenters indicate, other Federal, state or local indigent programs 
may have criteria different from the Medicare bad debt indigence 
policy, for various reasons or program incentives, and permit providers 
to use presumptive eligibility tools, to qualify patients for other 
indigent program. The Medicare bad debt policy is not an indigence 
program; it is a Medicare policy to pay providers for a beneficiary's 
unreimbursed deductible and coinsurance amounts after the provider has 
met certain criteria. The criteria for other indigence programs, such 
as charity care, may have different program or policy requirements than 
Medicare bad debt. Medicare does not pay providers directly for charity 
care, whereas Medicare bad debt amounts may be allowable, and directly 
paid to various provider types, without the providers performing a 
reasonable collection effort if the beneficiary qualifies for 
indigence. As previously stated, we believe it is possible that a 
Medicare beneficiary may have assets that are convertible to cash, 
unnecessary for the beneficiary's daily living expenses, which can be 
used for the beneficiary's care, including medical cost-sharing 
expenses. Therefore, we believe that evaluating a beneficiary's income 
and assets yields a more appropriate assessment of indigence for 
Medicare bad debt purposes. As stewards of the Medicare Trust Fund, CMS 
must ensure that providers comply with Medicare program policy in order 
to receive payment for bad debt for Medicare beneficiaries determined 
to be indigent under Medicare's indigence bad debt policy criteria.
    Comment: Some commenters questioned what a provider would need to 
do to conclude ``that there has been no improvement in the 
beneficiary's financial status'' once indigence is determined before 
the bad debt may be deemed uncollectible without applying a collection 
effort as proposed in Sec.  413.89(e)(2)(ii)(B). Some commenters 
suggested that this phrase in the proposed regulation text requires 
additional actions by providers and is vague and burdensome.
    Response: We appreciate commenters' concerns. Longstanding Medicare 
bad debt policy, as published in the PRM Sec.  312, has always required 
that ``once indigence is determined and the provider concluded that 
there had been no improvement in the beneficiary's financial condition, 
the debt may be deemed uncollectible without applying the Sec.  310 
procedures.'' We agree with providers that this proposed codification 
may not be beneficial to providers as it requires providers to take 
additional actions which may be burdensome, and not produce a different 
result, once the provider has determined the beneficiary to be indigent 
under proposed Sec.  413.89(e)(2)(ii)(A). We believe that providers 
should be afforded more flexibility when determining a beneficiary's 
indigence and that an analysis of liabilities and expenses should be 
reviewed in situations where it is only necessary to do so if the 
beneficiary does not first qualify for indigence with an analysis of 
income and assets. We also believe that flexibility should be afforded 
to providers so that they do not have to continually review a 
beneficiary's financial condition once indigence is determined. 
However, we recognize that a beneficiary's financial condition may 
improve, resulting in a change in the beneficiary's indigence status 
from indigent to non-indigent. If a provider discovers that the 
beneficiary's financial

[[Page 58999]]

condition has improved following the provider's determination of 
indigence, we expect the provider will no longer classify the 
beneficiary as indigent and implement reasonable collection efforts for 
the non-indigent beneficiary.
    After consideration of the public comments we received, we are 
finalizing Medicare bad debt indigence policies applicable to indigent 
non-dual eligible beneficiaries by amending Sec.  413.89(e)(2) by 
adding new paragraph (e)(2)(ii) to define an indigent non-dual eligible 
beneficiary as a Medicare beneficiary who is determined to be indigent 
by the provider and not eligible for Medicaid as categorically or 
medically needy. We are not finalizing our proposal to add new 
paragraph (e)(2)(ii)(A), which would have required a provider to 
evaluate a beneficiary's liabilities and expenses to determine 
indigence. Instead, new paragraph (e)(2)(ii)(A) specifies that in order 
to conclude that a beneficiary is an indigent non-dual eligible 
beneficiary, the provider: (1) Must not use a beneficiary's declaration 
of their inability to pay their medical bills or deductibles and 
coinsurance amounts as sole proof of indigence or medical indigence, 
(2) Must take into account the analysis of both the beneficiary's 
assets (only those convertible to cash and unnecessary for the 
beneficiary's daily living) and income, (3) May consider extenuating 
circumstances that would affect the determination of the beneficiary's 
indigence or medical indigence which may include an analysis of both 
the beneficiary's liabilities and expenses, if indigence is unable to 
be determined under (ii)(A)(2), (4) Must determine that no source other 
than the beneficiary would be legally responsible for the beneficiary's 
medical bill, such as a legal guardian or State Medicaid program, and 
(5) Must maintain and, upon request, furnish its Medicare contractor 
with the provider's indigence determination policy describing the 
method by which indigence or medical indigence is determined and all 
the verifiable beneficiary specific documentation which supports the 
provider's determination of each beneficiary's indigence or medical 
indigence. We believe that this policy finalization will reduce burden 
to providers when determining a beneficiary's indigence. We will 
evaluate the burden estimates for the recordkeeping requirements in all 
applicable cost reports, such as OMB Control No. 0938-0050 (Hospitals 
and Health Care Complex Cost Report), and if these recordkeeping 
activities have not been accounted for we will revise the ICR(s) via a 
Paperwork Reduction Act notice. We are not finalizing our proposal to 
amend Sec.  413.89(e)(2) by adding new paragraph (e)(2)(ii)(B), as 
proposed, to require that once indigence is determined and the provider 
concludes that there has been no improvement in the beneficiary's 
financial status, the bad debt may be deemed uncollectible without 
applying a collection effort. Instead, we are amending Sec.  
413.89(e)(2) by adding new paragraph (e)(2)(ii)(B) to specify that once 
indigence is determined, the bad debt may be deemed uncollectible 
without applying a collection effort. Unpaid deductible and coinsurance 
amounts without the provider's documentation of its determination of 
indigence will not be considered as allowable bad debts. We believe 
that this policy finalization will reduce burden to providers when 
determining a beneficiary's indigence.
    In the proposed rule, we proposed that our proposals would be 
effective for cost reporting periods beginning before, on and after the 
effective date of this rule because our proposals were clarifications 
and codifications of longstanding Medicare policies. However, because 
of the changes to the policies we are finalizing after consideration of 
public comments, we are finalizing these policies with an effective 
date for cost reporting periods beginning on or after October 1, 2020.
c. Reasonable Collection Effort, Dual Eligible Beneficiaries and the 
Medicaid Remittance Advice
    Dual eligible beneficiaries are Medicare beneficiaries who are 
enrolled in Medicare (either Part A, Part B, or both), and are also 
enrolled in ``full Medicaid'' coverage and/or the Medicare Savings 
Program (MSP).\517\ Authorized under sections 1902(a)(10)(E) and 
1905(p) and (s) of the Act, the MSP includes four mandatory Medicaid 
eligibility groups that assist low income Medicare beneficiaries with 
their Medicare expenses.\518\ One specific category of MSP is the 
Qualified Medicare Beneficiaries (QMB) program. Under 1905(p)(1) of the 
Act, a QMB is an individual who is entitled to hospital insurance 
benefits under Part A of Medicare, with income not exceeding 100 
percent of the Federal poverty level, and resources not exceeding three 
times the Supplemental Security Income limit.
---------------------------------------------------------------------------

    \517\ ``Full Medicaid'' coverage refers to the package of 
services, beyond coverage of Medicare premiums and cost-sharing, 
that certain individuals are entitled to when they qualify under 
eligibility groups covered under a state's Medicaid program.
    \518\ The MSP includes the Qualified Medicare Beneficiary, 
Specified Low-Income Medicare Beneficiary Qualifying Individual, and 
Qualified Disabled and Working Individual programs. Depending upon 
the MSP group the individual is enrolled in, the MSP pays all or 
some of an individual's Medicare expenses, including Parts A and B 
premiums, deductibles, coinsurance and copayments.
---------------------------------------------------------------------------

    Section 1902(a)(10)(E) of the Act directs State Medicaid Agencies 
to pay providers for QMB cost sharing amounts as defined in section 
1905(p)(3) of the Act. Under section 1905(p)(3) of the Act, ``Medicare 
cost sharing'' includes costs incurred with respect to a QMB, ``without 
regard to whether the costs incurred were for items and services for 
which medical assistance is otherwise available under the plan.'' The 
``Medicare cost sharing'' includes Medicare Part A and B coinsurance 
and deductibles. Section 1902(n)(2) of the Act permits the State to 
limit payment for QMB cost sharing to the amount necessary to provide a 
total payment to the provider (including Medicare, Medicaid, required 
nominal Medicaid copayments, and third party payments) equal to the 
amount a State would have paid for the service under the State plan.
    State Medicaid Management Information Systems (MMIS), funded under 
section 1903(a)(3) of the Act, are required, as an express condition of 
a State receiving enhanced federal matching funds for the design, 
development, installation and administration of their MMIS systems, to 
process Medicare crossover \519\ claims, including QMB cost sharing, 
for adjudication of Medicaid payment of Medicare cost sharing amounts, 
including deductibles and coinsurance for Medicare services. The MMIS 
is also required to furnish the provider with a Medicaid remittance 
advice (RA), a document that outlines the State's cost sharing 
liability for a particular service or set of services for the patient/
beneficiary.\520\ The Medicaid RA will also show whether the State has 
no liability for Medicare cost sharing for a beneficiary's service 
pursuant to the State plan.\521\ The MMIS must process all Medicare 
crossover claims for QMBs, including Medicare-adjusted claims that

[[Page 59000]]

are submitted by Medicaid-enrolled providers, even if a service or 
provider category is not currently recognized in the Medicaid State 
Plan. However, we recognize that there may be instances where the 
Medicare crossover claim process does not occur automatically, and 
providers must instead submit their Medicare claims manually to 
Medicaid for adjudication and determination of the state's cost sharing 
liability. The most direct and logical way to know a State's cost 
sharing liability for a QMB is from the Medicaid RA. If a State 
Medicaid program had Medicare cost sharing responsibility and refused 
to pay, or failed to process a Medicare crossover claim to determine 
its cost sharing liability, it would be out of compliance with its 
Medicaid State plan and would be subject to enforcement action by CMS.
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    \519\ ``Crossover'' claims are initiated when a Medicare 
certified provider submits a claim to its Medicare contractor for 
processing of the Medicare covered service and the claim ``crosses 
over'' to Medicaid for the State to determine and set forth the 
State's cost sharing liability towards beneficiaries' Medicare cost 
sharing. This crossover claim includes the primary payment amount 
from Medicare.
    \520\ http://www.medicaid.gov/Federal-Policy-Guidance/downloads/CIB-06-07-2013.pdf.
    \521\ http://www.medicaid.gov/Federal-Policy-Guidance/downloads/CIB-06-07-2013.pdf.
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    A State's requirement to determine its cost sharing liability for 
QMBs was also set forth at section 3490.14(A) of the State Medicaid 
Manual (SMM) (CMS Pub. 45); Payment of Medicare Part A and Part B 
Deductibles and Coinsurance--State Agency Responsibility, when paper 
claims were submitted by Medicare providers to the State to determine 
its cost sharing liability. Specifically, section 3490.14(A)(l) and (2) 
of the SMM required the State Agency to provide, through the State 
Plan, the payment rates applicable for services that are either covered 
or not covered by the State Plan, in order to determine the amount of 
Medicare coinsurance and deductibles that the State was responsible to 
pay. Because a QMB's financial situation and Medicaid eligibility 
status may change over the course of a very short period of time and 
the State is required to maintain the most current patient eligibility 
and financial information, the State is in the best position to fulfill 
its statutory requirement and make the most accurate determination of 
its cost sharing liability for any unpaid Medicare deductibles and 
coinsurance.
    Providers are prohibited under section 1902(n)(3) of the Act from 
seeking to collect payment from a QMB for Medicare deductibles or 
coinsurance, even if the Medicaid State plan's cost sharing liability 
is less than the total amount of the Medicare deductibles and 
coinsurance. Medicare may reimburse providers who provide Medicare 
covered services to dual eligible beneficiaries the difference between 
beneficiaries' unpaid Medicare cost sharing and the State's Medicare 
cost sharing liability for the beneficiary, up to the allowable 
Medicare bad debt amount if the provider has made a reasonable 
collection effort. To satisfy the reasonable collection effort, a 
provider that has furnished services to a dual eligible beneficiary 
must determine whether the State's Title XIX Medicaid Program (or a 
local welfare agency, if applicable) is responsible to pay all or a 
portion of the beneficiary's Medicare deductible and/or coinsurance 
amounts. A provider satisfies this by billing the State or State 
designee such as a Medicaid managed care organization (MCO), to 
determine any Medicare cost sharing amounts for which the State may be 
liable to the provider. This is known as the ``must-bill policy'' for 
dual eligible beneficiaries and is outlined in PRM Sec. Sec.  312 and 
322.
    In accordance with PRM Sec.  312, providers seeking Medicare 
reimbursement for bad debts for dual eligible beneficiaries' cost 
sharing are required to: (1) Bill the State Medicaid program to 
determine that no source other than the patient would be legally 
responsible for the patient's medical bill; for example, title XIX, 
local welfare agency and guardian (the ``must bill requirement''); and 
(2) obtain and submit to the Contractor, a Medicaid RA from the State 
Medicaid program (the ``RA requirement''). The must-bill policy and the 
RA requirement to document the States' cost sharing liability are both 
longstanding policies of CMS, as shown in PRM Sec. Sec.  312 and 322 
themselves: Administrative decisions applying the policies; and section 
4499, exhibit 15.08 of the Medicare Intermediary Manual (CMS Pub. 13-4) 
(December 1985).
    It has always been our position that the must-bill policy and the 
RA requirement are necessary to ensure that the provider obtains 
contemporaneous documentation that can be maintained in the usual 
course of the provider's business as required by Sec.  413.20(a). The 
historical background of the RA requirement is also set forth in PRM 
Sec.  322, Medicare Bad Debts Under State Welfare Programs.
    Thus, when Medicare certified providers provide services to QMBs 
and claim bad debt to Medicare for unpaid cost sharing amounts, 
Medicare bad debt policy requires providers to bill the State and 
submit to their contractors the Medicaid RA as documentation to 
evidence the State's liability for dual eligible beneficiaries' 
deductible and/or coinsurance amounts. If a provider does not bill the 
State and submit the Medicaid RA to Medicare with its claim for bad 
debt reimbursement for dual eligible beneficiaries, the result is that 
unpaid deductible and coinsurance amounts cannot be included as an 
allowable Medicare bad debt.
    In 2003, the Medicare ``must bill'' and RA requirements were upheld 
by the 9th Circuit Court of Appeals in Community Hospital of the 
Monterey Peninsula v. Thompson, 323 F.3d 782 (9th Cir. 2003). In August 
2004, CMS issued a Joint Signature Memorandum (``JSM'') 370, 
reiterating the ``must bill'' policy for dual eligible beneficiaries. 
Specifically, the JSM 370 reiterated that where the State owes none or 
only a portion of the dual eligible beneficiary's deductible or 
coinsurance, the unpaid cost sharing for the beneficiary is not 
reimbursable to the provider by Medicare until the provider bills the 
State, and the State refuses payment by producing a Medicaid RA.
    In October 2004, we issued a newsletter that reiterated and 
clarified the contents of the JSM by stating that in instances where 
the State owes none or only a portion of the dual eligible patient's 
deductible or copayment, the unpaid liability for the bad debt is not 
reimbursable to the provider by Medicare until the provider bills the 
State, and the State refuses payment (with a State Remittance Advice).
    In order to satisfy the regulatory requirement that a bad debt is 
uncollectible, the provider must bill the State Medicaid Agency and 
receive a Medicaid RA that contains a formal denial from the State or a 
statement setting forth the State's cost sharing liability. A State's 
failure to process a bill for determination of its cost sharing equates 
to a provider's failure to determine the cost sharing liability of the 
State. The burden remains on the provider to work with the State to 
determine the State's cost sharing amounts. This burden is not 
transferred to the Medicare program, and the Medicare program has no 
duty to determine a State's cost sharing liability. A provider cannot 
substitute an estimate of the State's cost sharing liability for the 
Medicaid RA, as this does not satisfy the regulatory requirement of 
demonstrating that the bad debt is uncollectible. Any amount that the 
State is obligated to pay, either by statute or under the terms of its 
approved Medicaid State plan, will not be included as an allowable 
Medicare bad debt, regardless of whether the State actually pays its 
obligated amount to the provider. However, the deductible and/or 
coinsurance amount, or any portion thereof, that the State is not 
obligated to pay and which remains unpaid by the beneficiary can be 
included as an allowable Medicare bad debt.
    Prior to the implementation of automated claims processing, section

[[Page 59001]]

3490.14(B) of the SMM previously provided a mechanism whereby providers 
could bill the State for the determination of the State's cost sharing 
amounts without actually being or becoming a Medicaid provider. In 
accordance with section 3490.14(B), ``Subject to State law a provider 
has the right to accept a patient either as private pay only, as a QMB 
only, or (if the patient is both a QMB and Medicaid eligible) as a full 
Medicaid patient, but the provider must advise the patient, for payment 
purposes, how he/she is accepted. Medicaid payment of Medicare 
deductible and coinsurance amounts may be made only to Medicaid 
participating providers, even though a Medicare service may not be 
covered by the Medicaid State plan. A provider agreement necessary for 
participation for this purpose (for example, for furnishing the 
services to the individual as a QMB) may be executed through the 
submission of a claim to the Medicaid agency requesting Medicaid 
payment for Medicare deductibles and coinsurance for QMBs.'' Although 
this SMM provision is no longer in effect, we believe State Medicaid 
Agencies have a statutory obligation to determine any Medicare cost 
sharing for QMBs, however some States do not recognize certain Medicare 
provider types or services under the State Medicaid program and do not 
process Medicare crossover claims and issue a Medicaid RA.
    Some States' noncompliance with the statutory requirement to 
process Medicare crossover claims and produce a Medicaid RA have 
resulted in numerous appeals filed by providers whose claims for 
reimbursement of unpaid Medicare cost sharing from services provided to 
dual eligible beneficiaries were denied for Medicare bad debt 
reimbursement because the State did not process the Medicare crossover 
claim and issue a Medicaid RA to the provider.
    In 2013, CMS attempted to address States' non-compliance with the 
Federal statutory requirements at sections 1902(a)(10)(E), 1902(n) and 
1903(a)(3) of the Act, by issuing an Informational Bulletin,\522\ which 
reminded States of the Federal statutory requirement to process 
Medicare cost sharing claims for QMBs from Medicare-certified 
providers, and to be able to document proper processing of such claims. 
A State's non-compliance with the Federal statutory requirements 
conflicts with Medicare's must bill policy, resulting in the State's 
non-compliance and leaving providers disadvantaged.
---------------------------------------------------------------------------

    \522\ https://www.medicaid.gov/federal-policy-guidance/downloads/cib-06-07-2013.pdf.
---------------------------------------------------------------------------

    We continue to believe that the best documentation to evidence 
States' cost sharing liability for a dual eligible beneficiary is the 
Medicaid RA, and that the Medicare requirements for the provider to 
bill the State and submit the RA to its contractor should remain. Where 
the State processes a Medicare crossover claim and issues a Medicaid RA 
to the provider that details the State's Medicare cost sharing 
liability, we believe that providers must continue to provide the 
Medicaid RA in order to claim Medicare bad debt. Therefore, we proposed 
that the provider must bill that State and submit the Medicaid RA to 
Medicare to evidence the State's Medicare cost sharing liability, so 
that any State Medicare cost sharing liability can be deducted from the 
Medicare bad debt reimbursement.
    Consistent with this proposal, we proposed to amend Sec.  
413.89(e)(2) by adding a new paragraph (e)(2)(iii) to clarify and 
codify that that, effective for cost reporting periods beginning on and 
before the effective date of this rule, to be considered a reasonable 
collection effort, a provider that has furnished services to a dual 
eligible beneficiary must determine whether the State's Title XIX 
Medicaid Program (or a local welfare agency, if applicable) is 
responsible to pay all or a portion of the beneficiary's Medicare 
deductible and/or coinsurance amounts. To make this determination, the 
provider must submit a bill to its Medicaid/title XIX agency (or to its 
local welfare agency) to determine the State's cost sharing obligation 
to pay all or a portion of the applicable Medicare deductible and 
coinsurance. (This is effectuated by the provider submitting a bill to 
Medicare for payment and the MAC administering the payment process 
automatically `crosses over' the bill to the applicable Medicaid/title 
XIX agency for determination of the State's obligation, if any, toward 
the cost sharing.) The provider must then submit to its contractor a 
Medicaid RA reflecting the State's payment decision. Any amount that 
the State is obligated to pay, either by statute or under the terms of 
its approved Medicaid State plan, will not be included as an allowable 
Medicare bad debt, regardless of whether the State actually pays its 
obligated amount to the provider. However, the Medicare deductible and/
or coinsurance amount, or any portion thereof that the State is not 
obligated to pay, can be included as an allowable Medicare bad debt. A 
provider's failure to bill the State and produce to its Medicare 
contractor documentation, including the RA reflecting the State's 
verification that it processed a bill to determine its liability, will 
result in unpaid deductible and coinsurance amounts not being included 
as an allowable Medicare bad debt. Unpaid deductible and coinsurance 
amounts without collection effort documentation will not be considered 
as allowable bad debts.
    We proposed that these revisions be effective for cost reporting 
periods beginning before, on and after the effective date of this rule 
because they clarify and codify our longstanding policy to require that 
the provider effectuate a reasonable collection effort by billing the 
party (state) responsible for the Medicare cost sharing of the 
beneficiary. The result of the provider billing the State and the State 
processing the Medicare crossover claim is the provider's receipt of 
the Medicaid RA which is necessary to evidence the State's Medicare 
cost sharing liability.
    Although the best documentation to evidence a State's Medicare cost 
sharing liability for a dual eligible beneficiary is the Medicaid RA, 
we acknowledged that challenges exist for providers when States do not 
comply with the Federal statutory requirements. So as not to 
disadvantage providers in States that are not in compliance with the 
Federal statute, we considered alternatives for providers to comply 
with the ``must bill'' policy and still evidence a State's cost sharing 
liability (or absence thereof) for dual eligible beneficiaries when a 
State does not process a Medicare crossover claim and issue a Medicaid 
RA to providers that could be finalized in the final rule. For example, 
alternative documentation to a Medicaid RA could be obtained by 
providers from a State that demonstrates it will not enroll the 
provider in Medicaid, or a certain class of a type of provider, for the 
limited purpose of processing a claim for determining cost sharing 
liability. Providers could obtain alternative documentation to a RA 
such as a State Medicaid notification where the State has no legal 
obligation to pay the beneficiary's Medicare cost sharing. In a State 
that has a Medicare cost sharing liability for a beneficiary's service, 
the Medicaid State Plan may set forth the Medicare cost sharing 
liability for particular services. Alternatively, in a State that has a 
Medicare cost sharing liability for a beneficiary's service, the 
provider could obtain alternative documentation to a Medicaid RA that 
sets forth the State's Medicare cost sharing liability that would then 
be deducted from the provider's Medicare bad debt reimbursement. In 
addition to verifying the state's cost sharing liability, it will also 
be important that

[[Page 59002]]

any alternative documentation to a Medicaid RA accurately verifies a 
beneficiary's eligibility for Medicaid for the date of service. We 
stated that we would consider adopting a policy in this final rule to 
the effect that when a State does not process a Medicare crossover 
claim and issue a Medicaid RA, the provider could obtain, and submit to 
its Medicare contractor, some form of alternative documentation to 
evidence a state's Medicare cost sharing liability (or absence 
thereof). We welcomed suggestions from stakeholders regarding the best 
alternative documentation to the Medicaid RA that a provider could 
obtain and submit to Medicare to evidence a beneficiary's Medicaid 
eligibility for the date of service and the State's Medicare cost 
sharing liability (or absence thereof) and regarding whether we should 
or could adopt such a policy effective for past cost reporting periods, 
including whether doing so would serve an important public interest by 
allowing providers with cases currently pending before the PRRB an 
avenue for timely and cost-effective resolution.
    Comment: Many commenters asserted that CMS lacks the statutory 
authority to retroactively codify the Medicare bad debt must bill 
policy applicable to dual eligible beneficiaries and also asserted that 
the Bad Debt Moratorium prevents retroactive codification. Some 
commenters asserted that applying Medicare bad debt policies 
retroactively would create confusion among providers causing providers 
to request reopening of prior years' cost reports. Some commenters were 
supportive of the codification of the Medicare bad debt must bill 
policy applicable to dual eligible beneficiaries.
    Response: We respectfully disagree with commenters' assertions that 
CMS lacks statutory authority to retroactively codify the reasonable 
collection effort, must bill policy, for dual eligible beneficiaries. 
The must bill policy is based on a combination of regulatory and sub-
regulatory rules that existed for many years prior to the 1987 Bad Debt 
Moratorium, as explicitly articulated not only in those pre-moratorium 
rules themselves but also in final agency adjudicatory decisions. We 
have asserted for many years, based on rules promulgated prior to the 
moratorium, that Medicare will not reimburse a provider for dual 
eligible beneficiaries' unpaid deductible and coinsurance amounts 
unless the provider has first billed the relevant state Medicaid agency 
and obtained from the state a determination of the state's payment 
responsibility for the beneficiary's unpaid deductible and coinsurance 
amounts. Several federal courts have agreed with that position, 
including the court in Community Hospital of the Monterey Peninsula as 
previously discussed. The court there not only upheld both the must-
bill and RA policies as compliant with the moratorium, but indeed 
struck down our attempt to liberalize the RA requirement while the 
moratorium was in effect. On several other occasions courts have found 
that our must-bill and/or RA requirements predated the moratorium. See 
Mercy Gen'l Hosp. v. Price, No.16-99, 2017 WL 4797796 (D.D.C. 2017) 
(Mag. Report and Recommendation) (must-bill and RA requirements predate 
the moratorium); Mercy Gen'l Hosp. v. Azar, 410 F. Sup.3d 63 (D.D.C. 
2019) (must-bill requirement predates the moratorium); Select Specialty 
Hosp.-Denver, Inc. v. Azar, 391 F. Supp.3d 53 (D.D.C. 2019) (must-bill 
requirements has been consistently articulated since at least 1983). We 
reject the commenters' suggestion that we are not now merely clarifying 
and codifying our longstanding must-bill and RA requirements for the 
reasons stated in these cases. To the extent any of these cases suggest 
the RA requirement did not predate the moratorium, we disagree with 
such a characterization. At least one agency adjudication involving 
cost years predating the moratorium articulates the requirement that a 
provider obtain a state determination of its payment obligation before 
claiming bad debt reimbursement from Medicare. See Hosp. de Area de 
Carolina v. Coop. de Seguros de Vida de Puerto Rico, PRRB No. 93-D23, 
CCH ] 41,411 (HCFA Ad. 1993).
    Some commenters cited Bowen v. Georgetown Univ. Hosp., 488 U.S. 
204, 208 (1988), as showing that CMS lacked statutory authority to 
retroactively codify our longstanding Medicare bad debt policies. In 
Georgetown, the Supreme Court of the United States held that the APA 
did not grant federal agencies the statutory authority to promulgate 
rules retroactively, but noted that Congress could bestow that 
authority in other specific statutory provisions. However, we note that 
Georgetown was decided in 1988, prior to the promulgation of SSA 
1871(e)(1) in 2003 which Congress granted CMS the statutory authority 
to promulgate rules retroactively in certain circumstances, one of 
which is when the failure to do so would be contrary to the public 
interest. We believe there is significant public interest served by 
applying these Medicare bad debt rules retroactively because doing so 
would provide guidance with certainty and clarity, yielding timely and 
cost-effective relief to providers with cases currently pending before 
the PRRB. In this regard, we believe that our failure to codify these 
rules in a retroactive manner would actually harm providers and be 
contrary to public interest. While some commenters stated that we 
misunderstood the statutory standard for promulgating retroactive rules 
as being whether such promulgation was in the public interest, (not 
whether failing to do so would be contrary to the public interest), 
that is not the case. We also reject some commenters' suggestion that 
applying these rules retroactively would cause rather than alleviate 
confusion because it might lead to provider requests for reopening of 
notices of program reimbursement (NPRs). Any such request would only 
apply to an NPR issued within three years before the request. Moreover, 
CMS has almost total discretion to deny a request for reopening. For 
all these reasons, we believe any additional confusion or burden 
imposed in connection with reopening requests prompted by retroactive 
application of these rules would be minimal. We continue to believe 
that on balance applying these rules retroactively will promote rather 
than impede clarity and understanding of the applicable rules by 
providers, beneficiaries, our contractors, and other stakeholders. To 
the extent commenters assert that our bad debt policies have been 
subject to varying interpretations or the subject of litigation, that 
is a factor in favor of clarifying them retroactively, not one against 
it.
    Comment: Some commenters asserted that the bad debt must bill 
policy applicable to dual eligible beneficiaries did not serve an 
important interest for a dual eligible beneficiary's Medicare cost 
sharing because they assert that states pay little, if anything, toward 
a dual eligible beneficiary's Medicare cost sharing and thus, billing 
the state Medicaid agency was not a worthwhile exercise. Some 
commenters noted that the crossover billing process sometimes fails for 
other various reasons.
    Response: We disagree with commenters' conclusions that the 
Medicare bad debt must-bill policy does not serve an important interest 
to ascertain the states' cost sharing liability for dual eligible 
beneficiaries. As noted earlier, we continue to believe that the best 
documentation to evidence States' cost sharing liability for a dual 
eligible beneficiary is the Medicaid RA, produced by the state 
following its claim by claim adjudication of the Medicare crossover 
billing. Amounts

[[Page 59003]]

that the State is obligated to pay, either by statute or under the 
terms of its approved Medicaid State plan, will not be included as an 
allowable Medicare bad debt and thus are amounts that are not paid from 
the taxpayer funded Medicare Trust Fund. As stewards of the Medicare 
Trust Fund, CMS is obligated to manage the Medicare Trust Fund in a 
fiscally prudent manner which entails ensuring accurate amounts are 
paid therefrom. If the Medicare crossover billing fails or is not 
completed in certain instances when submitted as a matter of course in 
the crossover claims process, the provider has opportunity to work with 
the Contractor to identify and resolve the issue.
    Comment: Many commenters were supportive of a policy whereby 
providers can submit alternate documentation to a Medicaid RA in 
instances where the State fails to issue the provider a Medicaid RA 
that evidences the State's Medicare cost sharing liability for a dual 
eligible beneficiary, however some commenters expressed disappointment 
that a specific proposal for alternate documentation was not set forth 
in the proposed rule. Some commenters were not supportive of a 
resolution that would be applied retroactively. Some commenters 
suggested that submission of alternate documentation be permitted, 
similar to what was previously set forth in the now obsolete section 
1102.3L of the PRM, Part 2 manual provision, that required submission 
of evidence the beneficiary was eligible for Medicaid on the date of 
service, copies of billing for the Medicare cost sharing amounts that 
were sent to the State Medicaid Agency, and copies of the Medicaid RA 
showing the denial and the amounts of the Medicare cost sharing. Other 
commenters suggested that providers should be allowed to submit, as 
alternate documentation to the Medicaid RA, the State Medicaid 
notification evidencing that the State has no legal obligation to pay 
the beneficiary's Medicare cost sharing, documentation setting forth 
the State's liability for the Medicare cost sharing, and documentation 
verifying the beneficiary's eligibility for Medicaid for the date of 
service. Some commenters suggested that Medicare contractors assist 
providers in ascertaining the State's Medicare cost sharing liability.
    Response: We appreciate commenters' support of the adoption of a 
policy whereby providers can submit alternate documentation to a 
Medicaid RA. As previously mentioned, we considered adopting a policy 
in this final rule to the effect that when a State does not process a 
Medicare crossover claim and issue a Medicaid RA, the provider could 
obtain, and submit to its Medicare contractor, some form of alternative 
documentation to evidence a state's Medicare cost sharing liability (or 
absence thereof). We welcomed suggestions from stakeholders regarding 
the best alternative verifiable documentation to the Medicaid RA that 
would set forth the State's Medicare cost sharing liability. We agree 
with many commenters' suggestions and believe that the vital items 
needed to substitute a Medicaid RA must contain all of the following: 
(1) The State Medicaid notification stating that the State has no 
obligation to pay the beneficiary's Medicare cost sharing or 
notification evidencing the provider's inability to enroll in Medicaid 
for purposes of processing a crossover cost sharing claim, (2) 
documentation setting forth the State's liability, or lack thereof, for 
the Medicare cost sharing, and (3) documentation verifying the 
beneficiary's eligibility for Medicaid for the date of service.
    We believe that under (1), as previously detailed, the State's 
Medicaid notification stating that the State has no legal obligation to 
pay the provider for the beneficiary's Medicare cost sharing, or 
documentation evidencing the provider's inability to enroll in Medicaid 
for purposes of processing a Medicare crossover cost sharing claim, 
must be through no fault or deficiency of the provider. This means that 
if the provider could have enrolled as a Medicaid provider, but chose 
not to do so for reasons such as inconvenience or a business decision, 
the evidence of non-enrollment would be an impermissible document to 
accept as an alternate to the Medicaid RA acceptance. However, if the 
provider was not recognized by the State Medicaid Agency as a Medicaid 
provider type, then documentation evidencing that the State Medicaid 
Agency does not recognize the provider as a Medicaid provider type for 
purposes of processing a Medicare crossover cost sharing claim would be 
sufficient to evidence the State's notification of no obligation to pay 
the beneficiary's Medicare cost sharing. We understand that in some 
states it may be difficult to supply evidence that the state will not 
enroll a specific provider type. Medicare contractors will have to 
afford providers flexibility in producing acceptable evidence. We 
encourage states to consider separate enrollment pathways for Medicare 
providers that seek to enroll in Medicaid solely for the purposes of 
processing Medicare crossover claims for dually eligible beneficiaries.
    We also believe that under (2), as previously detailed, 
documentation setting forth the State's liability for the Medicare cost 
sharing, or lack thereof, can be produced by the provider, in part, 
from the State Plan documents and may also include other documents such 
as state and state contractor fee schedules or payment rates, or other 
documents the provider produces that can be verified by the contractor. 
We note that the process of documenting the State's liability for 
Medicare cost sharing may entail a comparison of the Medicare and 
Medicaid rates for certain services, as well as documentation from the 
Medicaid State plan on whether the state uses a lesser-of methodology 
for that service type. We believe that ascertaining the State's cost 
sharing liability amount may result from a collaborative effort between 
the provider, state, and the Medicare contractor. Medicare contractors 
will afford providers flexibility in producing documentation acceptable 
to evidence the State's Medicare cost sharing in the absence of a 
Medicaid RA.
    Regarding (3), as previously detailed and noted by some commenters, 
documentation verifying the beneficiary's eligibility for Medicaid for 
the date of service could take the form of an eligibility report from a 
state's eligibility verification system. For example, for QMBs the 
provider can query the CMS HIPAA Eligibility Transaction System (HETS), 
or for Medicare claims processed on or after October 2, 2017, provide a 
Medicare remittance advice showing the QMB status.
    Medicare contractors will afford providers flexibility in producing 
acceptable evidence of the beneficiary's eligibility for Medicaid for 
the date of service. We will work with the providers, states, and 
Medicare contractors on guidelines for acceptable alternative 
documentation to the Medicaid RA. We believe that codifying an 
alternate documentation policy and applying it retroactively will serve 
an important public policy interest by providing clarity, cost 
effective relief and burden reduction to providers with cases currently 
pending before the PRRB.
    After consideration of the public comments we received, we are 
finalizing our proposal to codify our longstanding Medicare must bill 
bad debt policy with respect to QMB dual eligible beneficiaries to 
require that the provider must bill the State for the QMB's Medicare 
cost sharing and

[[Page 59004]]

submit the resulting Medicaid RA the provider receives to Medicare to 
evidence the State's Medicare cost sharing liability, so that any State 
Medicare cost sharing liability can be deducted from the Medicare bad 
debt reimbursement. We are also codifying an alternate Medicaid RA 
documentation policy so that, in limited circumstances, providers can 
comply with the must bill policy and still evidence a State's cost 
sharing liability (or absence thereof) for dual eligible beneficiaries 
when a State does not process a Medicare crossover claim and issue a 
Medicaid RA to providers. In this regard, we are codifying that to be 
considered a reasonable collection effort for dual eligible 
beneficiaries when alternative documentation to the Medicaid remittance 
advice is submitted, a provider must submit all of the following: (1) 
The State Medicaid notification evidencing that the State has no 
obligation to pay the beneficiary's Medicare cost sharing or 
notification evidencing the provider's inability to enroll in Medicaid 
for purposes of processing a crossover cost sharing claim, (2) 
documentation setting forth the State's liability, or lack thereof, for 
the Medicare cost sharing, and (3) documentation verifying the 
beneficiary's eligibility for Medicaid for the date of service. These 
policies are effective for cost reporting periods beginning before, on 
and after the effective date of this final rule. We will continue to 
evaluate our alternative Medicaid RA documentation policy so that any 
policy refinements can be addressed in future rulemaking, if needed. We 
will instruct contractors to commence a process to work with providers 
to resolve cases pending before the PRRB so that providers may 
experience relief and burden reduction through the application of this 
rule to their existing cases.
d. Accounting Standard Update Topic 606 and Accounting for Medicare Bad 
Debt
(1) Accounting Standard Update Topic 606
    The principles of cost reimbursement require that providers 
maintain sufficient financial records and statistical data for proper 
determination of costs payable under the program (see Sec.  413.20(a)). 
Additionally, providers must use standardized definitions and follow 
accounting, statistical, and reporting practices that are widely 
accepted in the hospital and related fields (see Sec.  413.20(a)). 
Medicare accounting standards follow the general accounting standards 
unless the Secretary declares otherwise on a particular matter (see 
Sec.  413.20(a)). The regulations at Sec.  413.89(c) provide that the 
normal accounting treatment for bad debts, charity, and courtesy 
allowances represent reductions in revenue. The failure to collect 
charges for services furnished does not add to the cost of providing 
the services. Such costs have already been incurred in the production 
of the services. In this regard, providers are required to record bad 
debts and uncollectible accounts as a direct reduction of net patient 
revenue rather than an operating expense in their financial records.
    Additionally, PRM Sec.  314, ``Accounting Period for Bad Debts'', 
provides further guidance to providers for the accounting treatment of 
Medicare bad debts and sets forth that ``Uncollectible deductibles and 
coinsurance amounts are recognized as allowable bad debts in the 
reporting period in which the debts are determined to be worthless. 
Allowable bad debts must be related to specific amounts which have been 
determined to be uncollectible. Since bad debts are uncollectible 
accounts receivable and notes receivable, the provider should have the 
usual accounts receivable records-ledger cards and source documents to 
support its claim for a bad debt for each account included'' (PRM Sec.  
314). PRM Sec.  320 sets forth methods of determining bad debt expense, 
where ``accounts receivable are analyzed and a determination made as to 
specific accounts which are deemed uncollectible. The amounts deemed to 
be uncollectible are charged to an expense account for uncollectible 
accounts. The amounts charged to the expense account for bad debts 
should be adequately identified as to those which represent deductible 
and coinsurance amounts applicable to beneficiaries and those which are 
applicable to other than beneficiaries or which are for other than 
covered services. Those bad debts which are applicable to beneficiaries 
for uncollectible deductible and coinsurance amounts are included in 
the calculation of reimbursable bad debts.''
    The Financial Accounting Standards Board's (FASB) Accounting 
Standards Update (ASU) 2014-09, Revenue from Contracts with Customers 
(Topic 606), (hereinafter ``ASU Topic 606''), was published in May 2014 
with the first implementation period in 2018. Under the ASU Topic 606, 
there are changes in the national accounting standard for revenue 
recognition of patient-related bad debts and uncollectible accounts, as 
well as changes to terminology regarding bad debts. These changes are 
for all industries and organizations nationwide, including the 
healthcare sector and providers. Under the ASU Topic 606, an amount 
representing a bad debt would generally no longer be reported 
separately as an operating expense in the provider's financial 
statements, but would generally be treated as an ``implicit price 
concession,'' and included as a reduction in patient revenue. 
Additionally, under the ASU Topic 606 standards, bad debts treated as 
``implicit price concessions'' are now considered to be ``reductions in 
patient revenue'' instead of ``uncollectible accounts receivable and 
notes receivable'' in accordance with the current language in PRM Sec.  
316. Additionally, under the ASU Topic 606 standards, the provider 
should have the usual ``accounting recordations for the reductions in 
revenue'' instead of ``accounts receivable records ledger cards'' as 
set forth in the current language in PRM Sec.  316.
    Although ASU Topic 606 requires different reporting for providers 
and terminology for bad debts (also known as implicit price 
concessions), there is no change in the required criteria a provider 
must meet to qualify a beneficiary's bad debt account for Medicare bad 
debt reimbursement under Sec.  413.89. Therefore, we proposed to 
recognize the ASU Topic 606 terminology in Sec.  413.89. Specifically, 
we proposed to recognize that bad debts, also known as ``implicit price 
concessions,'' are amounts considered to be uncollectible from accounts 
that were created or acquired in providing services. ``Implicit price 
concessions'' are designations for uncollectible claims arising from 
the furnishing of services, and may be collectible in money in the 
relatively near future and are recorded in the provider's accounting 
records as a component of net patient revenue.
    We proposed to amend Sec.  413.89(b)(1) by adding new paragraph 
(b)(1)(i) to specify that for cost reporting periods beginning before 
October 1, 2020, bad debts are amounts considered to be uncollectible 
from accounts and notes receivable that were created or acquired in 
providing services. ``Accounts receivable'' and ``notes receivable'' 
are designations for claims arising from the furnishing of services, 
and are collectible in money in the relatively near future. Consistent 
with this proposal, we are also proposing to amend Sec.  413.89(b)(1) 
by adding new paragraph (b)(1)(ii) to specify that for cost reporting 
periods beginning on or after October 1, 2020, bad debts, also known as 
``implicit price concessions,'' are amounts considered to be

[[Page 59005]]

uncollectible from accounts that were created or acquired in providing 
services. ``Implicit price concessions'' are designations for 
uncollectible claims arising from the furnishing of services, and may 
be collectible in money in the relatively near future and are recorded 
in the provider's accounting records as a component of net patient 
revenue. We also proposed to amend Sec.  413.89(c) by adding new 
paragraph (c)(1) to specify that effective for cost reporting periods 
beginning before October 1, 2020 bad debts, charity, and courtesy 
allowances represent reductions in revenue. We also proposed to amend 
Sec.  413.89(c) by adding new paragraph (c)(2) to specify that, 
effective for cost reporting periods beginning on or after October 1, 
2020, bad debts, also known as ``implicit price concessions,'' charity, 
and courtesy allowances represent reductions in revenue.
    Comment: Many commenters were supportive of our proposal to adopt 
the ASU Topic 606 terminology for bad debt to be recognized as an 
implicit price concession. Some commenters suggested that many of our 
ASU Topic 606 terminology adoptions have already been adopted by 
hospitals on their financial statements but have not been incorporated 
for purposes of the Medicare cost report. Other commenters suggested 
that the implicit price concession terminology should be incorporated 
into the Worksheet S-10 for incorporation into uncompensated care 
calculations. Some commenters suggested a retroactive effective date to 
coincide with the effective date of ASU Topic 606.
    Response: We appreciate commenters' support of our proposals to 
adopt the ASU Topic 606 terminology for bad debt to be recognized as an 
implicit price concession, a reduction in revenue. We recognize that 
under the ASU Topic 606 standards, the provider should have the usual 
``accounting recordations for the reductions in revenue.'' We believe 
that our proposals to include this terminology in the regulatory 
definition of bad debt are responsive to stakeholders' requests. We 
agree with commenters' suggestions that the implicit price concession 
terminology should be incorporated into the Worksheet S-10 for 
incorporation into uncompensated care calculations. We believe that it 
is most appropriate to adopt this policy with a future effective date.
    We note that we did not propose to adopt this policy retroactively 
and that providers might or might not have already changed their 
accounting terminology to coincide with the ASU Topic 606 standards. 
Nor is the policy we are finalizing a longstanding Medicare policy that 
we are merely clarifying. As a result, we have not determined that 
failing to apply this provision retroactively would be contrary to the 
public interest.
    After consideration of the public comments we received, we are 
finalizing our proposal to amend Sec.  413.89(c) by adding new 
paragraph (c)(1) to specify that effective for cost reporting periods 
beginning before October 1, 2020 bad debts, charity, and courtesy 
allowances represent reductions in revenue. We also finalizing our 
proposal to amend Sec.  413.89(c) by adding new paragraph (c)(2) to 
specify that, effective for cost reporting periods beginning on or 
after October 1, 2020, bad debts (also known as ``implicit price 
concessions)'' charity, and courtesy allowances represent reductions in 
revenue.
(2) Medicare Bad Debt and Contractual Allowances
    Medicare regulations require providers to follow standardized 
definitions, accounting, statistics, and reporting practices that are 
widely accepted in the hospital and related fields. PRM Sec.  320 sets 
forth methods of determining bad debt expense, where accounts 
receivable are analyzed and a determination made as to specific 
accounts which are deemed uncollectible. The amounts deemed to be 
uncollectible are charged to an expense account for uncollectible 
accounts. The amounts charged to the expense account for bad debts 
should be adequately identified as amounts that represent deductible 
and coinsurance amounts applicable to Medicare beneficiaries, including 
QMBs, amounts that are applicable to non-beneficiaries, or amounts that 
are for other than covered services. Those bad debts which are 
applicable to Medicare beneficiaries, including QMBs, for uncollectible 
deductible and coinsurance amounts are included in the calculation of 
reimbursable bad debts.''
    Based on recent questions received, it appears that many providers 
are not accurate in their accounting classification method of writing-
off a beneficiary's deductible and coinsurance amounts for Medicare-
Medicaid crossover claims, by incorrectly writing off Medicare-Medicaid 
crossover bad debts to a contractual allowance account. Contractual 
allowances, also known as contractual adjustments, are the difference 
between what a healthcare provider bills for the service rendered 
versus what it will contractually be paid (or should be paid) based on 
the terms of its contracts with third-party insurers and/or government 
programs.\523\ Some providers have been writing Medicare-Medicaid 
crossover bad debt amounts off to a contractual allowance account 
because they are unable to bill the beneficiary for the difference 
between the billed amount and the Medicaid claim payment amount. Other 
providers are writing these amounts off to a contractual allowance 
account because the Medicaid remittance advice referenced the unpaid 
amount as a ``Medicaid contractual allowance.'' These Medicare-Medicaid 
crossover claim amounts do not meet the classification requirements for 
a Medicare bad debt as set forth in PRM Sec.  320 and are not compliant 
with Sec.  413.20 when these amounts are written off to a contractual 
adjustment or allowance account instead of a bad debt expense account.
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    The April 4, 2019 Medicare Learning Network Special Edition (MLN 
SE) article served to remind providers of Medicare's longstanding 
policy with regard to the provider's proper reporting of Medicare bad 
debts for cost reporting periods beginning before October 1, 2019. The 
MLN SE also served as a notification to providers but also provided 
flexibility by allowing providers to report contractual allowance 
amounts as a bad debt, as long as 413.89 requirements are met, for cost 
reporting periods beginning before October 1, 2019. The MLN SE also 
served to remind providers of the expectation for proper reporting of 
Medicare bad debts and that following the flexibility notice period, 
reporting Medicare bad debts as a contractual allowance was no longer 
permissible for cost reporting periods on or after October 1, 2019.
    In the proposed rule, we proposed to clarify that Medicare bad 
debts must not be written off to a contractual allowance account but 
must be charged to an expense account for uncollectible accounts (bad 
debt or implicit price concession). Consistent with this proposal, we 
proposed to amend Sec.  413.89(c) by adding paragraph (c)(3) to specify 
that, effective for cost reporting periods beginning on or after 
October 1, 2020, Medicare bad debts must not be written off to a 
contractual allowance account but must be charged to an expense account 
for uncollectible accounts (bad debt or implicit price concession).
    Comment: Many commenters were not supportive of the proposed

[[Page 59006]]

regulation text in Sec.  413.89(c)(3) that ``Effective for cost 
reporting periods beginning on or after October 1, 2020, Medicare bad 
debts must not be written off to a contractual allowance account but 
must be charged to an expense account for uncollectible accounts.'' 
Many commenters suggested that the language refer to implicit price 
concessions instead of bad debt and also that the accounts be charged 
to ``a reduction in revenue expense account for uncollectible 
accounts'' instead of ``an expense account for uncollectible 
accounts.'' Many commenters suggested that the proposal would increase 
burden to providers by requiring them to change accounting practices 
and that providers have recorded bad debts in their accounting records 
as contractual allowances for years citing the Generally Accepted 
Accounting Principles (GAAP) as the permissive authority to do so. 
Another commenter indicated that providers classify their Medicare-
Medicaid crossover bad debt as contractual allowances and contractors 
reimburse them for a portion of these contractual allowance amounts. 
Other commenters suggested a retroactive date to coincide with the 
effective date of ASU Topic 606, while other commenters did not favor a 
retroactive effective date. Some commenters questioned whether the 
effective date for this provision should be October 1, 2019, pursuant 
to the effective date for which we issued guidance to contractors in a 
technical direction letter issued in March 2019, regarding the 
treatment of contractual allowances on the Medicare cost report.
    Response: We appreciate the commenters' suggestions. We believe it 
is necessary to reiterate that it is never appropriate for a provider 
to write off Medicare-Medicaid crossover bad debt amounts to a 
contractual allowance account simply because they are unable to bill 
the beneficiary for the difference between the billed amount and the 
Medicaid claim payment amount. It is likewise inappropriate to present 
these amounts to Medicare for reimbursement as Medicare bad debts. We 
agree with commenters that the proposal to amend Sec.  413.89(c) by 
adding paragraph (c)(3) to specify that, ``effective for cost reporting 
periods beginning on or after October 1, 2020, Medicare bad debts must 
not be written off to a contractual allowance account but must be 
charged to an expense account for uncollectible accounts (bad debt or 
implicit price concession),'' incorrectly refers to an ``expense 
account'' and should instead more clearly refer to as a ``component of 
net patient revenue'' or a ``reduction in revenue'' account.
    We believe the April 4, 2019 MLN SE article served as a 
notification to providers and provided flexibility by allowing 
providers to report contractual allowance amounts as a bad debt, as 
long as 413.89 requirements are met, for cost reporting periods 
beginning before October 1, 2019. The MLN SE notification also served 
to remind providers that compliance with the longstanding Medicare bad 
debt policy in Sec.  320 of the PRM for cost reporting periods 
beginning on or after October 1, 2019 is required, so that bad debts 
are written off to an expense account, and not a contractual allowance 
account. Because we are now adopting the implicit price concession 
terminology effective for cost reporting periods beginning on or after 
October 1, 2020, for Medicare bad debt purposes, the bad debt must be 
recorded in the provider's accounting records as a component of net 
patient revenue. We are not codifying this retroactively because we 
believe that all providers should have equal understanding and footing 
as we move forward with the standardized definitions, accounting and 
reporting practices and the intersection with the new implicit price 
concession standards.
    After consideration of the public comments we received, we are 
revising our proposal to amend Sec.  413.89(c) by adding paragraph 
(c)(3)(i) to specify that, for cost reporting periods beginning before 
October 1, 2020, Medicare bad debts must not be written off to a 
contractual allowance account but must be charged to an expense account 
for uncollectible accounts. We are also revising our proposal to amend 
Sec.  413.89(c) by adding paragraph (c)(3)(ii) to specify that, for 
cost reporting periods beginning on or after October 1, 2020, Medicare 
bad debts must not be written off to a contractual allowance account 
but must be charged to an uncollectible receivables account that 
results in a reduction in revenue. We are not applying a retroactive 
effective date to this proposal for the same reasons as previously 
discussed regarding the effective date of ASU Topic 606.
e. Technical Corrections in 42 CFR Parts 412 and 417
    A technical correction is required for 42 CFR 412.622(b)(2)(i) 
which incorrectly refers to 42 CFR 413.80 instead of the correct 
citation of Sec.  413.89, which is the regulation that sets forth rules 
pertaining to the bad debts of Medicare beneficiaries.
    A technical correction is also required for 42 CFR 417.536(g) which 
incorrectly refers to Sec.  413.80 instead of the correct citation of 
Sec.  413.89, which sets forth that bad debts, charity, and courtesy 
allowances are deductions from revenue and are not to be included in 
allowable costs.
    We received no comments on the proposal to make technical 
corrections to the citations in Sec.  412.622(b)(2)(i) and Sec.  
417.536(g), and therefore are finalizing these citation corrections 
without modification.

X. MedPAC Recommendations

    Under section 1886(e)(4)(B) of the Act, the Secretary must consider 
MedPAC's recommendations regarding hospital inpatient payments. Under 
section 1886(e)(5) of the Act, the Secretary must publish in the annual 
proposed and final IPPS rules the Secretary's recommendations regarding 
MedPAC's recommendations. We have reviewed MedPAC's March 2020 ``Report 
to the Congress: Medicare Payment Policy'' and have given the 
recommendations in the report consideration in conjunction with the 
policies set forth in this final rule. MedPAC recommendations for the 
IPPS for FY 2021 are addressed in Appendix B to this final rule.
    For further information relating specifically to the MedPAC reports 
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226, 
or visit MedPAC's website at: http://www.medpac.gov.

XI. Other Required Information

A. Publicly Available Files

    IPPS-related data are available on the internet for public use. The 
data can be found on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. We listed the 
data files available in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32876 through 32878).
    Commenters interested in discussing any data files used in 
construction of this final rule should contact Michael Treitel at (410) 
786-4552.

B. Collection of Information Requirements

1. Statutory Requirement for Solicitation of Comments
    Under the Paperwork Reduction Act (PRA) of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information

[[Page 59007]]

collection should be approved by OMB, section 3506(c)(2)(A) of the PRA 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In the FY 2021 IPPS/LTCH PPS proposed rule, we solicited public 
comment on each of these issues for the following sections of this 
document that contain information collection requirements (ICRs).
2. ICRs Regarding PRRB Electronic Filing (Sec. Sec.  405.1801 Through 
405.1889)
    As stated earlier in section IX.B.3 of the preamble of this final 
rule, we are finalizing our proposal to amend the regulations at 42 CFR 
405.1801 through 405.1889 to allow the PRRB to make use of the system 
mandatory in PRRB appeals. Proposed Sec.  405.1801 states that except 
for subpoena requests being sent to a nonparty pursuant to Sec.  
405.1857(c), the reviewing entity may prescribe the method(s) by which 
a party must make a submission, including the requirement to use an 
electronic filing system for submission of documents. Proposed 
amendments to the regulations at 42 CFR 405.1843 make clear that 
parties to a Board appeal must familiarize themselves with the 
instructions for handling a PRRB appeal, including any and all 
requirements related to the electronic or online filing of documents 
for future mandatory filing.
    The burden associated with the requirements as discussed in this 
section is the time and effort necessary to review instructions and 
register for the electronic submission system as well as the time and 
effort to gather develop and submit various documents associated with a 
PRRB appeal. While these requirements impose burden, we believe the 
requirements are exempt from the PRA in accordance with the 
implementing regulations of the PRA at 5 1320.4(a)(2). Information 
collected during the conduct of a criminal investigation or civil 
action or during the conduct of an administrative action, 
investigation, or audit involving an agency against specific 
individuals or entities is not subject to the PRA.
3. ICRs for Requests for Changes to the Medicare Severity Diagnosis-
Related Group (MS-DRG) Classifications
    As discussed in section II.D. of the preamble of this final rule, 
the public may request changes to the MS-DRG classifications to reflect 
changes in treatment patterns, technology, and any other factors that 
may change the relative use of hospital resources. The burden 
associated with requesting changes to the MS-DRG classifications will 
be discussed in a forthcoming information collection request, which is 
currently under development. However, upon completion of the ICR, we 
will publish the required 60-day and 30-day notices to solicit public 
comments in accordance with the requirements of the PRA.
4. ICRs Relating to the Hospital Readmissions Reduction Program
    In section IV.K. of the preamble of this final rule, we note that 
we did not propose the removal or adoption of any new measures into the 
Hospital Readmissions Reduction Program. All six of the Hospital 
Readmissions Reduction Program's measures are claims-based measures. We 
do not believe that continuing to use these claims-based measures 
creates or reduces any burden for hospitals because they will continue 
to be collected using Medicare FFS claims that hospitals are already 
submitting to the Medicare program for payment purposes. We did not 
receive any comments regarding the ICRs for the Hospital Readmissions 
Reduction Program and therefore are finalizing without modification.
5. ICRs for the Hospital Value-Based Purchasing (VBP) Program
    In section IV.L. of the preamble of this final rule, we provide 
newly established performance standards for the Hospital VBP Program 
for certain measures for the FY 2023, FY 2024, FY 2025, and FY 2026 
program years. We do not believe that updating program performance 
standards will create or reduce any burden for hospitals. Data 
submissions for the Hospital VBP Program are associated with the 
Hospital Inpatient Quality Reporting Program under OMB control number 
0938-1022, the National Healthcare Safety Network under OMB control 
number 0920-0666, and the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) survey under OMB control number 0938-
0981. Because the FY 2023 Hospital VBP Program will use data that are 
also used to calculate quality measures in other programs and Medicare 
fee-for-service claims data that hospitals are already submitting to 
CMS for payment purposes, the program does not anticipate any change in 
burden associated with this final rule.
    Comment: A few commenters expressed their support for the newly 
established performance standards for certain measures for the FY 2023 
through FY 2026 program years.
    Response: We thank commenters for their support.
    After consideration of the public comments we received, we are 
finalizing this provision without modification.
6. ICRs Relating to the Hospital-Acquired Condition (HAC) Reduction 
Program
    In section IV.M. of the preamble of this final rule, we discuss 
proposed requirements for the HAC Reduction Program. In this final 
rule, we are not removing any measures or adopting any new measures 
into the HAC Reduction Program. The HAC Reduction Program has adopted 
six measures. We do not believe that the claims-based CMS PSI 90 
measure in the HAC Reduction Program creates or reduces any burden for 
hospitals because it is collected using Medicare FFS claims hospitals 
are already submitting to the Medicare program for payment purposes. We 
note the burden associated with collecting and submitting data for the 
HAI measures (CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, MRSA 
bactermia, and CDI) via the NHSN system is captured under a separate 
OMB control number, 0920-0666 (expiration November 30, 2021), and 
therefore will not impact our burden estimates.
    In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41478 through 
41484), we finalized our policy to validate NHSN HAI measures under the 
HAC Reduction Program, which will require hospitals to submit 
validation templates for the NHSN HAI measures beginning with Q3 CY 
2020 discharges. OMB has currently approved these 43,200 hours of 
burden and approximately $1.6 million under OMB control number 0938-
1352 (expiration date January 31, 2021), accounting for information 
collection burden experienced by up to 600 IPPS hospitals selected for 
validation under the HAC Reduction Program for the FY 2023 program year 
and each subsequent year.
    In section IV.M.6. of the preamble of this final rule, we finalized 
changing the pool of hospitals selected for validation under the HAC 
Reduction Program from up to 600 hospitals to up to 400 hospitals, as 
similarly proposed under

[[Page 59008]]

the Hospital IQR Program, as discussed in section VIII.A. of the 
preamble of this final rule. In this FY 2021 IPPS/LTCH PPS final rule, 
we updated our burden calculation to reflect the reduction in the 
number of hospitals selected for validation each year along with using 
the most recent data from the Bureau of Labor Statistics that reflects 
a median hourly wage of $19.40 \524\ per hour for a Medical Records and 
Health Information Technician professional. We calculate the cost of 
overhead, including fringe benefits, at 100 percent of the hourly wage 
estimate. This is necessarily a rough adjustment, both because fringe 
benefits and overhead costs vary significantly from employer-to-
employer and because methods of estimating these costs vary widely from 
study-to-study. Nonetheless, we believe that doubling the hourly wage 
rate ($19.40 x 2 = $38.80) to estimate total cost is a reasonably 
accurate estimation method. Accordingly, we calculate cost burden to 
hospitals using a wage plus benefits estimate of $38.80 per hour.
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    We previously estimated a reporting burden of 80 hours (20 hours 
per record x 1 record per hospital per quarter x 4 quarters) per 
hospital selected for validation per year to submit the CLABSI and 
CAUTI templates, and 64 hours (16 hours per record x 1 record per 
hospital per quarter x 4 quarters) per hospital selected for validation 
per year to submit the MRSA and CDI templates for a total of 43,200 
hours ([80 hours x 300 hospitals] + [64 hours x 300 hospitals]). We 
estimate a new total burden of 28,800 hours ([80 hours per hospital to 
submit CLABSI and CAUTI templates x 200 hospitals selected for 
validation] + [64 hours per hospital to submit MRSA and CDI templates x 
200 hospitals selected for validation]), reflecting a total burden 
decrease of 14,400 hours (43,200 hours - 28,800 hours), and a new total 
burden cost of approximately $1,117,440 (28,800 hours x $38.80 per hour 
\525\). We will submit the revised information collection estimates to 
OMB for approval under OMB control number 0938-1352. We did not receive 
any comments regarding the ICRs for the HAC Reduction Program and are 
therefore finalizing these ICRs without modification.
7. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program
a. Background
    The Hospital IQR Program (formerly referred to as the Reporting 
Hospital Quality Data for Annual Payment Update (RHQDAPU) Program) was 
originally established to implement section 501(b) of the MMA, Public 
Law 108-173. OMB has currently approved 1,612,710 hours of burden and 
approximately $60.7 million under OMB control number 0938-1022, 
accounting for information collection burden experienced by 
approximately 3,300 IPPS hospitals and 1,100 non-IPPS hospitals for the 
FY 2022 payment determination. In this final rule, we describe the 
burden changes with regard to collection of information under OMB 
control number 0938-1022 (expiration date December 31, 2022) for IPPS 
hospitals due to the finalized proposals in this final rule.
    In section VIII.A.5.b. of the preamble to this final rule, we are 
finalizing a policy to progressively increase the numbers of quarters 
of eCQM data reported, from one self-selected quarter of data to four 
quarters of data over a 3-year period, by requiring hospitals to report 
two quarters of data for the CY 2021 reporting period/FY 2023 payment 
determination, three quarters of data for the CY 2022 reporting period/
FY 2024 payment determination, and four quarters of data beginning with 
the CY 2023 reporting period/FY 2025 payment determination and for 
subsequent years. We expect these policies will increase our collection 
of information burden estimates. Details on these policies as well as 
the expected burden changes are discussed further in this section of 
this rule.
    In section VIII.A. of the preamble to this final rule, we are 
finalizing the proposal to begin public display of eCQM data beginning 
with data reported by hospitals for the CY 2021 reporting period and 
for subsequent years. As discussed further in this final rule, we do 
not expect this policy to affect our information collection burden 
estimates.
    In section VIII.A.11. of the preamble to this final rule, we also 
are finalizing proposals to streamline validation processes under the 
Hospital IQR Program. We are finalizing proposals to: (1) Update the 
quarters of data required for validation for both chart-abstracted 
measures and eCQMs; (2) expand targeting criteria to include hospital 
selection for eCQMs; (3) change the validation pool from 800 hospitals 
to 400 hospitals; (4) remove the current exclusions for eCQM validation 
selection, (5) require electronic file submissions for chart-abstracted 
measure data; (6) align the eCQM and chart-abstracted measure scoring 
processes; and (7) update the educational review process to address 
eCQM validation results. As discussed further in this final rule, we 
expect our finalized proposal to align the hospital selection process 
will increase our information collection burden estimates. We do not 
expect the other finalized validation proposals to affect our 
information collection burden estimates. Details on these policies as 
well as the expected burden changes are discussed further in this 
section of this rule.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42602 through 
42605), we estimated that reporting measures for the Hospital IQR 
Program could be accomplished by staff with a median hourly wage of 
$18.83 per hour. We note that since then, more recent wage data have 
become available, and we are updating the wage rate used in these 
calculations in this final rule. The most recent data from the Bureau 
of Labor Statistics reflects a median hourly wage of $19.40 per hour 
for a Medical Records and Health Information Technician 
professional.\526\ We calculated the cost of overhead, including fringe 
benefits, at 100 percent of the median hourly wage, consistent with 
previous years. This is necessarily a rough adjustment, both because 
fringe benefits and overhead costs vary significantly by employer and 
methods of estimating these costs vary widely in the literature. 
Nonetheless, we believe that doubling the hourly wage rate ($19.40 x 2 
= $38.80) to estimate total cost is a reasonably accurate estimation 
method. Accordingly, we will calculate cost burden to hospitals using a 
wage plus benefits estimate of $38.80 per hour throughout the 
discussion in this section of this rule for the Hospital IQR Program.
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b. Information Collection Burden Estimates for Proposed Policies 
Related to eCQM Reporting and Submission Requirements for the CY 2021 
Reporting Period/FY 2023 Payment Determination, the CY 2022 Reporting 
Period/FY 2024 Payment Determination, and the CY 2023 Reporting Period/
FY 2025 Payment Determination and Subsequent Years
    In the FY 2020 IPPS/LTCH PPS final rule, we finalized eCQM 
reporting and submission requirements such that hospitals submit one, 
self-selected calendar quarter of data for four eCQMs for the CYs 2020 
and 2021 reporting periods/FYs 2022 and 2023 payment determinations (84 
FR 42503) and one, self-selected calendar quarter of data for three 
self-selected eCQMs and the Safe Use of Opioids--Concurrent Prescribing

[[Page 59009]]

eCQM for the CY 2022 reporting period/FY 2024 payment determination (84 
FR 42505). Our related information collection estimates were discussed 
at (84 FR 42604).
    In sections VIII.A.10.e.(1). through (4). of the preamble to this 
final rule, we are finalizing our proposal to progressively increase 
the number of quarters of eCQM data reported, from one self-selected 
quarter of data to four quarters of data over a 3-year period, by 
requiring hospitals to report: (1) Two quarters of data for the CY 2021 
reporting period/FY 2023 payment determination, while continuing to 
require hospitals to report four self-selected eCQMs; (2) three 
quarters of data for the CY 2022 reporting period/FY 2024 payment 
determination, while continuing to report three self-selected eCQMs and 
the Safe Use of Opioids--Concurrent Prescribing eCQM ; and (3) four 
quarters of data beginning with the CY 2023 reporting period/FY 2025 
payment determination and for subsequent years, while continuing to 
require hospitals to report three self-selected eCQMs and the Safe Use 
of Opioids--Concurrent Prescribing eCQM. We believe there would be a 
progressive increase to the burden estimate over the 3-year period due 
to these proposed policies.
    We previously estimated the information collection burden 
associated with the eCQM reporting and submission requirements to be 40 
minutes per hospital per year (10 minutes x 4 eCQMs x 1 quarter = 40 
minutes), or 0.67 hours per hospital per year (40 minutes/60). We 
estimated a total annual burden of 2,200 hours across all IPPS 
hospitals (0.67 hours x 3,300 IPPS hospitals). Using the updated wage 
estimate as described previously, we estimate this to represent a total 
annual cost of $85,360 ($38.80 hourly wage x 2,200 annual hours) across 
all IPPS hospitals. Based on our proposal to progressively increase the 
number of quarters of data reported, from one self-selected quarter of 
data to four quarters of data over a 3-year period, we estimate an 
annual burden increase of 2,200 hours and $85,360 for all participating 
IPPS hospitals for each of the CY 2021 reporting period/FY 2023 payment 
determination, CY 2022 reporting period/FY 2024 payment determination, 
and CY 2023 reporting period/FY 2025 payment determination. By 
increasing the number of quarters of eCQM data required to be reported 
by hospitals from one self-selected quarter of data to two quarters of 
data, then to three quarters of data, and finally to four quarters of 
data, respectively, we estimate a total increase of 6,600 hours (2,200 
hours + 2,200 hours + 2,200 hours) and $256,080 ($85,360 + $85,360 + 
$85,360) across a 3-year period for all participating IPPS hospitals.
c. Information Collection Burden Estimate for Proposed eCQM Public 
Display Requirements Beginning With the CY 2021 Reporting Period/FY 
2023 Payment Determination
    In section VIII.A.13.b. of the preamble to this final rule, we are 
finalizing a policy to begin public display of eCQM data beginning with 
data reported by hospitals for the CY 2021 reporting period and for 
subsequent years. Because hospitals would not have any additional 
information collection requirements, we believe there would be no 
change to the information collection burden estimate due to this 
policy, but acknowledge that there are other types of burden associated 
with this proposal. For example, there is burden associated with the 
optional reviewing of hospital-specific reports during the public 
reporting preview period; however, we believe this burden is nominal 
because hospitals already review these reports with respect to other 
types of measures for the Hospital IQR Program.
d. Information Collection Burden Estimate for Proposed Updates to the 
Processes for Validation of Hospital IQR Program Measure Data
    In section VIII.A.11. of the preamble to this final rule, we are 
finalizing proposals to make several changes to streamline the 
validation process. We are finalizing our proposals to: (1) Require the 
use of electronic file submissions via a CMS-approved secure file 
transmission process and no longer allow the submission of paper copies 
of medical records or copies on digital portable media such as CD, DVD, 
or flash drive, beginning with validation of Q1 2021 data affecting the 
FY 2024 payment determination; (2) combine the validation processes for 
chart-abstracted measures and eCQMs by: (a) Aligning data submission 
quarters, with the validation quarters affecting the FY 2023 payment 
determination serving as a transition year before being fully aligned 
as to validation quarters affecting the FY 2024 payment determination; 
(b) combining hospital selection, including: (i) Reducing the pool of 
hospitals randomly selected for chart-abstracted measure validation, 
and (ii) integrating and applying targeting criteria for eCQM 
validation, beginning with validation affecting the FY 2024 payment 
determination; (c) removing previous exclusion criteria; and (d) 
combining scoring processes by providing one combined validation score 
for the validation of chart-abstracted measures and eCQMs with the eCQM 
portion of the combined score weighted at zero, beginning with 
validation affecting the FY 2024 payment determination; and (3) 
formalize the process for conducting educational reviews for eCQM 
validation in alignment with current processes for providing feedback 
for chart-abstracted validation results, beginning with eCQM validation 
affecting the FY 2023 payment determination.
    As noted in the FY 2017 IPPS/LTCH IPPS final rule (81 FR 57261), we 
have been reimbursing hospitals directly for expenses associated with 
submission of medical records for data validation; specifically, we 
reimburse hospitals at 12 cents per photocopied page; for hospitals 
providing medical records digitally via a rewritable disc, such as 
encrypted CD-ROMs, DVDs, or flash drives, we reimburse hospitals at a 
rate of 40 cents per disc, along with $3.00 per record; and for 
hospitals providing medical records as electronic files submitted via 
secure file transmission, we reimburse hospitals at $3.00 per record. 
In addition, in the FY 2017 IPPS/LTCH IPPS final rule (81 FR 57261), we 
finalized that for eCQM validation, we reimburse hospitals at $3.00 per 
record for providing medical records as electronic files submitted via 
secure file transmission (paper copies and digital portable media are 
not accepted for eCQM validation). Because we directly reimburse, we do 
not anticipate any net change in information collection burden 
associated with our finalized proposal to require electronic file 
submissions of medical records via secure file transmission for 
hospitals selected for chart-abstracted measures validation; hospitals 
would continue to be reimbursed at $3.00 per record.
    We do not anticipate any net change in information collection 
burden associated with our finalized proposals to align the data 
submission quarters, to combine the hospital selection process by 
reducing the pool of hospitals randomly selected for validation for 
chart-abstracted measures from 400 hospitals to up to 200 hospitals, or 
to combine the scoring processes to provide one combined validation 
score for the validation of chart-abstracted measures and eCQMs. 
However, we refer readers to section I.K. of Appendix A of this final 
rule for a discussion of how our finalized proposals to align the 
validation processes for chart-abstracted measures and eCQMs may have 
the potential to reduce burden other than information collection 
burden. In addition, we do not anticipate any

[[Page 59010]]

information collection burden associated with our finalized proposal to 
formalize the process for conducting educational reviews for eCQM 
validation. As discussed in section VIII.A.11.b.(3). of the preamble to 
this final rule, this process would allow any validated hospital to 
request an educational review of their eCQM validation results with 
CMS.
    We previously estimated the information collection burden 
associated with eCQM validation to be 80 minutes per record, or 
approximately 11 hours per hospital per year (80 minutes per record x 8 
records x 1 quarter/60 = 10.67 hours) (81 FR 57261). We estimated a 
total annual burden of approximately 2,200 hours across 200 IPPS 
hospitals selected for eCQM validation each year (11 hours x 200 IPPS 
hospitals). Using the updated wage estimate as described previously, we 
estimate this to represent a total annual cost of $85,360 (2,200 hours 
x $38.80) across 200 hospitals.
    The previous estimate of 80 minutes per record was based on our 
limited experience working with voluntary hospital participants during 
the eCQM validation pilot conducted in 2015 (79 FR 50269 through 
50272). For the validation pilot, participating hospitals attended a 
30-minute pre-briefing session and had to install CMS-approved software 
that allowed our Clinical Data Abstraction Center (CDAC) contractor to 
remotely view isolated records in real-time under hospital supervision 
in order to compare all abstracted data with QRDA Category I file data 
and summarize the results of the real-time session (79 FR 50270). Since 
this 2015 pilot, the eCQM validation process that we have implemented 
under the Hospital IQR Program has been significantly streamlined so 
that we no longer need hospitals to allow remote access to the CDAC 
contractor to view records in real-time under each hospital's 
supervision nor for them to engage in discussions with our contractor 
during the process. Instead, hospitals selected for eCQM validation are 
required to submit timely and complete copies of medical records on 
eCQMs selected for validation to CMS by submitting records in PDF file 
format within 30 calendar days following the medical records request 
date listed on the CDAC request form via the QualityNet secure file 
transmission process (81 FR 57179).
    Based on this updated process, as well as hospitals having gained 
several years of experience using EHRs, we are revising our previous 
estimate from 80 minutes per record to 10 minutes per record. This is 
the amount of time we estimate is needed for hospitals to create PDF 
files and to electronically submit each medical record to us via the 
CMS-approved secure file transmission process. The estimate of 10 
minutes per record is similar to our estimate of 10 minutes per eCQM 
per quarter in submitting QRDA Category I files via the QualityNet 
secure portal (81 FR 57260). We note that as mentioned previously, 
hospitals will still be reimbursed at $3.00 per record (81 FR 57261).
    In addition, we anticipate that our finalized proposal to 
progressively increase the number of quarters of eCQM data reported, 
from one self-selected quarter of data to four quarters of data over a 
3-year period, would similarly increase the total number of quarters of 
data from which cases would be selected for eCQM validation over a 3-
year period. We also anticipate that our finalized proposal to combine 
the hospital selection process such that the Hospital IQR Program would 
validate a pool of up to 400 hospitals across measure types (up to 200 
hospitals would be randomly selected and up to 200 hospitals would be 
selected using targeting criteria) would increase the number of 
hospitals selected for eCQM validation from up to 200 hospitals to up 
to 400 hospitals. Therefore, we estimate the following burden changes 
over a 3-year period using the revised estimate of 10 minutes (0.1667 
hours) per record as discussed previously. For eCQM validation of CY 
2021 data affecting the FY 2024 payment determination, we estimate a 
total burden of 1,067 hours across 400 IPPS hospitals selected for eCQM 
validation (0.1667 hours x 2 quarters x 8 cases x 400 IPPS hospitals) 
and $41,400 (1,067 hours x 38.80). This reflects a total burden 
decrease of 1,133 hours (2,200 hours - 1,067 hours) and $43,960 
($85,360 - $41,400) compared to our previous burden estimate for eCQM 
validation affecting the FY 2024 payment determination. For eCQM 
validation of CY 2022 data affecting the FY 2025 payment determination, 
we estimate a total burden of 1,600 hours across 400 IPPS hospitals 
selected for eCQM validation (0.1667 hours x 3 quarters x 8 cases x 400 
IPPS hospitals) and $62,080 (1,600 hours x $38.80). This reflects a 
total burden decrease of 600 hours (2,200 hours - 1,600 hours) and 
$23,280 ($85,360 - $62,080) compared to our previous burden estimate 
for eCQM validation affecting the FY 2025 payment determination. For 
eCQM validation of CY 2023 data affecting the FY 2026 payment 
determination, and for subsequent years, we estimate a total burden of 
2,133 hours across 400 IPPS hospitals selected for eCQM validation 
(0.1667 hours x 4 quarters x 8 cases x 400 IPPS hospitals) and $82,760 
(2,133 hours x $38.80). This reflects a total burden decrease of 67 
hours (2,200 hours - 2,133 hours) and $2,600 ($85,360 - $82,760) 
compared to our previous burden estimate for eCQM validation affecting 
the FY 2026 payment determination and subsequent years.
e. Summary of Information Collection Burden Estimates for the Hospital 
IQR Program
    In summary, under OMB control number 0938-1022, we estimate that 
the policies finalized in this final rule will result in an increase of 
6,533 hours (6,660 - 67 hours) for 3,300 IPPS hospitals across a 4-year 
period from the CY 2021 reporting period/FY 2023 payment determination 
through the CY 2024 reporting period/FY 2026 payment determination. The 
total cost increase related to this information collection is 
approximately $253,480 (6,533 hours x $38.80) (which also reflects use 
of an updated hourly wage rate as previously discussed). The tables 
summarize the total burden changes for each respective FY payment 
determination compared to our currently approved information collection 
burden estimates (the table for the FY 2026 payment determination 
reflects the cumulative burden changes). We will submit the revised 
information collection estimates to OMB for approval under OMB control 
number 0938-1022.
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[[Page 59012]]


[GRAPHIC] [TIFF OMITTED] TR18SE20.253

BILLING CODE 4120-01-C

[[Page 59013]]

    A number of commenters expressed concern about an increase in 
burden related to our eCQM related proposals to increase the number of 
required reporting quarters for eCQM data and our proposal to begin 
publicly reporting eCQM data.
    We believe the long-term benefits associated with reporting a full 
year of electronic data will outweigh the burdens and that increasing 
the number of quarters for which hospitals are required to report eCQM 
data will produce more comprehensive and reliable quality information 
for patients and providers. We stated our intention in the FY 2018 
IPPS/LTCH PPS final rule to gradually transition toward more robust 
eCQM reporting (82 FR 38356). We reiterated this stated goal to 
incrementally increase the use of EHR data for quality measurement in a 
subsequent final rule (84 FR 42502). We believe that taking an 
incremental approach to increasing eCQM reporting over a 3-year period 
will help to ease the burdens associated with reporting larger amounts 
of data and will provide hospitals and vendors with additional time to 
plan and sufficiently allocate resources for more robust eCQM 
reporting. For a detailed discussion of comments we received on the 
information collection burden associated with the finalization of these 
proposals, please see section VIII.A.10 of the preamble of this final 
rule. We believe the finalization of these proposals effectively 
balances the burdens associated with increased reporting of eCQM data 
and the benefits of providing that quality data to patients and 
consumers.
8. ICRs for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    As discussed in section VIII.B. of the preamble of this final rule, 
section 1866(k)(1) of the Act requires, for purposes of FY 2014 and 
each subsequent fiscal year, that a hospital described in section 
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) 
submit data in accordance with section 1866(k)(2) of the Act with 
respect to such fiscal year. There is no financial impact to PCH 
Medicare payment if a PCH does not participate.
    As discussed in section VIII.B.3. of the preamble of this final 
rule, we are finalizing our proposal to adopt refined versions of two 
existing measures: Catheter-associated Urinary Tract Infection (CAUTI) 
and Central Line-associated Bloodstream Infection (CLABSI), beginning 
with the FY 2023 program year. The refined versions of the measure 
incorporate an updated SIR calculation methodology developed by the 
Centers for Disease Control and Prevention (CDC) that calculates rates 
stratified by patient care locations within PCHs, without the use of 
predictive models or comparisons in the rate calculations. We do not 
estimate any net change in burden hours for the PCHQR Program for the 
FY 2023 program year because there would be no change in the data 
submission requirements for PCHs. We note that burden estimates for 
these CDC NHSN measures are submitted separately under OMB control 
number 0920-0666.
    The PCHQR Program measure set would continue to consist of 15 
measures for the FY 2023 program year. The most recent data from the 
Bureau of Labor Statistics reflects a median hourly wage of $19.40 
(previously $18.83).\527\ Consequently, while our finalized policy will 
not yield a net change in burden hours, the change in labor wage will 
cause an increase in burden cost for the PCHQR Program. Therefore, 
using the previously finalized \528\ hourly burden estimate of 75,779 
burden hours across the 11 PCHs for data collection and submission of 
all 15 measures, we estimate a total annual labor cost of $2,940,225 
(75,779 hours x $38.80 per hour) for all 11 PCHs for the FY 2023 
program year. The burden hours associated with these reporting 
requirements is currently approved under OMB control number 0938-1175. 
The updated burden cost, based on the increase in the labor wage, will 
be submitted to OMB.
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    \527\ Occupational Employment and Wages. Available at: https://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.htm.
    \528\ FY 2020 IPPS/LTCH PPS Final Rule PRA Revision Submission. 
OMB Control Number 0938-1175: ``Supporting Statement-A'' Accessed on 
1/8/2020. Available at: https://protect2.fireeye.com/url?k=f221f793-ae75deb8-f221c6ac-0cc47a6d17cc-43510bdd6105db67&u= https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201910-0938-003.
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    We received no comments in response to the burden estimates 
specifically discussed above. Thus, we are finalizing them without 
modification.
9. ICRs for the Promoting Interoperability Programs
    In section VIII.D. of the preamble of this final rule, we discuss 
several finalized proposals for the Medicare and Medicaid Promoting 
Interoperability Programs. OMB has currently approved 623,562 total 
burden hours and approximately $61 million under OMB control number 
0938-1278, accounting for information collection burden experienced by 
approximately 3,300 eligible hospitals and CAHs (serving Medicare-only 
and dual eligible beneficiaries) that attest to CMS under the Medicare 
Promoting Interoperability Program. The collection of information 
burden analysis in this final rule focuses on eligible hospitals and 
CAHs that attest to the objectives and measures, and report CQMs, under 
the Medicare Promoting Interoperability Program for the reporting 
period in CY 2021.
b. Summary of Policies for Eligible Hospitals and CAHs That Attest to 
CMS Under the Medicare Promoting Interoperability Program
    In section VIII.D.3.b. of the preamble of this final rule, we are 
finalizing the following changes for eligible hospitals and CAHs that 
attest to CMS under the Medicare Promoting Interoperability Program: 
(1) An EHR reporting period of a minimum of any continuous 90-day 
period in CY 2022 for new and returning participants (eligible 
hospitals and CAHs); (2) to maintain the Electronic Prescribing 
Objective's Query of PDMP measure as optional and worth 5 bonus points 
in CY 2021; (3) to modify the name of the Support Electronic Referral 
Loops by Receiving and Incorporating Health Information measure; (4) to 
progressively increase the number of quarters for which hospitals are 
required to report eCQM data, from the current requirement of one self-
selected calendar quarter of data, to four calendar quarters of data, 
over a 3-year period. Specifically, we propose to require: (a) 2 self-
selected calendar quarters of data for the CY 2021 reporting period; 
(b) 3 self-selected calendar quarters of data for the CY 2022 reporting 
period; and (c) 4 calendar quarters of data beginning with the CY 2023 
reporting period, where the submission period for the Medicare 
Promoting Interoperability Program will be the 2 months following the 
close of the respective calendar year; (5) to begin publicly reporting 
eCQM performance data beginning with the eCQM data reported by eligible 
hospitals and CAHs for the reporting period in CY 2021 on the Hospital 
Compare and/or data.medicare.gov websites or successor websites; (6) to 
correct errors and amend regulation text under Sec.  
495.104(c)(5)(viii)(B) through (D) regarding transition factors under 
section 1886(n)(2)(E)(i) of the Act for the incentive payments for 
Puerto Rico eligible hospitals; and (7) to correct errors and amend 
regulation text under Sec.  495.20(e)(5)(iii) and (l)(11)(ii)(C)(1) for 
regulatory citations for the ONC certification criteria. We are 
finalizing the amendments to the regulations to incorporate the 
proposed changes.

[[Page 59014]]

c. Summary of Collection of Information Burden Estimates
(1) Summary of Estimates Used To Calculate the Collection of 
Information Burden
    In the Medicare and Medicaid Programs; Electronic Health Record 
Incentive Program--Stage 3 and Modifications to Meaningful Use in 2015 
Through 2017 final rule (80 FR 62917), we estimated it will take an 
individual provider or designee approximately 10 minutes to attest to 
each objective and associated measure that requires a numerator and 
denominator to be generated. The measures that require a ``yes/no'' 
response will take approximately one minute to complete. We estimated 
that the Security Risk Analysis measure will take approximately 6 hours 
for an individual provider or designee to complete (we note this 
measure is still part of the program, but is not subject to 
performance-based scoring). We continue to believe these are 
appropriate burden estimates for reporting and have used this 
methodology in our collection of information burden estimates for this 
final rule.
    Given the proposals, we estimated a total burden estimate of 6 
hours 31 minutes per respondent (6.5 hours) which remains unchanged 
from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42044).
[GRAPHIC] [TIFF OMITTED] TR18SE20.254

(2) Hourly Labor Costs
    In the Medicare and Medicaid Programs; Electronic Health Record 
Incentive Program--Stage 3 and Modifications to Meaningful Use in 2015 
Through 2017 final rule (80 FR 62917), we estimated a mean hourly rate 
of $63.46 for the staff involved in attesting to EHR technology, 
meaningful use objectives and associated measures, and electronically 
submitting the clinical quality measures. We had previously used the 
mean hourly rate of $68.22 for the necessary staff involved in 
attesting to the objectives and measures under 42 CFR 495.24(e) in the 
FY 2020 IPPS/LTCH PPS final rule (84 FR 42609), however, this rate has 
since been updated to $69.34 for the FY 2021 final rule based upon 
recently-released 2018 data from the Bureau of Labor Statistics 
(BLS).\529\
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    \529\ https://www.bls.gov/oes/current/oes231011.htm.
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    We are finalizing these provisions as proposed, therefore, we do 
not estimate any net change in burden hours for the Medicare Promoting 
Interoperability Program for CY 2021, as there is no substantive change 
in measures or data submission requirements for eligible hospitals and 
CAHs in our proposals. However, we discovered an incorrect mathematical 
calculation in last year's final rule and are correcting it in the 
table that follows. The correction we are providing in following table 
is that 3,300 responses multiplied by 6.5 burden hours equals 21,450 
total annual burden hours (a decrease in 44 hours from what was 
mistakenly reported last year). While we reiterate that the provisions 
included in this rule do not contribute to additional or reduced burden 
hours, please note that the correction of this error will update 
subsequent burden calculations detailed later in this section.
    As previously stated, recent data from the BLS reflects a median 
hourly staff wage of $69.34 (previously $68.22). Consequently, while 
our proposal will not yield a net change in burden hours, the change in 
labor wage will cause an increase in burden cost for the program. 
Therefore, using the updated estimate of total annual burden hours of 
21,450 burden hours across 3,300 responses to data collection and 
submissions for the program objectives' measures, we estimate a total 
annual labor cost of $1,487,343 (21,450 hours x $69.34 per hour) for 
the CY 2021 EHR reporting period. The burden hours associated with 
these reporting requirements is currently approved under OMB control 
number 0938-1278. The updated burden cost, based solely on the increase 
in labor wages, will be revised and submitted to OMB.

[[Page 59015]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.255

    As no measures have been removed nor introduced since last year's 
final rule, but are mainly continuations of current policies, we do not 
consider the finalized proposals included in this section to change the 
program. That being said, the numerical-correction of the total annual 
burden hours and an updated BLS hourly labor cost of reporting will 
impact the program's total cost. Thus, the Collection Burden's Total 
Cost for CY 2021 of $1,487,343 is an increase of $24,024 from last 
year's final rule.
    We did not receive comments on to the information collection 
requirement discussed in this section.
10. ICR for the Submission of Electronic Medical Records to Quality 
Improvement Organizations (QIOs)
    In section IX.A. of this final rule, we discuss the changes we are 
finalizing relating to the submission of patient records to the QIOs in 
an electronic format by providers and practitioners in accordance with 
Sec.  476.78 and by institutions and practitioners in accordance with 
Sec.  480.111. These patient records must be submitted to the QIOs for 
purposes of one or more QIO functions. As a result, the collection and 
review of such records by the QIOs constitutes an audit, investigation 
or administrative action as specified in section 1154(a) of the Act. 
Therefore, we believe these collection requirements are not subject to 
the PRA as stipulated under 5 CFR 1320.4(a)(2).
11. ICR for Payer-Specific Negotiated Charges Data Collection
    Section IV.P. of the preamble of this final rule discusses the 
collection of market-based payment rate information by MS-DRG on the 
Medicare cost report for cost reporting periods ending on or after 
January 1, 2021. Hospitals would report the median payer-specific 
negotiated charge by MS-DRG for payers that are MA organizations. We 
proposed to collect this market-based information on new form CMS-2552-
10, Worksheet S-12. The required cost report reporting changes to 
accomplish this will be in more detail in the Information Collection 
Request approved under OMB No. 0938-0050, which is subject to a 
separate comment solicitation.
    We believe reporting this market based information will be less 
burdensome for hospitals given that hospitals are required, beginning 
in CY 2021, to make public their payer-specific negotiated charges for 
the same service packages under the requirements we finalized in the 
Hospital Price Transparency final rule. The market-based rate 
information we are finalizing to collect on the Medicare cost report 
would be the median of the payer-specific negotiated charges for every 
MS-DRG, that the hospital has negotiated with its MA organizations. We 
believe that because hospitals are already required to publically 
report the payer-specific negotiated charge information that they will 
use to calculate these medians, the additional calculation and 
reporting of the median payer-specific negotiated charge will be less 
burdensome for hospitals.
    Burden hours estimate the time (number of hours) required for each 
IPPS hospital to complete ongoing data gathering and recordkeeping 
tasks, search existing data resources, review instructions, and 
complete the Form CMS-2552-10, Worksheet S-12. The most recent data 
from the System for Tracking Audit and Reimbursement, an internal CMS 
data system maintained by the Office of Financial Management (OFM), 
reports that 3,189 hospitals, the current number of Medicare certified 
IPPS hospitals, file Form CMS-2552-10 annually.
    In section IV.P.2.c. of the preamble to this final rule, we 
finalized that subsection (d) hospitals in the 50 states and DC, as 
defined at section 1886(d)(1)(B) of the Act, and subsection (d) Puerto 
Rico hospitals, as defined under section 1886(d)(9)(A) of the Act, 
would be required to report the median payer-specific negotiated charge 
information, as proposed. Hospitals that do not negotiate payment rates 
and only receive non-negotiated payments for service would be exempted 
from this definition. Hospitals that are exempted from this policy 
include, Critical Access Hospitals (CAHs), hospitals in Maryland, which 
are currently paid under the Maryland Total Cost of Care Model, during 
the performance period of that Model, hospitals operated by an Indian 
Health Program as defined in section 4(12) of the Indian Health Care 
Improvement Act, and federally owned and operated facilities, and non-
subsection (d) hospitals. Based on this policy, we estimate that 3,189 
hospitals would be required to comply with this market-based data 
collection requirement.
    Based on our understanding of the resources necessary to report 
this information, we estimate an average annual burden per hospital of 
20 hours (5 hours for recordkeeping and 15 hours for reporting) for the 
Worksheet S-12. This represents an increase of 5 hours over the burden 
estimate provided within the proposed rule, based on feedback from 
commenters that additional effort would be necessary to crosswalk 
inpatient discharges to an MS-DRG, specifically if a hospital is not 
familiar with the MS-DRG classification system, for use in calculating 
the median payer-specific negotiated charges. The burden is minimized 
because the median payer-specific negotiated charge data collected on 
the Worksheet S-12 is based on payer-specific data already maintained 
by the hospital. We believe that since hospitals assign the underlying 
ICD-10-CM principal diagnosis, and any other secondary diagnosis codes 
and ICD-10-PCS procedure codes, which determine how patients are 
assigned to an MS-DRG, that hospitals are able to associate those items 
and services to MS-DRGs for each discharge. Additionally, hospitals 
that are not as familiar with MS-DRGs have access to the most current 
publically available version of the CMS Grouper used to group ICD-10 
codes to MS-DRGs, and are able to use this software to uniformly group 
inpatient items and services to MS-DRGs, either initially by 
proactively using the same Grouper version used by CMS, or 
retrospectively after an inpatient hospital stay, but prior to 
submitting this information on the hospital cost report.

[[Page 59016]]

    We estimated the total annual burden hours as follows: 3,189 
hospitals times 20 hours per hospital equals 63,780 annual burden 
hours.
    The 5 hours for recordkeeping include hours for bookkeeping, 
accounting and auditing clerks; the 15 hours for reporting include 
accounting and audit professionals' activities. We believe the basic 
median calculation would be captured within the recordkeeping portion 
of this assessment.
    Based on the most recent Bureau of Labor Statistics (BLS) in its 
2019 Occupation Outlook Handbook, the mean hourly wage for Category 43-
3031 (bookkeeping, accounting and auditing clerks) is $20.65 (https://www.bls.gov/oes/current/oes433031.htm). We added 100 percent of the 
mean hourly wage to account for fringe and overhead benefits, which 
calculates to $41.30 ($20.65 + $20.65) and multiplied it by 5 hours, to 
determine the annual recordkeeping costs per hospital to be $206.50 
($41.30 x 5 hours).
    The mean hourly wage for Category 13-2011 (accounting and audit 
professionals) is $38.23 (www.bls.gov/oes/current/oes132011.htm). We 
added 100 percent of the mean hourly wage to account for fringe and 
overhead benefits, which calculates to $76.46 ($38.23 + $38.23) and 
multiplied it by 15 hours, to determine the annual reporting costs per 
hospital to be $1,146.90 ($76.46 x 15 hours). We have calculated the 
total annual cost per hospital of $1,353.40 by adding the recordkeeping 
costs of $206.50 plus the reporting costs of $1,146.90 (see Table K1). 
We estimated the total annual cost to be $4,315,993 ($1,353.40 x 3,189 
IPPS hospitals) (see Table K2).
[GRAPHIC] [TIFF OMITTED] TR18SE20.256

    We believe that because hospitals are already required to 
publically report the payer-specific negotiated charge information that 
they will use to calculate these medians, the additional calculation 
and reporting of the median payer-specific negotiated charge will be 
less burdensome for hospitals than if hospitals did not already have 
this information compiled. The Hospital Price Transparency final rule 
required that hospitals establish, update, and make public via the 
internet standard charges in two different ways: (1) A single machine-
readable file with a list of standard charges (including gross charges, 
payer-specific negotiated charges, de-identified minimum negotiated 
charges, de-identified maximum negotiated charges, and discounted cash 
prices) for all items and services including service packages 
identified by MS-DRG; and (2) standard charges (including payer-
specific negotiated charges, discounted cash prices, de-identified 
minimum negotiated charges, de-identified maximum negotiated charges) 
in a consumer-friendly manner for as many of the 70 CMS-specified 
shoppable services that are provided by the hospital, and as many 
additional hospital-selected shoppable services as is necessary for a 
combined total of at least 300 shoppable services. We note that the 
data collection requirement in this final rule would apply to a smaller 
subset of hospitals as compared to the public reporting requirements 
under the Hospital Price Transparency final rule.
    In total, the Hospital Price Transparency final rule estimated in 
the first year of public reporting, it would take a hospital an 
estimated 150 hours at a cost of $11,898.60 per hospital \530\ to 
implement and comply with the requirements, as specified at 45 CFR part 
180. The estimated 150 hours of burden for the first year includes 10 
total hours for a lawyer ($138.68/hour) and general operations manager 
($119.12/hour) to read and review the rule; 80 hours for a business 
operations specialist ($74.00/hour) to gather and compile the required 
information and post it in the form and manner specified in the 
Hospital Price Transparency final rule; 30 hours for a network and 
computer system administrator ($83.72/hour) to comply with the form and 
manner standards set forth in the

[[Page 59017]]

Hospital Price Transparency final rule; 30 hours for a registered nurse 
($72.60/hour) to capture the necessary clinical input to comply with 
reporting the CMS-specified and hospital-selected shoppable services. 
(150 hours = 5 hours + 5 hours + 80 hours + 30 hours + 30 hours; 
totaling a cost of $11,898.60 ($693.40 + $595.60 + $5,920 + $2,511.60 + 
$2,178) per hospital.)
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    \530\ The estimated hourly cost for each labor category used in 
this analysis were referencing the Bureau of Labor Statistics report 
on Occupational Employment and Wages, May 2018 (Bureau of Labor 
Statistics report on Occupational Employment and Wages, May 2018 
Available at: https://www.bls.gov/oes/2018/may/oes_nat.htm). We also 
have calculated the cost of overhead at 100 percent of the mean 
hourly wage, in line with the Hospital Inpatient and Hospital 
Outpatient Quality Reporting programs (81 FR 57260 and 82 FR 59477, 
respectively).
---------------------------------------------------------------------------

    In this final rule, we finalized the requirement for hospitals to 
calculate and report on the Medicare cost report the median payer-
specific negotiated charge by MS-DRG using the payer-specific 
negotiated charge data that hospitals are required to make public under 
the Hospital Price Transparency final rule. Therefore, the burden 
associated with establishing and updating the payer-specific negotiated 
charges has already been assumed. Specifically, given that the payer-
specific negotiated charge is one of the five types of standard charges 
(gross charges, payer-specific negotiated charges, de-identified 
minimum negotiated charges, de-identified maximum negotiated charges, 
and discounted cash prices) that the Hospital Price Transparency final 
rule requires that hospitals estimate, update and make public, we 
believe that a fraction of the estimated 80 hours of burden associated 
with gathering, compiling, and posting, that required information in 
the form and manner specified in the Hospital Price Transparency final 
rule, would support the reporting efforts in this final rule. We heard 
from commenters that additional effort would be necessary to crosswalk 
discharges to an MS-DRG, specifically if a hospital is not familiar 
with the MS-DRG classification system, for use in calculating the 
median payer-specific negotiated charges. In recognition of this 
additional effort, we have increased the burden hours associated with 
reporting the median payer-specific negotiated charge. However, we note 
that much of the burden associated with gathering and compiling the 
payer-specific negotiated charge is captured initially in the Hospital 
Price Transparency burden estimate provided in that final rule. We 
refer readers to the Hospital Price Transparency final rule for the 
full burden assessment analysis for the requirements set forth within 
that final rule (84 FR 65524).
    We maintain that the estimated burden associated with completing 
the Worksheet S-12 would be 20 hours (5 hours for recordkeeping and 15 
hours for reporting), given the minimized burden since hospitals would 
already have collected the payer-specific negotiated charge data and 
would only then need to calculate the median payer-specific negotiated 
charge by MS-DRG for payers that are MA organizations.
    Further instructions for the reporting and complying with this 
market-based data collection requirement on the Medicare cost report 
will be discussed in a forthcoming revision of the ICR request 
currently approved under OMB control number 0938-0050, expiration date 
March 31, 2022.
12. Summary of All Burden in This Final Rule
    The following chart reflects the total burden and associated costs 
for the provisions included in this final rule.
[GRAPHIC] [TIFF OMITTED] TR18SE20.257

C. Waiver of the 60-Day Delay in Effective Date for the Final Rule

    We are committed to ensuring that we fulfill our statutory 
obligation to update the IPPS and LTCH PPS as required by law and we 
have worked diligently in that regard. We ordinarily provide a 60-day 
delay in the effective date of final rules after the date they are 
issued in accord with the Congressional Review Act (CRA) (5 U.S.C. 
801(a)(3)). However, section 808(2) of the CRA provides that, if an 
agency finds good cause that notice and public procedure are 
impracticable, unnecessary, or contrary to the public interest, the 
rule shall take effect at such time as the agency determines. In 
addition, the Administrative Procedure Act, (5 U.S.C. 553(d)), 
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. 
This 30-day delay in effective date can be waived, however, if an 
agency finds good cause to support an earlier effective date. Section 
1871(e)(1)(B)(ii) of the Act, also permits a substantive rule to take 
effect less than 30 days after its publication if the Secretary finds 
that waiver of the 30-day period is necessary to comply with statutory 
requirements or that the 30-day delay would be contrary to the public 
interest.
    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

[[Page 59018]]

all 50 States and the District of Columbia. The virus has been named 
``SARS-CoV-2'' and the disease it causes has been named ``coronavirus 
disease 2019'' (abbreviated ``COVID-19'').
    On January 30, 2020, the International Health Regulations Emergency 
Committee of the World Health Organization (WHO) declared the outbreak 
a ``Public Health Emergency of international concern'' (PHEIC). On 
January 31, 2020, Health and Human Services Secretary, Alex M. Azar II, 
declared a PHE for the United States to aid the nation's healthcare 
community in responding to COVID-19. On March 11, 2020, the WHO 
publicly characterized COVID-19 as a pandemic. On March 13, 2020, the 
President of the United States declared the COVID-19 outbreak a 
national emergency.
    The COVID-19 PHE has required the agency to divert energy and 
personnel resources that would otherwise have been used to complete 
this IPPS and LTCH PPS payment rule to other priority matters, 
including three interim final rules necessary because of the PHE. (See 
85 FR 19230 (April 6, 2020); 85 FR 27550 (May 8, 2020); and the interim 
final rule scheduled to appear in the September 2, 2020 Federal 
Register.) Although we have devoted significant resources to completing 
the IPPS and LTCH PPS payment rule, it was impracticable for CMS to 
complete the work needed on the rule in accordance with our usual 
schedule for this rulemaking or in sufficient time to ensure a full 60-
day period of public notice prior to the next fiscal year that begins 
on October 1, 2020. The IPPS and LTCH PPS payment rule is necessary to 
annually review and update the payment systems, and it is critical to 
ensure that the payment policies for these systems are effective on the 
first day of the fiscal year to which they are intended to apply. 
Therefore, in light of the COVID-19 PHE, and the resulting strain on 
CMS's resources, it was impracticable for CMS to publish this final 
rule either 30 or 60 days prior to the beginning of the upcoming fiscal 
year, and CMS has determined that, for good cause, it would be contrary 
to the public interest to delay the effective date of this final rule 
for any longer than 28 days.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.

42 CFR Part 417

    Administrative practice and procedure, Grant programs--health, 
Health care, Health insurance, Health maintenance organizations (HMO), 
Loan programs--health, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 476

    Grant programs--health, Health care, Health facilities, Health 
professions, Quality Improvement Organizations (QIOs), Reporting and 
recordkeeping requirements.

42 CFR Part 480

    Health care, Health professions, Health records, Penalties, 
Privacy, Quality Improvement Organizations (QIOs), Reporting and 
recordkeeping requirements.

42 CFR Part 484

    Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 495

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Health professions, Health records, 
Medicaid, Medicare, Penalties, Privacy, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
and Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 continues to read as follows:

    Authority:  42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x, 
1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k).


0
2. Section 405.1801 is amended--
0
a. In paragraph (a), in the definition of ``Date of receipt''--
0
i. By revising paragraphs (1)(ii) and (2) introductory text;
0
ii. In paragraph (2)(i) by removing ``; or'' and adding a period in its 
place; and
0
iii. By adding paragraph (2)(iii); and
0
b. By revising paragraph (d) introductory text.
    The revisions and addition read as follows:


Sec.  405.1801   Introduction.

    (a) * * *

Date of receipt * * *

    (1) * * *
    (ii) For purposes of a contractor hearing, if no contractor hearing 
officer is appointed (or none is currently presiding), the date of 
receipt of materials sent to the contractor hearing officer (as 
permitted under paragraph (d) of this section) is presumed to be, as 
applicable, the date that the contractor stamps ``Received'' on the 
materials, or the date of electronic delivery.
* * * * *
    (2) A reviewing entity. For purposes of this definition, a 
reviewing entity is deemed to include the Office of the Attorney 
Advisor. The determination as to the date of receipt by the reviewing 
entity to which the document or other material was submitted (as 
permitted under paragraph (d) of this section) is final and binding as 
to all parties to the appeal. The date of receipt of documents by a 
reviewing entity is presumed to be, as applicable, one of the following 
dates:
* * * * *
    (iii) Of electronic delivery. In writing or written means a hard 
copy or electronic submission (subject to the restrictions in paragraph 
(d) of this section), as applicable throughout this subpart.
* * * * *
    (d) Method for submissions and calculating time periods and 
deadlines. Except for subpoena requests being sent to a nonparty under 
Sec.  405.1857(c), the reviewing entity may prescribe the method(s) by 
which a party must make a submission, including the requirement to use 
an electronic filing system for submission of documents. Such methods 
or instructions apply to any period of time or deadline prescribed or 
allowed under this subpart (for example, requests for appeal under 
Sec. Sec.  405.1811(b), 405.1835(b), and 405.1837(c) and (e)) or 
authorized by a reviewing entity. In computing any period of time or 
deadline prescribed or allowed under this subpart or authorized by a 
reviewing entity the following principles are applicable:
* * * * *


Sec.  405.1811   [Amended]

0
3. Section 405.1811 is amended in paragraph (c)(1) by removing the 
phrase

[[Page 59019]]

``the date the contractor stamped'' and adding in its place is the 
phrase ``the date of electronic delivery, or the date the contractor 
stamped''.


Sec.  405.1813   [Amended]

0
4. Section 405.1813 is amended--
0
a. In paragraph (d) by removing the phrase ``must give prompt written 
notice to the provider, and mail a copy'' and adding in its place is 
the phrase ``must send prompt written notice to the provider, and send 
a copy''; and
0
b. In paragraph (e)(1) by removing the phrase ``promptly mails the 
decision'' and adding in its place is the phrase ``promptly sends the 
decision''.


Sec.  405.1814   [Amended]

0
5. Section 405.1814 is amended in paragraph (c)(2) by removing the 
phrase ``must be mailed promptly'' and adding in its place is the 
phrase ``must be sent promptly''.


Sec.  405.1819   [Amended]

0
6. Section 405.1819 is amended by removing the phrase ``prior to the 
mailing of notice'' and adding in its place is the phrase ``prior to 
the sending of notice''.


Sec.  405.1821   [Amended]

0
7. Section 405.1821 is amended--
0
a. In paragraph (c)(1) by removing the phrase ``be mailed promptly'' 
and adding in its place is the phrase ``be sent promptly''; and
0
b. In paragraph (c)(3)(iii)(B) by removing the phrase ``Issue and 
mail'' and adding in its place is the phrase ``Issue and send''.


Sec.  405.1831   [Amended]

0
8. Section 405.1831 is amended in paragraph (d) by removing the phrase 
``must be mailed'' and adding in its place is the phrase ``must be 
sent''.


Sec.  405.1834   [Amended]

0
9. Section 405.1834 is amended in paragraph (e)(3) by removing the 
phrase ``must be mailed'' and adding in its place is the phrase ``must 
be sent''.


Sec.  405.1835   [Amended]

0
10. Section 405.1835 is amended--
0
a. In paragraph (b) introductory text by removing ``in writing to the 
Board'', ``(b)(1) through (b)(4)'', and ``(b)(1), (b)(2), or (b)(3)'' 
and adding in their places ``in writing in the manner prescribed by the 
Board'', ``(b)(1) through (4)'', and ``(b)(1), (2), or (3)'', 
respectively.
0
b. In paragraph (d) introductory text by removing ``in writing to the 
Board'', ``(d)(1) through (d)(4)'', and ``(d)(1), (d)(2), or (d)(3)'' 
and adding in their places ``in writing in the manner prescribed by the 
Board'', ``(d)(1) through (4)'', and ``(d)(1), (2), or (3)'', 
respectively.


Sec.  405.1836   [Amended]

0
11. Section 405.1836 is amended--
0
a. In paragraph (d) by removing the phrase ``and mail a copy'' and 
adding in its place is the phrase ``and send a copy''; and
0
b. In paragraph (e)(1) by removing the phrase ``of this subpart'' in 
two places and removing the phrase ``must be mailed'' and adding in its 
place is the phrase ``must be sent''.


Sec.  405.1840   [Amended]

0
12. Section 405.1840 is amended paragraph (c)(2) by removing the phrase 
``of this subpart'' in two places and removing the phrase ``must be 
mailed'' and adding in its place is the phrase ``must be sent''.

0
13. Section 405.1843 is amended--
0
a. By redesignating paragraph (a) as paragraph (a)(1);
0
b. In newly redesignated paragraph (a)(1) by removing the phrase ``of 
this subpart'';
0
c. By adding paragraph (a)(2); and
0
d. In paragraph (d)(2) by removing the phrase ``promptly mail copies'' 
and adding in its place is the phrase ``promptly send copies''.
    The addition reads as follows:


Sec.  405.1843   Parties to proceedings in a Board appeal.

    (a) * * *
    (2) All parties to a Board appeal are to familiarize themselves 
with the instructions for handling a Provider Reimbursement Review 
Board (PRRB) appeal, including any and all requirements related to the 
electronic/online filing of documents.
* * * * *


Sec.  405.1845   [Amended]

0
14. Section 405.1845 is amended in paragraph (h)(2)(iii) by removing 
the phrase ``Mail the remand'' and adding in its place is the phrase 
``Send the remand''.


Sec.  405.1849   [Amended]

0
15. Section 405.1849 is amended by removing the phrase ``mail written 
notice thereof to the parties at their last known addresses,'' and 
adding in its place is the phrase ``send notice thereof to the parties' 
contact information on file,''.


Sec.  405.1851   [Amended]

0
16. Section 405.1851 is amended by removing the phrase ``mailing of 
notice'' and adding in its place is the phrase ``issuing of the 
notice''.


Sec.  405.1853   [Amended]

0
17. Section 405.1853 is amended in paragraph (e)(5)(vi)(A) by removing 
the phrase ``issue and mail'' and adding in its place is the phrase 
``issue and send''.

0
18. Section 405.1857 is amended--
0
a. By revising paragraph (c)(1) introductory text; and
0
b. In paragraph (c)(4)(iii)(A) by removing the phrase ``mail promptly 
to each party'' and adding in its place is the phrase ``send promptly 
to each party''.
    The revision reads as follows:


Sec.  405.1857   Subpoenas.

* * * * *
    (c) * * *
    (1) Subpoena requests. The requesting party must send any subpoena 
request submitted to the Board promptly to the party or nonparty 
subject to the subpoena, and to any other party to the Board appeal. If 
the subpoena request is being sent to a nonparty subject to the 
subpoena, then the subpoena request must be sent by certified mail. The 
request must--
* * * * *


Sec.  405.1868   [Amended]

0
19. Section 405.1868 is amended in paragraph (d)(1) by removing the 
phrase ``must be mailed'' and adding in its place is the phrase ``must 
be sent''.


Sec.  405.1871   [Amended]

0
20. Section 405.1871 is amended in paragraph (a)(5) by removing the 
phrase ``must be mailed'' and adding in its place is the phrase ``must 
be sent''.


Sec.  405.1875   [Amended]

0
21. Section 405.1875 is amended--
0
a. In paragraph (c)(1)(iv) by removing the phrase ``must be mailed'' 
and adding in its place is the phrase ``must be sent''; and
0
b. In paragraph (e)(2) by removing the phrase ``mail a copy'' and 
adding in its place is the phrase ``send a copy''.


Sec.  405.1885   [Amended]

0
22. Section 405.1885 is amended--
0
a. In paragraph (b)(1) by removing the phrase ``of this subpart'' and 
by removing the term ``mailed'' and adding in its place the term 
``sent'' each time it appears; and
0
b. In paragraph (b)(2)(i) by removing the phrase ``request to reopen is 
conclusively presumed to be the date of delivery by a nationally-
recognized next-day courier, or the date stamped ``Received'' by CMS, 
the contractor or

[[Page 59020]]

the reviewing entity (where a nationally-recognized next-day courier is 
not employed),'' and adding in its place the phrase ``request to reopen 
is determined by applying the date of receipt presumption criteria for 
reviewing entities defined in Sec.  405.1801(a),''.

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
23. The authority citation for part 412 continues to read as follows:

    Authority:  42 U.S.C. 1302 and 1395hh.


0
24. Section 412.1 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  412.1   Scope of part.

    (a) * * *
    (1) This part implements sections 1886(d) and (g) of the Act by 
establishing a prospective payment system for the operating costs of 
inpatient hospital services furnished to Medicare beneficiaries in cost 
reporting periods beginning on or after October 1, 1983, and a 
prospective payment system for the capital-related costs of inpatient 
hospital services furnished to Medicare beneficiaries in cost reporting 
periods beginning on or after October 1, 1991.
    (i) Under these prospective payment systems, payment for the 
operating and capital-related costs of inpatient hospital services 
furnished by hospitals subject to the systems (generally, short-term, 
acute-care hospitals) is made on the basis of prospectively determined 
rates and applied on a per discharge basis.
    (ii) Payment for other costs related to inpatient hospital services 
(organ acquisition costs incurred by hospitals with approved organ 
transplantation centers, the costs of qualified nonphysician 
anesthetist's services, as described in Sec.  412.113(c), direct costs 
of approved nursing and allied health educational programs, costs 
related to hematopoietic stem cell acquisition for the purpose of an 
allogeneic hematopoietic stem cell transplant as described in Sec.  
412.113(e)) is made on a reasonable cost basis.
    (iii) Payment for the direct costs of graduate medical education is 
made on a per resident amount basis in accordance with Sec. Sec.  
413.75 through 413.83 of this chapter.
    (iv) Additional payments are made for outlier cases, bad debts, 
indirect medical education costs, and for serving a disproportionate 
share of low-income patients.
    (v) Under either prospective payment system, a hospital may keep 
the difference between its prospective payment rate and its operating 
or capital-related costs incurred in furnishing inpatient services, and 
the hospital is at risk for inpatient operating or inpatient capital-
related costs that exceed its payment rate.
* * * * *

0
25. Section 412.2 is amended by adding paragraph (e)(6) to read as 
follows:


Sec.  412.2   Basis of payment.

* * * * *
    (e) * * *
    (6) For cost reporting periods beginning on or after October 1, 
2020, the costs of allogenic hematopoietic stem cell acquisition, as 
described in Sec.  412.113(e), for the purpose of an allogeneic 
hematopoietic stem cell transplant.
* * * * *

0
26. Section 412.64 is amended by adding paragraph (e)(5) to read as 
follows:


Sec.  412.64   Federal rates for inpatient operating costs for Federal 
fiscal year 2005 and subsequent fiscal years.

* * * * *
    (e) * * *
    (5) CMS makes an adjustment to the standardized amount to ensure 
that the reasonable cost based payments for allogeneic hematopoietic 
stem cell acquisition costs are made in a manner so that aggregate 
payments to hospitals are not affected.
* * * * *


Sec.  412.82   [Amended]

0
27. Section 412.82 is amended in paragraph (c) by removing the 
reference ``Sec.  412.86'' and adding in its place ``Sec.  412.83''.

0
28. Section 412.85 and an undesignated center heading preceding the 
section are added to read as follows:

Payment Adjustment for Certain Clinical Trial Cases and Expanded Access 
Use Immunotherapy


Sec.  412.85  Payment adjustment for certain clinical trial and 
expanded access use immunotherapy cases.

    (a) General rule. For discharges occurring on or after October 1, 
2020, the amount of payment for a discharge described in paragraph (b) 
of this section is adjusted as described in paragraph (c) of this 
section.
    (b) Discharges subject to payment adjustment. Payment is adjusted 
in accordance with paragraph (c) of this section for discharges 
assigned to MS-DRG 018 involving expanded access use of immunotherapy, 
or that are part of an applicable clinical trial as determined by CMS 
based on the reporting of a diagnosis code indicating the encounter is 
part of a clinical research program on the claim for the discharge.
    (c) Adjustment. The DRG weighting factor determined under Sec.  
412.60(b) is adjusted by a factor that reflects the average cost for 
cases to be assigned to MS-DRG 018 that involve expanded access use of 
immunotherapy, or are part of an applicable clinical trial, to the 
average cost for cases to be assigned to MS-DRG 018 that do not involve 
expanded access use of immunotherapy and are not part of an applicable 
clinical trial.


Sec.  412.86   [Redesignated as Sec.  412.83]

0
29. Section 412.86 is redesignated as Sec.  412.83.


Sec.  412.86   [Added and Reserved]

0
30. New reserved Sec.  412.86 is added.

0
31. Section 412.87 is amended by revising paragraphs (c)(1), (d) 
introductory text, (d)(1), the paragraph (e) subject heading, and 
(e)(2) and by adding paragraph (e)(3) to read as follows:


Sec.  412.87   Additional payment for new medical services and 
technologies: General provisions.

* * * * *
    (c) * * *
    (1) A new medical device is part of the Food and Drug 
Administration's (FDA) Breakthrough Devices Program and has received 
marketing authorization for the indication covered by the Breakthrough 
Device designation.
* * * * *
    (d) Eligibility criteria for alternative pathway for certain 
antimicrobial products. (1)(i) A new medical product is designated by 
FDA as a Qualified Infectious Disease Product and has received 
marketing authorization for the indication covered by the Qualified 
Infectious Disease Product designation; or
    (ii) For discharges occurring on or after October 1, 2021, a new 
medical product is approved under FDA's Limited Population Pathway for 
Antibacterial and Antifungal Drugs (LPAD) and used for the indication 
approved under the LPAD pathway.
* * * * *
    (e) Announcement of determinations and deadline for consideration 
of new medical service or technology applications, and conditional 
approval for certain antimicrobial products. * * *
    (2) Except as provided for in paragraph (e)(3) of this section, CMS

[[Page 59021]]

only considers, for add-on payments for a particular fiscal year, an 
application for which the new medical service or technology has 
received FDA marketing authorization by July 1 prior to the particular 
fiscal year.
    (3) A technology for which an application is submitted under an 
alternative pathway for certain antimicrobial products under paragraph 
(d) of this section that does not receive FDA marketing authorization 
by the July 1 deadline specified in paragraph (e)(2) of this section 
may be conditionally approved for the new technology add-on payment for 
a particular fiscal year, effective for discharges beginning in the 
first quarter after FDA marketing authorization is granted, provided 
that FDA marketing authorization is granted before July 1 of the fiscal 
year for which the applicant applied for new technology add-on 
payments.

0
32. Section 412.88 is amended--
0
a. In paragraph (a)(2)(ii)(A) introductory text by removing the 
reference ``paragraph (a)(2)(ii)(2) of this section'' and adding in its 
place ``paragraph (a)(2)(ii)(B) of this section'';
0
b. By revising paragraphs (a)(2)(ii)(B) introductory text and (b)(2).
    The revisions read as follows:


Sec.  412.88  Additional payment for new medical service or technology.

    (a) * * *
    (2) * * *
    (ii) * * *
    (B) For a medical product designated by FDA as a Qualified 
Infectious Disease Product or, for discharges occurring on or after 
October 1, 2020, for a product approved under FDA's Limited Population 
Pathway for Antibacterial and Antifungal Drugs, if the costs of the 
discharge (determined by applying the operating cost-to-charge ratios 
as described in Sec.  412.84(h)) exceed the full DRG payment, an 
additional amount equal to the lesser of--
* * * * *
    (b) * * *
    (2) For discharges occurring on or after October 1, 2019. Unless a 
discharge case qualifies for outlier payment under Sec.  412.84, 
Medicare will not pay any additional amount beyond the DRG payment 
plus--
    (i) 65 percent of the estimated costs of the new medical service or 
technology;
    (ii) For a medical product designated by FDA as a Qualified 
Infectious Disease Product, 75 percent of the estimated costs of the 
new medical service or technology; or
    (iii) For discharges occurring on or after October 1, 2020, for a 
product approved under FDA's Limited Population Pathway for 
Antibacterial and Antifungal Drugs, 75 percent of the estimated costs 
of the new medical service or technology.

0
32. Section 412.92 is amended by revising paragraph (c)(3) to read as 
follows:


Sec.  412.92  Special treatment: Sole community hospitals.

* * * * *
    (c)* * *
    (3) The term service area means the area from which a hospital 
draws at least 75 percent of its inpatients during the most recent 12-
month cost reporting period ending before it applies for classification 
as a sole community hospital. If the most recent cost reporting period 
ending before the hospital applies for classification as a sole 
community hospital is for less than 12 months, the hospital's most 
recent 12-month or longer cost reporting period before the short period 
is used.
* * * * *

0
33. Section 412.96 is amended by adding paragraph (c)(2)(iii) to read 
as follows:


Sec.  412.96   Special treatment: Referral centers.

* * * * *
    (c) * * *
    (2) * * *
    (iii) If the hospital's cost reporting period that began during the 
same fiscal year as the cost reporting periods used to compute the 
regional median discharges under paragraph (i) of this section is for 
less than 12 months or longer than 12 months, the hospital's number of 
discharges for that cost reporting period will be annualized to 
estimate the total number of discharges for a 12-month cost reporting 
period.
* * * * *

0
34. Section 412.104 is amended by revising paragraph (a) to read as 
follows:


Sec.  412.104  Special treatment: Hospitals with high percentage of 
ESRD discharges.

    (a) Criteria for classification. CMS provides an additional payment 
to a hospital for inpatient services provided to ESRD beneficiaries who 
receive a dialysis treatment during a hospital stay, if the hospital 
has established that ESRD beneficiary discharges, excluding discharges 
classified into any of the following MS-DRGs, where the beneficiary 
received dialysis services during the inpatient stay, constitute 10 
percent or more of its total Medicare discharges:
    (1) MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with 
Hemodialysis).
    (2) MS-DRGs 650 and 651 (Kidney Transplant with Hemodialysis with 
MCC, without MCC, respectively).
    (3) MS-DRGs 682, 683, and 684 (Renal Failure with MCC, with CC, 
without CC/MCC, respectively).
* * * * *


Sec.  412.105   [Amended]

0
35. Section 412.105 is amended in paragraph (f)(1)(ix)(A)--
0
a. By removing the phrase ``to reflect residents added because'' and 
adding in its place the phrase ``to reflect displaced residents added 
because'' each time it appears.
0
b. By removing the citations ``Sec. Sec.  413.79(h)(1) and (h)(2)'', 
``Sec. Sec.  413.79(h)(1) and (h)(3)(ii)'', and ``Sec. Sec.  
413.79(h)(1) and (h)(3)(i)'' and adding in their places the citations 
``Sec.  413.79(h)(1) and (2)'', ``Sec.  413.79(h)(1) and (h)(3)(ii)'', 
and ``Sec.  413.79(h)(1) and (h)(3)(i)'', respectively.

0
36. Section 412.106 is amended by removing the semicolon at the end of 
paragraph (g)(1)(iii)(C)(6) and adding a period in its place and adding 
paragraphs (g)(1)(iii)(C)(7) and (8).
    The additions read as follows:


Sec.  412.106   Special treatment: Hospitals that serve a 
disproportionate share of low-income patients.

* * * * *
    (g) * * *
    (1) * * *
    (iii) * * *
    (C) * * *
    (7) For fiscal year 2021, CMS will base its estimates of the amount 
of hospital uncompensated care on data on uncompensated care costs, 
defined as charity care costs plus non-Medicare and non-reimbursable 
Medicare bad debt costs from 2017 cost reports from the most recent 
Hospital Cost Report Information System (HCRIS) database extract, 
except that, for Puerto Rico hospitals and Indian Health Service or 
Tribal hospitals, CMS will base its estimates on utilization data for 
Medicaid and Medicare Supplemental Security Income (SSI) patients, as 
determined by CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of 
this section, using data on Medicaid utilization from 2013 cost reports 
from the most recent HCRIS database extract and the most recent 
available year of data on Medicare SSI utilization (or, for Puerto Rico 
hospitals, a proxy for Medicare SSI utilization data).
    (8) For each subsequent fiscal year, for all eligible hospitals, 
except Indian Health Service and Tribal hospitals and Puerto Rico 
hospitals, CMS will base its estimates of the amount of hospital 
uncompensated care on data on

[[Page 59022]]

uncompensated care costs, defined as charity care costs plus non-
Medicare and non-reimbursable Medicare bad debt costs from cost reports 
from the most recent cost reporting year for which audits have been 
conducted.
* * * * *

0
37. Section 412.113 is amended by adding paragraph (e) to read as 
follows:


Sec.  412.113   Other payments.

* * * * *
    (e) Allogeneic hematopoietic stem cell acquisition. For cost 
reporting periods beginning on or after October 1, 2020, in the case of 
a subsection (d) hospital that furnishes an allogeneic hematopoietic 
stem cell transplant to an individual, payment to such hospital for 
hematopoietic stem cell acquisition costs is made on a reasonable cost 
basis.
    (1) An allogeneic hematopoietic stem cell transplant is the 
intravenous infusion of hematopoietic cells derived from bone marrow, 
peripheral blood stem cells, or cord blood, but not including embryonic 
stem cells, of a donor to an individual that are or may be used to 
restore hematopoietic function in such individual having an inherited 
or acquired deficiency or defect.
    (2) Allogeneic hematopoietic stem cell acquisition costs recognized 
under this paragraph (e) are costs of acquiring hematopoietic stem 
cells from a donor. These costs are as follows:
    (i) Registry fees from a national donor registry described in 42 
U.S.C. 274k, if applicable, for stem cells from an unrelated donor.
    (ii) Tissue typing of donor and recipient.
    (iii) Donor evaluation.
    (iv) Physician pre-admission/pre-procedure donor evaluation 
services.
    (v) Costs associated with the collection procedure (for example, 
general routine and special care services, procedure/operating room and 
other ancillary services, apheresis services), and transportation costs 
of stem cells if the recipient hospital incurred or paid such costs.
    (vi) Post-operative/post-procedure evaluation of donor.
    (vii) Preparation and processing of stem cells derived from bone 
marrow, peripheral blood stem cells, or cord blood (but not including 
embryonic stem cells).
    (3) A subsection (d) hospital that furnishes inpatient allogeneic 
hematopoietic stem cell transplants is required to hold all allogeneic 
hematopoietic stem cell acquisition charges and bill them to Medicare 
using the appropriate revenue code, when the transplant occurs.
    (4) A subsection (d) hospital must maintain an itemized statement 
that identifies, for all costs defined in paragraph (e)(2) of this 
section, the services furnished in collecting hematopoietic stem cells 
including all invoices or statements for purchased services for all 
donors and their service charges. Records must be for the person 
receiving the services (donor or recipient; for all donor sources, the 
hospital must identify the prospective recipient), and the recipient's 
Medicare beneficiary identification number.

0
38. Section 412.115 is amended by revising paragraph (c) to read as 
follows:


Sec.  412.115   Additional payments.

* * * * *
    (c) QIO reimbursement for cost of sending requested patient records 
to the QIO. An additional payment is made to a hospital in accordance 
with Sec.  476.78 of this chapter for the costs of sending requested 
patient records to the QIO in electronic format, by facsimile, or by 
photocopying and mailing.

0
39. Section 412.152 is amended by revising the definitions of 
``Applicable period'' and ``Applicable period for dual eligibility'' to 
read as follows:


Sec.  412.152  Definitions for the Hospital Readmissions Reduction 
Program.

* * * * *
    Applicable period is, with respect to a fiscal year, the 3-year 
period (specified by the Secretary) from which data are collected in 
order to calculate excess readmission ratios and adjustments under the 
Hospital Readmissions Reduction Program.
    (1) The applicable period for FY 2022 is the 3-year period from 
July 1, 2017 through June 30, 2020; and
    (2) Beginning with the FY 2023 program year, the applicable period 
is the 3-year period advanced by 1-year from the prior year's period 
from which data are collected in order to calculate excess readmission 
ratios and adjustments under the Hospital Readmissions Reduction 
Program, unless otherwise specified by the Secretary.
    Applicable period for dual eligibility is the 3-year data period 
corresponding to the applicable period for the Hospital Readmissions 
Reduction Program, unless otherwise established by the Secretary.
* * * * *

0
40. Section 412.170 is amended by revising the definition of 
``Applicable period'' and adding definitions for ``CDC NHSN HAI'' and 
``CMS PSI 90'' in alphabetical order to read as follows:


Sec.  412.170   Definitions for the Hospital-Acquired Condition 
Reduction Program.

* * * * *
    Applicable period is, unless otherwise specified by the Secretary, 
with respect to a fiscal year, the 2-year period (specified by the 
Secretary) from which data are collected in order to calculate the 
total hospital-acquired condition score under the Hospital-Acquired 
Condition Reduction Program.
    (1) The applicable period for FY 2022--
    (i) For the CMS PSI 90 measure, is the 24-month period from July 1, 
2018 through June 30, 2020; and
    (ii) For the CDC NHSN HAI measures, is the 24-month period from 
January 1, 2019 through December 31, 2020.
    (2) Beginning with the FY 2023 program year, the applicable period 
is the 24-month period advanced by 1-year from the prior fiscal year's 
period from which data are collected in order to calculate the total 
hospital-acquired condition score under the Hospital-Acquired Condition 
Reduction Program, unless otherwise specified by the Secretary.
    CDC NHSN HAI stands for Centers for Disease Control and Prevention 
National Healthcare Safety Network healthcare-associated infection 
measures.
    CMS PSI 90 stands for Patient Safety and Adverse Events Composite 
for Selected Indicators (modified version of PSI 90).
* * * * *

0
41. Section 412.230 is amended by revising paragraph (d)(2)(ii)(A) to 
read as follows:


Sec.  412.230   Criteria for an individual hospital seeking 
redesignation to another rural area or an urban area.

* * * * *
    (d) * * *
    (2) * * *
    (ii) * * *
    (A) For hospital-specific data, the hospital must provide a 
weighted 3-year average of its average hourly wages using data from the 
CMS hospital wage survey used to construct the wage index in effect for 
prospective payment purposes.
    (1) For the limited purpose of qualifying for geographic 
reclassification based on wage data from cost reporting periods 
beginning prior to FY 2000, a hospital may request that its wage data 
be revised if the hospital is in an urban area that was subject to the 
rural floor for the period during which the wage data the hospital 
wishes to revise were used to calculate its wage index.
    (2) Once a hospital has accumulated at least 1 year of wage data in 
the

[[Page 59023]]

applicable 3-year average hourly wage period used by the MGCRB, the 
hospital is eligible to apply for reclassification based on those data.
* * * * *

0
42. Section 412.278 is amended by revising paragraph (b)(1) to read as 
follows:


Sec.  412.278   Administrator's review.

* * * * *
    (b) * * *
    (1) The hospital's request for review must be in writing and sent 
to the Administrator, in care of the Office of the Attorney Advisor. 
The request must be received by the Administrator within 15 days after 
the date the MGCRB issues its decision. The hospital must also submit 
an electronic copy of its request for review to CMS's Hospital and 
Ambulatory Policy Group.
* * * * *

0
43. Section 412.312 is amended by adding paragraph (f) to read as 
follows:


Sec.  412.312   Payment based on the Federal rate.

* * * * *
    (f) Payment adjustment for certain clinical trial or expanded 
access use immunotherapy cases. For discharges occurring on or after 
October 1, 2020, in determining the payment amount under this section 
for certain clinical trial or expanded access use immunotherapy cases 
as described in Sec.  412.85(b), the DRG weighting factor described in 
paragraph (b)(1) of this section is adjusted as described in Sec.  
412.85(c).

0
44. Section 412.523 is amended by adding paragraph (c)(3)(xvii) to read 
as follows:


Sec.  412.523   Methodology for calculating the Federal prospective 
payment rates.

* * * * *
    (c) * * *
    (3) * * *
    (xvii) For long-term care prospective payment system fiscal year 
2021 and subsequent fiscal years. The long-term care hospital 
prospective payment system standard Federal payment rate for a long-
term care hospital prospective payment system fiscal year is the 
standard Federal payment rate for the previous long-term care 
prospective payment system fiscal year updated by the percentage 
increase in the market basket index (as determined by CMS) less a 
multifactor productivity adjustment (as determined by CMS), and further 
adjusted, as appropriate, as described in paragraph (d) of this 
section.
* * * * *

0
45. Section 412.622 is amended by revising paragraph (b)(2)(i) to read 
as follows:


Sec.  412.622   Basis of payment.

* * * * *
    (b) * * *
    (2) * * *
    (i) Bad debts of Medicare beneficiaries, as provided in Sec.  
413.89 of this chapter; and
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT 
RATES FOR SKILLED NURSING FACILITIES; PAYMENT FOR ACUTE KIDNEY 
INJURY DIALYSIS

0
46. The authority citation for part 413 continues to read as follows:

    Authority:  42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), 
(i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww.


0
47. Section 413.20 is amended by revising paragraph (d)(3) to read as 
follows:


Sec.  413.20  Financial data and reports.

* * * * *
    (d) * * *
    (3)(i) The provider must furnish the contractor--
    (A) Upon request, copies of patient service charge schedules and 
changes thereto as they are put into effect; and
    (B) Its median payer-specific negotiated charge by MS-DRG for 
payers that are Medicare Advantage (MA) organizations, as applicable, 
and changes thereto as they are put into effect.
    (ii) The contractor evaluates the charge schedules as specified in 
paragraph (d)(3)(i) of this section to determine the extent to which 
they may be used for determining program payment.
* * * * *

0
48. Section 413.79 is amended by adding paragraph (h)(1)(iii) to read 
as follows:


Sec.  413.79  Direct GME payments: Determination of the weighted number 
of FTE residents.

* * * * *
    (h) * * *
    (1) * * *
    (iii) Displaced resident means a resident who--
    (A) Leaves a program after the hospital or program closure is 
publicly announced, but before the actual hospital or program closure;
    (B) Is assigned to and training at planned rotations at another 
hospital who will be unable to return to his/her rotation at the 
closing hospital or program;
    (C) Is accepted into a GME program at the closing hospital or 
program but has not yet started training at the closing hospital or 
program;
    (D) Is physically training in the hospital on the day prior to or 
day of program or hospital closure; or
    (E) Is on approved leave at the time of the announcement of closure 
or actual closure, and therefore, cannot return to his/her rotation at 
the closing hospital or program.
* * * * *

0
49. Section 413.89 is amended by revising paragraphs (b)(1), (c), 
(e)(2), and (f) to read as follows:


Sec.  413.89   Bad debts, charity, and courtesy allowances.

* * * * *
    (b) Definitions--(1) Bad debts. (i) For cost reporting periods 
beginning before October 1, 2020:
    (A) ``Bad debts'' are amounts considered to be uncollectible from 
accounts and notes receivable that were created or acquired in 
providing services.
    (B) ``Accounts receivable'' and ``notes receivable'' are 
designations for claims arising from the furnishing of services, and 
are collectible in money in the relatively near future.
    (ii) For cost reporting periods beginning on or after October 1, 
2020, ``bad debts'' are amounts considered to be uncollectible from 
patient accounts that were created or acquired in providing services 
and are categorized as implicit price concessions for cost reporting 
purposes and are recorded in the provider's accounting records as a 
component of net patient revenue.
* * * * *
    (c) Normal accounting treatment: Reduction in revenue. (1) For cost 
reporting periods beginning before October 1, 2020:
    (i) Bad debts, charity, and courtesy allowances represent 
reductions in revenue. The failure to collect charges for services 
furnished does not add to the cost of providing the services as these 
costs have already been incurred in the production of the services.
    (ii) Medicare bad debts must not be written off to a contractual 
allowance account but must be charged to an expense account for 
uncollectible accounts.
    (2) For cost reporting periods beginning on or after October 1, 
2020:
    (i) Bad debts, also known as ``implicit price concessions,'' 
charity, and

[[Page 59024]]

courtesy allowances represent reductions in revenue. The failure to 
collect charges for services furnished does not add to the cost of 
providing the services as these costs have already been incurred in the 
production of the services.
    (ii) Medicare bad debts must not be written off to a contractual 
allowance account but must be recorded as an implicit price concession 
that results in a reduction in revenue.
* * * * *
    (e) * * *
    (2) The provider must be able to establish that reasonable 
collection efforts were made.
    (i) Non-indigent beneficiary. A non-indigent beneficiary is a 
beneficiary who has not been determined to be categorically or 
medically needy by a State Medicaid Agency to receive medical 
assistance from Medicaid, nor have they been determined to be indigent 
by the provider for Medicare bad debt purposes. To be considered a 
reasonable collection effort for non-indigent beneficiaries, all of the 
following are applicable:
    (A) A provider's collection effort or the effort of a collection 
agency acting on the provider's behalf, or both, to collect Medicare 
deductible or coinsurance amounts must consist of all of the following:
    (1) Be similar to the collection effort put forth to collect 
comparable amounts from non-Medicare patients.
    (2) For cost reporting periods beginning before October 1, 2020, 
involve the issuance of a bill to the beneficiary or the party 
responsible for the beneficiary's personal financial obligations on or 
shortly after discharge or death of the beneficiary.
    (3) For cost reporting periods beginning on or after October 1, 
2020, involve the issuance of a bill to the beneficiary or the party 
responsible for the beneficiary's personal financial obligations on or 
before 120 days after the latter of one of the following:
    (i) The date of the Medicare remittance advice that results from 
processing the claim for services furnished to the beneficiary and 
generates the beneficiary's cost sharing amounts.
    (ii) The date of the remittance advice from the beneficiary's 
secondary payer, if any.
    (iii) The date of the notification that the beneficiary's secondary 
payer does not cover the service furnished to the beneficiary.
    (4) Include other actions such as subsequent billings, collection 
letters, and telephone calls, emails, text messages, or personal 
contacts with this party.
    (5)(i) Last at least 120 days after paragraph (e)(2)(i)(A)(2) or 
(3) of this section is met before being written off as uncollectible 
under paragraph (e)(3) of this section.
    (ii) Start a new 120-day collection period each time a payment is 
received within a 120-day collection period.
    (6) Maintaining and, upon request, furnishing verifiable 
documentation to its contractor that includes all of the following:
    (i) The provider's bad debt collection policy which describes the 
collection process for Medicare and non-Medicare patients.
    (ii) The patient account history documents which show the dates of 
various collection actions such as the issuance of bills to the 
beneficiary, follow-up collection letters, reports of telephone calls 
and personal contact, etc.
    (iii) The beneficiary's file with copies of the bill(s) and follow-
up notices.
    (B) A provider that uses a collection agency to perform its 
collection effort must do all of the following:
    (1) Reduce the beneficiary's account receivable by the gross amount 
collected.
    (2) Include any fee charged by the collection agency as an 
administrative cost.
    (3) Before claiming the unpaid amounts as a Medicare bad debt, 
cease all collection efforts, including the collection agency efforts, 
and ensure that the collection accounts have been returned to the 
provider from the agency.
    (ii) Indigent non-dual eligible beneficiary. An indigent non-dual 
eligible beneficiary is a beneficiary who is determined to be indigent 
or medically indigent by the provider and is not eligible for Medicaid 
as categorically or medically needy.
    (A) To determine a beneficiary to be an indigent non-dual eligible 
beneficiary, the provider--
    (1) Must not use a beneficiary's declaration of their inability to 
pay their medical bills or deductibles and coinsurance amounts as sole 
proof of indigence or medical indigence;
    (2) Must take into account the analysis of both the beneficiary's 
assets (only those convertible to cash and unnecessary for the 
beneficiary's daily living) and income;
    (3) May consider extenuating circumstances that would affect the 
determination of the beneficiary's indigence or medical indigence which 
may include an analysis of both the beneficiary's liabilities and 
expenses, if indigence is unable to be determined under paragraph 
(e)(ii)(A)(2) of this section;
    (4) Must determine that no source other than the beneficiary would 
be legally responsible for the beneficiary's medical bill, such as a 
legal guardian or State Medicaid program; and
    (5) Must maintain and, upon request, furnish its contractor its 
indigence policy describing the method by which indigence or medical 
indigence is determined and all the verifiable beneficiary specific 
documentation which supports the provider's determination of each 
beneficiary's indigence or medical indigence.
    (B) Once indigence is determined the bad debt may be deemed 
uncollectible without applying a collection effort under paragraph 
(e)(2)(i)(A) or (B) of this section.
    (iii) Indigent dual-eligible beneficiaries (including qualified 
Medicare beneficiaries). Providers may deem Medicare beneficiaries 
indigent or medically indigent when such individuals have also been 
determined eligible for Medicaid under a State's Title XIX Medicaid 
program as either categorically needy individuals or medically needy 
individuals. To be considered a reasonable collection effort for dual-
eligible beneficiaries:
    (A) When a State permits a Medicare provider's Medicaid enrollment 
for the purposes of processing a beneficiary's claim, to determine the 
State's liability for the beneficiary's Medicare cost sharing, the 
provider--
    (1) Must determine whether the State's Title XIX Medicaid Program 
(or a local welfare agency, if applicable) is responsible to pay all or 
a portion of the beneficiary's Medicare deductible or coinsurance 
amounts;
    (2) Must submit a bill to its Medicaid/Title XIX agency (or to its 
local welfare agency) to determine the State's cost sharing obligation 
to pay all or a portion of the applicable Medicare deductible and 
coinsurance;
    (3) Must submit the Medicaid remittance advice received from the 
State to its Medicare contractor;
    (4) Must reduce allowable Medicare bad debt by any amount that the 
State is obligated to pay, either by statute or under the terms of its 
approved Medicaid State plan, regardless of whether the State actually 
pays its obligated amount to the provider; and
    (5) May include the Medicare deductible or coinsurance amount, or 
any portion thereof that the State is not obligated to pay, and which 
remains unpaid by the beneficiary, as an allowable Medicare bad debt.

[[Page 59025]]

    (B) When, through no fault of the provider, a provider does not 
receive a Medicaid remittance advice because the State does not permit 
a Medicare provider's Medicaid enrollment for the purposes of 
processing a beneficiary's claim, or because the State does not 
generate a Medicaid remittance advice, the provider--
    (1) Must submit to its contractor, all of the following auditable 
and verifiable documentation:
    (i) The State's Medicaid notification stating that the State has no 
legal obligation to pay the provider for the beneficiary's Medicare 
cost sharing.
    (ii) A calculation of the amount the State owes the provider for 
Medicare cost sharing.
    (iii) Verification of the beneficiary's eligibility for Medicaid 
for the date of service;
    (2) Must reduce allowable Medicare bad debt by any amount the State 
is obligated to pay, regardless of whether the State actually pays its 
obligated amount to the provider; and
    (3) May include the Medicare deductible or coinsurance amount, or 
any portion thereof that the State is not obligated to pay, and which 
remains unpaid by the beneficiary, as an allowable Medicare bad debt.
* * * * *
    (f) Reporting period for writing off bad debts and reporting of 
recoveries of bad debts reimbursed in prior periods. For cost reporting 
periods beginning before, on, or after October 1, 2020, the deductible 
and coinsurance amounts uncollected from beneficiaries are to be 
written off and recognized as allowable bad debts in the cost reporting 
period in which the accounts are deemed to be worthless.
    (1) Any payment on the account made by the beneficiary or a 
responsible party, after the write-off date but before the end of the 
cost reporting period, must be used to reduce the final bad debt for 
the account claimed in that cost report.
    (2) In some cases an amount written off as a bad debt and 
reimbursed by the program in a prior cost reporting period may be 
recovered in a subsequent period.
    (i) In situations described in this paragraph (f)(2), the recovered 
amount must be used to reduce the provider's reimbursable costs in the 
period in which the amount is recovered.
    (ii) The amount of reduction in the period of recovery (as 
specified in paragraph (f)(2)(i) of this section) must not exceed the 
actual amount reimbursed by the program for the related bad debt in the 
applicable prior cost reporting period.
* * * * *

0
50. Section 413.355 is revised to read as follows:


Sec.  413.355  Additional payment: QIO reimbursement for cost of 
sending records electronically or by photocopy and mailing.

    An additional payment is made to a skilled nursing facility in 
accordance with Sec.  476.78 of this chapter for the costs of sending 
requested patient records to the QIO in electronic format, by 
facsimile, or by photocopying and mailing.

PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL 
PLANS, AND HEALTH CARE PREPAYMENT PLANS

0
51. The authority citation for part 417 is revised to read as follows:

    Authority:  42 U.S.C. 300e, 300e-5, 300e-91302 and 1395hh), and 
31 U.S.C. 9701.


0
52. Section 417.536 is amended by revising paragraph (g) to read as 
follows:


Sec.  417.536   Cost payment principles.

* * * * *
    (g) Charity and courtesy allowances. As specified in Sec.  413.89 
of this chapter, charity and courtesy allowances are deductions from 
revenue and may not be included as allowable costs.
* * * * *

PART 476--QUALITY IMPROVEMENT ORGANIZATION REVIEW

0
53. The authority citation for part 476 is revised to read as follows:

    Authority:  42 U.S.C. 1302 and 1395hh.


0
54. Section 476.78 is amended--
0
a. In paragraph (b)(2)(i) by removing the phrase ``photocopy and 
deliver to the QIO'' and adding in its place ``deliver to the QIO'';
0
b. By revising paragraphs (b)(2)(ii) and (c);
0
c. By redesignating paragraph (d) as paragraph (f);
0
d. By adding new paragraph (d) and paragraph (e); and
0
e. By revising newly redesignated paragraph (f).
    The revisions and additions read as follows:


Sec.  476.78  Responsibilities of providers and practitioners.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Except if granted a waiver as described in paragraph (d) of 
this section, send secure transmission of an electronic version of each 
requested patient record to the QIO.
    (A) Providers and practitioners must deliver electronic versions of 
patient records within 14 calendar days of the request.
    (B) A QIO is authorized to require the receipt of the patient 
records earlier than the 14-day timeframe if the QIO makes a 
preliminary determination that the review involves a potential gross 
and flagrant or substantial violation as specified in part 1004 of this 
title and circumstances warrant earlier receipt of the patient records.
    (C) A practitioner's or provider's failure to comply with the 
request for patient records within the established timeframe may result 
in the QIO taking action in accordance with Sec.  476.90.
* * * * *
    (c) Submission of patient records in electronic format. Except as 
specified in paragraph (d) of this section, a provider or practitioner 
must deliver patient records requested by a QIO for the purpose of 
fulfilling one or more QIO functions, in an electronic format, using 
the mechanism specified by the QIO. In the absence of any mechanism 
specified by the requesting QIO, the requested patient records must be 
submitted using any CMS-approved mechanism.
    (d) Waiver from the requirement to submit patient records in an 
electronic format. (1) A provider or practitioner that lacks the 
capability to submit requested patient records to the requesting QIO in 
an electronic format may request a waiver from the requirements in 
paragraph (c) of this section.
    (i) For providers that are required to execute a written agreement 
with the QIO, a request for a waiver must be made during execution of 
the written agreement with the QIO.
    (ii) Providers that are required to execute a written agreement 
with the QIO must request a waiver by notifying the QIO that they lack 
the capability to submit patient records in electronic format, if their 
lack of capability arises after the written agreement is executed.
    (iii) Upon approval of the waiver, the waiver becomes part of the 
written agreement with the QIO.
    (iv) A provider with an approved waiver may submit patient records 
by facsimile or by photocopying and mailing to the QIO.
    (v) A provider with an approved waiver may be reimbursed by the QIO 
for patient records submitted by facsimile or by photocopying and 
mailing in accordance with paragraph (e)(2) of this section.
    (vi) A QIO may not reimburse for any patient record submitted to 
the QIO by

[[Page 59026]]

facsimile or by photocopying and mailing if the provider does not have 
an approved waiver.
    (2) Providers and practitioners that are not required to execute a 
written agreement with the QIO may request a waiver to be exempted from 
submitting patient records in an electronic format.
    (i) Such providers and practitioners may request a waiver by 
notifying the QIO that they lack the capability to submit patient 
records in electronic format.
    (ii) Upon approval of the waiver, a provider or practitioner may 
submit patient records by facsimile or by photocopying and mailing to 
the QIO.
    (iii) Providers and practitioners with approved waivers may be 
reimbursed by the QIO for patient records submitted by facsimile or by 
photocopying and mailing in accordance with paragraph (e)(2) of this 
section.
    (iv) A QIO may not reimburse for any patient records submitted to 
the QIO by facsimile or by photocopying and mailing, if the provider or 
practitioner does not have an approved waiver.
    (e) Reimbursement for submitting patient records to the QIO. (1) 
For purposes of this paragraph (e), a patient record means all patient 
care data and other pertinent data or information relating to care or 
services provided to an individual patient in the possession of the 
provider or practitioner, as requested by a QIO for the purpose of 
performing one or more QIO functions.
    (2) A QIO may reimburse a provider or practitioner for requested 
patient records submitted in an electronic format, at the rate of $3.00 
per patient record.
    (3) For a provider or practitioner that has an approved waiver 
under paragraph (d) of this section, a QIO may reimburse the provider 
or practitioner for requested records submitted by--
    (i) Facsimile at the rate of $0.15 per page; or
    (ii) Photocopying and mailing at the rate of $0.15 per page, plus 
the cost of first class postage.
    (4) A QIO may only reimburse a provider or practitioner once for 
each patient record submitted, per request, even if a patient record is 
submitted using multiple formats, in fragments, or more than once in 
response to a single request by the QIO.
    (f) Appeals. Reimbursement for the costs of submitting requested 
patient records to the QIO in electronic format, by facsimile or by 
photocopying and mailing is an additional payment to providers under 
the prospective payment system, as specified in Sec. Sec.  412.115, 
413.355, and 484.265 of this chapter. Appeals concerning these costs 
are subject to the review process specified in part 405, subpart R, of 
this chapter.

PART 480--ACQUISITION, PROTECTION, AND DISCLOSURE OF QUALITY 
IMPROVEMENT ORGANIZATION INFORMATION

0
55. The authority citation for part 480 is revised to read as follows:

    Authority:  42 U.S.C. 1302 and 1395hh.


0
56. Section 480.111 is amended by revising paragraph (d) to read as 
follows:


Sec.  480.111   QIO access to records and information of institutions 
and practitioners.

* * * * *
    (d)(1) When submitting patient records to the QIO under this 
section, the institution or practitioner must do so consistent with the 
requirements in Sec.  476.78(c) and (d) of this chapter.
    (2) Reimbursement to an institution or practitioner for the cost of 
providing patient records is paid in accordance with Sec.  476.78(e) of 
this chapter.

PART 484--HOME HEALTH SERVICES

0
57. The authority citation for part 484 continues to read as follows:

    Authority: 42 U.S.C. 1302 and 1395hh.


0
58. Section 484.265 is revised to read as follows:


Sec.  484.265   Additional payment.

    An additional payment is made to a home health agency in accordance 
with Sec.  476.78 of this chapter for the costs of sending requested 
patient records to the QIO in electronic format, by facsimile, or by 
photocopying and mailing.

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD TECHNOLOGY 
INCENTIVE PROGRAM

0
59. The authority citation for part 495 continues to read as follows:

    Authority:  42 U.S.C. 1302 and 1395hh.


0
60. Section 495.4 is amended in the definition of ``EHR reporting 
period for a payment adjustment year'' by adding paragraphs (2)(vi) and 
(3)(vi) to read as follows:


Sec.  495.4   Definitions.

* * * * *
    EHR reporting period for a payment adjustment year. * * *
    (2) * * *
    (vi) The following are applicable for 2022:
    (A) If an eligible hospital has not successfully demonstrated it is 
a meaningful EHR user in a prior year, the EHR reporting period is any 
continuous 90-day period within CY 2022 and applies for the FY 2023 and 
2024 payment adjustment years. For the FY 2023 payment adjustment year, 
the EHR reporting period must end before and the eligible hospital must 
successfully register for and attest to meaningful use no later than 
October 1, 2022.
    (B) If in a prior year an eligible hospital has successfully 
demonstrated it is a meaningful EHR user, the EHR reporting period is 
any continuous 90-day period within CY 2022 and applies for the FY 2024 
payment adjustment year.
    (3) * * *
    (vi) The following are applicable for 2022:
    (A) If a CAH has not successfully demonstrated it is a meaningful 
EHR user in a prior year, the EHR reporting period is any continuous 
90-day period within CY 2022 and applies for the FY 2022 payment 
adjustment year.
    (B) If in a prior year a CAH has successfully demonstrated it is a 
meaningful EHR user, the EHR reporting period is any continuous 90-day 
period within CY 2022 and applies for the FY 2022 payment adjustment 
year.
* * * * *


Sec.  495.20   [Amended]

0
61. Section 495.20 is amended--
0
a. In paragraph (e)(5)(iii) by removing the reference ``45 CFR 
170.304(g)'' and adding in its place the reference ``45 CFR 
170.314(g)''; and
0
b. In paragraph (l)(11)(ii)(C)(1) by removing the reference ``45 CFR 
107.314(b)(2)'' and adding in its place the reference ``45 CFR 
170.314(b)(2)''.

0
62. Section 495.24 to be amended by revising paragraph (e)(5)(iii)(B) 
and the paragraph (e)(6)(ii)(B) subject heading to read as follows:


Sec.  495.24   Stage 3 meaningful use objectives and measures for EPs, 
eligible hospitals and CAHs for 2019 and subsequent years.

* * * * *
    (e) * * *
    (5) * * *
    (iii) * * *
    (B) Query of prescription drug monitoring program (PDMP) measure. 
Subject to paragraph (e)(3) of this section, for at least one Schedule 
II opioid electronically prescribed using CEHRT during the EHR 
reporting period, the eligible hospital or CAH uses data from CEHRT to 
conduct a query of a Prescription Drug Monitoring Program (PDMP) for 
prescription drug history, except where prohibited and in accordance 
with applicable law. This

[[Page 59027]]

measure is worth 5 bonus points in CYs 2019, 2020, and 2021.
* * * * *
    (6) * * *
    (ii) * * *
    (B) Support electronic referral loops by receiving and reconciling 
health information measure. * * *
* * * * *

0
63. Section 495.104 is amended by revising paragraphs (c)(5)(viii)(B) 
through (D) to read as follows:


Sec.  495.104  Incentive payments to eligible hospitals.

* * * * *
    (c) * * *
    (5) * * *
    (viii) * * *
    (B) \3/4\ for FY 2019;
    (C) \1/2\ for FY 2020; and
    (D) \1/4\ for FY 2021.
* * * * *

    Dated: August 31, 2020
Seema Verma,
Administrator, Centers for Medicare and Medicaid Services.

    Dated: September 1, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.

    Note: The following Addendum and Appendixes will not appear in 
the Code of Federal Regulations.

Addendum--Schedule of Standardized Amounts, Update Factors, Rate of 
Increase- Percentages Effective With Cost Reporting Periods Beginning 
on or After October 1, 2020, and Payment Rates for LTCHs Effective for 
Discharges Occurring on or After October 1, 2020

I. Summary and Background

    In this Addendum, we are setting forth a description of the 
methods and data we used to determine the prospective payment rates 
for Medicare hospital inpatient operating costs and Medicare 
hospital inpatient capital-related costs for FY 2021 for acute care 
hospitals. We also are setting forth the rate-of-increase percentage 
for updating the target amounts for certain hospitals excluded from 
the IPPS for FY 2021. We note that, because certain hospitals 
excluded from the IPPS are paid on a reasonable cost basis subject 
to a rate-of-increase ceiling (and not by the IPPS), these hospitals 
are not affected by the figures for the standardized amounts, 
offsets, and budget neutrality factors. Therefore, in this final 
rule, we are setting forth the rate-of-increase percentage for 
updating the target amounts for certain hospitals excluded from the 
IPPS that will be effective for cost reporting periods beginning on 
or after October 1, 2020.
    In addition, we are setting forth a description of the methods 
and data we used to determine the LTCH PPS standard Federal payment 
rate that will be applicable to Medicare LTCHs for FY 2021.
    In general, except for SCHs and MDHs, for FY 2021, each 
hospital's payment per discharge under the IPPS is based on 100 
percent of the Federal national rate, also known as the national 
adjusted standardized amount. This amount reflects the national 
average hospital cost per case from a base year, updated for 
inflation.
    SCHs are paid based on whichever of the following rates yields 
the greatest aggregate payment: the Federal national rate 
(including, as discussed in section IV.G. of the preamble of this 
final rule, uncompensated care payments under section 1886(r)(2) of 
the Act); the updated hospital-specific rate based on FY 1982 costs 
per discharge; the updated hospital-specific rate based on FY 1987 
costs per discharge; the updated hospital-specific rate based on FY 
1996 costs per discharge; or the updated hospital-specific rate 
based on FY 2006 costs per discharge.
    Under section 1886(d)(5)(G) of the Act, MDHs historically were 
paid based on the Federal national rate or, if higher, the Federal 
national rate plus 50 percent of the difference between the Federal 
national rate and the updated hospital-specific rate based on FY 
1982 or FY 1987 costs per discharge, whichever was higher. However, 
section 5003(a)(1) of Public Law 109-171 extended and modified the 
MDH special payment provision that was previously set to expire on 
October 1, 2006, to include discharges occurring on or after October 
1, 2006, but before October 1, 2011. Under section 5003(b) of Public 
Law 109-171, if the change results in an increase to an MDH's target 
amount, we must rebase an MDH's hospital specific rates based on its 
FY 2002 cost report. Section 5003(c) of Public Law 109-171 further 
required that MDHs be paid based on the Federal national rate or, if 
higher, the Federal national rate plus 75 percent of the difference 
between the Federal national rate and the updated hospital specific 
rate. Further, based on the provisions of section 5003(d) of Public 
Law 109-171, MDHs are no longer subject to the 12-percent cap on 
their DSH payment adjustment factor. Section 50205 of the Bipartisan 
Budget Act of 2018 extended the MDH program for discharges on or 
after October 1, 2017 through September 30, 2022.
    As discussed in section IV.B. of the preamble of this final 
rule, in accordance with section 1886(d)(9)(E) of the Act as amended 
by section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 
114-113), for FY 2021, subsection (d) Puerto Rico hospitals will 
continue to be paid based on 100 percent of the national 
standardized amount. Because Puerto Rico hospitals are paid 100 
percent of the national standardized amount and are subject to the 
same national standardized amount as subsection (d) hospitals that 
receive the full update, our discussion later in this section does 
not include references to the Puerto Rico standardized amount or the 
Puerto Rico-specific wage index.
    As discussed in section II. of this Addendum, as we proposed, we 
are making we changes in the determination of the prospective 
payment rates for Medicare inpatient operating costs for acute care 
hospitals for FY 2021. In section III. of this Addendum, we discuss 
our policy changes for determining the prospective payment rates for 
Medicare inpatient capital-related costs for FY 2021. In section IV. 
of this Addendum, we are setting forth the rate-of-increase 
percentage for determining the rate-of-increase limits for certain 
hospitals excluded from the IPPS for FY 2021. In section V. of this 
Addendum, we discuss policy changes for determining the LTCH PPS 
standard Federal rate for LTCHs paid under the LTCH PPS for FY 2021. 
The tables to which we refer in the preamble of this final rule are 
listed in section VI. of this Addendum and are available via the 
internet on the CMS website.

II. Changes to Prospective Payment Rates for Hospital Inpatient 
Operating Costs for Acute Care Hospitals for FY 2021

    The basic methodology for determining prospective payment rates 
for hospital inpatient operating costs for acute care hospitals for 
FY 2005 and subsequent fiscal years is set forth under Sec.  412.64. 
The basic methodology for determining the prospective payment rates 
for hospital inpatient operating costs for hospitals located in 
Puerto Rico for FY 2005 and subsequent fiscal years is set forth 
under Sec. Sec.  412.211 and 412.212. Below we discuss the factors 
we used to use for determining the prospective payment rates for FY 
2021.
    In summary, the standardized amounts set forth in Tables 1A, 1B, 
and 1C that are listed and published in section VI. of this Addendum 
(and available via the internet on the CMS website) reflect--
     Equalization of the standardized amounts for urban and 
other areas at the level computed for large urban hospitals during 
FY 2004 and onward, as provided for under section 
1886(d)(3)(A)(iv)(II) of the Act.
     The labor-related share that is applied to the 
standardized amounts to give the hospital the highest payment, as 
provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of 
the Act. For FY 2021, depending on whether a hospital submits 
quality data under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a 
hospital that is a meaningful EHR user), there are four possible 
applicable percentage increases that can be applied to the national 
standardized amount. We refer readers to section IV.B. of the 
preamble of this final rule for a complete discussion on the FY 2021 
inpatient hospital update. The table that follows shows these four 
scenarios:

[[Page 59028]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.258

    We note that section 1886(b)(3)(B)(viii) of the Act, which 
specifies the adjustment to the applicable percentage increase for 
``subsection (d)'' hospitals that do not submit quality data under 
the rules established by the Secretary, is not applicable to 
hospitals located in Puerto Rico.
    In addition, section 602 of Public Law 114-113 amended section 
1886(n)(6)(B) of the Act to specify that Puerto Rico hospitals are 
eligible for incentive payments for the meaningful use of certified 
EHR technology, effective beginning FY 2016, and also to apply the 
adjustments to the applicable percentage increase under section 
1886(b)(3)(B)(ix) of the Act to Puerto Rico hospitals that are not 
meaningful EHR users, effective FY 2022. Accordingly, because the 
provisions of section 1886(b)(3)(B)(ix) of the Act are not 
applicable to hospitals located in Puerto Rico until FY 2022, the 
adjustments under this provision are not applicable for FY 2021.
     An adjustment to the standardized amount to ensure 
budget neutrality for DRG recalibration and reclassification, as 
provided for under section 1886(d)(4)(C)(iii) of the Act.
     An adjustment to ensure the wage index and labor-
related share changes (depending on the fiscal year) are budget 
neutral, as provided for under section 1886(d)(3)(E)(i) of the Act 
(as discussed in the FY 2006 IPPS final rule (70 FR 47395) and the 
FY 2010 IPPS final rule (74 FR 44005). We note that section 
1886(d)(3)(E)(i) of the Act requires that when we compute such 
budget neutrality, we assume that the provisions of section 
1886(d)(3)(E)(ii) of the Act (requiring a 62-percent labor-related 
share in certain circumstances) had not been enacted.
     An adjustment to ensure the effects of geographic 
reclassification are budget neutral, as provided for under section 
1886(d)(8)(D) of the Act, by removing the FY 2020 budget neutrality 
factor and applying a revised factor.
     A positive adjustment of 0.5 percent in FYs 2019 
through 2023 as required under section 414 of the MACRA.
     An adjustment to ensure the effects of the Rural 
Community Hospital Demonstration program required under section 410A 
of Public Law 108-173 (as amended by sections 3123 and 10313 of 
Public Law 111-148, which extended the demonstration program for an 
additional 5 years and section 15003 of Public Law 114-255), are 
budget neutral as required under section 410A(c)(2) of Public Law 
108-173.
     Beginning with FY 2021, as we proposed, we applied an 
adjustment to ensure the effects of the reasonable cost based 
payment for allogeneic hematopoietic stem cell acquisition costs 
under section 108 of the Further Consolidated Appropriations Act, 
2020 (Pub. L. 116-94), are budget neutral as required under section 
108 of Public Law 116-94.
     An adjustment to the standardized amount to implement 
in a budget neutral manner the increase in the wage index values for 
hospitals with a wage index value below the 25th percentile wage 
index value across all hospitals (as described in section III.N. of 
the preamble of this final rule).
     As discussed in this section and in section III.2.d of 
the preamble of this final rule, an adjustment to the standardized 
amount (using our exceptions and adjustments authority under section 
1886(d)(5)(I)(i) of the Act) to implement in a budget neutral manner 
our transition for hospitals negatively impacted due to changes to 
the wage index (including the implementation of the revised OMB 
market labor delineations). We refer reader to section III.2.d. of 
the preamble of this final rule, for a detailed discussion.
     An adjustment to remove the FY 2020 outlier offset and 
apply an offset for FY 2021, as provided for in section 
1886(d)(3)(B) of the Act.
    For FY 2021, consistent with current law, as we proposed, we 
applied the rural floor budget neutrality adjustment to hospital 
wage indexes. Also, consistent with section 3141 of the Affordable 
Care Act, instead of applying a State-level rural floor budget 
neutrality adjustment to the wage index, we applied a uniform, 
national budget neutrality adjustment to the FY 2021 wage index for 
the rural floor, as we proposed.

A. Calculation of the Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts

    In general, the national standardized amount is based on per 
discharge averages of adjusted hospital costs from a base period 
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted 
in accordance with the provisions of section 1886(d) of the Act. The 
September 1, 1983 interim final rule (48 FR 39763) contained a 
detailed explanation of how base-year cost data (from cost reporting 
periods ending during FY 1981) were established for urban and rural 
hospitals in the initial development of standardized amounts for the 
IPPS.
    Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us 
to update base-year per discharge costs for FY 1984 and then 
standardize the cost data in order to remove the effects of certain 
sources of cost variations among hospitals. These effects include 
case-mix, differences in area wage levels, cost-of-living 
adjustments for Alaska and Hawaii, IME costs, and costs to hospitals 
serving a disproportionate share of low-income patients.
    For FY 2021, as we proposed, we are continuing to use the 
national labor-related and nonlabor-related shares (which are based 
on the 2014-based hospital market basket) that were used in FY 2020. 
Specifically, under section 1886(d)(3)(E) of the Act, the Secretary 
estimates, from time to time, the proportion of payments that are 
labor-related and adjusts the proportion (as estimated by the 
Secretary from time to time) of hospitals' costs which are 
attributable to wages and wage-related costs of the DRG prospective 
payment rates. We refer to the proportion of hospitals' costs that 
are attributable to wages and wage-related costs as the ``labor-
related share.'' For FY 2021, as discussed in section III. of the 
preamble of this final rule, as we proposed, we are continuing to 
use a labor-related share of 68.3 percent for the national 
standardized amounts for all IPPS hospitals (including hospitals in 
Puerto Rico) that have a wage index value that is greater than 
1.0000. Consistent with section 1886(d)(3)(E) of the Act, as we 
proposed, we applied the wage index to a labor-related share of 62

[[Page 59029]]

percent of the national standardized amount for all IPPS hospitals 
(including hospitals in Puerto Rico) whose wage index values are 
less than or equal to 1.0000.
    The standardized amounts for operating costs appear in Tables 
1A, 1B, and 1C that are listed and published in section VI. of the 
Addendum to this final rule and are available via the internet on 
the CMS website.
    Comment: A commenter asserted a calculation error regarding the 
treatment of transfers in setting the standardized amount in 1983 
and that this alleged error impacts the FY 2021 standardized amount. 
This same commenter questioned if CMS had statutory authority to 
include transfers in the standardized amount for FY 2021.
    Response: We disagree with the commenter. The calculations of 
the standardized amounts since the inception of the IPPS have 
proceeded through notice and comment rulemaking, and there have been 
numerous statutory changes to the standardized amounts in the 
intervening years since the inception of the IPPS. There is no basis 
for a change to the standardized amount now in FY2021.
    Comment: Some commenters stated that CMS misinterpreted ATRA 
section 631 recoupment related to FY 2017, and that CMS should apply 
a MS-DRG documentation and coding positive adjustment of 0.7 
percentage points in addition to the 0.5 percentage point adjustment 
proposed. Some commenters believed that would stop the continuation 
of a recoupment adjustment that no longer serves any recoupment 
purpose.
    Response: We received similar comments on the ATRA requirements 
related to FY 2017 in response to the FY 2020 proposed rule, and we 
refer readers to that response. (84 FR 42057). In addition, we refer 
readers to section II.C of this final rule for additional 
discussion.

2. Computing the National Average Standardized Amount

    Section 1886(d)(3)(A)(iv)(II) of the Act requires that, 
beginning with FY 2004 and thereafter, an equal standardized amount 
be computed for all hospitals at the level computed for large urban 
hospitals during FY 2003, updated by the applicable percentage 
update. Accordingly, as we proposed, we calculated the FY 2021 
national average standardized amount irrespective of whether a 
hospital is located in an urban or rural location.

3. Updating the National Average Standardized Amount

    Section 1886(b)(3)(B) of the Act specifies the applicable 
percentage increase used to update the standardized amount for 
payment for inpatient hospital operating costs. We note that, in 
compliance with section 404 of the MMA, as we proposed, we used the 
2014-based IPPS operating and capital market baskets for FY 2021. As 
discussed in section IV.B. of the preamble of this final rule, in 
accordance with section 1886(b)(3)(B) of the Act, as amended by 
section 3401(a) of the Affordable Care Act, as we proposed, we 
reduced the FY 2021 applicable percentage increase (which for this 
final rule is based on IGI's second quarter 2020 forecast of the 
2014-based IPPS market basket) by the MFP adjustment, as discussed 
elsewhere in this final rule.
    Based on IGI's second quarter 2020 forecast of the hospital 
market basket increase (as discussed in Appendix B of this final 
rule), the forecast of the hospital market basket increase for FY 
2021 for this final rule is 2.4 percent. As discussed earlier, for 
FY 2021, depending on whether a hospital submits quality data under 
the rules established in accordance with section 1886(b)(3)(B)(viii) 
of the Act and is a meaningful EHR user under section 
1886(b)(3)(B)(ix) of the Act, there are four possible applicable 
percentage increases that can be applied to the standardized amount. 
We refer readers to section IV.B. of the preamble of this final rule 
for a complete discussion on the FY 2021 inpatient hospital update 
to the standardized amount. We also refer readers to the previous 
table for the four possible applicable percentage increases that 
would be applied to update the national standardized amount. The 
standardized amounts shown in Tables 1A through 1C that are 
published in section VI. of this Addendum and that are available via 
the internet on the CMS website reflect these differential amounts.
    Although the update factors for FY 2021 are set by law, we are 
required by section 1886(e)(4) of the Act to recommend, taking into 
account MedPAC's recommendations, appropriate update factors for FY 
2021 for both IPPS hospitals and hospitals and hospital units 
excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires 
that we publish our recommendations in the Federal Register for 
public comment. Our recommendation on the update factors is set 
forth in Appendix B of this final rule.

4. Methodology for Calculation of the Average Standardized Amount

    The methodology we used to calculate the FY 2021 standardized 
amount is as follows:
     To ensure we are only including hospitals paid under 
the IPPS in the calculation of the standardized amount, we applied 
the following inclusion and exclusion criteria: Include hospitals 
whose last four digits fall between 0001 and 0879 (section 2779A1 of 
Chapter 2 of the State Operations Manual on the CMS website at: 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); exclude CAHs at the time of this final 
rule; exclude hospitals in Maryland (because these hospitals are 
paid under an all payer model under section 1115A of the Act); and 
remove PPS excluded- cancer hospitals that have a ``V'' in the fifth 
position of their provider number or a ``E'' or ``F'' in the sixth 
position.
     As in the past, we adjusted the FY 2021 standardized 
amount to remove the effects of the FY 2020 geographic 
reclassifications and outlier payments before applying the FY 2021 
updates. We then applied budget neutrality offsets for outliers and 
geographic reclassifications to the standardized amount based on FY 
2021 payment policies.
     We do not remove the prior year's budget neutrality 
adjustments for reclassification and recalibration of the DRG 
relative weights and for updated wage data because, in accordance 
with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, 
estimated aggregate payments after updates in the DRG relative 
weights and wage index should equal estimated aggregate payments 
prior to the changes. If we removed the prior year's adjustment, we 
would not satisfy these conditions.
    Budget neutrality is determined by comparing aggregate IPPS 
payments before and after making changes that are required to be 
budget neutral (for example, changes to MS-DRG classifications, 
recalibration of the MS-DRG relative weights, updates to the wage 
index, and different geographic reclassifications). We include 
outlier payments in the simulations because they may be affected by 
changes in these parameters.
     Consistent with our methodology established in the FY 
2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because 
IME Medicare Advantage payments are made to IPPS hospitals under 
section 1886(d) of the Act, we believe these payments must be part 
of these budget neutrality calculations. However, we note that it is 
not necessary to include Medicare Advantage IME payments in the 
outlier threshold calculation or the outlier offset to the 
standardized amount because the statute requires that outlier 
payments be not less than 5 percent nor more than 6 percent of total 
``operating DRG payments,'' which does not include IME and DSH 
payments. We refer readers to the FY 2011 IPPS/LTCH PPS final rule 
for a complete discussion on our methodology of identifying and 
adding the total Medicare Advantage IME payment amount to the budget 
neutrality adjustments.
     Consistent with the methodology in the FY 2012 IPPS/
LTCH PPS final rule, in order to ensure that we capture only fee-
for-service claims, we are only including claims with a ``Claim 
Type'' of 60 (which is a field on the MedPAR file that indicates a 
claim is an FFS claim).
     Consistent with our methodology established in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57277), in order to further 
ensure that we capture only FFS claims, we are excluding claims with 
a ``GHOPAID'' indicator of 1 (which is a field on the MedPAR file 
that indicates a claim is not an FFS claim and is paid by a Group 
Health Organization).
     Consistent with our methodology established in the FY 
2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we 
examine the MedPAR file and remove pharmacy charges for anti-
hemophilic blood factor (which are paid separately under the IPPS) 
with an indicator of ``3'' for blood clotting with a revenue code of 
``0636'' from the covered charge field for the budget neutrality 
adjustments. We also remove organ acquisition charges from the 
covered charge field for the budget neutrality adjustments because 
organ acquisition is a pass-through payment not paid under the IPPS.
     The participation of hospitals under the BPCI (Bundled 
Payments for Care Improvement) Advanced model started on October 1, 
2018. The BPCI Advanced model, tested under the authority of section 
3021 of the Affordable Care Act (codified at section 1115A of the 
Act), is comprised of a single

[[Page 59030]]

payment and risk track, which bundles payments for multiple services 
beneficiaries receive during a Clinical Episode. Acute care 
hospitals may participate in the BPCI Advanced model in one of two 
capacities: As a model Participant or as a downstream Episode 
Initiator. Regardless of the capacity in which they participate in 
the BPCI Advanced model, participating acute care hospitals will 
continue to receive IPPS payments under section 1886(d) of the Act. 
Acute care hospitals that are Participants also assume financial and 
quality performance accountability for Clinical Episodes in the form 
of a reconciliation payment. For additional information on the BPCI 
Advanced model, we refer readers to the BPCI Advanced web page on 
the CMS Center for Medicare and Medicaid Innovation's website at: 
https://innovation.cms.gov/initiatives/bpci-advanced/.
    For FY 2021, consistent with how we treated hospitals that 
participated in the BPCI Advanced Model in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42620), as we proposed, we are including all 
applicable data from subsection (d) hospitals participating in the 
BPCI Advanced model in our IPPS payment modeling and ratesetting 
calculations. We believe it is appropriate to include all applicable 
data from the subsection (d) hospitals participating in the BPCI 
Advanced model in our IPPS payment modeling and ratesetting 
calculations because these hospitals are still receiving IPPS 
payments under section 1886(d) of the Act. For the same reasons, as 
we also proposed, we included all applicable data from subsection 
(d) hospitals participating in the Comprehensive Care for Joint 
Replacement (CJR) Model in our IPPS payment modeling and ratesetting 
calculations.
     Consistent with our methodology established in the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we 
believe that it is appropriate to include adjustments for the 
Hospital Readmissions Reduction Program and the Hospital VBP Program 
(established under the Affordable Care Act) within our budget 
neutrality calculations.
    Both the hospital readmissions payment adjustment (reduction) 
and the hospital VBP payment adjustment (redistribution) are applied 
on a claim-by-claim basis by adjusting, as applicable, the base-
operating DRG payment amount for individual subsection (d) 
hospitals, which affects the overall sum of aggregate payments on 
each side of the comparison within the budget neutrality 
calculations.
    In order to properly determine aggregate payments on each side 
of the comparison, consistent with the approach we have taken in 
prior years, for FY 2021, as we proposed, we are continuing to apply 
a proxy based on the prior fiscal year hospital readmissions payment 
adjustment (for FY 2021 this would be FY 2020 final adjustment 
factors from Table 15 of the FY 2020 IPPS/LTCH final rule) and a 
proxy based on the prior fiscal year hospital VBP payment adjustment 
(for FY 2021 this would be FY 2020 final adjustment factors from 
Table 16B of the FY 2020 IPPS/LTCH final rule) on each side of the 
comparison, consistent with the methodology that we adopted in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688). That 
is, as we proposed, we applied a proxy readmissions payment 
adjustment factor and a proxy hospital VBP payment adjustment factor 
from the prior final rule on both sides of our comparison of 
aggregate payments when determining all budget neutrality factors 
described in section II.A.4. of this Addendum.
     The Affordable Care Act also established section 
1886(r) of the Act, which modifies the methodology for computing the 
Medicare DSH payment adjustment beginning in FY 2014. Beginning in 
FY 2014, IPPS hospitals receiving Medicare DSH payment adjustments 
receive an empirically justified Medicare DSH payment equal to 25 
percent of the amount that would previously have been received under 
the statutory formula set forth under section 1886(d)(5)(F) of the 
Act governing the Medicare DSH payment adjustment. In accordance 
with section 1886(r)(2) of the Act, the remaining amount, equal to 
an estimate of 75 percent of what otherwise would have been paid as 
Medicare DSH payments, reduced to reflect changes in the percentage 
of individuals who are uninsured and any additional statutory 
adjustment, will be available to make additional payments to 
Medicare DSH hospitals based on their share of the total amount of 
uncompensated care reported by Medicare DSH hospitals for a given 
time period. In order to properly determine aggregate payments on 
each side of the comparison for budget neutrality, prior to FY 2014, 
we included estimated Medicare DSH payments on both sides of our 
comparison of aggregate payments when determining all budget 
neutrality factors described in section II.A.4. of this Addendum.
    To do this for FY 2021 (as we did for the last 7 fiscal years), 
as we proposed, we included estimated empirically justified Medicare 
DSH payments that will be paid in accordance with section 1886(r)(1) 
of the Act and estimates of the additional uncompensated care 
payments made to hospitals receiving Medicare DSH payment 
adjustments as described by section 1886(r)(2) of the Act. That is, 
we considered estimated empirically justified Medicare DSH payments 
at 25 percent of what would otherwise have been paid, and also the 
estimated additional uncompensated care payments for hospitals 
receiving Medicare DSH payment adjustments on both sides of our 
comparison of aggregate payments when determining all budget 
neutrality factors described in section II.A.4. of this Addendum.
     When calculating total payments for budget neutrality, 
to determine total payments for SCHs, we model total hospital-
specific rate payments and total Federal rate payments and then 
include whichever one of the total payments is greater. As discussed 
in section IV.G. of the preamble to this final rule and later in 
this section, we are continuing to use the FY 2014 finalized 
methodology under which we take into consideration uncompensated 
care payments in the comparison of payments under the Federal rate 
and the hospital-specific rate for SCHs. Therefore, we included 
estimated uncompensated care payments in this comparison.
    Similarly, for MDHs, as discussed in section IV.G. of the 
preamble of this final rule, when computing payments under the 
Federal national rate plus 75 percent of the difference between the 
payments under the Federal national rate and the payments under the 
updated hospital-specific rate, as we proposed, we continued to take 
into consideration uncompensated care payments in the computation of 
payments under the Federal rate and the hospital-specific rate for 
MDHs.
     As we proposed, we included an adjustment to the 
standardized amount for those hospitals that are not meaningful EHR 
users in our modeling of aggregate payments for budget neutrality 
for FY 2021. Similar to FY 2020, we are including this adjustment 
based on data on the prior year's performance. Payments for 
hospitals will be estimated based on the applicable standardized 
amount in Tables 1A and 1B for discharges occurring in FY 2021.
     In our determination of all budget neutrality factors 
described in section II.A.4. of this Addendum, we used transfer-
adjusted discharges. Specifically, we calculated the transfer-
adjusted discharges using the statutory expansion of the postacute 
care transfer policy to include discharges to hospice care by a 
hospice program as discussed in section IV.A.2.b. of the preamble of 
this final rule.
    We finally note that the wage index value is calculated and 
assigned to a hospital based on the hospital's labor market area. 
Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we 
delineate hospital labor market areas based on the Core-Based 
Statistical Areas (CBSAs) established by the Office of Management 
and Budget (OMB). The current statistical areas used in FY 2020 are 
based on OMB standards published on February 28, 2013 (79 FR 49951) 
and Census 2010 data and Census Bureau population estimates for 2014 
and 2015 (OMB Bulletin No. 17-01). As stated in section II.D.2. of 
the preamble to this final rule, on April 10, 2018 OMB issued OMB 
Bulletin No. 18-03 which superseded the August 15, 2017 OMB Bulletin 
No. 17-01. On September 14, 2018, OMB issued OMB Bulletin No. 18-04 
which superseded the April 10, 2018 OMB Bulletin No. 18-03. These 
bulletins established revised delineations for Metropolitan 
Statistical Areas, Micropolitan Statistical Areas, and Combined 
Statistical Areas, and provided guidance on the use of the 
delineations of these statistical areas. A copy of OMB Bulletin No. 
18-04 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf. (We note, on March 6, 2020 OMB 
issued OMB Bulletin 20-01 (available on the web at https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf), 
and as discussed in the preamble, this bulletin was not issued in 
time for development of the FY 2021 IPPS/LTCH PPS proposed rule.)
    In section III.A.2. of the preamble to this final rule, as we 
proposed, we are implementing the revised OMB delineations as 
described in the September 14, 2018 OMB Bulletin No. 18-04, 
effective October 1, 2020

[[Page 59031]]

beginning with the FY 2021 IPPS wage index. Consistent with our 
adoption of the revised OMB delineations, in order to properly 
determine aggregate payments on each side of the comparison for our 
budget neutrality calculations, as we proposed, we used wage indexes 
based on the new OMB delineations in the determination of all of the 
budget neutrality factors discussed in this section. We also note 
that, consistent with past practice as finalized in the FY 2005 IPPS 
final rule (69 FR 49034), we are not adopting the revised OMB 
delineations themselves in a budget neutral manner. We continue to 
believe that the revision to the labor market areas in and of itself 
does not constitute an ``adjustment or update'' to the adjustment 
for area wage differences, as provided under section 1886(d)(3)(E) 
of the Act.

a. Recalibration of MS-DRG Relative Weights

    Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning 
in FY 1991, the annual DRG reclassification and recalibration of the 
relative weights must be made in a manner that ensures that 
aggregate payments to hospitals are not affected. As discussed in 
section II.G. of the preamble of this rule, we normalized the 
recalibrated MS-DRG relative weights by an adjustment factor so that 
the average case relative weight after recalibration is equal to the 
average case relative weight prior to recalibration. However, 
equating the average case relative weight after recalibration to the 
average case relative weight before recalibration does not 
necessarily achieve budget neutrality with respect to aggregate 
payments to hospitals because payments to hospitals are affected by 
factors other than average case relative weight. Therefore, as we 
have done in past years, as we proposed, we are making a budget 
neutrality adjustment to ensure that the requirement of section 
1886(d)(4)(C)(iii) of the Act is met.
    For FY 2021, to comply with the requirement that MS-DRG 
reclassification and recalibration of the relative weights be budget 
neutral for the standardized amount and the hospital-specific rates, 
we used FY 2019 discharge data to simulate payments and compared the 
following:
     Aggregate payments using the FY 2020 labor-related 
share percentages, the revised OMB labor market area delineations 
for FY 2021, the FY 2020 relative weights, and the FY 2020 pre-
reclassified wage data, and applied the FY 2021 hospital 
readmissions payment adjustments and estimated FY 2021 hospital VBP 
payment adjustments; and
     Aggregate payments using the FY 2020 labor-related 
share percentages, the revised OMB labor market area delineations 
for FY 2021, the FY 2021 relative weights, and the FY 2020 pre-
reclassified wage data, and applied the FY 2021 hospital 
readmissions payment adjustments and estimated FY 2021 hospital VBP 
payment adjustments applied previously. (We note that these FY 2021 
relative weights reflect our temporary measure for FY 2021, as 
discussed in section II.G. of the preamble of this final rule, to 
set the FY 2021 relative weight for MS-DRG 215 equal to the average 
of the FY 2020 relative weight and the otherwise applicable FY 2021 
relative weight). Because this payment simulation uses the FY 2021 
relative weights, consistent with our policy in section IV.I. of the 
preamble to this final rule, we applied the adjustor for certain CAR 
T-cell therapy cases in our simulation of these payments. (As 
discussed in section II.E.2.b. of the preamble of this final rule, 
we also calculated an adjustment to account for certain CAR T-cell 
therapy cases in calculating the FY 2021 relative weights and for 
purposes of budget neutrality and outlier simulations.) We note that 
because the simulations of payments for all of the budget neutrality 
factors discussed in this section also use the FY 2021 relative 
weights, as we proposed, we applied the adjustor for certain CAR T-
cell therapy cases in all simulations of payments for the budget 
neutrality factors discussed later in this section. We refer the 
reader to section IV.I. of the preamble of this final rule for a 
complete discussion on the adjustor for certain CAR T-cell therapy 
cases and to section II.E.2.b. of the preamble of this final rule, 
for a complete discussion of the adjustment to the FY 2021 relative 
weights to account for certain CAR T-cell therapy cases.
    Based on this comparison, we computed a budget neutrality 
adjustment factor and applied this factor to the standardized 
amount. As discussed in section IV. of this Addendum, as we 
proposed, we applied the MS-DRG reclassification and recalibration 
budget neutrality factor to the hospital-specific rates that are 
effective for cost reporting periods beginning on or after October 
1, 2020. Please see the table later in this section setting forth 
each of the FY 2021 budget neutrality factors.
    Comments: Some commenters requested that CMS revisit the MS-DRG 
recalibration process to determine reasons for negative impacts on 
rural hospitals generally, and hospitals designated as RRCs, SCHs, 
and MDHs based on the proposed rule's impact table and past final 
rules' table. Some commenters requested a special adjustment to 
prevent significant losses from the MS-DRG recalibration process, 
which the commenters asserted has had an ongoing negative impact.
    Response: We thank the commenters for their input and 
suggestion. For a discussion of the estimated impact table, we refer 
the reader to the Appendix of this final rule. For this final rule, 
as noted previously, we are making a budget neutrality adjustment to 
ensure that the requirement of section 1886(d)(4)(C)(iii) of the Act 
is met. We believe we have applied this budget neutrality adjustment 
appropriately.

b. Updated Wage Index--Budget Neutrality Adjustment

    Section 1886(d)(3)(E)(i) of the Act requires us to update the 
hospital wage index on an annual basis beginning October 1, 1993. 
This provision also requires us to make any updates or adjustments 
to the wage index in a manner that ensures that aggregate payments 
to hospitals are not affected by the change in the wage index. 
Section 1886(d)(3)(E)(i) of the Act requires that we implement the 
wage index adjustment in a budget neutral manner. However, section 
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 
percent for hospitals with a wage index less than or equal to 
1.0000, and section 1886(d)(3)(E)(i) of the Act provides that the 
Secretary shall calculate the budget neutrality adjustment for the 
adjustments or updates made under that provision as if section 
1886(d)(3)(E)(ii) of the Act had not been enacted. In other words, 
this section of the statute requires that we implement the updates 
to the wage index in a budget neutral manner, but that our budget 
neutrality adjustment should not take into account the requirement 
that we set the labor-related share for hospitals with wage indexes 
less than or equal to 1.0000 at the more advantageous level of 62 
percent. Therefore, for purposes of this budget neutrality 
adjustment, section 1886(d)(3)(E)(i) of the Act prohibits us from 
taking into account the fact that hospitals with a wage index less 
than or equal to 1.0000 are paid using a labor-related share of 62 
percent. Consistent with current policy, for FY 2021, as we 
proposed, we are adjusting 100 percent of the wage index factor for 
occupational mix. We describe the occupational mix adjustment in 
section III.E. of the preamble of this final rule.
    To compute a budget neutrality adjustment factor for wage index 
and labor-related share percentage changes, we used FY 2019 
discharge data to simulate payments and compared the following:
     Aggregate payments using the revised OMB labor market 
area delineations for FY 2021, the FY 2021 relative weights and the 
FY 2020 pre-reclassified wage indexes, applied the FY 2020 labor-
related share of 68.3 percent to all hospitals (regardless of 
whether the hospital's wage index was above or below 1.0000), and 
applied the FY 2021 hospital readmissions payment adjustment and the 
estimated FY 2021 hospital VBP payment adjustment; and
     Aggregate payments using the revised OMB labor market 
area delineations for FY 2021, the FY 2021 relative weights and the 
FY 2021 pre-reclassified wage indexes, applied the labor-related 
share for FY 2021 of 68.3 percent to all hospitals (regardless of 
whether the hospital's wage index was above or below 1.0000), and 
applied the same FY 2021 hospital readmissions payment adjustments 
and estimated FY 2021 hospital VBP payment adjustments applied 
previously.
    In addition, we applied the MS-DRG reclassification and 
recalibration budget neutrality adjustment factor (derived in the 
first step) to the payment rates that were used to simulate payments 
for this comparison of aggregate payments from FY 2020 to FY 2021. 
Based on this comparison, we computed a budget neutrality adjustment 
factor and applied this factor to the standardized amount for 
changes to the wage index. Please see the table later in this 
section for a summary of the FY 2021 budget neutrality factors.

c. Reclassified Hospitals--Budget Neutrality Adjustment

    Section 1886(d)(8)(B) of the Act provides that certain rural 
hospitals are deemed urban. In addition, section 1886(d)(10) of the 
Act provides for the reclassification of hospitals based on 
determinations by the MGCRB. Under section 1886(d)(10) of the Act, a 
hospital may be reclassified for purposes of the wage index.

[[Page 59032]]

    Under section 1886(d)(8)(D) of the Act, the Secretary is 
required to adjust the standardized amount to ensure that aggregate 
payments under the IPPS after implementation of the provisions of 
sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal 
to the aggregate prospective payments that would have been made 
absent these provisions. We note, with regard to the requirement 
under section 1886(d)(8)(C)(iii) of the Act, as finalized in the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42333 through 42336), we 
excluded the wage data of urban hospitals that have reclassified as 
rural under section 1886(d)(8)(E) of the Act (as implemented in 
Sec.  412.103) from the calculation of ``the wage index for rural 
areas in the State in which the county is located.'' We refer the 
reader to the FY 2015 IPPS final rule (79 FR 50371 and 50372) for a 
complete discussion regarding the requirement of section 
1886(d)(8)(C)(iii) of the Act. We further note that the wage index 
adjustments provided for under section 1886(d)(13) of the Act are 
not budget neutral. Section 1886(d)(13)(H) of the Act provides that 
any increase in a wage index under section 1886(d)(13) of the Act 
shall not be taken into account in applying any budget neutrality 
adjustment with respect to such index under section 1886(d)(8)(D) of 
the Act. To calculate the budget neutrality adjustment factor for FY 
2021, we used FY 2019 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the FY 2021 labor-related 
share percentages, the revised OMB labor market area delineations 
for FY 2021, the FY 2021 relative weights, and the FY 2021 wage data 
prior to any reclassifications under sections 1886(d)(8)(B) and (C) 
and 1886(d)(10) of the Act, and applied the FY 2021 hospital 
readmissions payment adjustments and the estimated FY 2021 hospital 
VBP payment adjustments; and
     Aggregate payments using the FY 2021 labor-related 
share percentages, the revised OMB labor market area delineations 
for FY 2021, the FY 2021 relative weights, and the FY 2021 wage data 
after such reclassifications, and applied the same FY 2021 hospital 
readmissions payment adjustments and the estimated FY 2021 hospital 
VBP payment adjustments applied previously.
    We note that the reclassifications applied under the second 
simulation and comparison are those listed in Table 2 associated 
with this final rule, which is available via the internet on the CMS 
website. This table reflects reclassification crosswalks for FY 
2021, and applies the policies explained in section III. of the 
preamble of this final rule. Based on this comparison, we computed a 
budget neutrality adjustment factor and applied this factor to the 
standardized amount to ensure that the effects of these provisions 
are budget neutral, consistent with the statute. Please see the 
table later in this section for a summary of the FY 2021 budget 
neutrality factors.
    The FY 2021 budget neutrality adjustment factor was applied to 
the standardized amount after removing the effects of the FY 2020 
budget neutrality adjustment factor. We note that the FY 2021 budget 
neutrality adjustment reflects FY 2021 wage index reclassifications 
approved by the MGCRB or the Administrator at the time of 
development of this final rule.

d. Rural Floor--Budget Neutrality Adjustment

    Under Sec.  412.64(e)(4), we make an adjustment to the wage 
index to ensure that aggregate payments after implementation of the 
rural floor under section 4410 of the BBA (Pub. L. 105-33) is equal 
to the aggregate prospective payments that would have been made in 
the absence of this provision. Consistent with section 3141 of the 
Affordable Care Act and as discussed in section III.G. of the 
preamble of this final rule and codified at Sec.  412.64(e)(4)(ii), 
the budget neutrality adjustment for the rural floor is a national 
adjustment to the wage index. We note, as finalized in the FY 2020 
IPPS/LTCH final rule (84 FR 42332 through 42336), for FY 2021 we are 
calculating the rural floor without including the wage data of urban 
hospitals that have reclassified as rural under section 
1886(d)(8)(E) of the Act (as implemented in Sec.  412.103).
    Similar to our calculation in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50369 through 50370), for FY 2021, as we proposed, we 
calculated a national rural Puerto Rico wage index. Because there 
are no rural Puerto Rico hospitals with established wage data, our 
calculation of the FY 2021 rural Puerto Rico wage index is based on 
the policy adopted in the FY 2008 IPPS final rule with comment 
period (72 FR 47323). That is, we use the unweighted average of the 
wage indexes from all CBSAs (urban areas) that are contiguous (share 
a border with) to the rural counties to compute the rural floor (72 
FR 47323; 76 FR 51594). Under the OMB labor market area 
delineations, except for Arecibo, Puerto Rico (CBSA 11640), all 
other Puerto Rico urban areas are contiguous to a rural area. 
Therefore, based on our existing policy, the FY 2021 rural Puerto 
Rico wage index is calculated based on the average of the FY 2021 
wage indexes for the following urban areas: Aguadilla-Isabela, PR 
(CBSA 10380); Guayama, PR (CBSA 25020); Mayaguez, PR (CBSA 32420); 
Ponce, PR (CBSA 38660); San German, PR (CBSA 41900); and San Juan-
Carolina-Caguas, PR (CBSA 41980).
    To calculate the national rural floor budget neutrality 
adjustment factor, we used FY 2019 discharge data to simulate 
payments, the revised OMB labor market area delineations for FY 2021 
and the post-reclassified national wage indexes and compared the 
following:
     National simulated payments without the rural floor; 
and
     National simulated payments with the rural floor.
    Based on this comparison, we determined a national rural floor 
budget neutrality adjustment factor. The national adjustment was 
applied to the national wage indexes to produce rural floor budget 
neutral wage indexes. Please see the table later in this section for 
a summary of the FY 2021 budget neutrality factors.
    Comment: A commenter opposed the application of the nationwide 
rural floor budget neutrality adjustment
    Response: In accordance with section 3141 of the Affordable Care 
Act, instead of applying a State-level rural floor budget neutrality 
adjustment to the wage index, we are required to apply a uniform, 
national budget neutrality adjustment to the FY 2021 wage index for 
the rural floor.

e. Rural Community Hospital Demonstration Program Adjustment

    In section IV.O. of the preamble of this final rule, we discuss 
the Rural Community Hospital Demonstration program, which was 
originally authorized for a 5-year period by section 410A of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (MMA) (Pub. L. 108-173), and extended for another 5-year period 
by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-
148). Subsequently, section 15003 of the 21st Century Cures Act 
(Pub. L. 114-255), enacted December 13, 2016, amended section 410A 
of Public Law 108-173 to require a 10-year extension period (in 
place of the 5-year extension required by the Affordable Care Act, 
as further discussed later in this section). We make an adjustment 
to the standardized amount to ensure the effects of the Rural 
Community Hospital Demonstration program are budget neutral as 
required under section 410A(c)(2) of Public Law 108-173. We refer 
readers to section IV.O. of the preamble of this final rule for 
complete details regarding the Rural Community Hospital 
Demonstration.
    With regard to budget neutrality, as mentioned earlier, we make 
an adjustment to the standardized amount to ensure the effects of 
the Rural Community Hospital Demonstration are budget neutral, as 
required under section 410A(c)(2) of Public Law 108-173. For FY 
2021, based on the latest data for this final rule, the total amount 
that we are applying to make an adjustment to the standardized 
amounts to ensure the effects of the Rural Community Hospital 
Demonstration program are budget neutral is $39,825,670.Accordingly, 
using the most recent data available to account for the estimated 
costs of the demonstration program, for FY 2021, we computed a 
factor for the Rural Community Hospital Demonstration budget 
neutrality adjustment that will be applied to the standardized 
amount. Please see the table later in this section for a summary of 
the FY 2021 budget neutrality factors. We refer readers to section 
IV.O. of the preamble of this final rule on complete details 
regarding the calculation of the amount we are applying to make an 
adjustment to the standardized amounts.

f. Stem Cell Acquisition Reasonable Cost Based Payment Budget 
Neutrality Adjustment

    In section IV.H. of the preamble of this final rule, we discuss 
the reasonable cost based payment for allogeneic hematopoietic stem 
cell acquisition costs beginning in FY 2021. Section 108 of the 
Further Consolidated Appropriations Act, 2020 requires that, for 
cost reporting periods beginning on or after October 1, 2020, in the 
case of a subsection (d) hospital that furnishes an allogeneic 
hematopoietic stem cell transplant, payment to such hospital for

[[Page 59033]]

hematopoietic stem cell acquisition shall be made on a reasonable 
cost basis, and also requires that, beginning in FY 2021, the 
payments made based on reasonable cost for the acquisition costs of 
allogeneic hematopoietic stem cells be made in a budget neutral 
manner. That is, under section 1886(d)(4)(C)(iii) of the Act as 
amended by section 108 of the Further Consolidated Appropriations 
Act, 2020, beginning with FY 2021, the reasonable cost based 
payments for allogeneic hematopoietic stem cell acquisition costs 
are to be made in a manner that assures that the aggregate IPPS 
payments for discharges in the fiscal year are not greater or less 
than those that would have been made without such payments. With 
regard to budget neutrality, we proposed to make an adjustment to 
the standardized amount to ensure the effects of the reasonable 
cost-based payments for allogeneic hematopoietic stem cell 
acquisition costs are budget neutral, as required under section 
1886(d)(4)(C)(iii) of the Act as amended by section 108 of Public 
Law 116-94. For FY 2021, based on the most recent data available for 
the proposed rule, the total amount that we proposed to apply to 
make an adjustment to the standardized amounts to ensure that the 
reasonable cost based payments for allogeneic hematopoietic stem 
cell acquisition costs are budget neutral was $15,865,374. Using the 
more recent data available for this final rule, we updated the total 
amount to $16,167,790.60. Accordingly, for FY 2021 we computed a 
final budget neutrality adjustment that we applied to the 
standardized amounts for FY 2021. Please see the table later in this 
section setting forth each of the FY 2021 budget neutrality factors. 
We refer readers to section IV.H. of the preamble of this final rule 
for further details regarding the calculation of the estimated 
amount of reasonable cost based payments for allogeneic 
hematopoietic stem cell acquisition costs that we are using to make 
an adjustment to the standardized amount for FY 2021.

g. Continuation of the Low Wage Index Hospital Policy--Budget 
Neutrality Adjustment

    As discussed in section III.G.3. of the preamble of this final 
rule, we are continuing the wage index policy finalized in the FY 
2020 IPPS/LTCH PPS final rule to address wage index disparities by 
increasing the wage index values for hospitals with a wage index 
value below the 25th percentile wage index value across all 
hospitals (the low wage index hospital policy). As discussed in the 
FY 2020 IPPS/LTCH final rule (84 FR 42332), consistent with our 
current methodology for implementing wage index budget neutrality 
under section 1886(d)(3)(E) of the Act, we are making a budget 
neutrality adjustment to the national standardized amount for all 
hospitals so that the increase in the wage index for hospitals with 
a wage index below the 25th percentile wage index, is implemented in 
a budget neutral manner.
    To calculate this budget neutrality adjustment factor for FY 
2021, we used FY 2019 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the FY 2021 labor-related 
share percentages, the revised OMB labor market area delineations 
for FY 2021, the FY 2021 relative weights, and the FY 2021 wage 
index for each hospital before adjusting the wage indexes under the 
low wage index hospital policy but without the 5 percent cap, and 
applied the FY 2021 hospital readmissions payment adjustments and 
the estimated FY 2021 hospital VBP payment adjustments, and the 
operating outlier reconciliation adjusted outlier percentage 
discussed later in this section; and
     Aggregate payments using the FY 2021 labor-related 
share percentages, the revised OMB labor market area delineations 
for FY 2021, the FY 2021 relative weights, and the FY 2021 wage 
index for each hospital after adjusting the wage indexes under the 
low wage index hospital policy but without the 5 percent cap, and 
applied the same FY 2021 hospital readmissions payment adjustments 
and the estimated FY 2021 hospital VBP payment adjustments applied 
previously, and the operating outlier reconciliation adjusted 
outlier percentage discussed later in this section.
    This FY 2021 budget neutrality adjustment factor was applied to 
the standardized amount. Please see the table later in this section 
setting forth each of the FY 2021 budget neutrality factors.
    For a discussion of public comments on this policy, we refer the 
reader to section III.G.3. of the preamble of this final rule.

h. Transition Budget Neutrality Adjustment

    In section III.A.2. of the preamble to this final rule, as we 
proposed, we are implementing the revised OMB delineations as 
described in the September 14, 2018 OMB Bulletin No. 18-04, 
effective October 1, 2020 beginning with the FY 2021 IPPS wage 
index. As we further stated in section III.A.2. of the preamble of 
this final rule, while the revised OMB delineations in the OMB 
bulletin (OMB Bulletin 18-04) are not based on new census data, 
there were some material changes in the OMB delineations. In 
accordance with our past practice of implementing transition 
policies to help mitigate negative impacts on hospitals of certain 
wage index policies, we stated that, in adopting the revised OMB 
delineations, it would be appropriate to implement a transition 
policy since, as mentioned previously, some of these revisions are 
material, and may negatively impact payments to hospitals. As we 
stated in section III.A.2. of the preamble of this final rule, we 
believe applying a 5-percent cap on any decrease in a hospital's 
wage index from the hospital's final wage index from the prior 
fiscal year, as we did for FY 2020, is an appropriate transition for 
FY 2021 for the revised OMB delineations. We refer the reader to 
section III.A.2. of the preamble to this final rule for a complete 
discussion on the rationale of this transition.
    For FY 2021, as we proposed, we are using our exceptions and 
adjustments authority under section 1886(d)(5)(I)(i) of the Act to 
apply a budget neutrality adjustment to the standardized amount so 
that our transition for hospitals negatively impacted is implemented 
in a budget neutral manner. We refer readers to section III.A.2. of 
the preamble of this final rule for a complete discussion regarding 
this policy. To calculate a transition budget neutrality adjustment 
factor for FY 2021, we used FY 2019 discharge data to simulate 
payments and compared the following:
     Aggregate payments without the 5-percent cap using the 
FY 2021 labor-related share percentages, the revised OMB labor 
market area delineations for FY 2021, the FY 2021 relative weights, 
the FY 2021 wage index for each hospital after adjusting the wage 
indexes under the low wage index hospital policy with the associated 
budget neutrality adjustment to the standardized amount, and applied 
the FY 2021 hospital readmissions payment adjustments and the 
estimated FY 2021 hospital VBP payment adjustments, and the 
operating outlier reconciliation adjusted outlier percentage; and
     Aggregate payments with the 5-percent cap using the FY 
2021 labor-related share percentages, the revised OMB labor market 
area delineations for FY 2021, the FY 2021 relative weights, the FY 
2021 wage index for each hospital after adjusting the wage indexes 
under the low wage index hospital policy with the associated budget 
neutrality adjustment to the standardized amount, and applied the 
same FY 2021 hospital readmissions payment adjustments and the 
estimated FY 2021 hospital VBP payment adjustments applied 
previously, and the operating outlier reconciliation adjusted 
outlier percentage.
    This FY 2021 budget neutrality adjustment factor was applied to 
the standardized amount. Please see the table later in this section 
setting forth each of the FY 2021 budget neutrality factors.
    For a discussion of the public comments on this policy, we refer 
the reader to section III.A.2.C. and d. of the preamble of this 
final rule.
    We note, Table 2 associated with this final rule, which is 
available via the internet on the CMS website contains the wage 
index by provider before and after applying the low wage index 
hospital policy and the transition.

[[Page 59034]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.259

i. Adjustment for FY 2021 Required Under Section 414 of Public Law 114-
10 (MACRA)

    As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785), 
once the recoupment required under section 631 of the ATRA was 
complete, we had anticipated making a single positive adjustment in 
FY 2018 to offset the reductions required to recoup the $11 billion 
under section 631 of the ATRA. However, section 414 of the MACRA 
(which was enacted on April 16, 2015) replaced the single positive 
adjustment we intended to make in FY 2018 with a 0.5 percent 
positive adjustment for each of FYs 2018 through 2023. (As noted in 
the FY 2018 IPPS/LTCH PPS proposed and final rules, section 15005 of 
the 21st Century Cures Act (Pub. L. 114-255), which was enacted 
December 13, 2016, reduced the adjustment for FY 2018 from 0.5 
percentage points to 0.4588 percentage points.) Therefore, for FY 
2021, as we proposed, we are implementing the required +0.5 percent 
adjustment to the standardized amount. This is a permanent 
adjustment to the payment rates.

j. Outlier Payments

    Section 1886(d)(5)(A) of the Act provides for payments in 
addition to the basic prospective payments for ``outlier'' cases 
involving extraordinarily high costs. To qualify for outlier 
payments, a case must have costs greater than the sum of the 
prospective payment rate for the MS-DRG, any IME and DSH payments, 
uncompensated care payments, any new technology add-on payments, and 
the ``outlier threshold'' or ``fixed-loss'' amount (a dollar amount 
by which the costs of a case must exceed payments in order to 
qualify for an outlier payment). We refer to the sum of the 
prospective payment rate for the MS-DRG, any IME and DSH payments, 
uncompensated care payments, any new technology add-on payments, and 
the outlier threshold as the outlier ``fixed-loss cost threshold.'' 
To determine whether the costs of a case exceed the fixed-loss cost 
threshold, a hospital's CCR is applied to the total covered charges 
for the case to convert the charges to estimated costs. Payments for 
eligible cases are then made based on a marginal cost factor, which 
is a percentage of the estimated costs above the fixed-loss cost 
threshold. The marginal cost factor for FY 2021 is 80 percent, or 90 
percent for burn MS-DRGs 927, 928, 929, 933, 934 and 935. We have 
used a marginal cost factor of 90 percent since FY 1989 (54 FR 36479 
through 36480) for designated burn DRGs as well as a marginal cost 
factor of 80 percent for all other DRGs since FY 1995 (59 FR 45367).
    In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier 
payments for any year are projected to be not less than 5 percent 
nor more than 6 percent of total operating DRG payments (which does 
not include IME and DSH payments) plus outlier payments. When 
setting the outlier threshold, we compute the percent target by 
dividing the total operating outlier payments by the total operating 
DRG payments plus outlier payments. As discussed in the next 
section, for FY 2021, as we proposed, we incorporated an estimate of 
outlier reconciliation when setting the outlier threshold. We do not 
include any other payments such as IME and DSH within the outlier 
target amount. Therefore, it is not necessary to include Medicare 
Advantage IME payments in the outlier threshold calculation. Section 
1886(d)(3)(B) of the Act requires the Secretary to reduce the 
average standardized amount by a factor to account for the estimated 
proportion of total DRG payments made to outlier cases. More 
information on outlier payments may be found on the CMS website at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/outlier.htm.

(1) Methodology To Incorporate an Estimate of Outlier Reconciliation in 
the FY 2020 Outlier Fixed-Loss Cost Threshold

    The regulations in 42 CFR 412.84(i)(4) state that any outlier 
reconciliation at cost report settlement will be based on operating 
and capital cost-to-charge ratios (CCRs) calculated based on a ratio 
of costs to charges computed from the relevant cost report and 
charge data determined at the time the cost report coinciding with 
the discharge is settled. We have instructed MACs to identify for 
CMS any instances where: (1) A hospital's actual CCR for the cost 
reporting period fluctuates plus or minus 10 percentage points 
compared to the interim CCR used to calculate outlier payments when 
a bill is processed; and (2) the total outlier payments for the 
hospital exceeded $500,000.00 for that cost reporting period. If we 
determine that a hospital's outlier payments should be reconciled, 
we reconcile both operating and capital outlier payments. We refer 
readers to section 20.1.2.5 of Chapter 3 of the Medicare Claims 
Processing Manual (available on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf) for complete details regarding outlier 
reconciliation. The regulation at Sec.  412.84(m) further states 
that at the time of any outlier reconciliation under Sec.  
412.84(i)(4), outlier payments may be adjusted to account for the 
time value of any underpayments or overpayments. Section 20.1.2.6 of 
Chapter 3 of the Medicare Claims Processing Manual contains 
instructions on how to assess the time value of money for reconciled 
outlier amounts.
    If the operating CCR of a hospital subject to outlier 
reconciliation is lower at cost report settlement compared to the 
operating CCR used for payment, the hospital will owe CMS money 
because it received an outlier overpayment at the time of claim 
payment. Conversely, if the operating CCR increases at cost report 
settlement compared to the operating CCR used for payment, CMS will 
owe the hospital money because the hospital outlier payments were 
underpaid.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42623 through 
42625), for FY 2021, we finalized a methodology to incorporate 
outlier reconciliation in the FY 2021 outlier fixed loss cost 
threshold. As discussed in the FY 2020 IPPS/LTCH PPS proposed rule 
(84 FR 19592), we stated that rather than trying to predict which 
claims and/or hospitals may be subject to outlier reconciliation, we 
believe a methodology that incorporates an estimate of outlier 
reconciliation dollars based on actual outlier reconciliation 
amounts reported in historical cost reports would be a more feasible 
approach and provide a better estimate and predictor of outlier 
reconciliation for the upcoming fiscal year. We also stated that we 
believe the methodology addresses stakeholder's concerns on the 
impact of outlier reconciliation on the modeling of the outlier 
threshold. For a detailed discussion of additional background 
regarding outlier reconciliation, we refer the reader to the FY 2020 
IPPS/LTCH PPS final rule.

(a) Incorporating a Projection of Outlier Payment Reconciliations for 
the FY 2021 Outlier Threshold Calculation

    Based on the methodology finalized in the FY 2020 IPPS/LTCH PPS 
final rule (84 FR 42623 through 42625), for FY 2021, as we proposed, 
we are continuing to incorporate

[[Page 59035]]

outlier reconciliation in the FY 2021 outlier fixed loss cost 
threshold.
    As discussed in the FY 2020 IPPS/LTCH PPS final rule, for FY 
2020, we used the historical outlier reconciliation amounts from the 
FY 2014 cost reports (cost reports with a begin date on or after 
October 1, 2013, and on or before September 30, 2014), which we 
believed would provide the most recent and complete available data 
to project the estimate of outlier reconciliation. We refer the 
reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42623 through 
42625) for a complete discussion on the use of the FY 2014 cost 
report data for purposes of projecting outlier payment 
reconciliations for the FY 2020 outlier threshold calculation.
    In the FY 2020 IPPS/LTCH PPS final rule, we stated that the 
methodology for FY 2020 could advance by 1 year the cost reports 
used to determine the historical outlier reconciliation. In the 
proposed rule, to determine a projection of outlier payment 
reconciliations for the FY 2021 outlier threshold calculation, we 
proposed to advance the methodology by 1 year and use FY 2015 cost 
reports (cost reports with a begin date on or after October 1, 2014, 
and on or before September 30, 2015).
    For FY 2021, we proposed to use the same methodology from FY 
2020 to incorporate a projection of operating outlier payment 
reconciliations for the FY 2021 outlier threshold calculation. The 
following steps are the same as those finalized in the FY 2020 final 
rule but with updated data for FY 2021:
    Step 1.--Use the Federal FY 2015 cost reports for hospitals paid 
under the IPPS from the most recent publicly available quarterly 
HCRIS extract available at the time of development of the proposed 
and final rules, and exclude sole community hospitals (SCHs) that 
were paid under their hospital-specific rate (that is, if Worksheet 
E, Part A, Line 48 is greater than Line 47). We note that when there 
are multiple columns available for the lines of the cost report 
described in the following steps and the provider was paid under the 
IPPS for that period(s) of the cost report, then we believe it is 
appropriate to use multiple columns to fully represent the relevant 
IPPS payment amounts, consistent with our methodology for the FY 
2020 final rule.
    Step 2.--Calculate the aggregate amount of historical total of 
operating outlier reconciliation dollars (Worksheet E, Part A, Line 
2.01) using the Federal FY 2015 cost reports from Step 1.
    Step 3.--Calculate the aggregate amount of total Federal 
operating payments using the Federal FY 2015 cost reports from Step 
1. The total Federal operating payments consist of the Federal 
payments (Worksheet E, Part A, Line 1.01 and Line 1.02, plus Line 
1.03 and Line 1.04), outlier payments (Worksheet E, Part A, Line 2 
and Line 2.02), and the outlier reconciliation payments (Worksheet 
E, Part A, Line 2.01). We note that a negative amount on Worksheet 
E, Part A, Line 2.01 for outlier reconciliation indicates an amount 
that was owed by the hospital, and a positive amount indicates this 
amount was paid to the hospital.
    Step 4.--Divide the amount from Step 2 by the amount from Step 3 
and multiply the resulting amount by 100 to produce the percentage 
of total operating outlier reconciliation dollars to total Federal 
operating payments for FY 2015. This percentage amount would be used 
to adjust the outlier target for FY 2021 as described in Step 5.
    Step 5.--Because the outlier reconciliation dollars are only 
available on the cost reports, and not in the Medicare claims data 
in the MedPAR file used to model the outlier threshold, we proposed 
to target 5.1 percent minus the percentage determined in Step 4 in 
determining the outlier threshold. Using the FY 2015 cost reports 
based on the December 2019 HCRIS extract, because the aggregate 
outlier reconciliation dollars from Step 2 are negative, but the 
percentage determined in Step 4 rounds to 0, we stated that we are 
targeting 5.1 percent for outlier payments for FY 2021 under our 
proposed methodology.
    In the FY 2021 proposed rule, we used the December 2019 HCRIS 
extract of the cost report data to calculate the proposed percentage 
adjustment for outlier reconciliation. For the FY 2021 final rule, 
we proposed to use the latest quarterly HCRIS extract that is 
publically available at the time of the development of that rule 
which, for FY 2021, would be the March 2020 extract. Similar to the 
FY 2020 final rule, we stated that we might also consider the use of 
more recent data that may become available for purposes of 
projecting the estimate of operating outlier reconciliation used in 
the calculation of the final FY 2021 outlier threshold.
    In the FY 2021 proposed rule, based on the December 2019 HCRIS, 
16 hospitals had an outlier reconciliation amount recorded on 
Worksheet E, Part A, Line 2.01 for total operating outlier 
reconciliation dollars of negative $2,516,904 (Step 2). The total 
Federal operating payments based on the December 2019 HCRIS was 
$90,313,815,275 (Step 3). The ratio (Step 4) is a negative 0.002787 
percent, which, when rounded to the second digit, is 0.00 percent. 
Therefore, for FY 2021, we proposed to incorporate a projection of 
outlier reconciliation dollars by targeting an outlier threshold at 
5.10 percent [5.1 percent - (-.00 percent)].
    When the percentage of operating outlier reconciliation dollars 
to total Federal operating payments rounds to a negative value (that 
is, when the aggregate amount of outlier reconciliation as a percent 
of total operating payments rounds to a negative percent), the 
effect is a decrease to the outlier threshold compared to an outlier 
threshold that is calculated without including this estimate of 
operating outlier reconciliation dollars. In section II.A.4.i.(2). 
of the Addendum to the proposed rule, we provided the FY 2021 
outlier threshold as calculated for the proposed rule both with and 
without including this proposed percentage estimate of operating 
outlier reconciliation. However, we noted that for the proposed 
rule, the outlier threshold was the same with and without the 
percentage estimate, since the projection of outlier reconciliation 
rounded to zero.
    As explained in the FY 2020 IPPS/LTCH PPS final rule, we 
proposed to continue to use a 5.1 percent target (or an outlier 
offset factor of 0.949) in calculating the outlier offset to the 
standardized amount. In the past, the outlier offset was six 
decimals because we targeted and set the threshold at 5.1 percent by 
adjusting the standardized amount by the outlier offset until 
operating outlier payments divided by total operating Federal 
payments plus operating outlier payments equaled approximately 5.1 
percent (this approximation resulted in an offset beyond three 
decimals). However, under our methodology, we believe a three 
decimal offset of 0.949 reflecting 5.1 percent is appropriate rather 
than the unrounded six decimal offset that we have calculated for 
prior fiscal years. Specifically, as discussed in section II.A.5. of 
this Addendum, we proposed to determine an outlier adjustment by 
applying a factor to the standardized amount that accounts for the 
projected proportion of total estimated FY 2021 operating Federal 
payments paid as outliers. Our proposed modification to the outlier 
threshold methodology is designed to adjust the total estimated 
outlier payments for FY 2021 by incorporating the projection of 
negative outlier reconciliation. That is, under this proposal, total 
estimated outlier payments for FY 2021 would be the sum of the 
estimated FY 2021 outlier payments based on the claims data from the 
outlier model and the estimated FY 2021 total operating outlier 
reconciliation dollars. We stated that we believe the proposed 
methodology would more accurately estimate the outlier adjustment to 
the standardized amount by increasing the accuracy of the 
calculation of the total estimated FY 2021 operating Federal 
payments paid as outliers. In other words, the net effect of our 
outlier proposal to incorporate a projection for outlier 
reconciliation dollars into the threshold methodology would be that 
FY 2021 outlier payments (which included the proposed estimated 
recoupment percentage for FY 2021 of 0.00 percent) would be 5.1 
percent of total operating Federal payments plus total outlier 
payments. Therefore, the proposed operating outlier offset to the 
standardized amount was 0.949 (1 - 0.051).
    We invited public comment on our proposed methodology for 
projecting an estimate of outlier reconciliation and incorporating 
that estimate into the modeling for the fixed-loss cost outlier 
threshold for FY 2021.
    Comment: A commenter supported incorporating an estimate of 
outlier reconciliation. A commenter stated that they were successful 
in replicating the proposed calculations given the logic described. 
Based on the commenter's analysis, the commenter determined that no 
adjustment for FY 2021 is necessary based on their analysis of 
historical cost report data.
    Response: We thank the commenter for their feedback on the 
proposed calculation methodology.
    After consideration of the comments received, and for the 
reasons discussed in the proposed rule and in this final rule, we 
are finalizing the methodology described previously for 
incorporating the outlier reconciliation in the outlier threshold 
calculation. Therefore, for this final rule we

[[Page 59036]]

used the same steps described previously and in the proposed rule to 
incorporate a projection of operating outlier payment 
reconciliations for the calculation of the FY 2021 outlier threshold 
calculation. The March 2020 HCRIS contained data for 17 hospitals. 
As stated previously, while we proposed to use the March 2020 HCRIS 
extract to calculate the reconciliation adjustment for this FY 2021 
IPPS final rule, we also stated that similar to the FY 2020 final 
rule, we might consider the use of more recent data that may become 
available for purpose of projecting the estimate of operating 
outlier reconciliation used in the calculation of the final FY 2021 
outlier threshold. Data for two additional outlier reconciliations 
were made available to CMS outside of the March 2020 HCRIS update. 
Similar to our discussion of the estimated operating outlier 
reconciliation for FY 2020 in the FY 2020 IPPS/LTCH final rule (84 
FR 53609), we believe supplementing with two hospitals' outlier 
reconciliation data will lend additional accuracy to project the 
estimate of operating outlier reconciliation used in the calculation 
of the outlier threshold. Therefore, in order to use the most 
complete data for FY 2015 cost reports, we are using the March 2020 
HCRIS extract, supplemented by these two additional hospitals' data 
this FY 2021 IPPS final rule. Without the two additional hospitals' 
data, the rounded operating outlier reconciliation percentage would 
have been 0 (unrounded of 0.004506). As we gain more experience with 
this policy, we also are considering adding additional lines to the 
cost report in order to ensure we capture the maximum cost report 
data with the March HCRIS extract to calculate the percentage 
adjustment for outlier reconciliation. For the final rule for future 
rulemaking, as we generally expect historical cost reports for the 
applicable fiscal year to be available by March. Based onMarch 2020 
HCRIS and supplemental data for two hospitals, a total of 19 
hospitals had an outlier reconciliation amount recorded on Worksheet 
E, Part A, Line 2.01 for total operating outlier reconciliation 
dollars of negative $8,650,344 (Step 2). The total Federal operating 
payments based on the March 2020 HCRIS is $90,321,677,004 (Step 3). 
The ratio (Step 4) is a negative 0.009577 percent, which, when 
rounded to the second digit, is negative 0.01 percent. Therefore, 
for FY 2021, using the finalized methodology, we incorporated a 
projection of outlier reconciliation dollars by targeting an outlier 
threshold at 5.11 percent [5.1 percent - (-0.01 percent)]. As noted 
previously, when the percentage of operating outlier reconciliation 
dollars to total Federal operating payments is negative (such is the 
case when the aggregate amount of outlier reconciliation is 
negative), the effect is a decrease to the outlier threshold 
compared to an outlier threshold that is calculated without 
including this estimate of operating outlier reconciliation dollars. 
In section II.A.4.i.(2). of this Addendum of this final rule, we 
provide the FY 2021 outlier threshold as calculated both with and 
without including this percentage estimate of operating outlier 
reconciliation.

(b) Reduction to the FY 2021 Capital Standard Federal Rate by an 
Adjustment Factor To Account for the Projected Proportion of Capital 
IPPS Payments Paid as Outliers

    We establish an outlier threshold that is applicable to both 
hospital inpatient operating costs and hospital inpatient capital 
related costs (58 FR 46348). Similar to the calculation of the 
adjustment to the standardized amount to account for the projected 
proportion of operating payments paid as outlier payments, as 
discussed in greater detail in section III.A.2. of this Addendum, we 
proposed to reduce the FY 2021 capital standard Federal rate by an 
adjustment factor to account for the projected proportion of capital 
IPPS payments paid as outliers. The regulations in 42 CFR 
412.84(i)(4) state that any outlier reconciliation at cost report 
settlement will be based on operating and capital CCRs calculated 
based on a ratio of costs to charges computed from the relevant cost 
report and charge data determined at the time the cost report 
coinciding with the discharge is settled. As such, any 
reconciliation also applies to capital outlier payments.
    For FY 2021, we proposed to use the same methodology from FY 
2020 to adjust the FY 2021 capital standard Federal rate by an 
adjustment factor to account for the projected proportion of capital 
IPPS payments paid as outliers. Similar to FY 2020, as part of our 
proposal for FY 2021 to incorporate into the outlier model the total 
outlier reconciliation dollars from the most recent and most 
complete fiscal year cost report data, we also proposed to adjust 
our estimate of FY 2021 capital outlier payments to incorporate a 
projection of capital outlier reconciliation payments when 
determining the adjustment factor to be applied to the capital 
standard Federal rate to account for the projected proportion of 
capital IPPS payments paid as outliers. To do so, we proposed to use 
the following methodology, which generally parallels the methodology 
to incorporate a projection of operating outlier reconciliation 
payments for the FY 2021 outlier threshold calculation.
    Step 1.--Use the Federal FY 2015 cost reports for hospitals paid 
under the IPPS from the most recent publicly available quarterly 
HCRIS extract available at the time of development of the proposed 
and final rules, and exclude SCHs that were paid under their 
hospital-specific rate (that is, if Worksheet E, Part A, Line 48 is 
greater than Line 47). We note that when there are multiple columns 
available for the lines of the cost report described in the 
following steps and the provider was paid under the IPPS for that 
period(s) of the cost report, then we believe it is appropriate to 
use multiple columns to fully represent the relevant IPPS payment 
amounts, consistent with our methodology for the FY 2020 final rule. 
We used the December 2019 HCRIS extract for the proposed rule and 
stated that we expected to use the March 2020 HCRIS extract for the 
FY 2021 final rule. Similar to the FY 2020 final rule, we stated 
that we may also consider the use of more recent data that may 
become available for purposes of projecting the estimate of capital 
outlier reconciliation used in the calculation of the final FY 2021 
adjustment to the FY 2021 capital standard Federal rate.
    Step 2.--Calculate the aggregate amount of the historical total 
of capital outlier reconciliation dollars (Worksheet E, Part A, Line 
93, Column 1) using the Federal FY 2015 cost reports from Step 1.
    Step 3.--Calculate the aggregate amount of total capital Federal 
payments using the Federal FY 2015 cost reports from Step 1. The 
total capital Federal payments consist of the capital DRG payments, 
including capital indirect medical education (IME) and capital 
disproportionate share hospital (DSH) payments (Worksheet E, Part A, 
Line 50, Column 1) and the capital outlier reconciliation payments 
(Worksheet E, Part A, Line 93, Column 1). We note that a negative 
amount on Worksheet E, Part A, Line 93 for capital outlier 
reconciliation indicates an amount that was owed by the hospital, 
and a positive amount indicates this amount was paid to the 
hospital.
    Step 4.--Divide the amount from Step 2 by the amount from Step 3 
and multiply the resulting amount by 100 to produce the percentage 
of total capital outlier reconciliation dollars to total capital 
Federal payments for FY 2015. This percentage amount would be used 
to adjust the estimate of capital outlier payments for FY 2021 as 
described in Step 5.
    Step 5.--Because the outlier reconciliation dollars are only 
available on the cost reports, and not in the specific Medicare 
claims data in the MedPAR file used to estimate outlier payments, we 
proposed that the estimate of capital outlier payments for FY 2021 
would be determined by adding the percentage in Step 4 to the 
estimated percentage of capital outlier payments otherwise 
determined using the shared outlier threshold that is applicable to 
both hospital inpatient operating costs and hospital inpatient 
capital-related costs. (We note that this percentage is added for 
capital outlier payments but subtracted in the analogous step for 
operating outlier payments.
    We have a unified outlier payment methodology that uses a shared 
threshold to identify outlier cases for both operating and capital 
payments. The difference stems from the fact that operating outlier 
payments are determined by first setting a ``target'' percentage of 
operating outlier payments relative to aggregate operating payments 
which produces the outlier threshold. Once the shared threshold is 
set, it is used to estimate the percentage of capital outlier 
payments to total capital payments based on that threshold. Because 
the threshold is already set based on the operating target, rather 
than adjusting the threshold (or operating target), we adjust the 
percentage of capital outlier to total capital payments to account 
for the estimated effect of capital outlier reconciliation payments. 
This percentage is adjusted by adding the capital outlier 
reconciliation percentage from Step 4 to the estimate of the 
percentage of capital outlier payments to total capital payments 
based on the shared threshold.) Because the aggregate capital 
outlier reconciliation dollars from Step 2 are negative, we stated 
that the estimate of capital outlier payments

[[Page 59037]]

for FY 2021 under our proposed methodology would be lower than the 
percentage of capital outlier payments otherwise determined using 
the shared outlier threshold.
    Similarly, for the FY 2021 proposed rule, we used the December 
2019 HCRIS extract of the cost report data to calculate the proposed 
percentage adjustment for outlier reconciliation. For the FY 2021 
final rule, we proposed to use the latest quarterly HCRIS extract 
that is publically available at the time of the development of that 
rule which, for FY 2021, would be the March 2020 extract. As 
previously noted, we stated that we may also consider the use of 
more recent data that may become available for purposes of 
projecting the estimate of capital outlier reconciliation used in 
the calculation of the final FY 2021 adjustment to the FY 2021 
capital standard Federal rate.
    For the FY 2021 proposed rule, the estimated percentage of FY 
2021 capital outlier payments otherwise determined using the shared 
outlier threshold was 5.42 percent (estimated capital outlier 
payments of $432,102,494 divided by (estimated capital outlier 
payments of $432,102,494 plus the estimated total capital Federal 
payment of $7,569,294,589)). Based on the December 2019 HCRIS, 16 
hospitals had an outlier reconciliation amount recorded on Worksheet 
E, Part A, Line 93 for total capital outlier reconciliation dollars 
of negative $956,065 (Step 2). The total Federal capital payments 
based on the December 2019 HCRIS was $8,114,838,772 (Step 3) which 
results in a ratio (Step 4) of -0.01 percent. Therefore, for FY 
2021, taking into account projected capital outlier reconciliation 
payments under our proposed methodology would decrease the estimated 
percentage of FY 2021 aggregate capital outlier payments by 0.01 
percent.
    As discussed in section III.A.2. of this Addendum, we proposed 
to incorporate the capital outlier reconciliation dollars from Step 
5 when applying the outlier adjustment factor in determining the 
capital Federal rate based on the estimated percentage of capital 
outlier payments to total capital Federal rate payments for FY 2021.
    We are invited public comment on our proposed methodology for 
projecting an estimate of capital outlier reconciliation and 
incorporating that estimate into the modeling of the estimate of FY 
2021 capital outlier payments for purposes of determining the 
capital outlier adjustment factor.
    We did not receive comments about the proposed capital outlier 
reconciliation methodology.
    For the reasons discussed, we are finalizing the methodology for 
projecting an estimate of capital outlier reconciliation. Therefore, 
for this final rule we used the same steps as described in the 
proposed rule and this final rule to reduce the FY 2021 capital 
standard Federal rate by an adjustment factor to account for the 
projected proportion of capital IPPS payments paid as outliers.
    For projecting the estimate of capital outlier reconciliation, 
similar to our projection of the estimate of operating outlier 
reconciliation, we are using cost report data of 17 hospitals from 
the March 2020 HCRIS supplemented for two hospitals for a total of 
19 hospitals, which we believe will lend additional accuracy to the 
projection of estimated capital outlier reconciliation for FY 2021. 
Without the two additional reports, the step 4 unrounded value for 
capital outlier reconciliation would have been 0.0152, which rounds 
to 0.02. We note that a difference in the number of cost reports for 
the operating and capital outlier reconciliation projections is 
possible and may be due to new hospitals defined in the regulations 
at 42 CFR 412.300(b) that may receive capital cost-based payments 
(in lieu of Federal rate payments), and therefore would not receive 
capital outlier payments. As a result, capital outlier 
reconciliation is not applicable to such hospitals since there is no 
capital outlier payment.
    The estimated percentage of FY 2021 capital outlier payments 
otherwise determined using the shared outlier threshold is 5.36 
percent (estimated capital outlier payments of $429,431,834 divided 
by (estimated capital outlier payments of $429,431,834 plus the 
estimated total capital Federal payment of $7,577,697,269)). Based 
on the March 2020 HCRIS supplemented by the data for two additional 
providers, 19 hospitals had an outlier reconciliation amount 
recorded on Worksheet E, Part A, Line 93 for total capital outlier 
reconciliation dollars of negative $1,901,335 (Step 2). The total 
Federal capital payments based on the March 2020 HCRIS and 
supplemental two reports is $8,114,957,508 (Step 3). The ratio (Step 
4) is a negative 0.023430 percent, which, when rounded to the second 
digit, is negative 0.02 percent (Step 4). Therefore, for FY 2021, 
taking into account projected capital outlier reconciliation 
payments under our methodology would decrease the estimated 
percentage of FY 2021 aggregate capital outlier payments by 0.02 
percent.

(2) FY 2021 Outlier Fixed-Loss Cost Threshold

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977 through 
50983), in response to public comments on the FY 2013 IPPS/LTCH PPS 
proposed rule, we made changes to our methodology for projecting the 
outlier fixed-loss cost threshold for FY 2014. We refer readers to 
the FY 2014 IPPS/LTCH PPS final rule for a detailed discussion of 
the changes.
    As we have done in the past, to calculate the FY 2021 outlier 
threshold, we simulated payments by applying FY 2021 payment rates 
and policies using cases from the FY 2019 MedPAR file.
    We note that because this payment simulation uses the FY 2021 
relative weights, consistent with our finalized policy discussed in 
section IV.I. of the preamble to this final rule, we applied the 
adjustor for certain CAR-T cell therapy cases in our simulation of 
these payments. As discussed in section II.E.2.b. of the preamble of 
this final rule, we are finalizing an adjustment to account for 
certain CAR T-cell therapy cases in calculating the FY 2021 relative 
weights and for purposes of budget neutrality and outlier 
simulations. As noted in section II.C. of this Addendum, we specify 
the formula used for actual claim payment which is also used by CMS 
to project the outlier threshold for the upcoming fiscal year. The 
difference is the source of some of the variables in the formula. 
For example, operating and capital CCRs for actual claim payment are 
from the PSF while CMS uses an adjusted CCR (as described later in 
this section) to project the threshold for the upcoming fiscal year. 
In addition, charges for a claim payment are from the bill while 
charges to project the threshold are from the MedPAR data with an 
inflation factor applied to the charges (as described earlier).
    In order to determine the FY 2021 outlier threshold, we inflated 
the charges on the MedPAR claims by 2 years, from FY 2019 to FY 
2021. Consistent with the FY 2020 IPPS/LTCH PPS final rule (84 FR 
42626 and 42627), we proposed to use the following methodology to 
calculate the charge inflation factor for FY 2021:
     Include hospitals whose last four digits fall between 
0001 and 0899 (section 2779A1 of Chapter 2 of the State Operations 
Manual on the CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); include CAHs 
that were IPPS hospitals for the time period of the MedPAR data 
being used to calculate the charge inflation factor; include 
hospitals in Maryland; and remove PPS-excluded cancer hospitals who 
have a ``V'' in the fifth position of their provider number or a 
``E'' or ``F'' in the sixth position.
     Include providers that are in both periods of charge 
data that are used to calculate the 1-year average annual rate of-
change in charges per case. We note this is consistent with the 
methodology used since FY 2014.
     We excluded Medicare Advantage IME claims for the 
reasons described in section I.A.4. of this Addendum. We refer 
readers to the FY 2011 IPPS/LTCH PPS final rule for a complete 
discussion on our methodology of identifying and adding the total 
Medicare Advantage IME payment amount to the budget neutrality 
adjustments.
     In order to ensure that we capture only FFS claims, we 
included claims with a ``Claim Type'' of 60 (which is a field on the 
MedPAR file that indicates a claim is an FFS claim).
     In order to further ensure that we capture only FFS 
claims, we excluded claims with a ``GHOPAID'' indicator of 1 (which 
is a field on the MedPAR file that indicates a claim is not an FFS 
claim and is paid by a Group Health Organization).
     We examined the MedPAR file and removed pharmacy 
charges for anti-hemophilic blood factor (which are paid separately 
under the IPPS) with an indicator of ``3'' for blood clotting with a 
revenue code of ``0636'' from the covered charge field. We also 
removed organ acquisition charges from the covered charge field 
because organ acquisition is a pass-through payment not paid under 
the IPPS.
    Our general methodology to inflate the charges computes the 1-
year average annual rate-of-change in charges per case which is then 
applied twice to inflate the charges on the MedPAR claims by 2 years 
(for example, FY 2019 to FY 2021).
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42627), we 
modified our charge inflation methodology. We stated that we

[[Page 59038]]

believe balancing our preference to use the latest available data 
from the MedPAR files and stakeholders' concerns about being able to 
use publicly available MedPAR files to review the charge inflation 
factor can be achieved by modifying our methodology to use the 
publicly available Federal fiscal year period (that is, for FY 2020, 
we used the charge data from Federal fiscal years 2017 and 2018), 
rather than the most recent data available to CMS which, under our 
prior methodology, was based on calendar year data. We refer the 
reader to the FY 2020 IPPS/LTCH PPS final rule for a complete 
discussion regarding this change. For the same reasons discussed in 
that rulemaking, for FY 2021, we proposed to use the same 
methodology as FY 2020 and advance by 1 year the MedPAR data used to 
determine the charge inflation factor. That is, for FY 2021, we 
proposed to use the MedPAR files for the two most recent available 
federal fiscal year time periods to calculate the charge inflation 
factor, as we did for FY 2020. Specifically, for the proposed rule 
we used the December 2018 MedPAR file of FY 2018 (October 1, 2017 to 
September 30, 2018) charge data (released for the FY 2020 IPPS/LTCH 
PPS proposed rule) and the December 2019 MedPAR file of FY 2019 
(October 1, 2018 to September 30, 2019) charge data (released for 
the FY 2021 IPPS/LTCH PPS proposed rule) to compute the proposed 
charge inflation factor. We proposed that for the FY 2021 final 
rule, we would use more recently updated data, that is the MedPAR 
files from March 2019 for the FY 2018 time period and March 2020 for 
the FY 2019 time period. Under this proposed methodology, to compute 
the 1-year average annual rate-of-change in charges per case for FY 
2021, we compared the average covered charge per case of $61,533.34 
($582,022,123,240/9,458,647 cases) from October 1, 2017, through 
September 30, 2018 to the average covered charge per case of 
$65,442.49 ($601,183,502,371/9,186,440 cases) from October 1, 2018 
through September 30, 2019. This rate-of-change was 6.4 percent 
(1.06353) or 13.1 percent (1.131096) over 2 years. The billed 
charges are obtained from the claim from the MedPAR file and 
inflated by the inflation factor specified previously.
    As we have done in the past, in the FY 2021 IPPS/LTCH PPS 
proposed rule, we proposed to establish the FY 2021 outlier 
threshold using hospital CCRs from the December 2019 update to the 
Provider-Specific File (PSF)--the most recent available data at the 
time of the development of the proposed rule. We proposed to apply 
the following edits to providers' CCRs in the PSF. We believe these 
edits are appropriate in order to accurately model the outlier 
threshold. We first search for Indian Health Service providers and 
those providers assigned the statewide average CCR from the current 
fiscal year. We then replace these CCRs with the statewide average 
CCR for the upcoming fiscal year. We also assign the statewide 
average CCR (for the upcoming fiscal year) to those providers that 
have no value in the CCR field in the PSF or whose CCRs exceed the 
ceilings described later in this section (3.0 standard deviations 
from the mean of the log distribution of CCRs for all hospitals). We 
do not apply the adjustment factors described later in this section 
to hospitals assigned the statewide average CCR. For FY 2021, we 
also proposed to continue to apply an adjustment factor to the CCRs 
to account for cost and charge inflation (as explained later in this 
section). We also proposed that, if more recent data become 
available, we would use that data to calculate the final FY 2021 
outlier threshold.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we 
adopted a new methodology to adjust the CCRs. Specifically, we 
finalized a policy to compare the national average case-weighted 
operating and capital CCR from the most recent update of the PSF to 
the national average case-weighted operating and capital CCR from 
the same period of the prior year.
    Therefore, as we have done since FY 2014, we proposed to adjust 
the CCRs from the December 2019 update of the PSF by comparing the 
percentage change in the national average case-weighted operating 
CCR and capital CCR from the December 2018 update of the PSF to the 
national average case-weighted operating CCR and capital CCR from 
the December 2019 update of the PSF. We note that we used total 
transfer-adjusted cases from FY 2019 to determine the national 
average case-weighted CCRs for both sides of the comparison. As 
stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we 
believe that it is appropriate to use the same case count on both 
sides of the comparison, because this will produce the true 
percentage change in the average case-weighted operating and capital 
CCR from 1 year to the next without any effect from a change in case 
count on different sides of the comparison.
    Using the proposed methodology, for the proposed rule, we 
calculated a proposed December 2018 operating national average case-
weighted CCR of 0.255979 and a proposed December 2019 operating 
national average case-weighted CCR of 0.249649. We then calculated 
the percentage change between the two national operating case-
weighted CCRs by subtracting the December 2018 operating national 
average case-weighted CCR from the December 2019 operating national 
average case-weighted CCR and then dividing the result by the 
December 2018 national operating average case-weighted CCR. This 
resulted in a proposed national operating CCR adjustment factor of 
0.975271.
    We used this same proposed methodology to adjust the capital 
CCRs. Specifically, we calculated a December 2018 capital national 
average case-weighted CCR of 0.021043 and a December 2019 capital 
national average case-weighted CCR of 0.020255. We then calculated 
the percentage change between the two national capital case-weighted 
CCRs by subtracting the December 2018 capital national average case-
weighted CCR from the December 2019 capital national average case-
weighted CCR and then dividing the result by the December 2018 
capital national average case-weighted CCR. This resulted in a 
proposed national capital CCR adjustment factor of 0.962553.
    For purposes of estimating the proposed outlier threshold for FY 
2021, we used a wage index that reflects the policies discussed in 
the proposed rule. This includes the proposed frontier State floor 
adjustments in accordance with section 10324(a) of the Affordable 
Care Act, the proposed out-migration adjustment as added by section 
505 of Public Law 108-173, as well as incorporating the FY 2021 wage 
index adjustment for hospitals with a wage index value below the 
25th percentile, where the increase in the wage index value for 
these hospitals would be equal to half the difference between the 
otherwise applicable final wage index value for a year for that 
hospital and the 25th percentile wage index value for that year 
across all hospitals. We also incorporated our proposal of the 5-
percent cap on any decrease in a hospital's wage index from the 
hospital's final wage index in FY 2020. We stated in the proposed 
rule that if we did not take the aforementioned into account, our 
estimate of total FY 2021 payments would be too low, and, as a 
result, our proposed outlier threshold would be too high, such that 
estimated outlier payments would be less than our projected 5.1 
percent of total payments (which includes outlier reconciliation).
    As described in sections IV.K. and IV.L., respectively, of the 
preamble of this final rule, sections 1886(q) and 1886(o) of the Act 
establish the Hospital Readmissions Reduction Program and the 
Hospital VBP Program, respectively. We do not believe that it is 
appropriate to include the proposed hospital VBP payment adjustments 
and the hospital readmissions payment adjustments in the proposed 
outlier threshold calculation or the proposed outlier offset to the 
standardized amount. Specifically, consistent with our definition of 
the base operating DRG payment amount for the Hospital Readmissions 
Reduction Program under Sec.  412.152 and the Hospital VBP Program 
under Sec.  412.160, outlier payments under section 1886(d)(5)(A) of 
the Act are not affected by these payment adjustments. Therefore, 
outlier payments would continue to be calculated based on the 
unadjusted base DRG payment amount (as opposed to using the base-
operating DRG payment amount adjusted by the hospital readmissions 
payment adjustment and the hospital VBP payment adjustment). 
Consequently, we proposed to exclude the proposed hospital VBP 
payment adjustments and the estimated hospital readmissions payment 
adjustments from the calculation of the proposed outlier fixed-loss 
cost threshold.
    We noted in the proposed rule that, to the extent section 
1886(r) of the Act modifies the DSH payment methodology under 
section 1886(d)(5)(F) of the Act, the uncompensated care payment 
under section 1886(r)(2) of the Act, like the empirically justified 
Medicare DSH payment under section 1886(r)(1) of the Act, may be 
considered an amount payable under section 1886(d)(5)(F) of the Act 
such that it would be reasonable to include the payment in the 
outlier determination under section 1886(d)(5)(A) of the Act. As we 
have done since the implementation of uncompensated care payments in 
FY 2014, for FY 2021, we also proposed to allocate an estimated per-
discharge uncompensated care

[[Page 59039]]

payment amount to all cases for the hospitals eligible to receive 
the uncompensated care payment amount in the calculation of the 
outlier fixed-loss cost threshold methodology. We continue to 
believe that allocating an eligible hospital's estimated 
uncompensated care payment to all cases equally in the calculation 
of the outlier fixed-loss cost threshold would best approximate the 
amount we would pay in uncompensated care payments during the year 
because, when we make claim payments to a hospital eligible for such 
payments, we would be making estimated per-discharge uncompensated 
care payments to all cases equally. Furthermore, we continue to 
believe that using the estimated per-claim uncompensated care 
payment amount to determine outlier estimates provides 
predictability as to the amount of uncompensated care payments 
included in the calculation of outlier payments. Therefore, 
consistent with the methodology used since FY 2014 to calculate the 
outlier fixed-loss cost threshold, for FY 2021, we proposed to 
include estimated FY 2021 uncompensated care payments in the 
computation of the outlier fixed-loss cost threshold. Specifically, 
we proposed to use the estimated per-discharge uncompensated care 
payments to hospitals eligible for the uncompensated care payment 
for all cases in the calculation of the outlier fixed-loss cost 
threshold methodology.
    Using this methodology, we used the formula described in section 
I.C.1. of this Addendum to simulate and calculate the Federal 
payment rate and outlier payments for all claims. In addition, as 
described in the earlier section to this Addendum, we proposed to 
incorporate an estimate of FY 2021 outlier reconciliation in the 
methodology for determining the outlier threshold. As noted 
previously, for the FY 2021 proposed rule, the ratio of outlier 
reconciliation dollars to total Federal Payments (Step 4) was a 
negative 0.002787 percent, which, when rounded to the second digit, 
is 0.00 percent. Therefore, for FY 2021, we proposed to incorporate 
a projection of outlier reconciliation dollars by targeting an 
outlier threshold at 5.10 percent [5.1 percent - (-.00 percent)]. 
Under the proposed approach, we determined a threshold of $30,006 
and calculated total outlier payments of $4,935,261,570 and total 
operating Federal payments of $91,833,641,321. We then divided total 
outlier payments by total operating Federal payments plus total 
outlier payments and determined that this threshold matched with the 
5.10 percent target, which reflected our proposal to incorporate an 
estimate of outlier reconciliation in the determination of the 
outlier threshold (as discussed in more detail in the previous 
section of this Addendum). Since the target remained at 5.10 
percent, we noted that the threshold calculated without applying our 
proposed methodology for incorporating an estimate of outlier 
reconciliation in the determination of the outlier threshold is the 
same as identified previously at $30,006. We proposed an outlier 
fixed-loss cost threshold for FY 2021 equal to the prospective 
payment rate for the MS-DRG, plus any IME, empirically justified 
Medicare DSH payments, estimated uncompensated care payment, and any 
add-on payments for new technology, plus $30,006.
    Comment: Regarding the proposed charge inflation methodology, a 
commenter stated that relying on FYs 2018 and 2019 charge data was a 
thoughtful choice for the proposed rule, but did not believe that 
less current data should be used for the final rule. This commenter 
asserted that CMS should disclose all aspects of its edits to the 
most current data and commit to the same process and methods when it 
recalculates the threshold for purposes of the final rule. A 
commenter stated that their analysis using the publically available 
claim data, was 6.404 percent in comparison to the proposed rule's 
6.353 percent for charge inflation.
    Response: We thank the commenter for their input and analysis. 
We have not made any modification to the proposed charge inflation 
methodology in this final rule, other than using more recently 
updated data. In addition, we refer the reader to the detailed 
discussion in last year's final rule regarding the use of publically 
available data in the charge inflation methodology initially adopted 
in the FY 2020 IPPS final rule (84 FR 42627).
    Comment: Commenters expressed concerns with the increase of the 
outlier threshold from $26,473 in FY 2020 to $30,006 in the FY 2021 
proposed rule. They asserted that the increase will reduce the 
number of Medicare inpatient cases that qualify for an outlier 
payment. Some commenters recommended that CMS maintain the current 
threshold of $26,473. A commenter requested CMS examine the reasons 
for the continuing rise in the outlier threshold and whether there 
are any interventions CMS can take to ensure that outlier payments 
remain equitable and continue to protect hospitals from high cost 
cases where Medicare payments are insufficient to adequately 
compensate.
    Response: As noted previously, section 1886(d)(5)(A)(iv) of the 
Act states that outlier payments may not be not less than 5 percent 
nor more than 6 percent of the total payments projected or estimated 
to be made based on DRG prospective payment rates for discharges in 
that year. We believe that maintaining the FY 2020 outlier fixed-
loss cost threshold for FY 2021 would be inconsistent with the 
statute because we would be setting a threshold based on the prior 
fiscal year. Also, when we calculate the threshold, we use the 
updated data that is available at the time of the development of the 
proposed and final rule.
    Comment: Some commenters requested that CMS consider whether it 
is appropriate to include extreme cases when calculating the 
threshold. One commenter explained that high charge cases have a 
significant impact on the threshold. The commenter observed that the 
amount of cases with over $1.5 million in covered charges has 
increased significantly from FY 2011 (926 cases) to FY 2019 (3,062 
cases). The commenter believed that the impact of these cases will 
cause the threshold to rise and recommended that CMS carefully 
consider what is causing the trend, whether the inclusion of these 
cases in the calculation of the threshold is appropriate, and 
whether a separate outlier mechanism should apply to these cases 
that more closely hews outlier payments to marginal costs.
    Response: As we explained when responding to a similar comment 
in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38526), the 
methodology used to calculate the outlier threshold includes all 
claims in order to account for all different types of cases, 
including high charge cases, to ensure that CMS meets the 5.1 
percent target. As the commenter pointed out, the volume of these 
cases continues to rise, making their impact on the threshold 
significant. We believe excluding these cases would artificially 
lower the threshold. We believe it is important to include all cases 
in the calculation of the threshold no matter how high or low the 
charges. Including these cases with high charges lends more accuracy 
to the threshold, as these cases have an impact on the threshold and 
continue to rise in volume. Therefore, we believe the inclusion of 
the high-cost outlier cases in the calculation of the outlier 
threshold is appropriate.
    Comment: A commenter noted that, for a given year, typically the 
final outlier threshold established by CMS in the final rule is 
lower than the threshold set forth in the proposed rule. The 
commenter emphasized that CMS should use the most recent data 
available when the Agency calculates the outlier threshold.
    Response: We responded to similar comments in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50378 through 50379) and refer readers to 
that rule for our response. We note that we have updated at the time 
of development of this final rule to use more recent data available 
(that is, the March 2020 release of MedPAR claims from FY 2019).
    After consideration of the public comments we received, we are 
using the same methodology we proposed to calculate the final 
outlier threshold. As discussed previously, we are adopting for this 
final rule to calculate charge inflation using the publically 
available FY 2018 and FY 2019 claims data and to incorporate a 
projection of outlier payment reconciliations for the FY 2021 
outlier threshold calculation.
    For the FY 2021 final outlier threshold, we used the used the 
March 2019 MedPAR file of FY 2018 (October 1, 2017 through September 
30, 2018) charge data (released in conjunction with the FY 2020 
IPPS/LTCH PPS final rule) and the March 2020 MedPAR file of FY 2019 
(October 1, 2018 through September 30, 2019) charge data (released 
in conjunction with this FY 2021 IPPS/LTCH PPS final rule) to 
determine the charge inflation factor. To compute the 1 year average 
annual rate of change in charges per case, we compared the average 
covered charge per case of $61,578.82 ($584,618,863,834/9,493,830 
cases) from October 1, 2017 through September 31, 2018, to the 
average covered charge per case of $65,522.10 ($604,209,834,327/
9,519,120 cases) from October 1, 2018 through September 31, 2019. 
This rate-of-change was 6.4 percent (1.06404) or 13.2 percent 
(1.13218) over 2 years. The billed charges are obtained from the 
claims from the MedPAR file and inflated by the inflation factor 
specified previously.

[[Page 59040]]

    As we have done in the past, we are establishing the FY 2021 
outlier threshold using hospital CCRs from the March 2020 update to 
the Provider-Specific File (PSF)--the most recent available data at 
the time of the development of the final rule. We applied the 
following edits to providers' CCRs in the PSF. We believe these 
edits are appropriate in order to accurately model the outlier 
threshold. We first search for Indian Health Service providers and 
those providers assigned the statewide average CCR from the current 
fiscal year. We then replaced these CCRs with the statewide average 
CCR for the upcoming fiscal year. We also assigned the statewide 
average CCR (for the upcoming fiscal year) to those providers that 
have no value in the CCR field in the PSF or whose CCRs exceed the 
ceilings described later in this section (3.0 standard deviations 
from the mean of the log distribution of CCRs for all hospitals). We 
did not apply the adjustment factors described below to hospitals 
assigned the statewide average CCR. For FY 2021, we also are 
continuing to apply an adjustment factor to the CCRs to account for 
cost and charge inflation (as explained below).
    For this final rule, as we have done since FY 2014, we are 
adjusting the CCRs from the March 2020 update of the PSF by 
comparing the percentage change in the national average case-
weighted operating CCR and capital CCR from the March 2019 update of 
the PSF to the national average case-weighted operating CCR and 
capital CCR from the March 2020 update of the PSF. We note that we 
used total transfer-adjusted cases from FY 2019 to determine the 
national average case weighted CCRs for both sides of the 
comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50979), we believe that it is appropriate to use the same case count 
on both sides of the comparison because this will produce the true 
percentage change in the average case-weighted operating and capital 
CCR from one year to the next without any effect from a change in 
case count on different sides of the comparison.
    Using the methodology described previously, for this final rule, 
we calculated a March 2019 operating national average case-weighted 
CCR of 0.254027 and a March 2020 operating national average case-
weighted CCR of 0.247548. We then calculated the percentage change 
between the two national operating case-weighted CCRs by subtracting 
the March 2019 operating national average case-weighted CCR from the 
March 2020 operating national average case-weighted CCR and then 
dividing the result by the March 2019 national operating average 
case-weighted CCR. This resulted in a national operating CCR 
adjustment factor of 0.974495.
    We used the same methodology to adjust the capital CCRs. 
Specifically, for this final rule, we calculated a March 2019 
capital national average case-weighted CCR of 0.02073 and a March 
2020 capital national average case-weighted CCR of 0.019935. We then 
calculated the percentage change between the two national capital 
case weighted CCRs by subtracting the March 2019 capital national 
average case-weighted CCR from the March 2020 capital national 
average case-weighted CCR and then dividing the result by the March 
2019 capital national average case-weighted CCR. This resulted in a 
national capital CCR adjustment factor of 0.96165.
    As discussed previously, similar to the proposed rule, for FY 
2021, we applied the following policies (as discussed in more detail 
earlier):
     We used a wage index based on the FY 2021 wage index 
that hospitals will be paid. This included our policy to remove 
urban to rural reclassifications from the calculation of the rural 
floor, the frontier State floor adjustment in accordance with 
section 10324(a) of the Affordable Care Act, and the out migration 
adjustment as added by section 505 of Public Law 108-173, and 
incorporates our wage index policies to: (1) Increase the wage index 
values for hospitals with a wage index value below the 25th 
percentile wage index value across all hospitals, and (2) apply a 5 
percent cap for FY 2021 on any decrease in a hospital's final wage 
index from the hospital's final wage index in FY 2020. As stated 
previously, if we did not take the above into account, our estimate 
of total FY 2021 payments would be too low, and, as a result, our 
outlier threshold would be too high, such that estimated outlier 
payments would be less than our projected 5.11 percent of total 
payments (which reflects the estimate of outlier reconciliation 
calculated for this final rule).
     We excluded the hospital VBP payment adjustments and 
the hospital readmissions payment adjustments from the calculation 
of the outlier fixed-loss cost threshold.
     We used the estimated per-discharge uncompensated care 
payments to hospitals eligible for the uncompensated care payment 
for all cases in the calculation of the outlier fixed-loss cost 
threshold methodology.
    Using this methodology, we used the formula described in section 
I.C.1 of this Addendum to simulate and calculate the Federal payment 
rate and outlier payments for all claims. In addition, as described 
in the earlier section to this Addendum, we are finalizing to 
incorporate an estimate of FY 2021 outlier reconciliation in the 
methodology for determining the outlier threshold. As noted 
previously, for this FY 2021 final rule, the ratio of outlier 
reconciliation dollars to total Federal Payments (Step 4) is a 
negative 0.009217 percent, which, when rounded to the second digit, 
is 0.01 percent. Therefore, for FY 2021, we incorporated a 
projection of outlier reconciliation dollars by targeting an outlier 
threshold at 5.11 percent [5.1 percent - (-.01 percent)]. Under this 
approach, we determined a threshold of $29,051 and calculated total 
outlier payments of $4,955,813,978 and total operating Federal 
payments of $92,027,177,037. We then divided total outlier payments 
by total operating Federal payments plus total outlier payments and 
determined that this threshold matched with the 5.11 percent target, 
which reflects our methodology to incorporate an estimate of outlier 
reconciliation in the determination of the outlier threshold (as 
discussed in more detail in the previous section of this Addendum). 
We note that, if calculated without applying our finalized 
methodology for incorporating an estimate of outlier reconciliation 
in the determination of the outlier threshold, the threshold would 
have been $29,108. We are finalizing an outlier fixed-loss cost 
threshold for FY 2021 equal to the prospective payment rate for the 
MS-DRG, plus any IME, empirically justified Medicare DSH payments, 
estimated uncompensated care payment, and any add-on payments for 
new technology, plus $29,051.

(3) Other Changes Concerning Outliers

    As stated in the FY 1994 IPPS final rule (58 FR 46348), we 
establish an outlier threshold that is applicable to both hospital 
inpatient operating costs and hospital inpatient capital-related 
costs. When we modeled the combined operating and capital outlier 
payments, we found that using a common threshold resulted in a 
higher percentage of outlier payments for capital-related costs than 
for operating costs. We project that the threshold for FY 2021 
(which reflects our methodology to incorporate an estimate of 
operating outlier reconciliation) will result in outlier payments 
that will equal 5.1 percent of operating DRG payments and we 
estimate that capital outlier payments will equal 5.34 percent of 
capital payments based on the Federal rate (which reflects our 
methodology discussed previously to incorporate an estimate of 
capital outlier reconciliation).
    In accordance with section 1886(d)(3)(B) of the Act and as 
discussed previously, we reduced the FY 2021 standardized amount by 
the percentage of 5.1 percent to account for the projected 
proportion of payments paid as outliers.
    The outlier adjustment factors that would be applied to the 
operating standardized amount and capital Federal rate based on the 
FY 2021 outlier threshold are as follows:
[GRAPHIC] [TIFF OMITTED] TR18SE20.260


[[Page 59041]]


    We are applying the outlier adjustment factors to the FY 2021 
payment rates after removing the effects of the FY 2020 outlier 
adjustment factors on the standardized amount.
    To determine whether a case qualifies for outlier payments, we 
currently apply hospital-specific CCRs to the total covered charges 
for the case. Estimated operating and capital costs for the case are 
calculated separately by applying separate operating and capital 
CCRs. These costs are then combined and compared with the outlier 
fixed-loss cost threshold.
    Under our current policy at Sec.  412.84, we calculate operating 
and capital CCR ceilings and assign a statewide average CCR for 
hospitals whose CCRs exceed 3.0 standard deviations from the mean of 
the log distribution of CCRs for all hospitals. Based on this 
calculation, for hospitals for which the MAC computes operating CCRs 
greater than 1.142 or capital CCRs greater than 0.135, or hospitals 
for which the MAC is unable to calculate a CCR (as described under 
Sec.  412.84(i)(3) of our regulations), statewide average CCRs are 
used to determine whether a hospital qualifies for outlier payments. 
Table 8A listed in section VI. of this Addendum (and available via 
the internet on the CMS website) contains the statewide average 
operating CCRs for urban hospitals and for rural hospitals for which 
the MAC is unable to compute a hospital-specific CCR within the 
range previously specified. These statewide average ratios would be 
effective for discharges occurring on or after October 1, 2020 and 
would replace the statewide average ratios from the prior fiscal 
year. Table 8B listed in section VI. of this Addendum (and available 
via the internet on the CMS website) contains the comparable 
statewide average capital CCRs. As previously stated, the CCRs in 
Tables 8A and 8B would be used during FY 2021 when hospital-specific 
CCRs based on the latest settled cost report either are not 
available or are outside the range noted previously. Table 8C listed 
in section VI. of this Addendum (and available via the internet on 
the CMS website) contains the statewide average total CCRs used 
under the LTCH PPS as discussed in section V. of this Addendum.
    We finally note that section 20.1.2 of chapter three of the 
Medicare Claims Processing Manual (on the internet at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf) covers an array of topics, including CCRs, 
reconciliation, and the time value of money. We encourage hospitals 
that are assigned the statewide average operating and/or capital 
CCRs to work with their MAC on a possible alternative operating and/
or capital CCR as explained in the manual. Use of an alternative CCR 
developed by the hospital in conjunction with the MAC can avoid 
possible overpayments or underpayments at cost report settlement, 
thereby ensuring better accuracy when making outlier payments and 
negating the need for outlier reconciliation. We also note that a 
hospital may request an alternative operating or capital CCR at any 
time as long as the guidelines of the manual are followed. In 
addition, the manual outlines the outlier reconciliation process for 
hospitals and Medicare contractors. We refer hospitals to the manual 
instructions for complete details on outlier reconciliation.

(4) FY 2019 Outlier Payments

    Our current estimate, using available FY 2019 claims data, is 
that actual outlier payments for FY 2019 were approximately 5.43 
percent of actual total MS-DRG payments. Therefore, the data 
indicate that, for FY 2019, the percentage of actual outlier 
payments relative to actual total payments is higher than we 
projected for FY 2019. Consistent with the policy and statutory 
interpretation we have maintained since the inception of the IPPS, 
we do not make retroactive adjustments to outlier payments to ensure 
that total outlier payments for FY 2019 are equal to 5.1 percent of 
total MS-DRG payments. As explained in the FY 2003 Outlier Final 
Rule (68 FR 34502), if we were to make retroactive adjustments to 
all outlier payments to ensure total payments are 5.1 percent of MS-
DRG payments (by retroactively adjusting outlier payments), we would 
be removing the important aspect of the prospective nature of the 
IPPS. Because such an across-the-board adjustment would either lead 
to more or less outlier payments for all hospitals, hospitals would 
no longer be able to reliably approximate their payment for a 
patient while the patient is still hospitalized. We believe it would 
be neither necessary nor appropriate to make such an aggregate 
retroactive adjustment. Furthermore, we believe it is consistent 
with the statutory language at section 1886(d)(5)(A)(iv) of the Act 
not to make retroactive adjustments to outlier payments. This 
section states that outlier payments be equal to or greater than 5 
percent and less than or equal to 6 percent of projected or 
estimated (not actual) MS-DRG payments. We believe that an important 
goal of a PPS is predictability. Therefore, we believe that the 
fixed-loss outlier threshold should be projected based on the best 
available historical data and should not be adjusted retroactively. 
A retroactive change to the fixed-loss outlier threshold would 
affect all hospitals subject to the IPPS, thereby undercutting the 
predictability of the system as a whole.
    We note that, because the MedPAR claims data for the entire FY 
2020 period will not be available until after September 30, 2020, we 
are unable to provide an estimate of actual outlier payments for FY 
2020 based on FY 2020 claims data in this final rule. We will 
provide an estimate of actual FY 2020 outlier payments in the FY 
2022 IPPS/LTCH PPS proposed rule.

5. FY 2021 Standardized Amount

    The adjusted standardized amount is divided into labor-related 
and nonlabor-related portions. Tables 1A and 1B listed and published 
in section VI. of this Addendum (and available via the internet on 
the CMS website) contain the national standardized amounts that we 
are applying to all hospitals, except hospitals located in Puerto 
Rico, for FY 2021. The standardized amount for hospitals in Puerto 
Rico is shown in Table 1C listed and published in section VI. of 
this Addendum (and available via the internet on the CMS website). 
The amounts shown in Tables 1A and 1B differ only in that the labor-
related share applied to the standardized amounts in Table 1A is 
68.3 percent, and the labor-related share applied to the 
standardized amounts in Table 1B is 62 percent. In accordance with 
sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, we are 
applying a labor-related share of 62 percent, unless application of 
that percentage would result in lower payments to a hospital than 
would otherwise be made. In effect, the statutory provision means 
that we will apply a labor-related share of 62 percent for all 
hospitals whose wage indexes are less than or equal to 1.0000.
    In addition, Tables 1A and 1B include the standardized amounts 
reflecting the applicable percentage increases for FY 2021.
    The labor-related and nonlabor-related portions of the national 
average standardized amounts for Puerto Rico hospitals for FY 2021 
are set forth in Table 1C listed and published in section VI. of 
this Addendum (and available via the internet on the CMS website). 
Similarly, section 1886(d)(9)(C)(iv) of the Act, as amended by 
section 403(b) of Public Law 108-173, provides that the labor-
related share for hospitals located in Puerto Rico be 62 percent, 
unless the application of that percentage would result in lower 
payments to the hospital.
    The following table illustrates the changes from the FY 2020 
national standardized amounts to the FY 2021 national standardized 
amounts. The second through fifth columns display the changes from 
the FY 2019 standardized amounts for each applicable FY 2021 
standardized amount. The first row of the table shows the updated 
(through FY 2020) average standardized amount after restoring the FY 
2020 offsets for outlier payments and the geographic 
reclassification budget neutrality. The MS-DRG reclassification and 
recalibration and wage index budget neutrality adjustment factors 
are cumulative. Therefore, those FY 2020 adjustment factors are not 
removed from this table. Additionally, for FY 2021 we have applied 
the budget neutrality factors for the low wage index hospital policy 
and the transition policy, described previously.
BILLING CODE 4120-01-P

[[Page 59042]]

[GRAPHIC] [TIFF OMITTED] TR18SE20.261


[[Page 59043]]


BILLING CODE 4120-01-C

B. Adjustments for Area Wage Levels and Cost-of-Living

    Tables 1A through 1C, as published in section VI. of this 
Addendum (and available via the internet on the CMS website), 
contain the labor related and -nonlabor related- shares that we used 
to calculate the prospective payment rates for hospitals located in 
the 50 States, the District of Columbia, and Puerto Rico for FY 
2021. This section addresses two types of adjustments to the 
standardized amounts that are made in determining the prospective 
payment rates as described in this Addendum.

1. Adjustment for Area Wage Levels

    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
that we make an adjustment to the labor-related portion of the 
national prospective payment rate to account for area differences in 
hospital wage levels. This adjustment is made by multiplying the 
labor-related portion of the adjusted standardized amounts by the 
appropriate wage index for the area in which the hospital is 
located. For FY 2021, as discussed in section IV.B.3. of the 
preamble of this final rule, as we proposed, we are applying a 
labor-related share of 68.3 percent for the national standardized 
amounts for all IPPS hospitals (including hospitals in Puerto Rico) 
that have a wage index value that is greater than 1.0000. Consistent 
with section 1886(d)(3)(E) of the Act, as we proposed, we are 
applying the wage index to a labor-related share of 62 percent of 
the national standardized amount for all IPPS hospitals (including 
hospitals in Puerto Rico) whose wage index values are less than or 
equal to 1.0000. In section III. of the preamble of this final rule, 
we discuss the data and methodology for the FY 2021 wage index.

2. Adjustment for Cost-of-Living in Alaska and Hawaii

    Section 1886(d)(5)(H) of the Act provides discretionary 
authority to the Secretary to make adjustments as the Secretary 
deems appropriate to take into account the unique circumstances of 
hospitals located in Alaska and Hawaii. Higher labor-related costs 
for these two States are taken into account in the adjustment for 
area wages described previously. To account for higher nonlabor-
related costs for these two States, we multiply the nonlabor-related 
portion of the standardized amount for hospitals in Alaska and 
Hawaii by an adjustment factor.
    In the FY 2013 IPPS/LTCH PPS final rule, we established a 
methodology to update the COLA factors for Alaska and Hawaii that 
were published by the U.S. Office of Personnel Management (OPM) 
every 4 years (at the same time as the update to the labor-related 
share of the IPPS market basket), beginning in FY 2014. We refer 
readers to the FY 2013 IPPS/LTCH PPS proposed and final rules for 
additional background and a detailed description of this methodology 
(77 FR 28145 through 28146 and 77 FR 53700 through 53701, 
respectively). For FY 2018, in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38530 through 38531), we updated the COLA factors published 
by OPM for 2009 (as these are the last COLA factors OPM published 
prior to transitioning from COLAs to locality pay) using the 
methodology that we finalized in the FY 2013 IPPS/LTCH PPS final 
rule.
    Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final 
rule, as we proposed, we are continuing to use the same COLA factors 
in FY 2021 that were used in FY 2019 to adjust the nonlabor-related 
portion of the standardized amount for hospitals located in Alaska 
and Hawaii. The following table lists the COLA factors for FY 2021.
[GRAPHIC] [TIFF OMITTED] TR18SE20.293

    Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final 
rule, the next update to the COLA factors for Alaska and Hawaii 
would occur at the same time as the update to the labor-related 
share of the IPPS market basket (no later than FY 2022).

C. Calculation of the Prospective Payment Rates

1. General Formula for Calculation of the Prospective Payment Rates for 
FY 2021

    In general, the operating prospective payment rate for all 
hospitals (including hospitals in Puerto Rico) paid under the IPPS, 
except SCHs and MDHs, for FY 2021 equals the Federal rate (which 
includes uncompensated care payments).
    Under current law, the MDH program has been extended for 
discharges occurring through September 30, 2022.
    SCHs are paid based on whichever of the following rates yields 
the greatest aggregate payment: the Federal national rate (which, as 
discussed in section V.G. of the preamble of this final rule, 
includes uncompensated care payments); the updated hospital-specific 
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated 
hospital-specific rate based on FY 1996 costs per discharge; or the 
updated hospital-specific rate based on FY 2006 costs per discharge 
to determine the rate that yields the greatest aggregate payment.
    The prospective payment rate for SCHs for FY 2021 equals the 
higher of the applicable Federal rate, or the hospital-specific rate 
as described later in this section. The prospective payment rate for 
MDHs for FY 2021 equals the higher of the Federal rate, or the 
Federal rate plus 75 percent of the difference between the Federal 
rate and the hospital-specific rate as described in this section. 
For MDHs, the updated hospital-specific rate is based on FY 1982, FY 
1987, or FY 2002 costs per discharge, whichever yields the greatest 
aggregate payment.

2. Operating and Capital Federal Payment Rate and Outlier Payment 
Calculation

    Note: The formula specified in this section is used for actual 
claim payment and is also used by CMS to project the outlier 
threshold for the upcoming fiscal year. The difference is the source 
of some of the variables in the formula. For example, operating and 
capital CCRs for actual claim payment are from the PSF while CMS 
uses an adjusted CCR (as described previously) to project the 
threshold for the upcoming fiscal year. In addition,

[[Page 59044]]

charges for a claim payment are from the bill while charges to 
project the threshold are from the MedPAR data with an inflation 
factor applied to the charges (as described earlier).

    Step 1--Determine the MS-DRG and MS-DRG relative weight (from 
Table 5) for each claim based on the ICD-10-CM diagnosis and ICD-10-
PCS procedure codes on the claim.
    Step 2--Select the applicable average standardized amount 
depending on whether the hospital submitted qualifying quality data 
and is a meaningful EHR user, as described previously.
    Step 3--Compute the operating and capital Federal payment rate:

--Federal Payment Rate for Operating Costs = MS-DRG Relative Weight 
x [(Labor-Related Applicable Standardized Amount x Applicable CBSA 
Wage Index) + (Nonlabor-Related Applicable Standardized Amount x 
Cost-of-Living Adjustment)] x (1 + IME + (DSH * 0.25))
--Federal Payment for Capital Costs = MS-DRG Relative Weight x 
Federal Capital Rate x Geographic Adjustment Fact x (1 + IME + DSH)

    Step 4--Determine operating and capital costs:

--Operating Costs = (Billed Charges x Operating CCR)
--Capital Costs = (Billed Charges x Capital CCR).

    Step 5--Compute operating and capital outlier threshold (CMS 
applies a geographic adjustment to the operating and capital outlier 
threshold to account for local cost variation):

--Operating CCR to Total CCR = (Operating CCR)/(Operating CCR + 
Capital CCR)
--Operating Outlier Threshold = [Fixed Loss Threshold x ((Labor-
Related Portion x CBSA Wage Index) + Nonlabor-Related portion)] x 
Operating CCR to Total CCR + Federal Payment with IME, DSH + 
Uncompensated Care Payment + New Technology Add-On Payment Amount
--Capital CCR to Total CCR = (Capital CCR)/(Operating CCR + Capital 
CCR)
--Capital Outlier Threshold = (Fixed Loss Threshold x Geographic 
Adjustment Factor x Capital CCR to Total CCR) + Federal Payment with 
IME and DSH

    Step 6--Compute operating and capital outlier payments:

--Marginal Cost Factor = 0.80 or 0.90 (depending on the MS-DRG)
--Operating Outlier Payment = (Operating Costs--Operating Outlier 
Threshold) x Marginal Cost Factor
--Capital Outlier Payment = (Capital Costs--Capital Outlier 
Threshold) x Marginal Cost Factor

    The payment rate may then be further adjusted for hospitals that 
qualify for a low-volume payment adjustment under section 
1886(d)(12) of the Act and 42 CFR 412.101(b). The base-operating DRG 
payment amount may be further adjusted by the hospital readmissions 
payment adjustment and the hospital VBP payment adjustment as 
described under sections 1886(q) and 1886(o) of the Act, 
respectively. Payments also may be reduced by the 1-percent 
adjustment under the HAC Reduction Program as described in section 
1886(p) of the Act. We also make new technology add-on payments in 
accordance with section 1886(d)(5)(K) and (L) of the Act. Finally, 
we add the uncompensated care payment to the total claim payment 
amount. As noted in the previous formula, we take uncompensated care 
payments and new technology add-on payments into consideration when 
calculating outlier payments.

3. Hospital-Specific Rate (Applicable Only to SCHs and MDHs)

a. Calculation of Hospital-Specific Rate

    Section 1886(b)(3)(C) of the Act provides that SCHs are paid 
based on whichever of the following rates yields the greatest 
aggregate payment: The Federal rate; the updated hospital-specific 
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated 
hospital-specific rate based on FY 1996 costs per discharge; or the 
updated hospital-specific rate based on FY 2006 costs per discharge 
to determine the rate that yields the greatest aggregate payment.
    As noted previously, the MDH program has been extended under 
current law for discharges occurring through September 30, 2022. For 
MDHs, the updated hospital-specific rate is based on FY 1982, FY 
1987, or FY 2002 costs per discharge, whichever yields the greatest 
aggregate payment.
    For a more detailed discussion of the calculation of the 
hospital-specific rates, we refer readers to the FY 1984 IPPS 
interim final rule (48 FR 39772); the April 20, 1990 final rule with 
comment period (55 FR 15150); the FY 1991 IPPS final rule (55 FR 
35994); and the FY 2001 IPPS final rule (65 FR 47082).

b. Updating the FY 1982, FY 1987, FY 1996, FY 2002 and FY 2006 
Hospital-Specific Rate for FY 2021

    Section 1886(b)(3)(B)(iv) of the Act provides that the 
applicable percentage increase applicable to the hospital-specific 
rates for SCHs and MDHs equals the applicable percentage increase 
set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same 
update factor as for all other hospitals subject to the IPPS). 
Because the Act sets the update factor for SCHs and MDHs equal to 
the update factor for all other IPPS hospitals, the update to the 
hospital-specific rates for SCHs and MDHs is subject to the 
amendments to section 1886(b)(3)(B) of the Act made by sections 
3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the 
applicable percentage increases to the hospital-specific rates 
applicable to SCHs and MDHs are the following:
[GRAPHIC] [TIFF OMITTED] TR18SE20.262

    For a complete discussion of the applicable percentage increase 
applied to the hospital-specific rates for SCHs and MDHs, we refer 
readers to section IV.B. of the preamble of this final rule. In 
addition, because SCHs and MDHs use the same MSDRGs as other 
hospitals when they are paid based in whole or in part on the 
hospital-specific rate, the -hospital specific-rate is adjusted by a 
budget

[[Page 59045]]

neutrality factor to ensure that changes to the MS-DRG 
classifications and the recalibration of the MS-DRG relative weights 
are made in a manner so that aggregate IPPS payments are unaffected. 
Therefore, the hospital specific-rate for an SCH or an MDH is 
adjusted by the MS-DRG reclassification and recalibration budget 
neutrality factor, as discussed in section III. of this Addendum and 
listed in the table in section II. of this Addendum. The resulting 
rate is used in determining the payment rate that an SCH or MDH 
would receive for its discharges beginning on or after October 1, 
2020. We note that, in this final rule, for FY 2021, we are not 
making a documentation and coding adjustment to the hospital-
specific rate. We refer readers to section II.D. of the preamble of 
this final rule for a complete discussion regarding our policies and 
previously finalized policies (including our historical adjustments 
to the payment rates) relating to the effect of changes in 
documentation and coding that do not reflect real changes in case 
mix.

III. Changes to Payment Rates for Acute Care Hospital Inpatient 
Capital-Related Costs for FY 2021

    The PPS for acute care hospital inpatient capital-related costs 
was implemented for cost reporting periods beginning on or after 
October 1, 1991. The basic methodology for determining Federal 
capital prospective rates is set forth in the regulations at 42 CFR 
412.308 through 412.352. In this section of this Addendum, we 
discuss the factors that we used to determine the capital Federal 
rate for FY 2021, which are effective for discharges occurring on or 
after October 1, 2020.
    All hospitals (except ``new'' hospitals under Sec.  
412.304(c)(2)) are paid based on the capital Federal rate. We 
annually update the capital standard Federal rate, as provided in 
Sec.  412.308(c)(1), to account for capital input price increases 
and other factors. The regulations at Sec.  412.308(c)(2) also 
provide that the capital Federal rate be adjusted annually by a 
factor equal to the estimated proportion of outlier payments under 
the capital Federal rate to total capital payments under the capital 
Federal rate. In addition, Sec.  412.308(c)(3) requires that the 
capital Federal rate be reduced by an adjustment factor equal to the 
estimated proportion of payments for exceptions under Sec.  412.348. 
(We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53705), there is generally no longer a need for an exceptions 
payment adjustment factor.) However, in limited circumstances, an 
additional payment exception for extraordinary circumstances is 
provided for under Sec.  412.348(f) for qualifying hospitals.
    Therefore, in accordance with Sec.  412.308(c)(3), an exceptions 
payment adjustment factor may need to be applied if such payments 
are made. Section 412.308(c)(4)(ii) requires that the capital 
standard Federal rate be adjusted so that the effects of the annual 
DRG reclassification and the recalibration of DRG weights and 
changes in the geographic adjustment factor (GAF) are budget 
neutral.
    Section 412.374 provides for payments to hospitals located in 
Puerto Rico under the IPPS for acute care hospital inpatient 
capital-related costs, which currently specifies capital IPPS 
payments to hospitals located in Puerto Rico are based on 100 
percent of the Federal rate.

A. Determination of the Federal Hospital Inpatient Capital-Related 
Prospective Payment Rate Update for FY 2021

    In the discussion that follows, we explain the factors that we 
used to determine the capital Federal rate for FY 2021. In 
particular, we explain why the FY 2021 capital Federal rate would 
increase approximately 0.84 percent, compared to the FY 2020 capital 
Federal rate. As discussed in the impact analysis in Appendix A to 
this FY 2021 IPPS/LTCH final rule, we estimate that capital payments 
per discharge would increase approximately 0.3 percent during that 
same period. Because capital payments constitute approximately 10 
percent of hospital payments, a 1-percent change in the capital 
Federal rate yields only approximately a 0.1 percent change in 
actual payments to hospitals.

1. Projected Capital Standard Federal Rate Update

    Under Sec.  412.308(c)(1), the capital standard Federal rate is 
updated on the basis of an analytical framework that takes into 
account changes in a capital input price index (CIPI) and several 
other policy adjustment factors. Specifically, we adjust the 
projected CIPI rate of change, as appropriate, each year for case-
mix index-related changes, for intensity, and for errors in previous 
CIPI forecasts. The update factor for FY 2021 under that framework 
is 1.1 percent based on a projected 1.1 percent increase in the 
2014-based CIPI, a 0.0 percentage point adjustment for intensity, a 
0.0 percentage point adjustment for case-mix, a 0.0 percentage point 
adjustment for the DRG reclassification and recalibration, and a 
forecast error correction of 0.0 percentage point. As discussed in 
section III.C. of this Addendum, we continue to believe that the 
CIPI is the most appropriate input price index for capital costs to 
measure capital price changes in a given year. We also explain the 
basis for the FY 2021 CIPI projection in that same section of this 
Addendum. Below we describe the policy adjustments that we applied 
in the update framework for FY 2021.
    The case-mix index is the measure of the average DRG weight for 
cases paid under the IPPS. Because the DRG weight determines the 
prospective payment for each case, any percentage increase in the 
case-mix index corresponds to an equal percentage increase in 
hospital payments.
    The case-mix index can change for any of several reasons--
     The average resource use of Medicare patient changes 
(``real'' case-mix change);
     Changes in hospital documentation and coding of patient 
records result in higher-weighted DRG assignments (``coding 
effects''); or
     The annual DRG reclassification and recalibration 
changes may not be budget neutral (``reclassification effect'').
    We define real case-mix change as actual changes in the mix (and 
resource requirements) of Medicare patients, as opposed to changes 
in documentation and coding behavior that result in assignment of 
cases to higher-weighted DRGs, but do not reflect higher resource 
requirements. The capital update framework includes the same case-
mix index adjustment used in the former operating IPPS update 
framework (as discussed in the May 18, 2004 IPPS proposed rule for 
FY 2005 (69 FR 28816)). (We no longer use an update framework to 
make a recommendation for updating the operating IPPS standardized 
amounts, as discussed in section II. of Appendix B to the FY 2006 
IPPS final rule (70 FR 47707).)
    For FY 2021, we are projecting a 0.5 percent total increase in 
the case-mix index. We estimated that the real case-mix increase 
would equal 0.5 percent for FY 2021. The net adjustment for change 
in case-mix is the difference between the projected real increase in 
case mix and the projected total increase in case mix. Therefore, as 
we proposed, the net adjustment for case-mix change in FY 2021 is 
0.0 percentage point.
    The capital update framework also contains an adjustment for the 
effects of DRG reclassification and recalibration. This adjustment 
is intended to remove the effect on total payments of prior year's 
changes to the DRG classifications and relative weights, in order to 
retain budget neutrality for all case-mix index-related changes 
other than those due to patient severity of illness. Due to the lag 
time in the availability of data, there is a 2-year lag in data used 
to determine the adjustment for the effects of DRG reclassification 
and recalibration. For example, we have data available to evaluate 
the effects of the FY 2019 DRG reclassification and recalibration as 
part of our update for FY 2021. We assume, for purposes of this 
adjustment, that the estimate of FY 2019 DRG reclassification and 
recalibration would result in no change in the case-mix when 
compared with the case-mix index that would have resulted if we had 
not made the reclassification and recalibration changes to the DRGs. 
Therefore, as we proposed, we are making a 0.0 percentage point 
adjustment for reclassification and recalibration in the update 
framework for FY 2021.
    The capital update framework also contains an adjustment for 
forecast error. The input price index forecast is based on 
historical trends and relationships ascertainable at the time the 
update factor is established for the upcoming year. In any given 
year, there may be unanticipated price fluctuations that may result 
in differences between the actual increase in prices and the 
forecast used in calculating the update factors. In setting a 
prospective payment rate under the framework, we make an adjustment 
for forecast error only if our estimate of the change in the capital 
input price index for any year is off by 0.25 percentage point or 
more. There is a 2-year lag between the forecast and the 
availability of data to develop a measurement of the forecast error. 
Historically, when a forecast error of the CIPI is greater than 0.25 
percentage point in absolute terms, it is reflected in the update 
recommended under this framework. A forecast error of 0.0

[[Page 59046]]

percentage point was calculated for the FY 2019 update, for which 
there are historical data. That is, current historical data 
indicated that the forecasted FY 2019 CIPI (1.4 percent) used in 
calculating the FY 2019 update factor was the same percentage 
increase as the actual realized price increase (1.4 percent). As 
this does not exceed the 0.25 percentage point threshold, we are not 
making an adjustment for forecast error in the update for FY 2021.
    Under the capital IPPS update framework, we also make an 
adjustment for changes in intensity. Historically, we calculate this 
adjustment using the same methodology and data that were used in the 
past under the framework for operating IPPS. The intensity factor 
for the operating update framework reflects how hospital services 
are utilized to produce the final product, that is, the discharge. 
This component accounts for changes in the use of quality-enhancing 
services, for changes within DRG severity, and for expected 
modification of practice patterns to remove noncost-effective 
services. Our intensity measure is based on a 5-year average.
    We calculate case-mix constant intensity as the change in total 
cost per discharge, adjusted for price level changes (the CPI for 
hospital and related services) and changes in real case-mix. Without 
reliable estimates of the proportions of the overall annual 
intensity changes that are due, respectively, to ineffective 
practice patterns and the combination of quality-enhancing new 
technologies and complexity within the DRG system, we assume that 
one-half of the annual change is due to each of these factors. Thus, 
the capital update framework provides an add-on to the input price 
index rate of increase of one-half of the estimated annual increase 
in intensity, to allow for increases within DRG severity and the 
adoption of quality-enhancing technology.
    In this final rule, as we proposed, we are continuing to use a 
Medicare-specific intensity measure that is based on a 5-year 
adjusted average of cost per discharge for FY 2021 (we refer readers 
to the FY 2011 IPPS/LTCH PPS final rule (75 FR 0436) for a full 
description of our Medicare-specific intensity measure). 
Specifically, for FY 2021, we used an intensity measure that is 
based on an average of cost-per-discharge data from the 5-year 
period beginning with FY 2014 and extending through FY 2018. Based 
on these data, we estimated that case-mix constant intensity 
declined during FYs 2014 through 2018. In the past, when we found 
intensity to be declining, we believed a zero (rather than a 
negative) intensity adjustment was appropriate. Consistent with this 
approach, because we estimated that intensity would decline during 
that 5-year period, we believe it is appropriate to continue to 
apply a zero-intensity adjustment for FY 2021. Therefore, as we 
proposed, we made a 0.0 percentage point adjustment for intensity in 
the update for FY 2021.
    Earlier, we described the basis of the components we used to 
develop the 1.1 percent capital update factor under the capital 
update framework for FY 2021, as shown in the following table.192
[GRAPHIC] [TIFF OMITTED] TR18SE20.263

2. Outlier Payment Adjustment Factor

    Section 412.312(c) establishes a unified outlier payment 
methodology for inpatient operating and inpatient capital-related 
costs. A shared threshold is used to identify outlier cases for both 
inpatient operating and inpatient capital-related payments. Section 
412.308(c)(2) provides that the standard Federal rate for inpatient 
capital-related costs be reduced by an adjustment factor equal to 
the estimated proportion of capital-related outlier payments to 
total inpatient capital-related PPS payments. The outlier threshold 
is set so that operating outlier payments are projected to be 5.1 
percent of total operating IPPS DRG payments. For FY 2021, as we 
proposed we are incorporating the estimated outlier reconciliation 
payment amounts into the outlier threshold model, as we did for FY 
2020. (For more details on our policy to incorporate outlier 
reconciliation payment amounts into the outlier threshold model, 
please see section II.A. of this Addendum to this final rule.)
    For FY 2020, we estimated that outlier payments for capital-
related PPS payments would equal 5.37 percent of inpatient capital-
related payments based on the capital Federal rate in FY 2020. Based 
on the threshold discussed in section II.A. of this Addendum, we 
estimate that prior to taking into account projected capital outlier 
reconciliation payments, outlier payments for capital-related costs 
would equal 5.36 percent for inpatient capital-related payments 
based on the capital Federal rate in FY 2021. However, using the 
methodology outlined in section II.A. of this Addendum, we estimate 
that taking into account projected capital outlier reconciliation 
payments would decrease FY 2021 aggregate estimated capital outlier 
payments by 0.02 percent. Therefore, accounting for estimated 
capital outlier reconciliation, the estimated outlier payments for 
capital-related PPS payments would equal 5.34 percent (5.36 percent 
- 0.02 percent) of inpatient capital-related payments based on the 
capital Federal rate in FY 2021. Accordingly, we applied an outlier 
adjustment factor of 0.9466 in determining the capital Federal rate 
for FY 2021. Thus, we estimate that the percentage of capital 
outlier payments to total capital Federal rate payments for FY 2021 
would be lower than the percentage for FY 2020.
    The outlier reduction factors are not built permanently into the 
capital rates; that is, they are not applied cumulatively in 
determining the capital Federal rate. The FY 2021 outlier adjustment 
of 0.9466 is a 0.03 percent change from the FY 2020 outlier 
adjustment of 0.9463. Therefore, the net change in the outlier 
adjustment to the capital Federal rate for FY 2021 is 1.0003 
(0.9466/0.9463; calculation performed on unrounded numbers) so that 
the outlier adjustment will increase the FY 2021 capital Federal 
rate by approximately 0.03 percent compared to the FY 2020 outlier 
adjustment.

3. Budget Neutrality Adjustment Factor for Changes in DRG 
Classifications and Weights and the GAF

    Section 412.308(c)(4)(ii) requires that the capital Federal rate 
be adjusted so that aggregate payments for the fiscal year based

[[Page 59047]]

on the capital Federal rate, after any changes resulting from the 
annual DRG reclassification and recalibration and changes in the 
GAF, are projected to equal aggregate payments that would have been 
made on the basis of the capital Federal rate without such changes.
    As discussed in section III.G.3. of the preamble of this final 
rule, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through 
42339), we finalized a policy to help reduce wage index disparities 
between high and low wage index hospitals by increasing the wage 
index values for certain hospitals with low wage index values. As 
also discussed in section III.G.3. of the preamble of this final 
rule, this policy will continue in FY 2021. In addition, in the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42332 through 42336), we 
removed urban to rural reclassifications from the calculation of the 
rural floor to prevent inappropriate payment increases under the 
rural floor due to rural reclassifications, such that, beginning in 
FY 2020, the rural floor is calculated without including the wage 
data of hospitals that have reclassified as rural under section 
1886(d)(8)(E) of the Act (as implemented in the regulations at Sec.  
412.103). Therefore, as mentioned in section III.G.1. of the 
preamble of this final rule, the rural floor for this FY 2021 final 
rule is calculated without the wage data of hospitals that have 
reclassified as rural under Sec.  412.103. Lastly, for FY 2020, we 
placed a 5-percent cap on any decrease in a hospital's wage index 
from the hospital's final wage index in FY 2019 (84 FR 42336 through 
42338). In light of the OMB updates described in section III.B.2. of 
the preamble of this final rule, for FY 2021, we are again capping 
any decreases in the wage index at 5 percent so that a hospital's 
final wage index for FY 2021 will not be less than 95 percent of its 
final wage index for FY 2020.
    As we discussed in the in the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42638 through 42639), we augmented our historical methodology 
for computing the budget neutrality factor for changes in the GAFs 
in light of the effect of those wage index changes on the GAFs. 
Specifically, we established a 2-step methodology, under which we 
first calculate a factor to ensure budget neutrality for changes to 
the GAFs due to the update to the wage data, wage index 
reclassifications and redesignations, including our policy to remove 
the wage data of urban hospitals that have reclassified as rural 
under Sec.  412.103 from the calculation of ``the wage index for 
rural areas in the State in which the county is located'' in 
applying the provisions of section 1886(d)(8)(C)(iii) of the Act, 
and the rural floor, including our policy to calculate the rural 
floor without including the wage data of urban hospitals that have 
reclassified as rural under Sec.  412.103, consistent with our 
historical GAF budget neutrality factor methodology. In the second 
step, we calculate a factor to ensure budget neutrality for changes 
to the GAFs due to our policy to increase the wage index for 
hospitals with a wage index value below the 25th percentile wage 
index and our policy to place a 5-percent cap on any decrease in a 
hospital's wage index from the hospital's final wage index in the 
prior fiscal year. In this section, we refer to these two policies 
as the lowest quartile hospital wage index adjustment and the 5-
percent cap on wage index decreases.
    In light of the changes to the wage index and other wage index 
policies for FY 2021 discussed previously, which directly affect the 
GAF, we continue to compute a budget neutrality factor for changes 
in the GAFs in two steps. We discuss our 2-step calculation of the 
GAF budget neutrality factors for FY 2021 as follows.
    To determine the GAF budget neutrality factors for FY 2021, we 
first compared estimated aggregate capital Federal rate payments 
based on the FY 2020 MS-DRG classifications and relative weights and 
the FY 2020 GAFs to estimated aggregate capital Federal rate 
payments based on the FY 2020 MS-DRG classifications and relative 
weights and the FY 2021 GAFs without incorporating the effects on 
the GAFs of the lowest quartile hospital wage index adjustment and 
the 5-percent cap on wage index decreases. To achieve budget 
neutrality for these changes in the GAFs, we calculated an 
incremental GAF budget neutrality adjustment factor of 1.0021 for FY 
2021. Next, we compared estimated aggregate capital Federal rate 
payments based on the FY 2021 GAFs with and without incorporating 
the effects on the GAFs of the lowest quartile hospital wage index 
adjustment and the 5-percent cap on wage index decreases. For this 
calculation, estimated aggregate capital Federal rate payments were 
calculated using the FY 2021 MS-DRG classifications and relative 
weights, and the FY 2021 GAFs (both with and without incorporating 
the effects on the GAF of the lowest quartile hospital wage index 
adjustment and the 5-percent cap on wage index decreases). (We note, 
for this calculation the GAFs included the out-migration and 
Frontier state adjustments.) To achieve budget neutrality for the 
effects of the lowest quartile hospital wage index adjustment and 
the 5-percent cap on wage index decreases on the FY 2021 GAFs, we 
calculated an incremental GAF budget neutrality adjustment factor of 
0.9963. Therefore, to achieve budget neutrality for the changes in 
the GAFs, based on the calculations described previously, we are 
applying an incremental budget neutrality adjustment factor of 
0.9984 (1.0021 x 0.9963) for FY 2021 to the previous cumulative FY 
2020 adjustment factor.
    We also compared estimated aggregate capital Federal rate 
payments based on the FY 2020 MS-DRG classifications and relative 
weights and the FY 2021 GAFs to estimated aggregate capital Federal 
rate payments based on the cumulative effects of the FY 2021 MS-DRG 
classifications and relative weights and the FY 2021 GAFs without 
the effects of the lowest quartile hospital wage index adjustment 
and the 5-percent cap on wage index decreases. The incremental 
adjustment factor for DRG classifications and changes in relative 
weights is 0.9988. The incremental adjustment factors for MS-DRG 
classifications and changes in relative weights (0.9988) and for 
changes in the GAFs through FY 2021 (0.9984) is 0.9971 (0.9988 x 
0.9984). We note that all the values are calculated with unrounded 
numbers.
    The GAF/DRG budget neutrality adjustment factors are built 
permanently into the capital rates; that is, they are applied 
cumulatively in determining the capital Federal rate. This follows 
the requirement under Sec.  412.308(c)(4)(ii) that estimated 
aggregate payments each year be no more or less than they would have 
been in the absence of the annual DRG reclassification and 
recalibration and changes in the GAFs.
    The methodology used to determine the recalibration and 
geographic adjustment factor (GAF/DRG) budget neutrality adjustment 
is similar to the methodology used in establishing budget neutrality 
adjustments under the IPPS for operating costs. One difference is 
that, under the operating IPPS, the budget neutrality adjustments 
for the effect of geographic reclassifications are determined 
separately from the effects of other changes in the hospital wage 
index and the MS-DRG relative weights. Under the capital IPPS, there 
is a single GAF/DRG budget neutrality adjustment factor for changes 
in the GAF (including geographic reclassification and the lowest 
quartile hospital wage index adjustment and the 5-percent cap on 
wage index decreases described previously) and the MS-DRG relative 
weights. In addition, there is no adjustment for the effects that 
geographic reclassification or the lowest quartile hospital wage 
index adjustment and the 5-percent cap on wage index decreases 
described previously have on the other payment parameters, such as 
the payments for DSH or IME.
    The incremental GAF/DRG adjustment factor of 0.9971 (the product 
of the incremental GAF budget neutrality adjustment factor of 0.9984 
and the incremental DRG budget neutrality adjustment factor of 
0.9988) accounts for the MS-DRG reclassifications and recalibration 
and for changes in the GAFs. As noted previously, it also 
incorporates the effects on the GAFs of FY 2021 geographic 
reclassification decisions made by the MGCRB compared to FY 2020 
decisions and the lowest quartile hospital wage index adjustment, 
and the 5-percent cap on wage index decreases described earlier. 
However, it does not account for changes in payments due to changes 
in the DSH and IME adjustment factors.

4. Capital Federal Rate for FY 2021

    For FY 2020, we established a capital Federal rate of $462.33 
(84 FR 42640, as corrected in 84 FR 53613). We are establishing an 
update of 1.1 percent in determining the FY 2021 capital Federal 
rate for all hospitals. As a result of this update and the budget 
neutrality factors discussed earlier, we are establishing a national 
capital Federal rate of $466.22 for FY 2021. The national capital 
Federal rate for FY 2021 was calculated as follows:
     The FY 2021 update factor is 1.011; that is, the update 
is 1.1 percent.
     The FY 2021 budget neutrality adjustment factor that is 
applied to the capital Federal rate for changes in the MS-DRG 
classifications and relative weights and changes in the GAFs is 
0.9971.
     The FY 2021 outlier adjustment factor is 0.9466.

[[Page 59048]]

    We are providing the following chart that shows how each of the 
factors and adjustments for FY 2021 affects the computation of the 
FY 2021 national capital Federal rate in comparison to the FY 2020 
national capital Federal rate. The FY 2021 update factor has the 
effect of increasing the capital Federal rate by 1.1 percent 
compared to the FY 2020 capital Federal rate. The GAF/DRG budget 
neutrality adjustment factor has the effect of decreasing the 
capital Federal rate by 0.29 percent. The FY 2021 outlier adjustment 
factor has the effect of increasing the capital Federal rate by 0.03 
percent compared to the FY 2020 capital Federal rate. The combined 
effect of all the changes would increase the national capital 
Federal rate by approximately 0.84 percent, compared to the FY 2020 
national capital Federal rate.
[GRAPHIC] [TIFF OMITTED] TR18SE20.264

B. Calculation of the Inpatient Capital-Related Prospective 
Payments for FY 2021

    For purposes of calculating payments for each discharge during 
FY 2021, the capital Federal rate is adjusted as follows: (Standard 
Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals located 
in Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME Adjustment 
Factor, if applicable). The result is the adjusted capital Federal 
rate.
    Hospitals also may receive outlier payments for those cases that 
qualify under the threshold established for each fiscal year. 
Section 412.312(c) provides for a shared threshold to identify 
outlier cases for both inpatient operating and inpatient capital-
related payments. The outlier threshold for FY 2021 is in section 
II.A. of this Addendum. For FY 2021, a case will qualify as a cost 
outlier if the cost for the case plus the (operating) IME and DSH 
payments (including both the empirically justified Medicare DSH 
payment and the estimated uncompensated care payment, as discussed 
in section II.A.4.j. of this Addendum) is greater than the 
prospective payment rate for the MS-DRG plus the fixed-loss amount 
of $29,051.
    Currently, as provided under Sec.  412.304(c)(2), we pay a new 
hospital 85 percent of its reasonable costs during the first 2 years 
of operation, unless it elects to receive payment based on 100 
percent of the capital Federal rate. Effective with the third year 
of operation, we pay the hospital based on 100 percent of the 
capital Federal rate (that is, the same methodology used to pay all 
other hospitals subject to the capital PPS).

C. Capital Input Price Index

1. Background

    Like the operating input price index, the capital input price 
index (CIPI) is a fixed-weight price index that measures the price 
changes associated with capital costs during a given year. The CIPI 
differs from the operating input price index in one important 
aspect--the CIPI reflects the vintage nature of capital, which is 
the acquisition and use of capital over time. Capital expenses in 
any given year are determined by the stock of capital in that year 
(that is, capital that remains on hand from all current and prior 
capital acquisitions). An index measuring capital price changes 
needs to reflect this vintage nature of capital. Therefore, the CIPI 
was developed to capture the vintage nature of capital by using a 
weighted-average of past capital purchase prices up to and including 
the current year.
    We periodically update the base year for the operating and 
capital input price indexes to reflect the changing composition of 
inputs for operating and capital expenses. For this FY 2021 IPPS/
LTCH PPS final rule, we use the IPPS operating and capital market 
baskets that reflect a 2014 base year. For a complete discussion of 
the development of these market baskets, we refer readers to section 
IV. of the preamble of the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38170).

2. Forecast of the CIPI for FY 2021

    Based on IHS Global Inc.'s second quarter 2020 forecast, for 
this FY 2021 IPPS/LTCH PPS final rule, we are forecasting the 2014-
based CIPI to increase 1.1 percent in FY 2021. This reflects a 
projected 1.6 percent increase in vintage-weighted depreciation 
prices (building and fixed equipment, and movable equipment), and a 
projected 1.7 percent increase in other capital expense prices in FY 
2021, partially offset by a projected 1.7 percent decline in 
vintage-weighted interest expense prices in FY 2021. The weighted 
average of these three factors produces the forecasted 1.1 percent 
increase for the 2014-based CIPI in FY 2021. As proposed, we are 
using the more recent data available for this final rule to 
determine the FY 2021 increase in the 2014-based CIPI for the final 
rule.

IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase 
Percentages for FY 2021

    Payments for services furnished in children's hospitals, 11 
cancer hospitals, and hospitals located outside the 50 States, the 
District of Columbia and Puerto Rico (that is, short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa) that are excluded from the IPPS 
are made on the basis of reasonable costs based on the hospital's 
own historical cost experience, subject to a rate-of-increase 
ceiling. A per discharge limit (the target amount, as defined in 
Sec.  413.40(a) of the regulations) is set for each hospital, based 
on the hospital's own cost experience in its base year, and updated 
annually by a rate-of-increase percentage specified in Sec.  
413.40(c)(3). In addition, as specified in the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38536), effective for cost reporting periods 
beginning during FY 2018, the annual update to the target amount for 
extended neoplastic disease care hospitals (hospitals described in 
Sec.  412.22(i) of the regulations) also is the rate-of-increase 
percentage specified in Sec.  413.40(c)(3). (We note that, in 
accordance with Sec.  403.752(a), religious nonmedical health care 
institutions (RNHCIs) are also subject to the rate-of

[[Page 59049]]

increase limits established under Sec.  413.40 of the regulations.)
    For the FY 2021 IPPS/LTCH PPS proposed rule, based on IGI's 
fourth quarter 2019 forecast, we estimated that the 2014-based IPPS 
operating market basket update for FY 2021 would be 3.0 percent 
(that is, the estimate of the market basket rate-of-increase). Based 
on this estimate, we stated in the proposed rule that the FY 2021 
rate-of-increase percentage that would be applied to the FY 2020 
target amounts in order to calculate the FY 2021 target amounts for 
children's hospitals, the 11 cancer hospitals, RNCHIs, short-term 
acute care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa, and extended 
neoplastic disease care hospitals would be 3.0 percent, in 
accordance with the applicable regulations at 42 CFR 413.40. 
However, we proposed that if more recent data became available for 
the final rule, we would use them, as appropriate, to calculate the 
IPPS operating market basket update for FY 2021. For this FY 2021 
IPPS/LTCH PPS final rule, based on IGI's 2020 second quarter 
forecast, the 2014-based IPPS operating market basket update for FY 
2021 is 2.4 percent (that is, the estimate of the market basket 
rate-of-increase). Therefore, the FY 2021 rate-of-increase 
percentage that will be applied to the FY 2020 target amounts in 
order to calculate the FY 2021 target amounts for children's 
hospitals, the 11 cancer hospitals, RNCHIs, extended neoplastic 
disease care hospitals, and short-term acute care hospitals located 
in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and 
American Samoa is 2.4 percent, in accordance with the applicable 
regulations at 42 CFR 413.40.
    IRFs and rehabilitation distinct part units, IPFs and 
psychiatric distinct part units, and LTCHs are excluded from the 
IPPS and paid under their respective PPSs. The IRF PPS, the IPF PPS, 
and the LTCH PPS are updated annually. We refer readers to section 
VII. of the preamble of this final rule and section V. of the 
Addendum to this final rule for the updated changes to the Federal 
payment rates for LTCHs under the LTCH PPS for FY 2021. The annual 
updates for the IRF PPS and the IPF PPS are issued by the agency in 
separate Federal Register documents.
    We did not receive public comments related to the rate-of-
increase percentage used to determine the target amounts for 
excluded hospitals for FY 2021. Therefore, for the reasons set forth 
in this final rule and in the FY 2021 IPPS/LTCH PPS proposed rule, 
we are finalizing as proposed, without modification, our policy for 
updating the target amounts for the excluded hospitals discussed in 
this section.

V. Changes to the Payment Rates for the LTCH PPS for FY 2021

A. LTCH PPS Standard Federal Payment Rate for FY 2021

1. Overview

    In section VII. of the preamble of this final rule, we discuss 
our annual updates to the payment rates, factors, and specific 
policies under the LTCH PPS for FY 2021.
    Under Sec.  412.523(c)(3) of the regulations, for LTCH PPS FYs 
2012 through 2020, we updated the standard Federal payment rate by 
the most recent estimate of the LTCH PPS market basket at that time, 
including additional statutory adjustments required by sections 
1886(m)(3) (citing sections 1886(b)(3)(B)(xi)(II), and 1886(m)(4) of 
the Act as set forth in the regulations at Sec.  412.523(c)(3)(viii) 
through (xv)). (For a summary of the payment rate development prior 
to FY 2012, we refer readers to the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38310 through 38312) and references therein.)
    Section 1886(m)(3)(A) of the Act specifies that, for rate year 
2012 and each subsequent rate year, any annual update to the 
standard Federal payment rate shall be reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act 
(which we refer to as ``the multifactor productivity (MFP) 
adjustment'') as discussed in section VII.C.2 of the preamble of 
this final rule.
    This section of the Act further provides that the application of 
section 1886(m)(3)(B) of the Act may result in the annual update 
being less than zero for a rate year, and may result in payment 
rates for a rate year being less than such payment rates for the 
preceding rate year. (As noted in section VII.C.2. of the preamble 
of this final rule, the annual update to the LTCH PPS occurs on 
October 1 and we have adopted the term ``fiscal year'' (FY) rather 
than ``rate year'' (RY) under the LTCH PPS beginning October 1, 
2010. Therefore, for purposes of clarity, when discussing the annual 
update for the LTCH PPS, including the provisions of the Affordable 
Care Act, we use the term ``fiscal year'' rather than ``rate year'' 
for 2011 and subsequent years.)
    For LTCHs that fail to submit the required quality reporting 
data in accordance with the LTCH QRP, the annual update is reduced 
by 2.0 percentage points as required by section 1886(m)(5) of the 
Act.

2. Development of the FY 2021 LTCH PPS Standard Federal Payment Rate

    Consistent with our historical practice, for FY 2021, as we 
proposed, we are applying the annual update to the LTCH PPS standard 
Federal payment rate from the previous year. Furthermore, in 
determining the LTCH PPS standard Federal payment rate for FY 2021, 
we also are making certain regulatory adjustments, consistent with 
past practices. Specifically, in determining the FY 2021 LTCH PPS 
standard Federal payment rate, as we proposed, we are applying a 
budget neutrality adjustment factor for the changes related to the 
area wage level adjustment (that is, changes to the wage data, 
labor-related share, and geographic labor-market area designations, 
and the 5-percent cap on any decrease in a LTCH's wage index 
transition policy) as discussed in section V.B.6 of this Addendum to 
this final rule. In addition, as we proposed, we applied the 
permanent budget neutrality adjustment factor (applied to LTCH PPS 
standard Federal payment rate cases only) for the cost of the 
elimination of the 25-percent threshold policy for FY 2021 
(discussed in section VII.D. of the preamble of this final rule).
    In this final rule, we are establishing an annual update to the 
LTCH PPS standard Federal payment rate of 2.3 percent. Accordingly, 
as reflected in Sec.  412.523(c)(3)(xvii), we are applying a factor 
of 1.023 to the FY 2020 LTCH PPS standard Federal payment rate of 
$42,677.64 to determine the FY 2021 LTCH PPS standard Federal 
payment rate. Also, as reflected in Sec.  412.523(c)(3)(xvii), 
applied in conjunction with the provisions of Sec.  412.523(c)(4), 
we are required to reduce the annual update to the LTCH PPS standard 
Federal payment rate by 2.0 percentage points for LTCHs that fail to 
submit the required quality reporting data for FY 2021 as required 
under the LTCH QRP. Therefore, we are establishing an annual update 
to the LTCH PPS standard Federal payment rate of 0.3 percent (that 
is, an update factor of 1.003) for FY 2021 for LTCHs that fail to 
submit the required quality reporting data for FY 2021 as required 
under the LTCH QRP. Additionally, as discussed in VII.C. of the 
preamble of this final rule, we are applying a permanent budget 
neutrality adjustment factor of 0.991249 to the LTCH PPS standard 
Federal payment rate for the cost of the elimination of the 25-
percent threshold policy for FY 2021 and subsequent years after 
removing the temporary budget neutrality adjustment factor of 
0.990737 that was applied to the LTCH PPS standard Federal payment 
rate for the cost of the elimination of the 25-percent threshold 
policy for FY 2020 (or a factor of 1.000517, calculated as 1/
0.990737 x 0.991249). Consistent with Sec.  412.523(d)(4), we also 
are applying an area wage level budget neutrality factor to the FY 
2021 LTCH PPS standard Federal payment rate of 1.0016837, based on 
the best available data at this time, to ensure that any changes to 
the general updates to the area wage level adjustment (that is, the 
annual update of the wage index, including any changes to the 
geographic labor-market area designations and labor-related share) 
would not result in any change (increase or decrease) in estimated 
aggregate LTCH PPS standard Federal payment rate payments. 
Accordingly, we are establishing an LTCH PPS standard Federal 
payment rate of $43,755.34 (calculated as $42,677.64 x 1.000517 x 
1.023 x 1.0016837 for FY 2021 (calculations performed on unrounded 
numbers). For LTCHs that fail to submit quality reporting data for 
FY 2021, in accordance with the requirements of the LTCH QRP under 
section 1866(m)(5) of the Act, we are establishing an LTCH PPS 
standard Federal payment rate of $42,899.90 (calculated as 
$42,677.64 x 1.000517 x 1.003 x 1.0016837) (calculations performed 
on unrounded numbers) for FY 2021.

B. Adjustment for Area Wage Levels Under the LTCH PPS for FY 2021

1. Background

    Under the authority of section 123 of the BBRA, as amended by 
section 307(b) of the BIPA, we established an adjustment to the LTCH 
PPS standard Federal payment rate to account for differences in LTCH 
area wage levels under Sec.  412.525(c). The labor-related share of 
the LTCH PPS standard Federal payment rate is adjusted to account 
for geographic differences in area wage levels by applying the 
applicable LTCH PPS wage index. The applicable LTCH PPS wage index 
is computed using wage data from inpatient acute care hospitals 
without regard to

[[Page 59050]]

reclassification under section 1886(d)(8) or section 1886(d)(10) of 
the Act.
    The FY 2021 LTCH PPS standard Federal payment rate wage index 
values that would be applicable for LTCH PPS standard Federal 
payment rate discharges occurring on or after October 1, 2020, 
through September 30, 2021, are presented in Table 12A (for urban 
areas) and Table 12B (for rural areas), which are listed in section 
VI. of the Addendum to this final rule and available via the 
internet on the CMS website.

2. Geographic Classifications (Labor Market Areas) for the LTCH PPS 
Standard Federal Payment Rate

    In adjusting for the differences in area wage levels under the 
LTCH PPS, the labor-related portion of an LTCH's Federal prospective 
payment is adjusted by using an appropriate area wage index based on 
the geographic classification (labor market area) in which the LTCH 
is located. Specifically, the application of the LTCH PPS area wage 
level adjustment under existing Sec.  412.525(c) is made based on 
the location of the LTCH--either in an ``urban area,'' or a ``rural 
area,'' as defined in Sec.  412.503. Under Sec.  412.503, an ``urban 
area'' is defined as a Metropolitan Statistical Area (MSA) (which 
includes a Metropolitan division, where applicable), as defined by 
the Executive OMB and a ``rural area'' is defined as any area 
outside of an urban area (75 FR 37246).
    The CBSA-based geographic classifications (labor market area 
definitions) currently used under the LTCH PPS, effective for 
discharges occurring on or after October 1, 2014, are based on the 
OMB labor market area delineations based on the 2010 Decennial 
Census data. In general, the current statistical areas (which were 
implemented beginning with FY 2015) are based on revised OMB 
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01. 
(As noted elsewhere in this final rule, we have adopted minor 
revisions and updates in the years between the decennial censuses.) 
We adopted these labor market area delineations because they were at 
that time based on the best available data that reflect the local 
economies and area wage levels of the hospitals that are currently 
located in these geographic areas. We also believed that these OMB 
delineations would ensure that the LTCH PPS area wage level 
adjustment most appropriately accounted for and reflected the 
relative hospital wage levels in the geographic area of the hospital 
as compared to the national average hospital wage level. We noted 
that this policy was consistent with the IPPS policy adopted in FY 
2015 under Sec.  412.64(b)(1)(ii)(D) of the regulations (79 FR 49951 
through 49963). (For additional information on the CBSA-based labor 
market area (geographic classification) delineations currently used 
under the LTCH PPS and the history of the labor market area 
definitions used under the LTCH PPS, we refer readers to the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50180 through 50185).)
    In general, it is our historical practice to update the CBSA-
based labor market area delineations annually based on the most 
recent updates issued by OMB. Generally, OMB issues major revisions 
to statistical areas every 10 years, based on the results of the 
decennial census.
    However, OMB occasionally issues minor updates and revisions to 
statistical areas in the years between the decennial censuses. OMB 
Bulletin No. 17-01, issued August 15, 2017, established the 
delineations for the Nation's statistical areas, and the 
corresponding changes to the CBSA-based labor market areas were 
adopted in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41731). A 
copy of this bulletin may be obtained on the website at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2017/b-17-01.pdf.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42642), we 
adopted our current policy, that is, the continued use of the CBSA-
based labor market area delineations as established in OMB Bulletin 
17-01 and adopted in the FY 2019 IPPS/LTCH PPS final rule.
    On April 10, 2018, OMB issued OMB Bulletin No. 18-03, which 
superseded the August 15, 2017 OMB Bulletin No. 17-01. On September 
14, 2018, OMB issued OMB Bulletin No. 18-04, which superseded the 
April 10, 2018 OMB Bulletin No. 18-03. These bulletins established 
revised delineations for Metropolitan Statistical Areas, 
Micropolitan Statistical Areas, and Combined Statistical Areas, and 
provided guidance on the use of the delineations of these 
statistical areas based on the standards published on June 28, 2010 
(75 FR 37246), and Census Bureau data. A copy of the September 14, 
2018 OMB Bulletin No. 18-04, may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf. 
(We note, on March 6, 2020 OMB issued OMB Bulletin 20-01 (available 
on the web at https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf), and as discussed later in this section of this 
rule was not issued in time for development of the proposed rule.) 
While OMB Bulletin No. 18-04 is not based on new census data, it 
includes some material changes to the OMB statistical area 
delineations, including some new CBSAs, urban counties that would 
become rural, rural counties that would become urban, and existing 
CBSAs that would be split apart.
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32920 through 
32921), we proposed to adopt the revised delineations announced in 
OMB Bulletin No. 18-04 effective for FY 2021 under the LTCH PPS. We 
did not receive any public comments on this proposal. Therefore, in 
this final rule, under the authority of section 123 of the BBRA, as 
amended by section 307(b) of the BIPA, we are adopting the revised 
delineations announced in OMB Bulletin No. 18-04 effective for FY 
2021 under the LTCH PPS, as we proposed, without modification. As 
noted previously, the March 6, 2020 OMB Bulletin 20-01 was not 
issued in time for development of the proposed rule. The minor 
updates included in OMB Bulletin 20-01 do not alter the urban or 
rural status of any county, and do not impact our updates to the 
CBSA-based labor market area delineations discussed in this section 
of the rule. Our adoption of the revised delineations announced in 
OMB Bulletin No. 18-04 is consistent with the changes under the IPPS 
for FY 2021 as discussed in section III.A.2. of the preamble of this 
final rule. A summary of these changes is presented in the 
discussion that follows in this section. For complete details on the 
changes we refer readers to section III.A.2. of the preamble of this 
final rule.

a. Urban Counties That Will Become Rural Under the Revised OMB 
Delineations

    Under the revised OMB labor market area delineations, 34 
counties (and county equivalents) currently considered part of an 
urban CBSA will be considered to be located in a rural area 
beginning in FY 2021 under our adoption of the revisions to the OMB 
delineations based on OMB Bulletin No. 18-04. The chart in section 
III.A.2.ii. of the preamble of this final rule lists the 34 urban 
counties that will be rural under these revisions to the OMB 
delineations.

b. Rural Counties That Will Become Urban Under the Revised OMB 
Delineations

    Under the revised labor market area delineations shows that a 
total of 47 counties (and county equivalents) located in rural areas 
that will be located in urban areas beginning in FY 2021 under our 
adoption of the revisions to the OMB delineations based on OMB 
Bulletin No. 18-04. The chart in section III.A.2.iii. of the 
preamble of this final rule lists the 47 rural counties that will be 
urban under these revised OMB delineations.

c. Urban Counties That Will Move to a Different Urban CBSA Under the 
Revised OMB Delineations

    In addition to rural counties becoming urban and urban counties 
becoming rural, some urban counties will shift from one urban CBSA 
to another urban CBSA under our adoption of the revised delineations 
announced in OMB Bulletin No. 18-04. In other cases, the adoption of 
the revised delineations announced in OMB Bulletin No. 18-04 will 
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) will experience both a change to its number 
and its name, and become CBSA 19430 (Dayton-Kettering, OH), while 
all of its three constituent counties will remain the same. In other 
cases, only the name of the CBSA will be modified, and none of the 
currently assigned counties will be reassigned to a different urban 
CBSA. The chart in section III.A.2.iii. of the preamble of this 
final rule lists the CBSAs where only the name and/or CBSA number 
changed.
    There are also counties that will shift between existing and new 
CBSAs, changing the constituent makeup of the CBSAs, under our 
adoption of the revisions to the OMB delineations based on OMB 
Bulletin No. 18-04. For example, some CBSAs will be split into 
multiple new CBSAs, or a CBSA will lose one or more counties to 
other urban CBSAs. The chart in section III.A.2.iv. of the preamble 
of this final rule lists the urban counties that will move from one 
urban CBSA to a new or modified CBSA under our after adoption of 
these revisions to the OMB delineations.

[[Page 59051]]

    We believe these revisions to the CBSA-based labor market area 
delineations as established in OMB Bulletin 18-04 will ensure that 
the LTCH PPS area wage level adjustment most appropriately accounts 
for and reflects the relative hospital wage levels in the geographic 
area of the hospital as compared to the national average hospital 
wage level based on the best available data that reflect the local 
economies and area wage levels of the hospitals that are currently 
located in these geographic areas (81 FR 57298). Therefore, as we 
proposed, we are adopting the revisions announced in OMB Bulletin 
No. 18-04 to the CBSA-based labor market area delineations under the 
LTCH PPS, effective October 1, 2020. Accordingly, the FY 2021 LTCH 
PPS wage index values in Tables 12A and 12B listed in section VI. of 
the Addendum to this final rule (which are available via the 
internet on the CMS website) reflect the revisions to the CBSA-based 
labor market area delineations previously described. We note that, 
as discussed in section III.A.2. of the preamble of this final rule, 
these revisions to the CBSA-based delineations also are being 
adopted under the IPPS.
    As indicated previously, overall, we believe that our adoption 
of the revised delineations announced in OMB Bulletin No. 18-04 will 
result in LTCH PPS wage index values being more representative of 
the actual costs of labor in a given area. However, we also 
recognize that some LTCHs will experience decreases in their area 
wage index values as a result of adopting the revisions to the OMB 
delineations. We also realize that many LTCHs will have higher area 
wage index values under our adoption of these revisions to the OMB 
delineations. To mitigate the impact upon LTCHs, we have in the past 
provided for transition periods when adopting changes that have 
significant payment implications, particularly large negative 
impacts. While we believe that using the new OMB delineations will 
create a more accurate payment adjustment for differences in area 
wage levels, as we discussed in the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32921), we also recognize that adopting such changes may 
cause some short-term instability in LTCH PPS payments. Therefore, 
we proposed a transition policy to help mitigate any significant 
negative impacts that LTCHs may experience due to our proposal to 
adopt the revised OMB delineations under the LTCH PPS. Consistent 
with past practice, we proposed that this transition would be 
implemented in a budget neutral manner. As discussed in section 
V.B.5. of the Addendum to this final rule, as we proposed, we are 
establishing a transition policy to help mitigate any significant 
negative impacts that LTCHs may experience due to our adoption of 
the revised OMB delineations under the LTCH PPS. Consistent with 
past practice, this transition will be implemented in a budget 
neutral manner, as discussed in section V.B.6. of the Addendum to 
this final rule.

3. Labor-Related Share for the LTCH PPS Standard Federal Payment Rate

    Under the payment adjustment for the differences in area wage 
levels under Sec.  412.525(c), the labor-related share of an LTCH's 
standard Federal payment rate payment is adjusted by the applicable 
wage index for the labor market area in which the LTCH is located. 
The LTCH PPS labor-related share currently represents the sum of the 
labor-related portion of operating costs and a labor-related portion 
of capital costs using the applicable LTCH market basket. Additional 
background information on the historical development of the labor-
related share under the LTCH PPS can be found in the RY 2007 LTCH 
PPS final rule (71 FR 27810 through 27817 and 27829 through 27830) 
and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51766 through 51769 
and 51808).
    For FY 2013, we rebased and revised the market basket used under 
the LTCH PPS by adopting a 2009-based LTCH market basket. In 
addition, beginning in FY 2013, we determined the labor-related 
share annually as the sum of the relative importance of each labor-
related cost category of the 2009-based LTCH market basket for the 
respective fiscal year based on the best available data. (For more 
details, we refer readers to the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53477 through 53479).) Then, effective for FY 2017, we 
rebased and revised the 2009-based LTCH market basket to reflect a 
2013 base year and determined the labor-related share annually as 
the sum of the relative importance of each labor-related cost 
category in the 2013-based LTCH market basket using the most recent 
available data. (For more details, we refer readers to the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57085 through 57096).)
    As noted previously in section V.A. in this Addendum to this 
final rule, effective for FY 2021, as we proposed, we are rebasing 
and revising the 2013-based LTCH market basket to reflect a 2017 
base year. In addition, as discussed in section VII.D.6. of the 
preamble of this final rule, as we proposed, we are establishing 
that the LTCH PPS labor-related share for FY 2021 is the sum of the 
FY 2021 relative importance of each labor-related cost category in 
the 2017-based LTCH market basket using the most recent available 
data. For more information on comments related to our proposed 
labor-related share as well as our responses to those comments, we 
refer readers to section VII.D.6. of the preamble of this final 
rule. Also as we proposed, consistent with our historical practice, 
we are using the most recent data available to determine the final 
FY 2021 labor-related share in this final rule.
    Table E9 in section VII.D.6. of the preamble of this final rule 
shows the FY 2021 labor-related share using the 2017-based LTCH 
market basket and the FY 2020 labor-related share using the 2013-
based LTCH market basket. The labor-related share for FY 2021 is the 
sum of the relative importance of Wages and Salaries; Employee 
Benefits; Professional Fees: Labor-Related; Administrative and 
Facilities Support Services; Installation, Maintenance, and Repair 
Services; All Other: Labor-related Services; and a portion of the 
Capital-Related cost weight from the 2017-based LTCH market basket. 
The relative importance reflects the different rates of price change 
for these cost categories between the base year (2017) and FY 2021. 
Based on IHS Global Inc.'s second quarter 2020 forecast of the 2017-
based LTCH market basket, the sum of the FY 2021 relative importance 
for Wages and Salaries, Employee Benefits, Professional Fees: Labor-
related, Administrative and Facilities Support Services, 
Installation Maintenance & Repair Services, and All Other: Labor-
related Services is 63.7 percent. The portion of Capital-Related 
costs that is influenced by the local labor market is estimated to 
be 46 percent, which is the same percentage applied to the 2013-
based LTCH market basket. Since the FY 2021 relative importance for 
Capital-Related is 9.5 percent based on IHS Global Inc.'s second 
quarter 2020 forecast of the 2017-based LTCH market basket, we took 
46 percent of 9.5 percent to determine the labor-related share of 
Capital-Related for FY 2021 of 4.4 percent. Therefore, consistent 
with our proposal, we are establishing a total labor-related share 
for FY 2021 of 68.1 percent (the sum of 63.7 percent for the 
operating cost and 4.4 percent for the labor-related share of 
Capital-Related). The total difference between the FY 2021 labor-
related share using the 2017-based LTCH market basket and the FY 
2020 labor-related share using the 2013-based LTCH market basket is 
1.8 percentage points (68.1 percent and 66.3 percent, respectively). 
As discussed in greater detail in section VII.D.6. of the preamble 
of this final rule, this difference is attributable to the revision 
to the base year cost weights, the revision to the starting point of 
the calculation of relative importance (base year) from 2013 to 
2017, and the use of an updated IHS Global Inc. forecast and 
reflecting an additional year of inflation.

4. Wage Index for FY 2021 for the LTCH PPS Standard Federal Payment 
Rate

    Historically, we have established LTCH PPS area wage index 
values calculated from acute care IPPS hospital wage data without 
taking into account geographic reclassification under sections 
1886(d)(8) and 1886(d)(10) of the Act (67 FR 56019). The area wage 
level adjustment established under the LTCH PPS is based on an 
LTCH's actual location without regard to the ``urban'' or ``rural'' 
designation of any related or affiliated provider.
    In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42643), we 
calculated the FY 2020 LTCH PPS area wage index values using the 
same data used for the FY 2020 acute care hospital IPPS (that is, 
data from cost reporting periods beginning during FY 2016), without 
taking into account geographic reclassification under sections 
1886(d)(8) and 1886(d)(10) of the Act, as these were the most recent 
complete data available at that time. In that same final rule, we 
indicated that we computed the FY 2020 LTCH PPS area wage index 
values, consistent with the urban and rural geographic 
classifications (labor market areas) that were in place at that time 
and consistent with the pre-reclassified IPPS wage index policy 
(that is, our historical policy of not taking into account IPPS 
geographic reclassifications in determining payments under the LTCH 
PPS). As with the IPPS wage index, wage data for multicampus 
hospitals with campuses located in different labor market areas 
(CBSAs) are apportioned to each CBSA where the campus (or campuses) 
are located. We also continued to use our existing policy for 
determining area

[[Page 59052]]

wage index values for areas where there are no IPPS wage data.
    Consistent with our historical methodology, to determine the 
applicable area wage index values for the FY 2021 LTCH PPS standard 
Federal payment rate, under the broad authority of section 123 of 
the BBRA, as amended by section 307(b) of the BIPA, as we proposed, 
we are continuing to employ our historical practice of using the 
same data we used to compute the FY 2021 acute care hospital 
inpatient wage index, as discussed in section III. of the preamble 
of this final rule, that is wage data collected from cost reports 
submitted by IPPS hospitals for cost reporting periods beginning 
during FY 2017, because these data are the most recent complete data 
available.
    In addition, as we proposed, we computed the FY 2021 LTCH PPS 
standard Federal payment rate area wage index values consistent with 
the ``urban'' and ``rural'' geographic classifications (that is, the 
labor market area delineations, including the updates, as previously 
discussed in section V.B. of this Addendum) and our historical 
policy of not taking into account IPPS geographic reclassifications 
under sections 1886(d)(8) and 1886(d)(10) of the Act in determining 
payments under the LTCH PPS. As we proposed, we also continued to 
apportion the wage data for multicampus hospitals with campuses 
located in different labor market areas to each CBSA where the 
campus or campuses are located, consistent with the IPPS policy. 
Lastly, consistent with our existing methodology for determining the 
LTCH PPS wage index values and as we proposed, for FY 2021 we 
continued to use our existing policy for determining area wage index 
values for areas where there are no IPPS wage data. Under our 
existing methodology, the LTCH PPS wage index value for urban CBSAs 
with no IPPS wage data is determined by using an average of all of 
the urban areas within the State, and the LTCH PPS wage index value 
for rural areas with no IPPS wage data is determined by using the 
unweighted average of the wage indices from all of the CBSAs that 
are contiguous to the rural counties of the State.
    Based on the FY 2017 IPPS wage data that we used to determine 
the FY 2021 LTCH PPS standard Federal payment rate area wage index 
values in this final rule, there are no IPPS wage data for the urban 
area of Hinesville, GA (CBSA 25980). Consistent with our existing 
methodology, we calculated the FY 2021 wage index value for CBSA 
25980 as the average of the wage index values for all of the other 
urban areas within the State of Georgia (that is, CBSAs 10500, 
12020, 12060, 12260, 15260, 16860, 17980, 19140, 23580, 31420, 
40660, 42340, 46660 and 47580), as shown in Table 12A, which is 
listed in section VI. of the Addendum to this final rule and 
available via the internet on the CMS website.
    Based on the FY 2017 IPPS wage data that we used to determine 
the FY 2021 LTCH PPS standard Federal payment rate area wage index 
values in this final rule, there are no rural areas without IPPS 
hospital wage data. Therefore, it is not necessary to use our 
established methodology to calculate a LTCH PPS standard Federal 
payment rate wage index value for rural areas with no IPPS wage data 
for FY 2021. We note that, as IPPS wage data are dynamic, it is 
possible that the number of rural areas without IPPS wage data will 
vary in the future.

5. Transition Wage Index for LTCHs Negatively Impacted

    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32922), overall, we believe that our proposal to adopt the revised 
OMB delineations announced in Bulletin No. 18-04 for FY 2021 would 
result in LTCH PPS wage index values being more representative of 
the actual costs of labor in a given area. However, we also 
recognize that some LTCHs would experience decreases in their area 
wage index values as a result of our proposal. We also realize that 
some LTCHs would have higher area wage index values under our 
proposal.
    To mitigate the potential impacts of policies on LTCHs, as we 
explained in the FY 2021 IPPS/LTCH PPS proposed final rule, we have 
in the past provided for transition periods when adopting changes 
that have significant payment implications, particularly large 
negative impacts. For example, we have proposed and finalized budget 
neutral transition policies to help mitigate negative impacts on 
LTCHs following the adoption of the new CBSA delineations based on 
the 2010 decennial census data in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50185). Specifically, we implemented a 1-year 50/50 
blended wage index for any LTCHs that experienced a decrease in wage 
index values due to our adoption of the revised delineations. This 
required calculating and comparing two wage indexes for each LTCH 
since that blended wage index was computed as the sum of 50 percent 
of the FY 2015 LTCH PPS wage index values under the FY 2014 CBSA 
delineations and 50 percent of the FY 2015 LTCH PPS wage index 
values under the FY 2015 new OMB delineations. While we believed 
that using the new OMB delineations would ultimately create a more 
accurate payment adjustment for differences in area wage levels, we 
also recognized that adopting such changes may cause some short-term 
instability in LTCH PPS payments. Similar instability may result 
from the wage policies herein, in particular for LTCHs that would be 
negatively impacted by the adoption of the updates to the OMB 
delineations. For example, LTCH's currently located in CBSA 35614 
(New York-Jersey City-White Plains, NY-NJ) that would be located in 
new CBSA 35154 (New Brunswick-Lakewood, NJ) under the changes to the 
CBSA-based labor market area delineations would experience a nearly 
17 percent decrease in the wage index as a result of the change. (85 
FR 32922)
    Consistent with our past practice of implementing transition 
policies to help mitigate negative impacts on hospitals following 
the adoption of the new CBSA delineations, we proposed that if we 
adopt the revised delineations announced in OMB Bulletin 18-04, it 
would be appropriate to implement a transition policy since, as 
mentioned previously, some of these revisions are material, and may 
negatively impact payments to LTCHs. Similar to the proposed policy 
under the IPPS for the adoption of the revised delineations 
announced in OMB Bulletin 18-04 discussed in section III.A.2. of the 
preamble to the proposed rule, we believe applying a 5-percent cap 
on any decrease in an LTCH's wage index from the LTCH's final wage 
index from the prior fiscal year would be an appropriate transition 
for FY 2021 for the revised OMB delineations as it provides 
transparency and predictability in payment levels from FY 2020 to 
the upcoming FY 2021. The FY 2021 5-percent cap on wage index 
decreases would be applied to all LTCHs that have any decrease in 
their wage indexes, regardless of the circumstance causing the 
decline. Given the significant portion of Medicare LTCH PPS payments 
that are adjusted by the wage index and how relatively few LTCHs 
generally see wage index declines in excess of 5 percent, LTCHs may 
have difficulty adapting to changes in the wage index of this 
magnitude all at once. For these reasons, in the FY 2021 IPPS/LTCH 
PPS proposed rule (85 FR 32922), under the authority of section 123 
of the BBRA, as amended by section 307(b) of the BIPA, we proposed 
to apply a 5-percent cap on any decrease in a LTCH's wage index from 
the LTCH's wage index from the prior fiscal year such that that an 
LTCH's final wage index for FY 2021 would not be less than 95 
percent of its final wage index for FY 2020. This transition would 
allow the effects of our adoption of the revised CBSA delineations 
to be phased in over 2 years, where the estimated reduction in an 
LTCH's wage index would be capped at 5 percent in FY 2021 (that is, 
no cap would be applied to the reduction in the wage index for the 
second year (FY 2022)). Because we believe that using the new OMB 
delineations would ultimately create a more accurate payment 
adjustment for differences in area wage levels we did not propose to 
include a cap on the overall increase in an LTCH's wage index value.
    Furthermore, consistent with the requirement at Sec.  
412.525(c)(2) that changes to area wage level adjustments are made 
in a budget neutral manner, we proposed that this 5 percent cap on 
the decrease on an LTCH's wage index would not result in any change 
in estimated aggregate LTCH PPS payments by including the 
application of this policy in the determination of the area wage 
level budget neutrality factor that is applied to the standard 
Federal payment rate, as is discussed in section V.B.6. of the 
Addendum to the proposed rule.
    Comment: A commenter expressed support for the proposed 5-
percent cap on wage index decreases. However, the commenter 
encouraged CMS to also apply a 5-percent cap on wage index increases 
and to implement that policy in a budget neutral manner.
    Another commenter noted that the FY 2021 LTCH PPS Impact File 
that accompanied the proposed rule did not include the proposed wage 
indexes for LTCHs after the 5-percent cap on wage index decreases 
was applied. The commenter recommended that in this final rule, we 
ensure that the wage index value for every LTCH with a final wage 
index value that would decreases by more than 5

[[Page 59053]]

percent show the application of the cap, as we proposed.
    Response: We appreciate the suggestion that the cap on wage 
index changes 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, as 
well as those we have implemented in the past, is to help mitigate 
the significant negative impacts of certain wage index changes. We 
believe that using the new OMB delineations will ultimately create a 
more accurate payment adjustment for differences in area wage levels 
and thus we do not think it would be appropriate to apply the 5 
percent cap on wage index increases as well.
    After consideration of the public comments we received, for the 
reasons discussed above, we are finalizing without modification our 
proposal to apply a 5-percent cap on any decrease in a LTCH's wage 
index from the LTCH's wage index from the prior fiscal year such 
that that an LTCH's final wage index for FY 2021 will not be less 
than 95 percent of its final wage index for FY 2020. In addition we 
are finalizing without modification our proposal adopt the 5 percent 
cap on the decrease on an LTCH's wage index in a budget neutral 
manner by including the application of this policy in the 
determination of the area wage level budget neutrality factor that 
is applied to the standard Federal payment rate, which is discussed 
in section V.B.6. of the Addendum to this final rule.
    In response to the comment that the FY 2021 LTCH PPS Impact File 
that accompanied the proposed rule did not include the LTCH wage 
indexes after the 5-percent cap on wage index decreases was applied, 
we have included in the FY 2021 LTCH PPS Impact File that 
accompanies this final rule the LTCH wage indexes without the 5-
percent cap on wage index decreases applied, as well as the final 
LTCH wage indexes for FY 2021 (which do have the 5-percent cap on 
wage index decreases applied).

6. Budget Neutrality Adjustments for Changes to the LTCH PPS Standard 
Federal Payment Rate Area Wage Level Adjustment

    Historically, the LTCH PPS wage index and labor-related share 
are updated annually based on the latest available data. Under Sec.  
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that 
estimated aggregate LTCH PPS payments are unaffected; that is, will 
be neither greater than nor less than estimated aggregate LTCH PPS 
payments without such changes to the area wage level adjustment. 
Under this policy, we determine an area wage level adjustment budget 
neutrality factor that is applied to the standard Federal payment 
rate to ensure that any changes to the area wage level adjustments 
are budget neutral such that any changes to the area wage index 
values or labor-related share would not result in any change 
(increase or decrease) in estimated aggregate LTCH PPS payments. 
Accordingly, under Sec.  412.523(d)(4), we have applied an area wage 
level adjustment budget neutrality factor in determining the 
standard Federal payment rate, and we also established a methodology 
for calculating an area wage level adjustment budget neutrality 
factor. (For additional information on the establishment of our 
budget neutrality policy for changes to the area wage level 
adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51771 through 51773 and 51809).)
    For FY 2021, in accordance with Sec.  412.523(d)(4), as we 
proposed, we applied an area wage level budget neutrality factor to 
adjust the LTCH PPS standard Federal payment rate to account for the 
estimated effect of the adjustments or updates to the area wage 
level adjustment under Sec.  412.525(c)(1) on estimated aggregate 
LTCH PPS payments, consistent with the methodology we established in 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51773). As discussed 
previously, the 5 percent cap on the decrease on an LTCH's wage 
index will be implemented in a budget neutral manner by including 
the application of that policy in the area wage level a budget 
neutrality factor that is applied to the standard Federal payment 
rate.
    Specifically, as we proposed, we determined an area wage level 
adjustment budget neutrality factor that is applied to the LTCH PPS 
standard Federal payment rate under Sec.  412.523(d)(4) for FY 2021 
using the following methodology:
    Step 1--Simulate estimated aggregate LTCH PPS standard Federal 
payment rate payments using the FY 2020 wage index values, the FY 
2020 labor-related share of 66.3 percent, and the FY 2020 labor 
market area designations.
    Step 2--Simulate estimated aggregate LTCH PPS standard Federal 
payment rate payments using the FY 2021 wage index values based on 
updated hospital wage data, including the 5 percent cap on the 
decrease on an LTCH's wage index, the FY 2021 labor-related share of 
68.1 percent, and the FY 2021 labor market area designations. (As 
noted previously, the changes to the wage index values based on 
updated hospital wage data are discussed in section V.B.4.a. of this 
Addendum to this final rule; the transitional 5 percent cap on the 
decrease on an LTCH's wage index is discussed in section V.B.5. of 
this Addendum to this final rule, the labor-related share is 
discussed in section V.B.3. of this Addendum to this final rule, and 
changes to the geographic labor-market area designations are 
discussed in section V.B.2. of this Addendum to this final rule.)
    Step 3--Calculate the ratio of these estimated total LTCH PPS 
standard Federal payment rate payments by dividing the estimated 
total LTCH PPS standard Federal payment rate payments using the FY 
2020 area wage level adjustments (calculated in Step 1) by the 
estimated total LTCH PPS standard Federal payment rate payments 
using the FY 2021 general updates to the area wage level adjustment 
(calculated in Step 2) to determine the budget neutrality factor for 
general updates to the area wage level adjustment for FY 2021 LTCH 
PPS standard Federal payment rate payments.
    Step 4--Apply the FY 2021 general updates to the area wage level 
adjustment budget neutrality factor from Step 3 to determine the FY 
2021 LTCH PPS standard Federal payment rate after the application of 
the FY 2021 annual update.
    We note that, because the area wage level adjustment under Sec.  
412.525(c) is an adjustment to the LTCH PPS standard Federal payment 
rate, consistent with historical practice, we only used data from 
claims that qualified for payment at the LTCH PPS standard Federal 
payment rate under the dual rate LTCH PPS to calculate the FY 2021 
LTCH PPS standard Federal payment rate area wage level adjustment 
budget neutrality factor. In addition, we note that the estimated 
LTCH PPS standard Federal payment rate used in the calculations in 
Steps 1 through 4 include the permanent one-time budget neutrality 
adjustment factor for the estimated cost of eliminating the 25-
percent threshold policy in FY 2021 and subsequent years (discussed 
in section VII.D. of the preamble of this final rule).
    For this final rule, using the steps in the methodology 
previously described, we determined a FY 2021 LTCH PPS standard 
Federal payment rate area wage level adjustment budget neutrality 
factor of 1.0016837. Accordingly, in section V.A. of the Addendum to 
this final rule, to determine the FY 2021 LTCH PPS standard Federal 
payment rate, we applied the area wage level adjustment budget 
neutrality factor of 1.0016837, in accordance with Sec.  
412.523(d)(4).

C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in 
Alaska and Hawaii

    Under Sec.  412.525(b), a cost-of-living adjustment (COLA) is 
provided for LTCHs located in Alaska and Hawaii to account for the 
higher costs incurred in those States. Specifically, we apply a COLA 
to payments to LTCHs located in Alaska and Hawaii by multiplying the 
nonlabor-related portion of the standard Federal payment rate by the 
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into 
account in the adjustment for area wage levels previously described. 
The methodology used to determine the COLA factors for Alaska and 
Hawaii is based on a comparison of the growth in the Consumer Price 
Indexes (CPIs) for Anchorage, Alaska, and Honolulu, Hawaii, relative 
to the growth in the CPI for the average U.S. city as published by 
the Bureau of Labor Statistics (BLS). It also includes a 25-percent 
cap on the CPI-updated COLA factors. Under our current policy, we 
update the COLA factors using the methodology as previously 
described every 4 years (at the same time as the update to the 
labor-related share of the IPPS market basket), and we last updated 
the COLA factors for Alaska and Hawaii published by OPM for 2009 in 
FY 2018 (82 FR 38539 through 38540).
    We continue to believe that determining updated COLA factors 
using this methodology would appropriately adjust the nonlabor-
related portion of the LTCH PPS standard Federal payment rate for 
LTCHs located in Alaska and Hawaii. Therefore, in the FY 2021 IPPS/
LTCH PPS proposed rule (85 FR 32923 through 32924), for FY 2021, 
under the broad authority conferred upon the

[[Page 59054]]

Secretary by section 123 of the BBRA, as amended by section 307(b) 
of the BIPA, to determine appropriate payment adjustments under the 
LTCH PPS, we proposed to continue to use the COLA factors based on 
the 2009 OPM COLA factors updated through 2016 by the comparison of 
the growth in the CPIs for Anchorage, Alaska, and Honolulu, Hawaii, 
relative to the growth in the CPI for the average U.S. city as 
established in the FY 2018 IPPS/LTCH PPS final rule. (For additional 
details on our current methodology for updating the COLA factors for 
Alaska and Hawaii and for a discussion on the FY 2018 COLA factors, 
we refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38539 through 38540).)
    We did not receive any public comments on our proposal. 
Therefore, we are adopting our proposal, without modification. 
Consistent with our historical practice, we are establishing that 
the COLA factors shown in the following table will be used to adjust 
the nonlabor-related portion of the LTCH PPS standard Federal 
payment rate for LTCHs located in Alaska and Hawaii under Sec.  
412.525(b).
[GRAPHIC] [TIFF OMITTED] TR18SE20.265

D. Adjustment for LTCH PPS High Cost Outlier (HCO) Cases

1. HCO Background

    From the beginning of the LTCH PPS, we have included an 
adjustment to account for cases in which there are extraordinarily 
high costs relative to the costs of most discharges. Under this 
policy, additional payments are made based on the degree to which 
the estimated cost of a case (which is calculated by multiplying the 
Medicare allowable covered charge by the hospital's overall hospital 
CCR) exceeds a fixed-loss amount. This policy results in greater 
payment accuracy under the LTCH PPS and the Medicare program, and 
the LTCH sharing the financial risk for the treatment of 
extraordinarily high-cost cases.
    We retained the basic tenets of our HCO policy in FY 2016 when 
we implemented the dual rate LTCH PPS payment structure under 
section 1206 of Public Law 113-67. LTCH discharges that meet the 
criteria for exclusion from the site neutral payment rate (that is, 
LTCH PPS standard Federal payment rate cases) are paid at the LTCH 
PPS standard Federal payment rate, which includes, as applicable, 
HCO payments under Sec.  412.523(e). LTCH discharges that do not 
meet the criteria for exclusion are paid at the site neutral payment 
rate, which includes, as applicable, HCO payments under Sec.  
412.522(c)(2)(i). In the FY 2016 IPPS/LTCH PPS final rule, we 
established separate fixed-loss amounts and targets for the two 
different LTCH PPS payment rates. Under this bifurcated policy, the 
historic 8-percent HCO target was retained for LTCH PPS standard 
Federal payment rate cases, with the fixed-loss amount calculated 
using only data from LTCH cases that would have been paid at the 
LTCH PPS standard Federal payment rate if that rate had been in 
effect at the time of those discharges. For site neutral payment 
rate cases, we adopted the operating IPPS HCO target (currently 5.1 
percent) and set the fixed-loss amount for site neutral payment rate 
cases at the value of the IPPS fixed-loss amount. Under the HCO 
policy for both payment rates, an LTCH receives 80 percent of the 
difference between the estimated cost of the case and the applicable 
HCO threshold, which is the sum of the LTCH PPS payment for the case 
and the applicable fixed-loss amount for such case.
    In order to maintain budget neutrality, consistent with the 
budget neutrality requirement at Sec.  412.522(d)(1) for HCO 
payments to LTCH PPS standard Federal rate payment cases, we also 
adopted a budget neutrality requirement for HCO payments to site 
neutral payment rate cases by applying a budget neutrality factor to 
the LTCH PPS payment for those site neutral payment rate cases. (We 
refer readers to Sec.  412.522(c)(2)(i) of the regulations for 
further details.) We note that, during the 4-year transitional 
period, the site neutral payment rate HCO budget neutrality factor 
did not apply to the LTCH PPS standard Federal payment rate portion 
of the blended payment rate at Sec.  412.522(c)(3) payable to site 
neutral payment rate cases. (For additional details on the HCO 
policy adopted for site neutral payment rate cases under the dual 
rate LTCH PPS payment structure, including the budget neutrality 
adjustment for HCO payments to site neutral payment rate cases, we 
refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49617 
through 49623).)

2. Determining LTCH CCRs Under the LTCH PPS

a. Background

    As noted previously, CCRs are used to determine payments for HCO 
adjustments for both payment rates under the LTCH PPS and also are 
used to determine payments for site neutral payment rate cases. As 
noted earlier, in determining HCO and the site neutral payment rate 
payments (regardless of whether the case is also an HCO), we 
generally calculate the estimated cost of the case by multiplying 
the LTCH's overall CCR by the Medicare allowable charges for the 
case. An overall CCR is used because the LTCH PPS uses a single 
prospective payment per discharge that covers both inpatient 
operating and capital-related costs. The LTCH's overall CCR is 
generally computed based on the sum of LTCH operating and capital 
costs (as described in Section 150.24, Chapter 3, of the Medicare 
Claims Processing Manual (Pub. 100-4)) as compared to total Medicare 
charges (that is, the sum of its operating and capital inpatient 
routine and ancillary charges), with those values determined from 
either the most recently settled cost report or the most recent 
tentatively settled cost report, whichever is from the latest cost 
reporting period. However, in certain instances, we use an 
alternative CCR, such as the statewide average CCR, a CCR that is 
specified by CMS, or one that is requested by the hospital. (We 
refer readers to Sec.  412.525(a)(4)(iv) of the regulations for 
further details regarding HCO adjustments for either LTCH PPS 
payment rate and Sec.  412.522(c)(1)(ii) for the site neutral 
payment rate.)

[[Page 59055]]

    The LTCH's calculated CCR is then compared to the LTCH total CCR 
ceiling. Under our established policy, an LTCH with a calculated CCR 
in excess of the applicable maximum CCR threshold (that is, the LTCH 
total CCR ceiling, which is calculated as 3 standard deviations from 
the national geometric average CCR) is generally assigned the 
applicable statewide CCR. This policy is premised on a belief that 
calculated CCRs above the LTCH total CCR ceiling are most likely due 
to faulty data reporting or entry, and CCRs based on erroneous data 
should not be used to identify and make payments for outlier cases.

b. LTCH Total CCR Ceiling

    Consistent with our historical practice, as we proposed, we used 
the most recent data available to determine the LTCH total CCR 
ceiling for FY 2021 in this final rule. Specifically, in this final 
rule, using our established methodology for determining the LTCH 
total CCR ceiling based on IPPS total CCR data from the March 2020 
update of the Provider Specific File (PSF), which is the most recent 
data available, we are establishing an LTCH total CCR ceiling of 
1.24 under the LTCH PPS for FY 2021 in accordance with Sec.  
412.525(a)(4)(iv)(C)(2) for HCO cases under either payment rate and 
Sec.  412.522(c)(1)(ii) for the site neutral payment rate. (For 
additional information on our methodology for determining the LTCH 
total CCR ceiling, we refer readers to the FY 2007 IPPS final rule 
(71 FR 48118 through 48119).)
    We did not receive any public comments on our proposals. 
Therefore, we are finalizing our proposals as described above, 
without modification.

c. LTCH Statewide Average CCRs

    Our general methodology for determining the statewide average 
CCRs used under the LTCH PPS is similar to our established 
methodology for determining the LTCH total CCR ceiling because it is 
based on ``total'' IPPS CCR data. (For additional information on our 
methodology for determining statewide average CCRs under the LTCH 
PPS, we refer readers to the FY 2007 IPPS final rule (71 FR 48119 
through 48120).) Under the LTCH PPS HCO policy at Sec.  
412.525(a)(4)(iv)(C), the SSO policy at Sec.  412.529(f)(4)(iii), 
and the site neutral payment rate at Sec.  412.522(c)(1)(ii), the 
MAC may use a statewide average CCR, which is established annually 
by CMS, if it is unable to determine an accurate CCR for an LTCH in 
one of the following circumstances: (1) New LTCHs that have not yet 
submitted their first Medicare cost report (a new LTCH is defined as 
an entity that has not accepted assignment of an existing hospital's 
provider agreement in accordance with Sec.  489.18); (2) LTCHs whose 
calculated CCR is in excess of the LTCH total CCR ceiling; and (3) 
other LTCHs for whom data with which to calculate a CCR are not 
available (for example, missing or faulty data). (Other sources of 
data that the MAC may consider in determining an LTCH's CCR include 
data from a different cost reporting period for the LTCH, data from 
the cost reporting period preceding the period in which the hospital 
began to be paid as an LTCH (that is, the period of at least 6 
months that it was paid as a short-term, acute care hospital), or 
data from other comparable LTCHs, such as LTCHs in the same chain or 
in the same region.)
    Consistent with our historical practice of using the best 
available data, in this final rule, using our established 
methodology for determining the LTCH statewide average CCRs, based 
on the most recent complete IPPS ``total CCR'' data from the March 
2020 update of the PSF, as we proposed, we are establishing LTCH PPS 
statewide average total CCRs for urban and rural hospitals that will 
be effective for discharges occurring on or after October 1, 2020, 
through September 30, 2021, in Table 8C listed in section VI. of the 
Addendum to this final rule (and available via the internet on the 
CMS website). Consistent with our historical practice, as we also 
proposed, we used more recent data to determine the LTCH PPS 
statewide average total CCRs for FY 2021 in this final rule.
    Under the current LTCH PPS labor market areas, all areas in 
Delaware, the District of Columbia, New Jersey, and Rhode Island are 
classified as urban. Therefore, there are no rural statewide average 
total CCRs listed for those jurisdictions in Table 8C. This policy 
is consistent with the policy that we established when we revised 
our methodology for determining the applicable LTCH statewide 
average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through 
48121) and is the same as the policy applied under the IPPS. In 
addition, although Connecticut has areas that are designated as 
rural, in our calculation of the LTCH statewide average CCRs, there 
was no data available from short-term, acute care IPPS hospitals to 
compute a rural statewide average CCR or there were no short-term, 
acute care IPPS hospitals or LTCHs located in these areas as of 
March 2020. Therefore, consistent with our existing methodology, as 
we proposed, we used the national average total CCR for rural IPPS 
hospitals for rural Connecticut in Table 8C. While Massachusetts 
also has rural areas, the statewide average CCR for rural areas in 
Massachusetts is based on one IPPS provider whose CCR is an atypical 
0.949. Because this is much higher than the statewide urban average 
(0.459) and furthermore implies costs are nearly equal to charges, 
as with Connecticut, we used the national average total CCR for 
rural hospitals for hospitals located in rural Massachusetts. 
Furthermore, consistent with our existing methodology, in 
determining the urban and rural statewide average total CCRs for 
Maryland LTCHs paid under the LTCH PPS, as we proposed, we are 
continuing to use, as a proxy, the national average total CCR for 
urban IPPS hospitals and the national average total CCR for rural 
IPPS hospitals, respectively. We are using this proxy because we 
believe that the CCR data in the PSF for Maryland hospitals may not 
be entirely accurate (as discussed in greater detail in the FY 2007 
IPPS final rule (71 FR 48120)).
    We did not receive any public comments on our proposals. 
Therefore, we are finalizing our proposals as described above, 
without modification.

d. Reconciliation of HCO Payments

    Under the HCO policy for cases paid under either payment rate at 
Sec.  412.525(a)(4)(iv)(D), the payments for HCO cases are subject 
to reconciliation. Specifically, any such payments are reconciled at 
settlement based on the CCR that was calculated based on the cost 
report coinciding with the discharge. For additional information on 
the reconciliation policy, we refer readers to Sections 150.26 
through 150.28 of the Medicare Claims Processing Manual (Pub. 100-
4), as added by Change Request 7192 (Transmittal 2111; December 3, 
2010), and the RY 2009 LTCH PPS final rule (73 FR 26820 through 
26821).

3. High-Cost Outlier Payments for LTCH PPS Standard Federal Payment 
Rate Cases

a. Changes to High-Cost Outlier Payments for LTCH PPS Standard Federal 
Payment Rate Cases

    Under the regulations at Sec.  412.525(a)(2)(ii) and as required 
by section 1886(m)(7) of the Act, the fixed-loss amount for HCO 
payments is set each year so that the estimated aggregate HCO 
payments for LTCH PPS standard Federal payment rate cases are 
99.6875 percent of 8 percent (that is, 7.975 percent) of estimated 
aggregate LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases. (For more details on the requirements for high-cost 
outlier payments in FY 2018 and subsequent years under section 
1886(m)(7) of the Act and additional information regarding high-cost 
outlier payments prior to FY 2018, we refer readers to the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38542 through 38544).)

b. Fixed-Loss Amount for LTCH PPS Standard Federal Payment Rate Cases 
for FY 2021

    When we implemented the LTCH PPS, we established a fixed-loss 
amount so that total estimated outlier payments are projected to 
equal 8 percent of total estimated payments under the LTCH PPS (67 
FR 56022 through 56026). When we implemented the dual rate LTCH PPS 
payment structure beginning in FY 2016, we established that, in 
general, the historical LTCH PPS HCO policy would continue to apply 
to LTCH PPS standard Federal payment rate cases. That is, the fixed-
loss amount and target for LTCH PPS standard Federal payment rate 
cases would be determined using the LTCH PPS HCO policy adopted when 
the LTCH PPS was first implemented, but we limited the data used 
under that policy to LTCH cases that would have been LTCH PPS 
standard Federal payment rate cases if the statutory changes had 
been in effect at the time of those discharges.
    To determine the applicable fixed-loss amount for LTCH PPS 
standard Federal payment rate cases, we estimate outlier payments 
and total LTCH PPS payments for each LTCH PPS standard Federal 
payment rate case (or for each case that would have been a LTCH PPS 
standard Federal payment rate case if the statutory changes had been 
in effect at the time of the discharge) using claims data from the 
MedPAR files. In accordance with Sec.  412.525(a)(2)(ii), the 
applicable fixed-loss amount for LTCH PPS standard Federal payment 
rate cases results

[[Page 59056]]

in estimated total outlier payments being projected to be equal to 
7.975 percent of projected total LTCH PPS payments for LTCH PPS 
standard Federal payment rate cases. We use MedPAR claims data and 
CCRs based on data from the most recent PSF (or from the applicable 
statewide average CCR if an LTCH's CCR data are faulty or 
unavailable) to establish an applicable fixed-loss threshold amount 
for LTCH PPS standard Federal payment rate cases.
    In the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32925), we 
proposed to continue to use our current methodology to calculate an 
applicable fixed-loss amount for LTCH PPS standard Federal payment 
rate cases for FY 2021 using the best available data that would 
maintain estimated HCO payments at the projected 7.975 percent of 
total estimated LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases (based on the payment rates and policies for 
these cases presented in the proposed rule).
    Specifically, based on the most recent complete LTCH data 
available at that time (that is, LTCH claims data from the December 
2019 update of the FY 2019 MedPAR file and CCRs from the December 
2019 update of the PSF), we determined a proposed fixed-loss amount 
for LTCH PPS standard Federal payment rate cases for FY 2021 of 
$30,515 that would result in estimated outlier payments projected to 
be equal to 7.975 percent of estimated FY 2021 payments for such 
cases. We also proposed to continue to make an additional HCO 
payment for the cost of an LTCH PPS standard Federal payment rate 
case that exceeds the HCO threshold amount that is equal to 80 
percent of the difference between the estimated cost of the case and 
the outlier threshold (the sum of the proposed adjusted LTCH PPS 
standard Federal payment rate payment and the proposed fixed-loss 
amount for LTCH PPS standard Federal payment rate cases of $30,515).
    Consistent with our historical practice of using the best data 
available, when determining the fixed-loss amount for LTCH PPS 
standard Federal payment rate cases for FY 2021 in the final rule, 
we proposed to use the most recent available LTCH claims data and 
CCR data.
    Comment: Some commenters stated that CMS continues to propose 
increases to the LTCH PPS standard Federal payment rate high cost 
outlier threshold. These commenters noted that an increase in the 
fixed-loss amount will result in reductions of the number of cases 
that qualify as high-cost outliers. One commenter added that the 
proposed increase in the fixed-loss amount would require LTCHs to 
absorb even more costs during a time when they are already 
struggling with high COVID related expenses. Commenters suggested 
that CMS leave the fixed-loss threshold at the FY 2020 amount of 
$26,778.
    Another commenter stated that CMS did not explain the proposed 
increase in the fixed-loss amount from FY 2020 of $26,778 to the FY 
2021 proposed amount of $30,515. The commenter continued by 
indicating that, based on historical experience, the final fixed-
loss amount would likely decrease from the proposed amount but 
expressed concern that the final fixed-loss amount may still reflect 
a significant increase. This commenter also stated that CMS did not 
explain how the charge inflation factor, which is integral to the 
determination of the fixed-loss amount, is calculated, and requested 
that CMS provide more information on how the fixed-loss amount for 
LTCH PPS standard Federal payment rate cases is calculated and the 
reasons for any significant changes.
    Response: We thank the commenters for their input and 
suggestions. In accordance with Sec.  412.525(a)(2)(ii), the 
applicable fixed-loss amount for LTCH PPS standard Federal payment 
rate cases results in estimated total outlier payments being 
projected to be equal to 7.975 percent of projected total LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases. We 
therefore are required by existing regulations to determine a fixed-
loss amount for the fiscal year, based on the most recently 
available data. We project that if the fixed-loss amount was kept at 
the FY 2020 amount of $26,778, outlier payments would be equal to 
8.044 percent of total LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases. Therefore, as described below, an 
increase in the fixed-loss amount for FY 2021 is necessary to 
maintain estimated HCO payments at the projected 7.975 percent of 
total estimated LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases.
    As stated in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32963), consistent with past practice, in calculating estimated high 
cost outlier payments for that proposed rule, we increased estimated 
costs by an inflation factor of 5.4 percent (determined by the 
Office of the Actuary) to update the FY 2019 costs of each case to 
FY 2021. Based on the data available for this final rule, in 
calculating estimated high cost outlier payments for this final 
rule, we increased estimated costs by an inflation factor of 4.3 
percent (determined by the Office of the Actuary) to update the FY 
2019 costs of each case to FY 2021. The charge inflation factor is 
the average value resultant from eight quarterly market basket 
updates. To calculate a two-year charge inflation factor for FY 2021 
for this final rule, consistent with historical practice, we divided 
the average of the four quarter market basket values for FY 2021 
(1.093) by the average of the four quarter market basket values for 
FY 2019 (1.047), which results in a two-year charge inflation factor 
for FY 2021 of 1.043 (calculation performed using unrounded 
numbers). Therefore, consistent with past practice, in determining a 
FY 2021 fixed-loss amount that would result in estimated outlier 
payments for FY 2021 being projected to be equal to 7.975 percent of 
projected total FY 2021 LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases, we inflated the charges on the MedPAR 
claims by 2 years, from FY 2019 to FY 2021, using the two-year 
charge inflation factor of 1.043.
    After consideration of public comments we are finalizing our 
proposals without modification. In addition, consistent with our 
historical practice of using the best data available, as we 
proposed, when determining the fixed-loss amount for LTCH PPS 
standard Federal payment rate cases for FY 2021 in this final rule, 
we used the most recent available LTCH claims data and CCR data.
    For this FY 2021 IPPS/LTCH PPS final rule, we are continuing to 
use our current methodology to calculate an applicable fixed-loss 
amount for LTCH PPS standard Federal payment rate cases for FY 2021 
using the best available data that will maintain estimated HCO 
payments at the projected 7.975 percent of total estimated LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases (based on 
the payment rates and policies for these cases presented in this 
final rule). Specifically, based on the most recent complete LTCH 
data available at this time (that is, LTCH claims data from the 
March 2020 update of the FY 2019 MedPAR file and CCRs from the March 
2020 update of the PSF), we determined a fixed-loss amount for LTCH 
PPS standard Federal payment rate cases for FY 2021 of $27,195 that 
will result in estimated outlier payments projected to be equal to 
7.975 percent of estimated FY 2021 payments for such cases. Under 
the broad authority of section 123(a)(1) of the BBRA and section 
307(b)(1) of the BIPA, we are establishing a fixed-loss amount of 
$27,195 for LTCH PPS standard Federal payment rate cases for FY 
2021. Under this policy, we would continue to make an additional HCO 
payment for the cost of an LTCH PPS standard Federal payment rate 
case that exceeds the HCO threshold amount that is equal to 80 
percent of the difference between the estimated cost of the case and 
the outlier threshold (the sum of the adjusted LTCH PPS standard 
Federal payment rate and the fixed-loss amount for LTCH PPS standard 
Federal payment rate cases of $27,195).
    We note, the fixed-loss amount for FY 2021 for LTCH PPS standard 
Federal payment rate cases we are establishing in this final rule 
based on the most recent LTCH claims data from the MedPAR file and 
the latest CCRs from the PSF, result in a fixed-loss amount for such 
cases that is lower than the proposed fixed-loss amount. This change 
is largely attributable to updates to CCRs from the December 2019 
update of the PSF to the March 2020 update of the PSF. As previously 
discussed, the increase in the fixed-loss amount from FY 2020 of 
$26,778 to the FY 2021 amount of $27,195 is necessary to maintain 
estimated HCO payments at the projected 7.975 percent of total 
estimated LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases.

4. High-Cost Outlier Payments for Site Neutral Payment Rate Cases

    When we implemented the application of the site neutral payment 
rate in FY 2016, in examining the appropriate fixed-loss amount for 
site neutral payment rate cases issue, we considered how LTCH 
discharges based on historical claims data would have been 
classified under the dual rate LTCH PPS payment structure and the 
CMS' Office of the Actuary projections regarding how LTCHs will 
likely respond to our implementation of policies resulting from the 
statutory payment changes. We again relied on these considerations 
and actuarial projections in FY 2017 and FY 2018 because the 
historical claims data available in each of these years were not all 
subject to the LTCH PPS dual rate payment system. Similarly, for FY 
2019

[[Page 59057]]

and FY 2020, we continued to rely on these considerations and 
actuarial projections because, due to the transitional blended 
payment policy for site neutral payment rate cases, FY 2018 and FY 
2019 claims for these cases were not subject to the full effect of 
the site neutral payment rate.
    For FYs 2016 through 2020, at that time our actuaries projected 
that the proportion of cases that would qualify as LTCH PPS standard 
Federal payment rate cases versus site neutral payment rate cases 
under the statutory provisions would remain consistent with what is 
reflected in the historical LTCH PPS claims data. Although our 
actuaries did not project an immediate change in the proportions 
found in the historical data, they did project cost and resource 
changes to account for the lower payment rates. Our actuaries also 
projected that the costs and resource use for cases paid at the site 
neutral payment rate would likely be lower, on average, than the 
costs and resource use for cases paid at the LTCH PPS standard 
Federal payment rate and would likely mirror the costs and resource 
use for IPPS cases assigned to the same MS-DRG, regardless of 
whether the proportion of site neutral payment rate cases in the 
future remains similar to what is found based on the historical 
data. As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49619), this actuarial assumption is based on our expectation that 
site neutral payment rate cases would generally be paid based on an 
IPPS comparable per diem amount under the statutory LTCH PPS payment 
changes that began in FY 2016, which, in the majority of cases, is 
much lower than the payment that would have been paid if these 
statutory changes were not enacted. In light of these projections 
and expectations, we discussed that we believed that the use of a 
single fixed-loss amount and HCO target for all LTCH PPS cases would 
be problematic. In addition, we discussed that we did not believe 
that it would be appropriate for comparable LTCH PPS site neutral 
payment rate cases to receive dramatically different HCO payments 
from those cases that would be paid under the IPPS (80 FR 49617 
through 49619 and 81 FR 57305 through 57307). For those reasons, we 
stated that we believed that the most appropriate fixed-loss amount 
for site neutral payment rate cases for FYs 2016 through 2020 would 
be equal to the IPPS fixed-loss amount for that particular fiscal 
year. Therefore, we established the fixed-loss amount for site 
neutral payment rate cases as the corresponding IPPS fixed-loss 
amounts for FYs 2016 through 2020. In particular, in FY 2020, we 
established the fixed-loss amount for site neutral payment rate 
cases as the FY 2020 IPPS fixed-loss amount of $26,552 (as corrected 
at 84 FR 49845).
    As noted earlier, because not all claims in the data used for 
this FY 2021 IPPS/LTCH PPS final rule were subject to the unblended 
site neutral payment rate, we continue to rely on the same 
considerations and actuarial projections used in FYs 2016 through 
2020 when developing a fixed-loss amount for site neutral payment 
rate cases for FY 2021. Our actuaries continue to project that site 
neutral payment rate cases in FY 2021 will continue to mirror an 
IPPS case paid under the same MS-DRG. That is, our actuaries 
continue to project that the costs and resource use for FY 2021 
cases paid at the site neutral payment rate would likely be lower, 
on average, than the costs and resource use for cases paid at the 
LTCH PPS standard Federal payment rate and will likely mirror the 
costs and resource use for IPPS cases assigned to the same MS-DRG, 
regardless of whether the proportion of site neutral payment rate 
cases in the future remains similar to what was found based on the 
historical data. (Based on the most recent FY 2019 LTCH claims data 
used in the development of this FY 2021 IPPS/LTCH PPS final rule, 
approximately 75 percent of LTCH cases were paid the LTCH PPS 
standard Federal payment rate and approximately 25 percent of LTCH 
cases were paid the site neutral payment rate for discharges 
occurring in FY 2019.)
    For these reasons, we continue to believe that the most 
appropriate fixed-loss amount for site neutral payment rate cases 
for FY 2021 is the IPPS fixed-loss amount for FY 2021. Therefore, 
consistent with past practice, in the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32926), we proposed that the applicable HCO threshold 
for site neutral payment rate cases is the sum of the site neutral 
payment rate for the case and the IPPS fixed-loss amount. That is, 
we proposed a fixed-loss amount for site neutral payment rate cases 
of $30,006. Accordingly, for FY 2021, we proposed to calculate a HCO 
payment for site neutral payment rate cases with costs that exceed 
the HCO threshold amount that is equal to 80 percent of the 
difference between the estimated cost of the case and the outlier 
threshold (the sum of the site neutral payment rate payment and the 
proposed fixed-loss amount for site neutral payment rate cases of 
$30,006).
    We did not receive any public comments on our proposals. 
Therefore, we are finalizing our proposals as described above, 
without modification. Therefore, for FY 2021, as we proposed, we are 
establishing that the applicable HCO threshold for site neutral 
payment rate cases is the sum of the site neutral payment rate for 
the case and the IPPS fixed loss amount. That is, we are 
establishing a fixed-loss amount for site neutral payment rate cases 
of $29,051, which is the same FY 2021 IPPS fixed-loss amount 
discussed in section II.A.4.g.(1). of the Addendum to this final 
rule. Accordingly, under this policy, for FY 2021, we will calculate 
a HCO payment for site neutral payment rate cases with costs that 
exceed the HCO threshold amount, which is equal to 80 percent of the 
difference between the estimated cost of the case and the outlier 
threshold (the sum of site neutral payment rate payment and the 
fixed-loss amount for site neutral payment rate cases of $29,051).
    In establishing a HCO policy for site neutral payment rate 
cases, we established a budget neutrality adjustment under Sec.  
412.522(c)(2)(i). We established this requirement because we 
believed, and continue to believe, that the HCO policy for site 
neutral payment rate cases should be budget neutral, just as the HCO 
policy for LTCH PPS standard Federal payment rate cases is budget 
neutral, meaning that estimated site neutral payment rate HCO 
payments should not result in any change in estimated aggregate LTCH 
PPS payments.
    To ensure that estimated HCO payments payable to site neutral 
payment rate cases in FY 2021 would not result in any increase in 
estimated aggregate FY 2021 LTCH PPS payments, under the budget 
neutrality requirement at Sec.  412.522(c)(2)(i), it is necessary to 
reduce site neutral payment rate payments by 5.1 percent to account 
for the estimated additional HCO payments payable to those cases in 
FY 2021, in general, we proposed to continue this policy.
    As explained in the proposed rule, consistent with the IPPS HCO 
payment threshold, we estimate the proposed fixed-loss threshold 
would result in FY 2021 HCO payments for site neutral payment rate 
cases to equal 5.1 percent of the site neutral payment rate payments 
that are based on the IPPS comparable per diem amount. As such, to 
ensure estimated HCO payments payable for site neutral payment rate 
cases in FY 2021 would not result in any increase in estimated 
aggregate FY 2021 LTCH PPS payments, under the budget neutrality 
requirement at Sec.  412.522(c)(2)(i), as we explained in the 
proposed rule, it is necessary to reduce the site neutral payment 
rate amount paid under Sec.  412.522(c)(1)(i) by 5.1 percent to 
account for the estimated additional HCO payments payable for site 
neutral payment rate cases in FY 2021. In order to achieve this, for 
FY 2021, we proposed to apply a budget neutrality factor of 0.949 
(that is, the decimal equivalent of a 5.1 percent reduction, 
determined as 1.0 - 5.1/100 = 0.949) to the site neutral payment 
rate for those site neutral payment rate cases paid under Sec.  
412.522(c)(1)(i). We note that, consistent with our current policy, 
this HCO budget neutrality adjustment would not be applied to the 
HCO portion of the site neutral payment rate amount (81 FR 57309).
    Comment: Some commenters, as they have done since the inception 
of the dual rate payment system that created the site neutral 
payment rate, objected to the proposed site neutral payment rate HCO 
budget neutrality adjustment, claiming that it would result in 
savings to the Medicare program instead of being budget neutral. The 
commenters' primary objection continued to be based on their belief 
that, because the IPPS base rates used in the IPPS comparable per 
diem amount calculation of the site neutral payment rate include a 
budget neutrality adjustment for IPPS HCO payments (for example, a 
5.1 percent adjustment on the operating IPPS standardized amount), 
an ``additional'' budget neutrality factor is not necessary and is, 
in fact, duplicative. Based on their belief that the proposed site 
neutral payment rate HCO budget neutrality adjustment is 
duplicative, some commenters recommended that if CMS continues with 
the application of that budget neutrality adjustment, the 
calculation of the IPPS comparable per diem amount should be revised 
to use the IPPS operating standardized amount prior to the 
application of the IPPS HCO budget neutrality adjustment.
    Response: We continue to disagree with the commenters that a 
budget neutrality adjustment for site neutral payment rate HCO

[[Page 59058]]

payments is unnecessary or duplicative. We have stated such 
disagreement during each previous rulemaking cycle. We refer readers 
to 84 FR 42648 through 42649, 83 FR 41737 through 41738, 82 FR 38545 
through 38546, 81 FR 57308 through 57309, and 80 FR 49621 through 
49622 for more information on our responses to these comments.
    After consideration of public comments, for the reasons 
discussed above, we are adopting our proposed site neutral payment 
rate HCO budget neutrality adjustment as final without modification. 
Specifically, for FY 2021, as we proposed, we are applying a budget 
neutrality factor of 0.949 (that is, the decimal equivalent of a 5.1 
percent reduction, determined as 1.0 - 5.1/100 = 0.949) to the site 
neutral payment rate for those site neutral payment rate cases paid 
under Sec.  412.522(c)(1)(i). We note that, consistent with our 
current policy, this HCO budget neutrality adjustment will not apply 
to the HCO portion of the site neutral payment rate amount.

E. Update to the IPPS Comparable Amount To Reflect the Statutory 
Changes to the IPPS DSH Payment Adjustment Methodology

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50766), we 
established a policy to reflect the changes to the Medicare IPPS DSH 
payment adjustment methodology made by section 3133 of the 
Affordable Care Act in the calculation of the ``IPPS comparable 
amount'' under the SSO policy at Sec.  412.529 and the ``IPPS 
equivalent amount'' under the site neutral payment rate at Sec.  
412.522. Historically, the determination of both the ``IPPS 
comparable amount'' and the ``IPPS equivalent amount'' includes an 
amount for inpatient operating costs ``for the costs of serving a 
disproportionate share of low-income patients.'' Under the statutory 
changes to the Medicare DSH payment adjustment methodology that 
began in FY 2014, in general, eligible IPPS hospitals receive an 
empirically justified Medicare DSH payment equal to 25 percent of 
the amount they otherwise would have received under the statutory 
formula for Medicare DSH payments prior to the amendments made by 
the Affordable Care Act. The remaining amount, equal to an estimate 
of 75 percent of the amount that otherwise would have been paid as 
Medicare DSH payments, reduced to reflect changes in the percentage 
of individuals who are uninsured and any additional statutory 
adjustment, is made available to make additional payments to each 
hospital that qualifies for Medicare DSH payments and that has 
uncompensated care. The additional uncompensated care payments are 
based on the hospital's amount of uncompensated care for a given 
time period relative to the total amount of uncompensated care for 
that same time period reported by all IPPS hospitals that receive 
Medicare DSH payments.
    To reflect the statutory changes to the Medicare DSH payment 
adjustment methodology in the calculation of the ``IPPS comparable 
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS, we 
stated that we will include a reduced Medicare DSH payment amount 
that reflects the projected percentage of the payment amount 
calculated based on the statutory Medicare DSH payment formula prior 
to the amendments made by the Affordable Care Act that will be paid 
to eligible IPPS hospitals as empirically justified Medicare DSH 
payments and uncompensated care payments in that year (that is, a 
percentage of the operating Medicare DSH payment amount that has 
historically been reflected in the LTCH PPS payments that are based 
on IPPS rates). We also stated that the projected percentage will be 
updated annually, consistent with the annual determination of the 
amount of uncompensated care payments that will be made to eligible 
IPPS hospitals. We believe that this approach results in appropriate 
payments under the LTCH PPS and is consistent with our intention 
that the ``IPPS comparable amount'' and the ``IPPS equivalent 
amount'' under the LTCH PPS closely resemble what an IPPS payment 
would have been for the same episode of care, while recognizing that 
some features of the IPPS cannot be translated directly into the 
LTCH PPS (79 FR 50766 through 50767).
    As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 
32927), based on the data available at that time, we proposed to 
establish that the calculation of the ``IPPS comparable amount'' 
under Sec.  412.529 would include an applicable operating Medicare 
DSH payment amount that is equal to 75.90 percent of the operating 
Medicare DSH payment amount that would have been paid based on the 
statutory Medicare DSH payment formula absent the amendments made by 
the Affordable Care Act. Furthermore, consistent with our historical 
practice, we proposed that, if more recent data became available, we 
would use that data to determine this factor in this final rule.
    We did not receive any public comments in response to our 
proposal, and we are adopting it as final. However, as we proposed 
we are determine the factor in this final rule using more recent 
data. For FY 2021, as discussed in greater detail in section IV.G.3. 
of the preamble of this final rule, based on the most recent data 
available, our estimate of 75 percent of the amount that would 
otherwise have been paid as Medicare DSH payments (under the 
methodology outlined in section 1886(r)(2) of the Act) is adjusted 
to 72.86 percent of that amount to reflect the change in the 
percentage of individuals who are uninsured. The resulting amount is 
then used to determine the amount available to make uncompensated 
care payments to eligible IPPS hospitals in FY 2021. In other words, 
the amount of the Medicare DSH payments that would have been made 
prior to the amendments made by the Affordable Care Act is adjusted 
to 54.65 percent (the product of 75 percent and 72.86 percent) and 
the resulting amount is used to calculate the uncompensated care 
payments to eligible hospitals. As a result, for FY 2021, we project 
that the reduction in the amount of Medicare DSH payments pursuant 
to section 1886(r)(1) of the Act, along with the payments for 
uncompensated care under section 1886(r)(2) of the Act, will result 
in overall Medicare DSH payments of 79.65 percent of the amount of 
Medicare DSH payments that would otherwise have been made in the 
absence of the amendments made by the Affordable Care Act (that is, 
25 percent + 54.65 percent = 79.65 percent).
    Therefore, for FY 2021, consistent with our proposal, we are 
establishing that the calculation of the ``IPPS comparable amount'' 
under Sec.  412.529 will include an applicable operating Medicare 
DSH payment amount that is equal to 79.65 percent of the operating 
Medicare DSH payment amount that would have been paid based on the 
statutory Medicare DSH payment formula absent the amendments made by 
the Affordable Care Act.

F. Computing the Adjusted LTCH PPS Federal Prospective Payments for 
FY 2021

    Section 412.525 sets forth the adjustments to the LTCH PPS 
standard Federal payment rate. Under the dual rate LTCH PPS payment 
structure, only LTCH PPS cases that meet the statutory criteria to 
be excluded from the site neutral payment rate are paid based on the 
LTCH PPS standard Federal payment rate. Under Sec.  412.525(c), the 
LTCH PPS standard Federal payment rate is adjusted to account for 
differences in area wages by multiplying the labor-related share of 
the LTCH PPS standard Federal payment rate for a case by the 
applicable LTCH PPS wage index (the FY 2021 values are shown in 
Tables 12A through 12B listed in section VI. of the Addendum to this 
final rule and are available via the internet on the CMS website). 
The LTCH PPS standard Federal payment rate is also adjusted to 
account for the higher costs of LTCHs located in Alaska and Hawaii 
by the applicable COLA factors (the final FY 2021 factors are shown 
in the chart in section V.C. of this Addendum) in accordance with 
Sec.  412.525(b). In this final rule, we are establishing an LTCH 
PPS standard Federal payment rate for FY 2021 of $43,755.34, as 
discussed in section V.A. of the Addendum to this final rule. We 
illustrate the methodology to adjust the LTCH PPS standard Federal 
payment rate for FY 2021 in the following example:
    Example: During FY 2021, a Medicare discharge that meets the 
criteria to be excluded from the site neutral payment rate, that is, 
an LTCH PPS standard Federal payment rate case, is from an LTCH that 
is located in CBSA 16984, which has a FY 2021 LTCH PPS wage index 
value of 1.0442 (obtained from Table 12A listed in section VI. of 
the Addendum to this final rule and available via the internet on 
the CMS website). The Medicare patient case is classified into MS-
LTC-DRG 189 (Pulmonary Edema & Respiratory Failure), which has a 
relative weight for FY 2021 of 0.9446 (obtained from Table 11 listed 
in section VI. of the Addendum to this final rule and available via 
the internet on the CMS website). The LTCH submitted quality 
reporting data for FY 2021 in accordance with the LTCH QRP under 
section 1886(m)(5) of the Act.
    To calculate the LTCH's total adjusted Federal prospective 
payment for this Medicare patient case in FY 2021, we computed the 
wage-adjusted Federal prospective payment amount by multiplying the 
unadjusted FY 2021 LTCH PPS standard Federal payment rate 
($43,755.34) by the labor-related share (0.681 percent) and the

[[Page 59059]]

wage index value (1.0442). This wage-adjusted amount was then added 
to the nonlabor-related portion of the unadjusted LTCH PPS standard 
Federal payment rate (0.319 percent; adjusted for cost of living, if 
applicable) to determine the adjusted LTCH PPS standard Federal 
payment rate, which is then multiplied by the MS-LTC-DRG relative 
weight (0.9446) to calculate the total adjusted LTCH PPS standard 
Federal prospective payment for FY 2021 ($42,575.37). The table 
illustrates the components of the calculations in this example.
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VI. Tables Referenced in This Final Rule Generally Available Through 
the Internet on the CMS Website

    This section lists the tables referred to throughout the 
preamble of this final rule and in the Addendum. In the past, a 
majority of these tables were published in the Federal Register as 
part of the annual proposed and final rules. However, similar to FYs 
2012 through 2020, for the FY 2021 rulemaking cycle, the IPPS and 
LTCH PPS tables will not be published in the Federal Register in the 
annual IPPS/LTCH PPS proposed and final rules and will be available 
through the internet. Specifically, all IPPS tables listed below, 
with the exception of IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS 
Table 1E, will generally be available through the internet. IPPS 
Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E are displayed at 
the end of this section and will continue to be published in the 
Federal Register as part of the annual proposed and final rules. For 
additional discussion of the information included in the IPPS and 
LTCH PPS tables associated with the IPPS/LTCH PPS proposed and final 
rules, as well as prior changes to the information included in these 
tables, we refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 
FR 42650 through 42651).
    In addition, under the HAC Reduction Program, established by 
section 3008 of the Affordable Care Act, a hospital's total payment 
may be reduced by 1 percent if it is in the lowest HAC performance 
quartile. The hospital-level data for the FY 2021 HAC Reduction 
Program will be made publicly available once it has undergone the 
review and corrections process.
    As was the cases for the FY 2020 IPPS/LTCH PPS proposed and 
final rules, we are no longer including Table 15, which had 
typically included the fiscal year readmissions payment adjustment 
factors because hospitals have not yet had the opportunity to review 
and correct the data before the data are made public under our 
policy regarding the reporting of hospital-specific data. After 
hospitals have been given an opportunity to review and correct their 
calculations for FY 2021, we will post Table 15 (which will be 
available via the internet on the CMS website) to display the final 
FY 2021 readmissions payment adjustment factors that will be 
applicable to discharges occurring on or after October 1, 2020. We 
expect Table 15 will be posted on the CMS website in the fall of 
2020.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS websites identified below should contact 
Michael Treitel at (410) 786-4552.
    The following IPPS tables for this final rule are generally 
available through the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left side of 
the screen titled, ``FY 2021 IPPS Final Rule Home Page'' or ``Acute 
Inpatient-Files- for Download.''

Table 2.--Case-Mix Index and Wage Index Table by CCN--FY 2021
Table 3.--Wage Index Table by CBSA--FY 2021
Table 4A.--List of Counties Eligible for the Out-Migration 
Adjustment under Section 1886(d)(13) of the Act--FY 2021
Table 4B.--Counties Redesignated under Section 1886(d)(8)(B) of the 
Act (LUGAR Counties)--FY 2021
Table 5.--List of Medicare Severity Diagnosis-Related Groups (MS-
DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean 
Length of Stay--FY 2021
Table 6A.--New Diagnosis Codes--FY 2021
Table 6B.--New Procedure Codes--FY 2021
Table 6C.--Invalid Diagnosis Codes--FY 2021
Table 6E.--Revised Diagnosis Code Titles--FY 2021
Table 6G.1.--Secondary Diagnosis Order Additions to the CC 
Exclusions List-FY 2021
Table 6G.2.--Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2021
Table 6H.1.--Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2021
Table 6H.2.--Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2021
Table 6I.--Complete MCC List--FY 2021 Table 6I.1.--Additions to the 
MCC List--FY 2021
Table 6I.2.--Deletions to the MCC List--FY 2021
Table 6J.--Complete CC List--FY 2021
Table 6J.1.--Additions to the CC List--FY 2021
Table 6J.2.--Deletions to the CC List--FY 2021
Table 6K.--Complete List of CC Exclusions--FY 2021
Table 6P.--ICD-10-CM and ICD-10-PCS Codes for MS-DRG Changes--FY 
2021 (Table 6P contains multiple tables, 6P.1a. through 6P.4a., that 
include the ICD-10-CM and ICD-10-PCS code lists relating to specific 
MS-DRG changes. These tables are referred to throughout section 
II.D. of the preamble of this final rule.)
Table 7A.--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay: FY 2019 MedPAR Update--March 2020 GROUPER Version 
37 MS-DRGs
Table 7B.--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay: FY 2019 MedPAR Update--March 2020 GROUPER Version 
38 MS-DRGs
Table 8A.--FY 2021 Statewide Average Operating Cost-to-Charge Ratios 
(CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--FY 2021 Statewide Average Capital Cost-to-Charge Ratios 
(CCRs) for Acute Care Hospitals
Table 16A.--Updated Proxy Hospital Value-Based Purchasing (VBP) 
Program Adjustment Factors for FY 2021
Table 18.--FY 2021 Medicare DSH Uncompensated Care Payment Factor 3

    The following LTCH PPS tables for this FY 2021 final rule are 
available through the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for 
Regulation Number CMS-1735-F:

Table 8C.--FY 2021 Statewide Average Total Cost-to-Charge Ratios 
(CCRs) for LTCHs (Urban and Rural)
Table 11.--MS-LTC-DRGs, Relative Weights, Geometric Average Length 
of Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS 
Discharges Occurring from October 1, 2020 through September 30, 2021
Table 12A.--LTCH PPS Wage Index for Urban Areas for Discharges 
Occurring from October 1, 2020 through September 30, 2021

[[Page 59060]]

Table 12B.-- LTCH PPS Wage Index for Rural Areas for Discharges 
Occurring from October 1, 2020 through September 30, 2021
BILLING CODE 4120-01-P
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[[Page 59061]]


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BILLING CODE 4120-01-C

Appendix A: Economic Analyses

I. Regulatory Impact Analysis

A. Statement of Need

    This final rule is necessary in order to make payment and policy 
changes under the Medicare IPPS for Medicare acute care hospital 
inpatient services for operating and capital-related costs as well 
as for certain hospitals and hospital units excluded from the IPPS. 
This final rule also is necessary to make payment and policy changes 
for Medicare hospitals under the LTCH PPS.

[[Page 59062]]

Also as we note later in this Appendix, the primary objective of the 
IPPS and the LTCH PPS is to create incentives for hospitals to 
operate efficiently and minimize unnecessary costs, while at the 
same time ensuring that payments are sufficient to adequately 
compensate hospitals for their legitimate costs in delivering 
necessary care to Medicare beneficiaries. In addition, we share 
national goals of preserving the Medicare Hospital Insurance Trust 
Fund.
    We believe that the changes in this final rule, such as the 
updates to the IPPS and LTCH PPS rates, and the policies and 
discussions relating to applications for new technology add-on 
payments, are needed to further each of these goals while 
maintaining the financial viability of the hospital industry and 
ensuring access to high quality health care for Medicare 
beneficiaries.
    For example, without additional payments for new medical 
technologies that meet the criteria for approval for new technology 
add-on payments, Medicare beneficiaries may not have appropriate 
access to these new technologies. We discuss the technologies for 
which we received applications for add-on payments for new medical 
technologies for FY 2021 in sections II.G.5. and 6. of the preamble 
to this final rule. As discussed in section II.G.6. of the preamble 
of this final rule, under the alternative pathway for new technology 
add-on payments, new technologies that are medical products with a 
Qualified Infectious Disease Product (QIDP) designation or are part 
of the Breakthrough Device program will be considered new and not 
substantially similar to an existing technology and will not need to 
demonstrate that the technology represents a substantial clinical 
improvement. These technologies must still meet the cost criterion.
    We expect that the policies in this final rule would ensure that 
the outcomes of the prospective payment systems are reasonable and 
equitable, while avoiding or minimizing unintended adverse 
consequences.

B. Overall Impact

    We have examined the impacts of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 
30, 1993), Executive Order 13563 on Improving Regulation and 
Regulatory Review (January 18, 2011), the Regulatory Flexibility Act 
(RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the 
Social Security Act, section 202 of the Unfunded Mandates Reform Act 
of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C. 
804(2), and Executive Order 13771 on Reducing Regulation and 
Controlling Regulatory Costs (January 30, 2017).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a rule: 
(1) Having an annual effect on the economy of $100 million or more 
in any 1 year, or adversely and materially affecting a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or 
communities (also referred to as ``economically significant''); (2) 
creating a serious inconsistency or otherwise interfering with an 
action taken or planned by another agency; (3) materially altering 
the budgetary impacts of entitlement grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raising novel legal or policy issues arising out of legal mandates, 
the President's priorities, or the principles set forth in the 
Executive Order.
    We have determined that this final rule is a major rule as 
defined in 5 U.S.C. 804(2). We estimate that the changes for FY 2021 
acute care hospital operating and capital payments would 
redistribute amounts in excess of $100 million to acute care 
hospitals. The applicable percentage increase to the IPPS rates 
required by the statute, in conjunction with other payment changes 
in this final rule, would result in an estimated $3.5 billion 
increase in FY 2021 payments, primarily driven by a combined $3.0 
billion increase in FY 2021 operating payments and uncompensated 
care payments, and a net increase of $506 million resulting from 
estimated changes in FY 2021 capital payments and new technology 
add-on payments. These changes are relative to payments made in FY 
2020. The impact analysis of the capital payments can be found in 
section I.I. of this Appendix. In addition, as described in section 
I.J. of this Appendix, LTCHs are expected to experience a decrease 
in payments by approximately 40 million in FY 2021 relative to FY 
2020, primarily due to the end of the statutory transition period 
for site neutral payment rate cases.
    Our operating impact estimate includes the 0.5 percentage point 
adjustment required under section 414 of the MACRA applied to the 
IPPS standardized amount, as discussed in section II.D. of the 
preamble of this final rule. In addition, our operating payment 
impact estimate includes the 2.4 percent hospital update to the 
standardized amount (which includes the estimated 2.4 percent market 
basket update and the 0.0 percentage point for the multifactor 
productivity (MFP) adjustment). The estimates of IPPS operating 
payments to acute care hospitals do not reflect any changes in 
hospital admissions or real case-mix intensity, which will also 
affect overall payment changes.
    The analysis in this Appendix, in conjunction with the remainder 
of this document, demonstrates that this final rule is consistent 
with the regulatory philosophy and principles identified in 
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of 
the Act. This final rule would affect payments to a substantial 
number of small rural hospitals, as well as other classes of 
hospitals, and the effects on some hospitals may be significant. 
Finally, in accordance with the provisions of Executive Order 12866, 
the Executive Office of Management and Budget has reviewed this 
final rule.

C. Objectives of the IPPS and the LTCH PPS

    The primary objective of the IPPS and the LTCH PPS is to create 
incentives for hospitals to operate efficiently and minimize 
unnecessary costs, while at the same time ensuring that payments are 
sufficient to adequately compensate hospitals for their legitimate 
costs in delivering necessary care to Medicare beneficiaries. In 
addition, we share national goals of preserving the Medicare 
Hospital Insurance Trust Fund.
    We believe that the changes in this final rule would further 
each of these goals while maintaining the financial viability of the 
hospital industry and ensuring access to high quality health care 
for Medicare beneficiaries. We expect that these changes would 
ensure that the outcomes of the prospective payment systems are 
reasonable and equitable, while avoiding or minimizing unintended 
adverse consequences.
    Because this final rule contains a range of policies, we refer 
readers to the section of the final rule where each policy is 
discussed. These sections include the rationale for our decisions, 
including the need for the policy.

D. Limitations of Our Analysis

    The following quantitative analysis presents the projected 
effects of our policy changes, as well as statutory changes 
effective for FY 2021, on various hospital groups. We estimate the 
effects of individual policy changes by estimating payments per 
case, while holding all other payment policies constant. We use the 
best data available, but, generally unless specifically indicated, 
we do not attempt to make adjustments for future changes in such 
variables as admissions, lengths of stay, case-mix, changes to the 
Medicare population, or incentives. In addition, we discuss 
limitations of our analysis for specific policies in the discussion 
of those policies as needed.

E. Hospitals Included in and Excluded From the IPPS

    The prospective payment systems for hospital inpatient operating 
and capital-related costs of acute care hospitals encompass most 
general short-term, acute care hospitals that participate in the 
Medicare program. There were 27 Indian Health Service hospitals in 
our database, which we excluded from the analysis due to the special 
characteristics of the prospective payment methodology for these 
hospitals. Among other short-term, acute care hospitals, hospitals 
in Maryland are paid in accordance with the Maryland Total Cost of 
Care Model, and hospitals located outside the 50 States, the 
District of Columbia, and Puerto Rico (that is, 6 short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa) receive payment for 
inpatient hospital services they furnish on the basis of reasonable 
costs, subject to a rate-of-increase ceiling.
    As of July 2020, there were 3,201 IPPS acute care hospitals 
included in our analysis. This represents approximately 54 percent 
of all Medicare-participating hospitals. The majority of this impact 
analysis focuses on this set of hospitals. There also are

[[Page 59063]]

approximately 1,414 CAHs. These small, limited service hospitals are 
paid on the basis of reasonable costs, rather than under the IPPS. 
IPPS-excluded hospitals and units, which are paid under separate 
payment systems, include IPFs, IRFs, LTCHs, RNHCIs, children's 
hospitals, 11 cancer hospitals, 1 extended neoplastic disease care 
hospital, and 6 short-term acute care hospitals located in the 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa. Changes in the prospective payment systems for IPFs and IRFs 
are made through separate rulemaking. Payment impacts of changes to 
the prospective payment systems for these IPPS-excluded hospitals 
and units are not included in this final rule. The impact of the 
update and policy changes to the LTCH PPS for FY 2021 is discussed 
in section I.J. of this Appendix.

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

    As of July 2020, there were 95 children's hospitals, 11 cancer 
hospitals, 6 short-term acute care hospitals located in the Virgin 
Islands, Guam, the Northern Mariana Islands and American Samoa, 1 
extended neoplastic disease care hospital, and 15 RNHCIs being paid 
on a reasonable cost basis subject to the rate-of-increase ceiling 
under Sec.  413.40. (In accordance with Sec.  403.752(a) of the 
regulation, RNHCIs are paid under Sec.  413.40.) Among the remaining 
providers, 302 rehabilitation hospitals and 816 rehabilitation 
units, and approximately 363 LTCHs, are paid the Federal prospective 
per discharge rate under the IRF PPS and the LTCH PPS, respectively, 
and 547 psychiatric hospitals and 1,003 psychiatric units are paid 
the Federal per diem amount under the IPF PPS. As stated previously, 
IRFs and IPFs are not affected by the rate updates discussed in this 
final rule. The impacts of the changes on LTCHs are discussed in 
section I.J. of this Appendix.
    For children's hospitals, the 11 cancer hospitals, the 6 short-
term acute care hospitals located in the Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa, the 1 extended 
neoplastic disease care hospital, and RNHCIs, the update of the 
rate-of-increase limit (or target amount) is the estimated FY 2021 
percentage increase in the 2014-based IPPS operating market basket, 
consistent with section 1886(b)(3)(B)(ii) of the Act, and Sec. Sec.  
403.752(a) and 413.40 of the regulations. Consistent with current 
law, based on IGI's second quarter 2020 forecast of the 2014-based 
IPPS market basket increase, we are estimating the FY 2021 update to 
be 2.4 percent (that is, the estimate of the market basket rate-of-
increase), as discussed in section IV.B. of the preamble of this 
final rule. We used the most recent data available for this final 
rule to calculate the IPPS operating market basket update for FY 
2021. Children's hospitals, the 11 cancer hospitals, the 6 short-
term acute care hospitals located in the Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa, the 1 extended 
neoplastic disease care hospital, and RNHCIs that continue to be 
paid based on reasonable costs subject to rate-of-increase limits 
under Sec.  413.40 of the regulations are not subject to the 
reductions in the applicable percentage increase required under the 
Affordable Care Act. The impact of the update in the rate-of-
increase limit on those excluded hospitals depends on the cumulative 
cost increases experienced by each excluded hospital since its 
applicable base period. For excluded hospitals that have maintained 
their cost increases at a level below the rate-of-increase limits 
since their base period, the major effect is on the level of 
incentive payments these excluded hospitals receive. Conversely, for 
excluded hospitals with cost increases above the cumulative update 
in their rate-of-increase limits, the major effect is the amount of 
excess costs that would not be paid.
    We note that, under Sec.  413.40(d)(3), an excluded hospital 
that continues to be paid under the TEFRA system and whose costs 
exceed 110 percent of its rate-of-increase limit receives its rate-
of-increase limit plus the lesser of: (1) 50 percent of its 
reasonable costs in excess of 110 percent of the limit; or (2) 10 
percent of its limit. In addition, under the various provisions set 
forth in Sec.  413.40, hospitals can obtain payment adjustments for 
justifiable increases in operating costs that exceed the limit.

G. Quantitative Effects of the Policy Changes Under the IPPS for 
Operating Costs

1. Basis and Methodology of Estimates

    In this final rule, we are announcing policy changes and payment 
rate updates for the IPPS for FY 2021 for operating costs of acute 
care hospitals. The FY 2021 updates to the capital payments to acute 
care hospitals are discussed in section I.I. of this Appendix.
    Based on the overall percentage change in payments per case 
estimated using our payment simulation model, we estimate that total 
FY 2021 operating payments would increase by 2.5 percent, compared 
to FY 2020. In addition to the applicable percentage increase, this 
amount reflects the +0.5 percentage point permanent adjustment to 
the standardized amount required under section 414 of MACRA. The 
impacts do not reflect changes in the number of hospital admissions 
or real case-mix intensity, which would also affect overall payment 
changes.
    We have prepared separate impact analyses of the changes to each 
system. This section deals with the changes to the operating 
inpatient prospective payment system for acute care hospitals. Our 
payment simulation model relies on the most recent available claims 
data to enable us to estimate the impacts on payments per case of 
certain changes in this final rule. However, there are other changes 
for which we do not have data available that would allow us to 
estimate the payment impacts using this model. For those changes, we 
have attempted to predict the payment impacts based upon our 
experience and other more limited data.
    The data used in developing the quantitative analyses of changes 
in payments per case presented in this section are taken from the FY 
2019 MedPAR file and the most current Provider-Specific File (PSF) 
that are used for payment purposes. Although the analyses of the 
changes to the operating PPS do not incorporate cost data, data from 
the most recently available hospital cost reports were used to 
categorize hospitals. Our analysis has several qualifications. 
First, in this analysis, we do not make adjustments for future 
changes in such variables as admissions, lengths of stay, or 
underlying growth in real case-mix. Second, due to the 
interdependent nature of the IPPS payment components, it is very 
difficult to precisely quantify the impact associated with each 
change. Third, we use various data sources to categorize hospitals 
in the tables. In some cases, particularly the number of beds, there 
is a fair degree of variation in the data from the different 
sources. We have attempted to construct these variables with the 
best available source overall. However, for individual hospitals, 
some miscategorizations are possible.
    Using cases from the FY 2019 MedPAR file, we simulate payments 
under the operating IPPS given various combinations of payment 
parameters. As described previously, Indian Health Service hospitals 
and hospitals in Maryland were excluded from the simulations. The 
impact of payments under the capital IPPS, and the impact of 
payments for costs other than inpatient operating costs, are not 
analyzed in this section. Estimated payment impacts of the capital 
IPPS for FY 2021 are discussed in section I.I. of this Appendix.
    We discuss the following changes:
     The effects of the application of the applicable 
percentage increase of 2.4 percent (that is, a 2.4 percent market 
basket update with a 0.0 percentage point adjustment for the 
multifactor productivity adjustment), and a 0.5 percentage point 
adjustment required under section 414 of the MACRA to the IPPS 
standardized amount, and the applicable percentage increase 
(including the market basket update and the multifactor productivity 
adjustment) to the hospital-specific rates.
     The effects of the changes to the relative weights and 
MS-DRG GROUPER.
     The effects of the changes in hospitals' wage index 
values reflecting updated wage data from hospitals' cost reporting 
periods beginning during FY 2017, compared to the FY 2016 wage data, 
to calculate the FY 2021 wage index.
     The effects of the geographic reclassifications by the 
MGCRB (as of publication of this final rule) that will be effective 
for FY 2021.
     The effects of the rural floor with the application of 
the national budget neutrality factor to the wage index.
     The effects of the frontier State wage index adjustment 
under the statutory provision that requires hospitals located in 
States that qualify as frontier States to not have a wage index less 
than 1.0. This provision is not budget neutral.
     The effects of the implementation of section 
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in a hospital's wage index if a 
threshold percentage of residents of the county where the hospital 
is located commute to work at hospitals in counties with higher wage 
indexes for FY 2021. This provision is not budget neutral.
     The total estimated change in payments based on the FY 
2021 policies relative to payments based on FY 2020 policies,

[[Page 59064]]

including estimated changes in outlier payments, the revised labor 
market area delineations in OMB Bulletin No. 18-04 and the 
transition to apply a 5-percent cap on any decrease in a hospital's 
wage index from the hospital's final wage index from the prior 
fiscal year.
    To illustrate the impact of the FY 2021 changes, our analysis 
begins with a FY 2020 baseline simulation model using: The FY 2020 
applicable percentage increase of 2.6 percent; the 0.5 percentage 
point adjustment required under section 414 of the MACRA applied to 
the IPPS standardized amount; the FY 2020 MS-DRG GROUPER (Version 
37); the FY 2020 CBSA designations for hospitals based on the OMB 
definitions from the 2010 Census; the FY 2020 wage index; and no 
MGCRB reclassifications. Outlier payments are set at 5.1 percent of 
total operating MS-DRG and outlier payments for modeling purposes.
    Section 1886(b)(3)(B)(viii) of the Act, as added by section 
5001(a) of Public Law 109-171, as amended by section 4102(b)(1)(A) 
of the ARRA (Pub. L. 111-5) and by section 3401(a)(2) of the 
Affordable Care Act (Pub. L. 111-148), provides that, for FY 2007 
and each subsequent year through FY 2014, the update factor will 
include a reduction of 2.0 percentage points for any subsection (d) 
hospital that does not submit data on measures in a form and manner, 
and at a time specified by the Secretary. Beginning in FY 2015, the 
reduction is one-quarter of such applicable percentage increase 
determined without regard to section 1886(b)(3)(B)(ix), (xi), or 
(xii) of the Act, or one-quarter of the market basket update. 
Therefore, as discussed in section IV.B.1. of the preamble of this 
final rule, for FY 2021, hospitals that do not submit quality 
information under rules established by the Secretary and that are 
meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act 
would receive an applicable percentage increase of 1.8 percent. At 
the time this impact was prepared, 37 hospitals are estimated to not 
receive the full market basket rate-of-increase for FY 2021 because 
they failed the quality data submission process or did not choose to 
participate, but are meaningful EHR users. For purposes of the 
simulations shown later in this section, we modeled the payment 
changes for FY 2021 using a reduced update for these hospitals.
    For FY 2021, in accordance with section 1886(b)(3)(B)(ix) of the 
Act, a hospital that has been identified as not a meaningful EHR 
user will be subject to a reduction of three-quarters of such 
applicable percentage increase determined without regard to section 
1886(b)(3)(B)(ix), (xi), or (xii) of the Act. Therefore, as 
discussed in section IV.B.1. of the preamble of this final rule, for 
FY 2021, hospitals that are identified as not meaningful EHR users 
and do submit quality information under section 1886(b)(3)(B)(viii) 
of the Act would receive an applicable percentage increase of 0.6 
percent. At the time this impact analysis was prepared, 153 
hospitals are estimated to not receive the full market basket rate-
of-increase for FY 2021 because they are identified as not 
meaningful EHR users that do submit quality information under 
section 1886(b)(3)(B)(viii) of the Act. For purposes of the 
simulations shown in this section, we modeled the payment changes 
for FY 2021 using a reduced update for these hospitals.
    Hospitals that are identified as not meaningful EHR users under 
section 1886(b)(3)(B)(ix) of the Act and also do not submit quality 
data under section 1886(b)(3)(B)(viii) of the Act would receive a 
applicable percentage increase of 0 percent, which reflects a one-
quarter reduction of the market basket update for failure to submit 
quality data and a three-quarter reduction of the market basket 
update for being identified as not a meaningful EHR user. At the 
time this impact was prepared, 30 hospitals are estimated to not 
receive the full market basket rate-of-increase for FY 2021 because 
they are identified as not meaningful EHR users that do not submit 
quality data under section 1886(b)(3)(B)(viii) of the Act.
    Each policy change, statutory or otherwise, is then added 
incrementally to this baseline, finally arriving at an FY 2021 model 
incorporating all of the changes. This simulation allows us to 
isolate the effects of each change.
    Our comparison illustrates the percent change in payments per 
case from FY 2020 to FY 2021. Two factors not discussed separately 
have significant impacts here. The first factor is the update to the 
standardized amount. In accordance with section 1886(b)(3)(B)(i) of 
the Act, we are updating the standardized amounts for FY 2021 using 
an applicable percentage increase of 2.4 percent. This includes our 
forecasted IPPS operating hospital market basket increase of 2.4 
percent with a 0.0 percentage point reduction for the multifactor 
productivity adjustment. Hospitals that fail to comply with the 
quality data submission requirements and are meaningful EHR users 
would receive an update of 1.8 percent. This update includes a 
reduction of one-quarter of the market basket update for failure to 
submit these data. Hospitals that do comply with the quality data 
submission requirements but are not meaningful EHR users would 
receive an update of 0.6 percent, which includes a reduction of 
three-quarters of the market basket update. Furthermore, hospitals 
that do not comply with the quality data submission requirements and 
also are not meaningful EHR users would receive a update of 0.0 
percent. Under section 1886(b)(3)(B)(iv) of the Act, the update to 
the hospital-specific amounts for SCHs and MDHs is also equal to the 
applicable percentage increase, or 2.4 percent, if the hospital 
submits quality data and is a meaningful EHR user.
    A second significant factor that affects the changes in 
hospitals' payments per case from FY 2020 to FY 2021 is the change 
in hospitals' geographic reclassification status from one year to 
the next. That is, payments may be reduced for hospitals 
reclassified in FY 2020 that are no longer reclassified in FY 2021. 
Conversely, payments may increase for hospitals not reclassified in 
FY 2020 that are reclassified in FY 2021.

2. Analysis of Table I

    Table I displays the results of our analysis of the changes for 
FY 2021. The table categorizes hospitals by various geographic and 
special payment consideration groups to illustrate the varying 
impacts on different types of hospitals. The top row of the table 
shows the overall impact on the 3,201 acute care hospitals included 
in the analysis.
    The next two rows of Table I contain hospitals categorized 
according to their geographic location: Urban and rural. There are 
2,462 hospitals located in urban areas and 739 hospitals in rural 
areas included in our analysis. The next two groupings are by bed-
size categories, shown separately for urban and rural hospitals. The 
last groupings by geographic location are by census divisions, also 
shown separately for urban and rural hospitals.
    The second part of Table I shows hospital groups based on 
hospitals' FY 2021 payment classifications, including any 
reclassifications under section 1886(d)(10) of the Act. For example, 
the rows labeled urban and rural show that the numbers of hospitals 
paid based on these categorizations after consideration of 
geographic reclassifications (including reclassifications under 
sections 1886(d)(8)(B) and 1886(d)(8)(E) of the Act that have 
implications for capital payments) are 2,049, and 1,152, 
respectively.
    The next three groupings examine the impacts of the changes on 
hospitals grouped by whether or not they have GME residency programs 
(teaching hospitals that receive an IME adjustment) or receive 
Medicare DSH payments, or some combination of these two adjustments. 
There are 2,037 nonteaching hospitals in our analysis, 907 teaching 
hospitals with fewer than 100 residents, and 257 teaching hospitals 
with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their 
DSH payment status, and whether they are considered urban or rural 
for DSH purposes. The next category groups together hospitals 
considered urban or rural, in terms of whether they receive the IME 
adjustment, the DSH adjustment, both, or neither.
    The next three rows examine the impacts of the changes on rural 
hospitals by special payment groups (SCHs, MDHs and RRCs). There 
were 483 RRCs, 304 SCHs, 145 MDHs, 149 hospitals that are both SCHs 
and RRCs, and 25 hospitals that are both MDHs and RRCs.
    The next series of groupings are based on the type of ownership 
and the hospital's Medicare utilization expressed as a percent of 
total inpatient days. These data were taken from the FY 2018 or FY 
2017 Medicare cost reports.
    The next grouping concerns the geographic reclassification 
status of hospitals. The first subgrouping is based on whether a 
hospital is reclassified or not. The second and third subgroupings 
are based on whether urban and rural hospitals were reclassified by 
the MGCRB for FY 2021 or not, respectively. The fourth subgrouping 
displays hospitals that reclassified from urban to rural in 
accordance with section 1886(d)(8)(E) of the Act. The fifth 
subgrouping displays hospitals deemed urban in accordance with 
section 1886(d)(8)(B) of the Act.
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a. Effects of the Hospital Update and Other Adjustments (Column 1)

    As discussed in section IV.B. of the preamble of this final 
rule, this column includes the hospital update, including the 2.4 
percent market basket update and the 0.0 percentage point for the 
multifactor productivity adjustment. In addition, as discussed in 
section II.D. of the preamble of this final rule, this column 
includes the FY 2021 +0.5 percentage point adjustment required under 
section 414 of the MACRA. As a result, we are making a 2.9 percent 
update to the national standardized amount.

[[Page 59070]]

This column also includes the update to the hospital-specific rates 
which includes the 2.4 percent market basket update together with 
the 0.0 percentage point for the multifactor productivity 
adjustment. As a result, we are making a 2.4 percent update to the 
hospital-specific rates.
    Overall, hospitals would experience a 2.8 percent increase in 
payments primarily due to the combined effects of the hospital 
update to the national standardized amount and the hospital update 
to the hospital-specific rate. Hospitals that are paid under the 
hospital-specific rate would experience a 2.4 percent increase in 
payments; therefore, hospital categories containing hospitals paid 
under the hospital-specific rate would experience a lower than 
average increase in payments.

b. Effects of the Changes to the MS-DRG Reclassifications and Relative 
Cost-Based Weights With Recalibration Budget Neutrality (Column 2)

    Column 2 shows the effects of the changes to the MS-DRGs and 
relative weights with the application of the recalibration budget 
neutrality factor to the standardized amounts. Section 
1886(d)(4)(C)(i) of the Act requires us annually to make appropriate 
classification changes in order to reflect changes in treatment 
patterns, technology, and any other factors that may change the 
relative use of hospital resources. Consistent with section 
1886(d)(4)(C)(iii) of the Act, we calculated a recalibration budget 
neutrality factor to account for the changes in MS-DRGs and relative 
weights to ensure that the overall payment impact is budget neutral.
    As discussed in section II.E. of the preamble of this final 
rule, the FY 2021 MS-DRG relative weights will be 100 percent cost-
based and 100 percent MS-DRGs. For FY 2021, the MS-DRGs are 
calculated using the FY 2019 MedPAR data grouped to the Version 38 
(FY 2021) MS-DRGs. The methodology to calculate the relative weights 
and the reclassification changes to the GROUPER are described in 
more detail in section II.G. of the preamble of this final rule.
    The ``All Hospitals'' line in Column 2 indicates that changes 
due to the MS-DRGs and relative weights would result in a 0.0 
percent change in payments with the application of the recalibration 
budget neutrality factor of 0.99798 to the standardized amount. 
Hospital categories that generally treat relatively less complex 
cases, such as rural hospitals and smaller urban hospitals, would 
experience a decrease in their payments, while hospitals that 
generally treat relatively more complex cases, such as larger urban 
hospitals, would experience an increase in their payments under the 
relative weights. For example, rural hospitals with 50-99 beds and 
urban hospitals of 99 beds or less would experience a -0.3 and -0.5 
percent decrease in payments, respectively. Conversely, urban 
hospitals of 500 beds or more would experience a +0.2 percent 
increase in payments.

c. Effects of the Wage Index Changes (Column 3)

    Column 3 shows the impact of the updated wage data using FY 2017 
cost report data, with the application of the wage budget neutrality 
factor. The wage index is calculated and assigned to hospitals on 
the basis of the labor market area in which the hospital is located. 
Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we 
delineate hospital labor market areas based on the Core Based 
Statistical Areas (CBSAs) established by OMB. The current 
statistical standards used in FY 2021 are based on OMB standards 
published on February 28, 2013 (75 FR 37246 and 37252), and 2010 
Decennial Census data (OMB Bulletin No. 13-01), as updated in OMB 
Bulletin Nos. 15-01 and 17-01. (We refer readers to the FY 2015 
IPPS/LTCH PPS final rule (79 FR 49951 through 49963) for a full 
discussion on our adoption of the OMB labor market area 
delineations, based on the 2010 Decennial Census data, effective 
beginning with the FY 2015 IPPS wage index, to the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 56913) for a discussion of our adoption of the 
CBSA updates in OMB Bulletin No. 15-01, which were effective 
beginning with the FY 2017 wage index, and to the FY 2020 IPPS/LTCH 
PPS final rule (83 FR 41362) for a discussion of our adoption of the 
CBSA update in OMB Bulletin No. 17-01 for the FY 2020 wage index.)
    As discussed in section III.A.2.a. of the preamble of this final 
rule, OMB Bulletin No. 18-04 established revised delineations for 
statistical areas, and in order to implement these changes for the 
IPPS, it is necessary to identify the new labor market area 
delineation for each county and hospital in the country that are 
affected by the revised OMB delineations. We believe that adopting 
the revised OMB delineations described in OMB Bulletin No. 18-04 
will allow us to maintain a more accurate payment system that 
reflects the reality of population shifts and labor market 
conditions. We further believe that using these delineations will 
increase the integrity of the IPPS wage index system by creating a 
more accurate representation of geographic variations in wage 
levels. As discussed in section III.A.2, in this final rule, we are 
finalizing our proposal to implement the revised OMB delineations as 
described in the September 14, 2018 OMB Bulletin No. 18-04, 
effective beginning with the FY 2021 IPPS wage index.
    Section 1886(d)(3)(E) of the Act requires that, beginning 
October 1, 1993, we annually update the wage data used to calculate 
the wage index. In accordance with this requirement, the wage index 
for acute care hospitals for FY 2021 is based on data submitted for 
hospital cost reporting periods, beginning on or after October 1, 
2016 and before October 1, 2017. The estimated impact of the updated 
wage data using the FY 2017 cost report data and the revised OMB 
labor market area delineations on hospital payments is isolated in 
Column 3 by holding the other payment parameters constant in this 
simulation. That is, Column 3 shows the percentage change in 
payments when going from a model using the FY 2020 wage index, based 
on FY 2016 wage data, the labor-related share of 68.3 percent, under 
the revised OMB delineations and having a 100-percent occupational 
mix adjustment applied, to a model using the FY 2021 pre-
reclassification wage index based on FY 2017 wage data with the 
labor-related share of 68.3 percent, under the revised OMB 
delineations, also having a 100-percent occupational mix adjustment 
applied, while holding other payment parameters, such as use of the 
Version 38 MS-DRG GROUPER constant. The FY 2021 occupational mix 
adjustment is based on the CY 2016 occupational mix survey.
    In addition, the column shows the impact of the application of 
the wage budget neutrality to the national standardized amount. In 
FY 2010, we began calculating separate wage budget neutrality and 
recalibration budget neutrality factors, in accordance with section 
1886(d)(3)(E) of the Act, which specifies that budget neutrality to 
account for wage index changes or updates made under that 
subparagraph must be made without regard to the 62 percent labor-
related share guaranteed under section 1886(d)(3)(E)(ii) of the Act. 
Therefore, for FY 2021, we finalizing our proposal to calculate the 
wage budget neutrality factor to ensure that payments under updated 
wage data and the labor-related share of 68.3 percent are budget 
neutral, without regard to the lower labor-related share of 62 
percent applied to hospitals with a wage index less than or equal to 
1.0. In other words, the wage budget neutrality is calculated under 
the assumption that all hospitals receive the higher labor-related 
share of the standardized amount. The FY 2021 wage budget neutrality 
factor is 1.000426 and the overall payment change is 0 percent.
    Column 3 shows the impacts of updating the wage data using FY 
2017 cost reports. Overall, the new wage data and the labor-related 
share, combined with the wage budget neutrality adjustment, would 
lead to no change for all hospitals, as shown in Column 3.
    In looking at the wage data itself, the national average hourly 
wage would increase 1.02 percent compared to FY 2020. Therefore, the 
only manner in which to maintain or exceed the previous year's wage 
index was to match or exceed the 1.02 percent increase in the 
national average hourly wage. Of the 3,181 hospitals with wage data 
for both FYs 2020 and 2021, 1,655 or 52 percent would experience an 
average hourly wage increase of 1.02 percent or more.
    The following chart compares the shifts in wage index values for 
hospitals due to changes in the average hourly wage data for FY 2021 
relative to FY 2020. These figures reflect changes in the ``pre-
reclassified, occupational mix-adjusted wage index,'' that is, the 
wage index before the application of geographic reclassification, 
the rural floor, the out-migration adjustment, and other wage index 
exceptions and adjustments. We note that this analysis was performed 
by applying the revised OMB labor market area delineations to the FY 
2021 wage data and also by recomputing the FY 2020 final wage data 
to reflect the revised OMB delineations. (We refer readers to 
sections III.G. through III.L. of the preamble of this final rule 
for a complete discussion of the exceptions and adjustments to the 
wage index.) We note that the ``post-reclassified wage index'' or 
``payment wage index,'' which is the wage index that includes all 
such exceptions and

[[Page 59071]]

adjustments (as reflected in Tables 2 and 3 associated with this 
final rule, which are available via the internet on the CMS website) 
is used to adjust the labor-related share of a hospital's 
standardized amount, either 68.3 percent or 62 percent, depending 
upon whether a hospital's wage index is greater than 1.0 or less 
than or equal to 1.0. Therefore, the pre-reclassified wage index 
figures in the following chart may illustrate a somewhat larger or 
smaller change than would occur in a hospital's payment wage index 
and total payment.
    The following chart shows the projected impact of changes in the 
area wage index values for urban and rural hospitals.
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d. Effects of MGCRB Reclassifications (Column 4)

    Our impact analysis to this point has assumed acute care 
hospitals are paid on the basis of their actual geographic location 
(with the exception of ongoing policies that provide that certain 
hospitals receive payments on bases other than where they are 
geographically located). The changes in Column 4 reflect the per 
case payment impact of moving from this baseline to a simulation 
incorporating the MGCRB decisions for FY 2021.
    By spring of each year, the MGCRB makes reclassification 
determinations that will be effective for the next fiscal year, 
which begins on October 1. The MGCRB may approve a hospital's 
reclassification request for the purpose of using another area's 
wage index value. Hospitals may appeal denials of MGCRB decisions to 
the CMS Administrator. Further, hospitals have 45 days from the date 
the IPPS proposed rule is issued in the Federal Register to decide 
whether to withdraw or terminate an approved geographic 
reclassification for the following year.
    The overall effect of geographic reclassification is required by 
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, 
for purposes of this impact analysis, we finalizing our proposal to 
apply an adjustment of 0.986583 to ensure that the effects of the 
reclassifications under sections 1886(d)(8)(B) and (C) and 
1886(d)(10) of the Act are budget neutral (section II.A. of the 
Addendum to this final rule). Geographic reclassification generally 
benefits hospitals in rural areas. We estimate that the geographic 
reclassification would increase payments to rural hospitals by an 
average of 1.1 percent. By region, most rural hospital categories 
would experience increases in payments due to MGCRB 
reclassifications. Hospitals in the rural West North Central region 
would experience a decrease in payments due to MGCRB 
reclassifications, while hospitals in the rural Mountain region 
would experience no change in payments due to MGCRB 
reclassifications.
    Table 2 listed in section VI. of the Addendum to this final rule 
and available via the internet on the CMS website reflects the 
reclassifications for FY 2021.

e. Effects of the Rural Floor, Including Application of National Budget 
Neutrality (Column 5)

    As discussed in the FY 2009 IPPS final rule, the FY 2010 IPPS/RY 
2010 LTCH PPS final rule, the FYs 2011 through 2020 IPPS/LTCH PPS 
final rules, and this FY 2021 IPPS/LTCH PPS final rule, section 4410 
of Public Law 105-33 established the rural floor by requiring that 
the wage index for a hospital in any urban area cannot be less than 
the wage index applicable to hospitals located in rural areas in the 
same state. We apply a uniform budget neutrality adjustment to the 
wage index. Column 5 shows the effects of the final rural floor.
    The Affordable Care Act requires that we apply one rural floor 
budget neutrality factor to the wage index nationally. We have 
calculated a FY 2021 rural floor budget neutrality factor of 
0.993433 that we applied to the wage index, which will reduce wage 
indexes by approximately 0.7 percent.
    Column 5 shows the projected impact of the rural floor with the 
national rural floor budget neutrality factor applied to the wage 
index based on the revised OMB labor market area delineations. The 
column compares the post-reclassification FY 2021 wage index of 
providers before the rural floor adjustment and the post-
reclassification FY 2021 wage index of providers with the rural 
floor adjustment based on the revised OMB labor market area 
delineations. Only urban hospitals can benefit from the rural floor. 
Because the provision is budget neutral, all other hospitals that do 
not receive an increase to their wage index from the rural floor 
adjustment (that is, all rural hospitals and those urban hospitals 
to which the adjustment is not made) will experience a decrease in 
payments due to the budget neutrality adjustment that is applied to 
the wage index nationally. (As finalized in the FY 2020 IPPS/LTCH 
PPS final rule, we calculate the rural floor without including the 
wage data of hospitals that have reclassified as rural under Sec.  
412.103.)
    We estimate that 285 hospitals will receive the rural floor in 
FY 2021. All IPPS hospitals in our model will have their wage 
indexes reduced by the rural floor budget neutrality adjustment of 
0.993433. We project that, in aggregate, rural hospitals will 
experience a 0.2 percent decrease in payments as a result of the 
application of the rural floor budget neutrality because the rural 
hospitals do not benefit from the rural floor, but have their wage 
indexes downwardly adjusted to ensure that the application of the 
rural floor is budget neutral overall. We project that, in the 
aggregate, hospitals located in urban areas will experience no 
change in payments because increases in payments to hospitals 
benefitting from the rural floor offset decreases in payments to 
nonrural floor urban hospitals whose wage index is downwardly 
adjusted by the rural floor budget neutrality factor. Urban 
hospitals in the New England region will experience a 2.3 percent 
increase in payments primarily due to the application of the rural 
floor in Massachusetts. Fifty-two urban providers in Massachusetts 
are expected to receive the rural floor wage index value, including 
the rural floor budget neutrality adjustment, which will increase 
payments overall to hospitals in Massachusetts by an estimated $158 
million. We estimate that Massachusetts hospitals will receive 
approximately a 4.1 percent increase in IPPS payments due to the 
application of the rural floor in FY 2021. Urban Puerto Rico 
hospitals are expected to experience a 0.2 percent increase in 
payments as a result of the application of the rural floor for FY 
2021.

f. Effects of the Application of the Frontier State Wage Index and Out-
Migration Adjustment (Column 6)

    This column shows the combined effects of the application of 
section 10324(a) of the Affordable Care Act, which requires that we 
establish a minimum post-reclassified wage index of 1.00 for all 
hospitals located in ``frontier States,'' and the effects of section 
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in the wage index for hospitals 
located in certain counties that have a relatively high percentage 
of hospital employees who reside in the county, but work in a 
different area with a higher wage index. These two wage index 
provisions are not budget neutral and will increase

[[Page 59072]]

payments overall by 0.1 percent compared to the provisions not being 
in effect.
    The term ``frontier States'' is defined in the statute as States 
in which at least 50 percent of counties have a population density 
less than 6 persons per square mile. Based on these criteria, 5 
States (Montana, Nevada, North Dakota, South Dakota, and Wyoming) 
are considered frontier States and 44 hospitals located in those 
States will receive a frontier wage index of 1.0000. Overall, this 
provision is not budget neutral and is estimated to increase IPPS 
operating payments by approximately $69 million. Urban hospitals 
located in the West North Central region will experience an increase 
in payments by 0.6 percent, because many of the hospitals located in 
this region are frontier State hospitals.
    In addition, section 1886(d)(13) of the Act, as added by section 
505 of Public Law 108-173, provides for an increase in the wage 
index for hospitals located in certain counties that have a 
relatively high percentage of hospital employees who reside in the 
county, but work in a different area with a higher wage index. 
Hospitals located in counties that qualify for the payment 
adjustment will receive an increase in the wage index that is equal 
to a weighted average of the difference between the wage index of 
the resident county, post-reclassification and the higher wage index 
work area(s), weighted by the overall percentage of workers who are 
employed in an area with a higher wage index. There are an estimated 
212 providers that will receive the out-migration wage adjustment in 
FY 2021. Rural hospitals generally will qualify for the adjustment, 
resulting in a 0.1 percent increase in payments. This provision 
appears to benefit section 401 hospitals and RRCs in that they will 
each experience a 0.1 and 0.2 percent increase in payments, 
respectively. This out-migration wage adjustment also is not budget 
neutral, and we estimate the impact of these providers receiving the 
out-migration increase will be approximately $51 million.

g. Effects of All FY 2021 Changes (Column 7)

    Column 7 shows our estimate of the changes in payments per 
discharge from FY 2020 and FY 2021, resulting from all changes 
reflected in this final rule for FY 2021. It includes combined 
effects of the year-to-year change of the previous columns in the 
table.
    The average increase in payments under the IPPS for all 
hospitals is approximately 2.5 percent for FY 2021 relative to FY 
2020 and for this row is primarily driven by the changes reflected 
in Column 1. Column 7 includes the annual hospital update of 2.9 
percent to the national standardized amount. This annual hospital 
update includes the 2.4 percent market basket update and the 0.0 
percentage point multifactor productivity adjustment. As discussed 
in section II.D. of the preamble of this final rule, this column 
also includes the +0.5 percentage point adjustment required under 
section 414 of the MACRA. Hospitals paid under the hospital-specific 
rate would receive a 2.4 percent hospital update. As described in 
Column 1, the annual hospital update with the +0.5 percent 
adjustment for hospitals paid under the national standardized 
amount, combined with the annual hospital update for hospitals paid 
under the hospital-specific rates, would result in a 2.5 percent 
increase in payments in FY 2021 relative to FY 2020. This estimated 
increase also reflects the effects of the adoption of the revised 
labor market area delineations in OMB Bulletin 18-04 and the effects 
of the transition to apply a 5-percent cap on any decrease in a 
hospital's wage index from the hospital's final wage index from the 
prior fiscal year. Additionally, the estimated increase also 
reflects an estimated decrease in outlier payments of 0.2 percent 
(from our current estimate of FY 2020 outlier payments of 
approximately 5.3 percent to 5.1 percent projected for FY 2021 based 
on the FY 2019 MedPAR data used for this final rule calculated for 
purposes of this impact analysis). There are also interactive 
effects among the various factors comprising the payment system that 
we are not able to isolate, which contribute to our estimate of the 
changes in payments per discharge from FY 2020 and FY 2021 in Column 
7.
    Overall payments to hospitals paid under the IPPS due to the 
applicable percentage increase and changes to policies related to 
MS-DRGs, geographic adjustments, and outliers are estimated to 
increase by 2.5 percent for FY 2021. Hospitals in urban areas would 
experience a 2.5 percent increase in payments per discharge in FY 
2021 compared to FY 2020. Hospital payments per discharge in rural 
areas are estimated to increase by 2.2 percent in FY 2021.

3. Impact Analysis of Table II

    Table II presents the projected impact of the changes for FY 
2021 for urban and rural hospitals and for the different categories 
of hospitals shown in Table I. It compares the estimated average 
payments per discharge for FY 2020 with the estimated average 
payments per discharge for FY 2021, as calculated under our models. 
Therefore, this table presents, in terms of the average dollar 
amounts paid per discharge, the combined effects of the changes 
presented in Table I. The estimated percentage changes shown in the 
last column of Table II equal the estimated percentage changes in 
average payments per discharge from Column 7 of Table I.
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H. Effects of Other Policy Changes

    In addition to those policy changes discussed previously that we 
are able to model using our IPPS payment simulation model, we are 
implementing various other changes in this final rule. As noted in 
section I.G. of this regulatory impact analysis, our payment 
simulation model uses the most recent available claims data to 
estimate the impacts on payments per case of certain changes being 
implemented in this final rule. Generally, we have limited or no 
specific data available with which to estimate the impacts of these 
changes using that payment simulation model. For those changes, we 
have attempted to predict the payment impacts based upon our 
experience and other more limited data. Our estimates of the likely 
impacts associated with these other changes are discussed in this 
section.

1. Effects of Policies Relating to New Medical Service and Technology 
Add-On Payments

    In section II.G.9.b of the preamble of this final rule, we are 
revising Sec.  412.87(d)(1) to add drugs approved under FDA's LPAD 
pathway to the current alternative new technology add-on payment 
pathway for QIDPs, beginning with discharges occurring on or after 
October 1, 2021.
    Given the relatively recent introduction of the FDA's LPAD 
pathway there have not been any drugs that were approved under the 
FDA's LPAD pathway that applied for an NTAP under the IPPS and were 
not approved for that NTAP. If all of the future LPADs that would 
have applied for new technology add-on payments would have been 
approved under existing criteria, this policy has no impact relative 
to current policy. To the

[[Page 59075]]

extent that there are future LPADs that are the subject of 
applications for new technology add-on payments, and those 
applications would have been denied under the current new technology 
add-on payment criteria, this policy is a cost, but that cost is not 
estimable. We also note that as this policy would be effective 
beginning with new technology add-on payment applications for FY 
2022, there would be no impact of this policy in FY 2021.

b. Change to Announcement of Determinations and Deadline for 
Consideration of New Medical Service or Technology Applications for 
Certain Antimicrobial Products

    In section II.G.9.c. of the preamble of this final rule, we are 
revising Sec.  412.87(e) to add a new paragraph (3) which would 
provide for conditional new technology add-on payment approval for a 
technology for which an application is submitted under the 
alternative pathway for certain antimicrobial products at Sec.  
412.87(d) that does not receive FDA marketing authorization by the 
July 1 deadline specified in Sec.  412.87(e)(2), provided that the 
technology receives FDA marketing authorization by July 1 of the 
particular fiscal year for which the applicant applied for new 
technology add-on payments.
    If all of the future antimicrobial products eligible for the 
alternative pathway for certain antimicrobial products at Sec.  
412.87(d) receive marketing authorization by the July 1 deadline 
specified in Sec.  412.87(e)(2), this policy has no impact. To the 
extent that there are future antimicrobial products that do not 
receive marketing authorization by that deadline, but do receive FDA 
marketing authorization by July 1 of the particular fiscal year for 
which the applicant applied for new technology add-on payments, this 
policy is a cost, but that cost is not estimable.

c. FY 2021 Status of Technologies Approved for FY 2020 New Technology 
Add-On Payments

    In section II.G.4. of the preamble of this final rule, as 
proposed, we are discontinuing new technology add-on payments for 
the AQUABEAM System (Aquablation), ERLEADA[supreg], 
GIAPREZATM, the remede-[supreg] System, 
VABOMERETM, VYXEOSTM, the Sentinel[supreg] 
Cerebral Protection System, and KYMRIAH[supreg] and YESCARTA[supreg] 
for FY 2021 because these technologies will have been on the U.S. 
market for 3 years. In addition, as we proposed, as discussed in 
section II.G.4. of the preamble of this final rule, we are 
continuing to make new technology add-on payments for 
AndexXaTM, AZEDRA[supreg], BALVERSATM, 
Cablivi[supreg], ELZONRIS[supreg], Esketamine, Jakafi[supreg], T2 
Bacteria Test Panel, XOSPATA[supreg], and ZEMDRITM in FY 
2021 because these technologies would still be considered new for 
purposes of new technology add-on payments. Under Sec.  412.88(a)(2) 
and in conjunction with our change to the calculation of the new 
technology add-on payments for products approved under the LPAD 
pathway, the new technology add-on payment for each case would be 
limited to the lesser of: (1) 65 percent of the costs of the new 
technology (or 75 percent of the costs for technologies designated 
as QIDPs or approved under the LPAD pathway); or (2) 65 percent of 
the amount by which the costs of the case exceed the standard MS-DRG 
payment for the case (or 75 percent of the amount for technologies 
designated as QIDPs or approved under the LPAD pathway). Because it 
is difficult to predict the actual new technology add-on payment for 
each case, our estimates below are based on the increase in new 
technology add-on payments for FY 2021 as if every claim that would 
qualify for a new technology add-on payment would receive the 
maximum add-on payment. The following are estimates for FY 2021 for 
the 10 technologies for which we are continuing to make new 
technology add-on payments in FY 2021:
     Based on the applicant's estimate for FY 2019, we 
currently estimate that new technology add-on payments for 
AndexXaTM would increase overall FY 2021 payments by 
$98,755,313 (maximum add-on payment of $18,281.25 * 5,402 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
AZEDRA[supreg] would increase overall FY 2021 payments by 
$39,260,000 (maximum add-on payment of $98,150 * 400 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
BALVERSATM would increase overall FY 2021 payments by 
$178,162 (maximum add-on payment of $3,563.23 * 50 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
Cablivi[supreg] would increase overall FY 2021 payments by 
$4,351,165 (maximum add-on payment of $33,215 * 131 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
ELZONRIS[supreg] would increase overall FY 2021 payments by 
$30,985,668 (maximum add-on payment of $125,448.05 * 247 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
Esketamine would increase overall FY 2021 payments by $6,494,656 
(maximum add-on payment of $1,014.79 * 6,400 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
Jakafi[supreg] would increase overall FY 2021 payments by $573,469 
(maximum add-on payment of $4,096.21 * 140 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for T2 
Bacteria Test Panel would increase overall FY 2021 payments by 
$3,669,803 (maximum add-on payment of $97.50 * 37,639 patients).
     Based on the applicant's estimate for FY 2020, we 
currently estimate that new technology add-on payments for 
XOSPATA[supreg] would increase overall FY 2021 payments by 
$13,710,938 (maximum add-on payment of $7,312.50 * 1,875 patients).
     Based on the applicant's estimate for FY 2019 we 
currently estimate that new technology add-on payments for 
ZEMDRITM would increase overall FY 2021 payments by 
$10,209,375 (maximum add-on payment of $4,083.75 * 2,500 patients).

d. FY 2021 Applications for New Technology Add-On Payments

    In sections II.G.5. and 6. of the preamble to this final rule, 
we discuss 15 technologies for which we received applications for 
add-on payments for new medical services and technologies for FY 
2021. We note that three applicants did not receive FDA approval for 
their technology by the July 1 deadline. As explained in the 
preamble to this final rule, add-on payments for new medical 
services and technologies under section 1886(d)(5)(K) of the Act are 
not required to be budget neutral. As discussed in section II.H.6. 
of the preamble of this final rule, under the alternative pathway 
for new technology add-on payments, new technologies that are 
medical products with a QIDP designation or are part of the 
Breakthrough Device program will be considered new and not 
substantially similar to an existing technology and will not need to 
demonstrate that the technology represents a substantial clinical 
improvement. These technologies must still meet the cost criterion.
    The following are estimates for FY 2021 for the 6 technologies 
that we are approving for under the traditional pathway new 
technology add-on payments beginning in FY 2021.
     Based on the applicant's estimate for FY 2021 we 
currently estimate that new technology add-on payments for ContaCT 
would increase overall FY 2021 payments by $72,109,440 (maximum add-
on payment of $1,040 * 69,336 patients).
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for 
EluviaTM Drug-Eluting Vascular Stent System would 
increase overall FY 2021 payments by $8,944,865 (maximum add-on 
payment of $3,646.50 * 2,453 patients).
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for 
Hemospray[supreg] would increase overall FY 2021 payments by 
$20,637,500 (maximum add-on payment of $1,625 * 12,700 patients).
     Based on the applicants' estimate for FY 2021, we 
currently estimate that new technology add-on payments for 
TECENTRIQ[supreg] and IMFINZI[supreg] would increase overall FY 2021 
payments by $29,538,866 (maximum add-on payment of $6,875.90 * 4,296 
patients).
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for 
Soliris[supreg] would increase overall FY 2021 payments by 
$290,012,580 (maximum add-on payment of $21,199.75 * 13,680 
patients).
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for the 
SpineJack System would increase overall FY 2021 payments by 
$5,745,220 (maximum add-on payment of $3,654.72 * 1,572 patients).
    As also discussed in section II.G.6. of the preamble of this 
final rule, for FY 2021 we are approving seven alternative pathway 
applicant technologies (2 Breakthrough devices and 5 QIDPs) and 
conditionally approving one alternative pathway applicant technology 
(1 QIDP) for FY 2021that one

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applicant did not receive FDA approval by the July 1 deadline (as 
discussed in section II.G.9.c. of the preamble of this final rule). 
We note that one applicant under the alternative pathway for 
Breakthrough Devices did not receive FDA approval by the July 1 
deadline.
    The following are estimates for FY 2021 for the eight 
alternative pathway technologies that we are approving or 
conditionally approving for new technology add-on payments beginning 
in FY 2021.
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for the 
BAROSTIM NEOTM System would increase overall FY 2021 
payments by $16,425,500 (maximum add-on payment of $22,750 * 722 
patients).
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for 
FETROJA[supreg] could increase overall FY 2021 payments by 
$50,330,710 (maximum add-on payment of $7,919.86 * 6,355 patients).
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for CONTEPO 
would increase overall FY 2021 payments by $20,369,531 (maximum add-
on payment of $2,343.75 * 8,691 patients) under our conditional 
approval policy for certain antimicrobial products depending on the 
quarter in which it ultimately receives FDA marketing authorization.
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for 
NUZYRA[supreg] would increase overall FY 2021 payments by 
$26,235,698 (maximum add-on payment of $1,522.50 * 16,899 patients).
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for Optimizer 
System would increase overall FY 2021 payments by $22,425,000 
(maximum add-on payment of $14,950 * 1,500 patients).
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for 
RECARBRIOTM would increase overall FY 2021 payments by 
$2,691,978 (maximum add-on payment of $3,532.78 * 762 patients).
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for 
XENELTATM would increase overall FY 2021 payments by 
$44,965,085 (maximum add-on payment of $1,275.75 * 35,246 patients).
     Based on the applicant's estimate for FY 2021, we 
currently estimate that new technology add-on payments for 
ZERBAXA[supreg] would increase overall FY 2021 payments by 
$55,324,327 (maximum add-on payment of $1,836.98 * 30,117 patients).

2. Effects of Changes to MS-DRGs Subject to the Postacute Care Transfer 
Policy and the MS-DRG Special Payment Policy

    In section IV.A. of the preamble of this final rule, we discuss 
our changes to the list of MS-DRGs subject to the postacute care 
transfer policy and the MS DRG special payment policy for FY 2021. 
As reflected in Table 5 listed in section VI. of the Addendum to 
this final rule (which is available via the internet on the CMS 
website), using criteria set forth in regulations at 42 CFR 412.4, 
we evaluated MS-DRG charge, discharge, and transfer data to 
determine which new or revised MS-DRGs would qualify for the 
postacute care transfer and MS-DRG special payment policies. As a 
result of our revisions to the MS-DRG classifications for FY 2021, 
which are discussed in section II.F. of the preamble of this final 
rule, we are adding two MS-DRGs to the list of MS-DRGs that will be 
subject to the postacute care transfer policy and the MS-DRG special 
payment policy. Column 2 of Table I in this Appendix A shows the 
effects of the changes to the MS-DRGs and the relative payment 
weights and the application of the recalibration budget neutrality 
factor to the standardized amounts.
    Section 1886(d)(4)(C)(i) of the Act requires us annually to make 
appropriate DRG classification changes in order to reflect changes 
in treatment patterns, technology, and any other factors that may 
change the relative use of hospital resources. The analysis and 
methods for determining the changes due to the MS-DRGs and relative 
payment weights account for and include changes as a result of the 
changes to the MS-DRGs subject to the MS-DRG postacute care transfer 
and MS-DRG special payment policies. We refer readers to section 
I.G. of this Appendix A for a detailed discussion of payment impacts 
due to the MS-DRG reclassification policies for FY 2021.

3. Effects of the Changes to Uncompensated Care Payments for FY 2021

    As discussed in section IV.G. of the preamble of this final 
rule, under section 3133 of the Affordable Care Act, hospitals that 
are eligible to receive Medicare DSH payments will receive 25 
percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments under section 
1886(d)(5)(F) of the Act. The remainder, equal to an estimate of 75 
percent of what formerly would have been paid as Medicare DSH 
payments (Factor 1), reduced to reflect changes in the percentage of 
uninsured individuals and any additional statutory adjustment 
(Factor 2), is available to make additional payments to each 
hospital that qualifies for Medicare DSH payments and that has 
uncompensated care. Each hospital eligible for Medicare DSH payments 
will receive an additional payment based on its estimated share of 
the total amount of uncompensated care for all hospitals eligible 
for Medicare DSH payments. The uncompensated care payment 
methodology has redistributive effects based on the proportion of a 
hospital's amount of uncompensated care relative to the aggregate 
amount of uncompensated care of all hospitals eligible for Medicare 
DSH payments (Factor 3). The change to Medicare DSH payments under 
section 3133 of the Affordable Care Act is not budget neutral.
    In this final rule, we are establishing the amount to be 
distributed as uncompensated care payments to DSH eligible 
hospitals, which for FY 2021 is $8,290,014,520.96. This figure 
represents 75 percent of the amount that otherwise would have been 
paid for Medicare DSH payment adjustments adjusted by a Factor 2 of 
72.86 percent. For FY 2020, the amount available to be distributed 
for uncompensated care was $8,350,599,096.04, or 75 percent of the 
amount that otherwise would have been paid for Medicare DSH payment 
adjustments adjusted by a Factor 2 of 67.14 percent. To calculate 
Factor 3 for FY 2021, we used information on uncompensated care 
costs from Worksheet S-10 of hospitals' FY 2017 cost reports for all 
eligible hospitals, with the exception of Puerto Rico hospitals and 
Indian Health Service and Tribal hospitals, for which we are 
finalizing our proposal to continue to use low-income insured days 
from FY 2013 cost reports and FY 2018 SSI days to determine Factor 
3. For purposes of this final rule, we used uncompensated care data 
from the HCRIS database, as updated through June 30, 2020, Medicaid 
days from hospitals' FY 2013 cost reports from the same extract of 
HCRIS, and SSI days from the FY 2018 SSI ratios. For a complete 
discussion of the methodology for calculating Factor 3, we refer 
readers to section IV.G.4. of the preamble of this final rule.
    To estimate the impact of the combined effect of the changes to 
Factors 1 and 2, as well as the changes to the data used in 
determining Factor 3, on the calculation of Medicare uncompensated 
care payments, we compared total uncompensated care payments 
estimated in the FY 2020 IPPS/LTCH PPS final rule to total 
uncompensated care payments estimated in this FY 2021 IPPS/LTCH PPS 
final rule. For FY 2020, we calculated 75 percent of the estimated 
amount that would be paid as Medicare DSH payments absent section 
3133 of the Affordable Care Act, adjusted by a Factor 2 of 67.14 
percent and multiplied by a Factor 3 calculated using the 
methodology described in the FY 2020 IPPS/LTCH PPS final rule. For 
FY 2021, we calculated 75 percent of the estimated amount that would 
be paid as Medicare DSH payments absent section 3133 of the 
Affordable Care Act, adjusted by a Factor 2 of 72.86 percent and 
multiplied by a Factor 3 calculated using the methodology described 
previously.
    Our analysis included 2,401 hospitals that are projected to be 
eligible for DSH in FY 2021. It did not include hospitals that 
terminated their participation from the Medicare program as of July 
10, 2020, Maryland hospitals, new hospitals, MDHs, and SCHs that are 
expected to be paid based on their hospital-specific rates. The 22 
hospitals participating in the Rural Community Hospital 
Demonstration Program were also excluded from this analysis, as 
participating hospitals are not eligible to receive empirically 
justified Medicare DSH payments and uncompensated care payments. In 
addition, the data from merged or acquired hospitals were combined 
under the surviving hospital's CMS certification number (CCN), and 
the nonsurviving CCN was excluded from the analysis. The estimated 
impact of the changes in Factors 1, 2, and 3 on uncompensated care 
payments across all hospitals projected to be eligible for DSH 
payments in FY 2021, by hospital characteristic, is presented in the 
following table.
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    The changes in projected uncompensated care payments for FY 2021 
in relation to the uncompensated care payments for FY 2020 are 
driven by a decrease in Factor 1 and an increase in Factor 2, as 
well as by a decrease in the number of hospitals projected to be 
eligible to receive DSH in FY 2021 relative to FY 2020. Factor 1 has 
decreased from $12.438 billion to $11.378 billion, while the percent 
change in the percent of individuals who are uninsured (Factor 2) 
has increased from 67.14 percent to 72.86 percent. Based on the 
changes in these two factors, the impact analysis found that, across 
all projected DSH eligible hospitals, FY 2021 uncompensated care 
payments are estimated at approximately $8.290 billion, or a 
decrease of approximately 0.73 percent from FY 2020 uncompensated 
care payments (approximately $8.351 billion). While these changes 
will result in a net decrease in the amount available to be 
distributed in uncompensated care payments, the projected payment 
decreases vary by hospital type. This redistribution of 
uncompensated care payments is caused by changes in Factor 3. As 
seen in the previous table, a percent change lower than negative 
0.73 percent indicates that hospitals within the specified category 
are projected to experience a larger decrease in uncompensated care 
payments, on average, compared to the universe of projected FY 2021 
DSH hospitals. Conversely, a percent change greater than negative 
0.73 percent indicates that a hospital type is projected to have a 
smaller decrease than the overall average. Similarly, a positive 
percent change indicates an increase in uncompensated care payments. 
The variation in the distribution of payments by hospital 
characteristic is largely dependent on a given hospital's 
uncompensated care costs as reported in the Worksheet S-10, or 
number of Medicaid days and SSI days for Puerto Rico hospitals and 
Indian Health Service and Tribal hospitals, used in the Factor 3 
computation.
    Rural hospitals, in general, are projected to experience larger 
decreases in uncompensated care payments than their urban 
counterparts. Overall, rural hospitals are projected to receive a 
5.7 percent decrease in uncompensated care payments,

[[Page 59079]]

while urban hospitals are projected to receive a 0.39 percent 
decrease in uncompensated care payments. Larger urban hospitals, 
however, are projected to receive a 0.65 percent increase in 
uncompensated care payments and hospitals in other urban areas a 
2.04 percent decrease.
    By bed size, smaller rural hospitals are projected to receive 
the largest decreases in uncompensated care payments. Rural 
hospitals with 0-99 beds are projected to receive a 7.22 percent 
payment decrease, and rural hospitals with 100-249 beds are 
projected to receive a 6.73 percent decrease. These decreases for 
smaller rural hospitals are greater than the overall hospital 
average. However, larger rural hospitals with 250+ beds are 
projected to receive a 7.44 percent payment increase. In contrast, 
the smallest urban hospitals (0-99 beds) are projected to receive an 
increase in uncompensated care payments of 2.42 percent, while urban 
hospitals with 100-249 beds are projected to receive a decrease of 
1.10 percent, and larger urban hospitals with 250+ beds projected to 
receive a 0.29 percent decrease in uncompensated care payments, 
which is less than the overall hospital average.
    By region, rural hospitals are expected to receive larger than 
average decreases in uncompensated care payments in all Regions, 
except for rural hospitals in the South Atlantic and East North 
Central Regions, which are projected to receive smaller than average 
decreases, and hospitals in the Pacific Region, which are projected 
to receive an increase in uncompensated care payments of 8.95 
percent. Urban hospitals are projected to receive a more varied 
range of payment changes. Urban hospitals in the New England, the 
Middle Atlantic, West South Central, and Mountain Regions, as well 
as urban hospitals in Puerto Rico, are projected to receive larger 
than average decreases in uncompensated care payments. While 
hospitals in the South Atlantic, East North Central, East South 
Central, West North Central and Pacific Regions are projected to 
receive increases in uncompensated care payments.
    By payment classification, hospitals in urban areas overall are 
expected to receive a 0.11 percent increase in uncompensated care 
payments, with hospitals in large urban areas are expected to see an 
increase in uncompensated care payments of 1.13 percent, while 
hospitals in other urban areas are expected to receive a decrease of 
1.78 percent. In contrast, hospitals in rural areas are projected to 
receive a decrease in uncompensated care payments of 2.99 percent.
    Nonteaching hospitals are projected to receive a payment 
decrease of 0.84 percent, teaching hospitals with fewer than 100 
residents are projected to receive a payment decrease of 0.77 
percent, and teaching hospitals with 100+ residents have a projected 
payment decrease of 0.59 percent. All of these decreases are 
consistent with the overall hospital average. Proprietary and 
government hospitals are projected to receive larger than average 
decreases of 2.55 and 1.25 percent respectively, while voluntary 
hospitals are expected to receive a payment increase of 0.06 
percent. Hospitals with less than 50 percent Medicare utilization 
are projected to receive decreases in uncompensated care payments 
consistent with the overall hospital average percent change, while 
hospitals with 50 to 65 percent Medicare utilization are projected 
to receive a larger than average decrease of 2.31 percent. Hospitals 
with greater than 65 percent Medicare utilization are projected to 
receive an increase of 0.62 percent.

4. Effects of Reductions Under the Hospital Readmissions Reduction 
Program for FY 2021

    In section IV.G. of the preamble of this final rule, we discuss 
our proposed policies for the FY 2021 Hospital Readmissions 
Reduction Program. This program requires a reduction to a hospital's 
base operating DRG payment to account for excess readmissions of 
selected applicable conditions and procedures. The table and 
analysis in this final rule illustrate the estimated financial 
impact of the Hospital Readmissions Reduction Program payment 
adjustment methodology by hospital characteristic. Hospitals are 
stratified into quintiles based on the proportion of dual-eligible 
stays among Medicare FFS and managed care stays between July 1, 2016 
and June 30, 2019 (that is the FY 2021 Hospital Readmissions 
Reduction Program's performance period). Hospitals' excess 
readmission ratios (ERRs) are assessed relative to their peer group 
median and a neutrality modifier is applied in the payment 
adjustment factor calculation to maintain budget neutrality. To 
analyze the results by hospital characteristic, we used the FY 2021 
Hospital IPPS Proposed Rule Impact File.
    These analyses include 2,986 non-Maryland hospitals eligible to 
receive a penalty during the performance period. Hospitals are 
eligible to receive a penalty if they have 25 or more eligible 
discharges for at least one measure between July 1, 2016 and June 
30, 2019. The second column in the table indicates the total number 
of non-Maryland hospitals with available data for each 
characteristic that have an estimated payment adjustment factor less 
than 1 (that is penalized hospitals).
    The third column in the table indicates the percentage of 
penalized hospitals among those eligible to receive a penalty by 
hospital characteristic. For example, 82.17 percent of eligible 
hospitals characterized as non-teaching hospitals are expected to be 
penalized. Among teaching hospitals, 89.70 percent of eligible 
hospitals with fewer than 100 residents and 92.64 percent of 
eligible hospitals with 100 or more residents are expected to be 
penalized.
    The fourth column in the table estimates the financial impact on 
hospitals by hospital characteristic. The table shows the share of 
penalties as a percentage of all base operating DRG payments for 
hospitals with each characteristic. This is calculated as the sum of 
penalties for all hospitals with that characteristic over the sum of 
all base operating DRG payments for those hospitals between October 
1, 2018 and September 30, 2019 (FY 2019). For example, the penalty 
as a share of payments for urban hospitals is 0.68 percent. This 
means that total penalties for all urban hospitals are 0.68 percent 
of total payments for urban hospitals. Measuring the financial 
impact on hospitals as a percentage of total base operating DRG 
payments accounts for differences in the amount of base operating 
DRG payments for hospitals with the characteristic when comparing 
the financial impact of the program on different groups of 
hospitals.
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    We did not receive any public comments regarding the impact of 
our proposals.

5. Effects of Requirements Under the FY 2021 Hospital Value-Based 
Purchasing (VBP) Program

    In section IV.L. of the preamble of this final rule, we discuss 
the Hospital VBP Program under which the Secretary makes value-based 
incentive payments to hospitals based on their performance on 
measures during the performance period with respect to a fiscal 
year. These incentive payments will be funded for FY 2021 through a 
reduction to the FY 2021 base operating DRG payment amounts for 
discharges during the fiscal year, as required by section 
1886(o)(7)(B) of the Act. The applicable percentage for FY 2021 and 
subsequent years is 2 percent. The total amount available for value-
based incentive payments must be equal to the total amount of 
reduced payments for all hospitals for the fiscal year, as estimated 
by the Secretary.
    In section IV.L.1.b. of the preamble of this final rule, we 
estimated the available pool of funds for value-based incentive 
payments in the FY 2021 program year, which, in accordance with 
section 1886(o)(7)(C)(v) of the Act, will be 2.00 percent of base 
operating DRG payment amounts, or a total of approximately $1.9 
billion. This estimated available pool for FY 2021 is based on the 
historical pool of hospitals that were eligible to participate in 
the FY 2020 program year and the payment information from the March 
2020 update to the FY 2019 MedPAR file.
    The estimated impacts of the FY 2021 program year by hospital 
characteristic, found in the table in this section, are based on 
historical TPSs. We used the FY 2020 program year's TPSs to 
calculate the proxy adjustment factors used for this impact 
analysis. These are the most recently available scores that 
hospitals were given an opportunity to review and correct. The proxy 
adjustment factors use estimated annual base operating DRG payment 
amounts derived from the March 2020 update to the FY 2019 MedPAR 
file. The proxy adjustment factors can be found in Table 16A 
associated with this final rule (available via the internet on the 
CMS website at https://www.cms.gov/medicare/acute-inpatient-pps/fy-2021-ipps-proposed-rule-home-page#Tables).
    The impact analysis shows that, for the FY 2021 program year, 
the number of hospitals that are expected to receive an increase in 
their base operating DRG payment amount is higher than the number of 
hospitals that are expected to receive a decrease. On average, among 
urban hospitals, hospitals in the West North Central region are 
expected to have the largest positive percent change in base 
operating DRG payment amounts, and among rural hospitals, hospitals 
in the Pacific region are expected to have the largest positive 
percent change in base operating DRG payment amounts. Urban Middle 
Atlantic, Urban East South Central, and Urban West South Central 
regions are expected to experience, on average, a decrease in base 
operating DRG payment amounts. All other regions, both urban and 
rural, are expected to experience, on average, an increase in base 
operating DRG payment amounts.
    As DSH patient percentage increases, the average percent change 
in base operating DRG payment amounts is expected to decrease. With 
respect to hospitals' Medicare utilization as a percent of inpatient 
days (MCR), as the MCR percent increases, the average percent change 
in base operating DRG payment amounts is expected to increase for 
MCR percent 0 to 65, but for MCR percent greater than 65, the 
average percent change in base operating DRG payment amounts is 
expected to decrease. On average, teaching hospitals are expected to 
have a decrease in base operating DRG payment amounts while non-
teaching hospitals are expected to have an increase in base 
operating DRG payment amounts.
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    Actual FY 2021 program year's TPSs will not be reviewed and 
corrected by hospitals until after the FY 2021 IPPS/LTCH PPS final 
rule has been published. Therefore, the same historical universe of 
eligible hospitals and corresponding TPSs from the FY 2020 program 
year were used for the updated impact analysis in this final rule. 
We did not receive any public comments regarding the financial 
impact of our proposals.

6. Effects of Requirements Under the HAC Reduction Program for FY 2021

    We are presenting the estimated impact of the FY 2021 Hospital-
Acquired Condition (HAC) Reduction Program on hospitals by hospital 
characteristic. These FY 2021 HAC Reduction Program results were 
calculated using the Equal Measure Weights approach finalized in the 
FY 2019 IPPS/LTCH PPS final rule (83 FR 41486 through 41489). Each 
hospital's Total HAC Score was calculated as the equally weighted 
average of the hospital's measure scores. The table in this section 
presents the estimated proportion of hospitals in the worst 
performing quartile of Total HAC Scores by hospital characteristic. 
Hospitals' CMS Patient Safety and Adverse Events Composite (CMS PSI 
90) measure results are based on Medicare FFS discharges from July 
1, 2017 through June 30, 2019 and version 10.0 of the PSI software. 
Hospitals' measure results for CDC Central Line-Associated 
Bloodstream Infection (CLABSI), Catheter-Associated Urinary Tract 
Infection (CAUTI), Colon and Abdominal Hysterectomy Surgical Site 
Infection (SSI), Methicillin-resistant Staphylococcus aureus (MRSA) 
bacteremia, and Clostridium difficile Infection (CDI) are derived 
from standardized infection ratios (SIRs) calculated with hospital 
surveillance data reported to the NHSN for infections occurring 
between January 1, 2018 and December 31, 2019. To analyze the 
results by hospital characteristic, we used the FY 2021 Proposed 
Rule Impact File.
    This table includes 3,111 non-Maryland hospitals with a FY 2021 
Total HAC Score. Maryland hospitals and hospitals without a Total 
HAC Score are excluded from the table. Of these 3,111 hospitals, 
3,102 hospitals had information for geographic location with bed 
size, Safety-net status, DSH percent, teaching status and ownership; 
3,111 had information on region; and 3,084 had information for MCR 
percent. The first column presents a breakdown of each 
characteristic.
    The third column in the table indicates the number of hospitals 
for each characteristic that would be in the worst-performing 
quartile of Total HAC Scores. These hospitals would receive a 
payment reduction under the FY 2021 HAC Reduction Program. For 
example, with regard to teaching status, 425 hospitals out of 1,968 
hospitals characterized as non-teaching hospitals would be subject 
to a payment reduction. Among teaching hospitals, 224 out of 876 
hospitals with fewer than 100 residents and 123 out of 258 hospitals 
with 100 or more residents would be subject to a payment reduction.
    The fourth column in the table indicates the proportion of 
hospitals for each characteristic that would be in the worst 
performing quartile of Total HAC Scores and thus receive a payment 
reduction under the FY 2021 HAC Reduction Program. For example, 21.6 
percent of the 1,968 hospitals characterized as non-teaching 
hospitals, 25.6 percent of the 876 teaching hospitals with fewer 
than 100 residents, and 47.7 percent of the 258 teaching hospitals 
with 100 or more

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residents would be subject to a payment reduction.
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We did not receive any public comments regarding the financial 
impact of our proposals.

7. Policy Change Related to Medical Residents Affected by Residency 
Program or Teaching Hospital Closure

    In section IV.N. of the preamble of this final rule, we are 
amending the Medicare policy with regard to closing teaching 
hospitals and closing residency programs to address the needs of 
residents attempting to find alternative hospitals in which to 
complete their training and the incentives of home and receiving 
hospitals with regard to seamless Medicare IME and direct GME 
funding. There are no new Medicare funded slots being created by 
this amendment; as under current policy, the maximum number of FTE 
cap slots that may be transferred with displaced residents is the 
number equal to the closing hospital's IME and direct GME FTE caps. 
Additionally, all of the funding for residents due to a hospital 
closure would eventually be transferred permanently to new hospitals 
under current law (section 5506 of the Affordable Care Act, which 
provides for permanent redistribution of slots due to hospital 
closure. As a result, we believe that ultimately, there is no new 
cost generated for the Medicare program as a result of this 
amendment.

8. Effect of the Payment for Allogeneic Hematopoietic Stem Cell 
Acquisition Costs

    Section 108 of the Further Consolidated Appropriations Act, 2020 
(Public Law 116-94) provides that, effective for cost reporting 
periods beginning on or after October 1, 2020, payment to a 
subsection (d) hospital that furnishes an allogeneic hematopoietic 
stem cell transplant for hematopoietic stem cell acquisition shall 
be made on a reasonable cost basis, and that the Secretary shall 
specify the items included in such hematopoietic stem cell 
acquisition in rulemaking. This statutory provision also requires 
that, beginning in FY 2021, the payments made based on reasonable 
cost for the acquisition costs of allogeneic hematopoietic stem 
cells be made in a budget neutral manner. Our implementation of 
section 108 of the Further Consolidated Appropriations Act, 2020 is 
discussed in section II.H. of the preamble of this final rule, 
including our adjustment to the standardized amount to ensure the 
effects of the additional payments for allogeneic hematopoietic stem 
cell acquisition costs are budget neutral, as required under that 
law.

9. Effects of Implementation of the Rural Community Hospital 
Demonstration Program in FY 2021

    In section IV.O. of the preamble of this final rule for FY 2021, 
we discussed our implementation and budget neutrality methodology 
for section 410A of Public Law 108-173, as amended by sections 3123 
and 10313 of Public Law 111-148, and more recently, by section 15003 
of Public Law 114-255, which requires the Secretary to conduct a 
demonstration that would modify payments for inpatient services for 
up to 30 rural hospitals.
    Section 15003 of Public Law 114-255 requires the Secretary to 
conduct the Rural Community Hospital Demonstration for a 10-year 
extension period (in place of the 5-year extension period required 
by the Affordable Care Act), beginning on the date immediately 
following the last day of the initial 5-year period under section 
410A(a)(5) of Public Law 108-173. Specifically, section 15003 of 
Public Law 114-255 amended section 410A(g)(4) of Public Law 108-173 
to require that, for hospitals participating in the demonstration as 
of the last day of the initial

[[Page 59086]]

5-year period, the Secretary shall provide for continued 
participation of such rural community hospitals in the demonstration 
during the 10-year extension period, unless the hospital makes an 
election to discontinue participation. Furthermore, section 15003 of 
Public Law 114-255 requires that, during the second 5 years of the 
10-year extension period, the Secretary shall provide for 
participation under the demonstration during the second 5 years of 
the 10-year extension period for hospitals that are not described in 
section 410A(g)(4) of Public Law 108-173.
    Section 15003 of Public Law 114-255 also requires that no later 
than 120 days after enactment of Public Law 114-255 that the 
Secretary issue a solicitation for applications to select additional 
hospitals to participate in the demonstration program for the second 
5 years of the 10-year extension period so long as the maximum 
number of 30 hospitals stipulated by Public Law 111-148 is not 
exceeded. Section 410A(c)(2) of Public Law 108-173 requires that in 
conducting the demonstration program under this section, the 
Secretary shall ensure that the aggregate payments made by the 
Secretary do not exceed the amount which the Secretary would have 
paid if the demonstration program under this section was not 
implemented (budget neutrality).
    In the preamble to this final rule, we described the terms of 
participation for the extension period authorized by Public Law 114-
255. In the FY 2018 IPPS/LTCH PPS final rule, we finalized our 
policy with regard to the effective date for the application of the 
reasonable cost-based payment methodology under the demonstration 
for those among the hospitals that had previously participated and 
were choosing to participate in the second 5-year extension period. 
According to our finalized policy, each of these previously 
participating hospitals began the second 5 years of the 10-year 
extension period on the date immediately after the date the period 
of performance under the 5-year extension period ended. Seventeen of 
the 21 hospitals that completed their periods of participation under 
the extension period authorized by the Affordable Care Act elected 
to continue in the second 5-year extension period, while 13 
additional hospitals were selected to participate. One of the 
hospitals selected in 2017 withdrew from the demonstration prior to 
beginning participation on July 1, 2018, while each of the remaining 
newly participating hospitals began its 5-year period of 
participation effective the start of the first cost reporting period 
on or after October 1, 2017. In addition, one among the previously 
participating hospitals closed effective January 2019, while two 
have withdrawn effective September 1 and October 1, 2019, 
respectively. Therefore, 27 hospitals were participating in the 
demonstration as of this date--15 previously participating and 12 
newly participating. For four of the previously participating 
hospitals, this 5-year period of participation will end during FY 
2020; while one of the previously participating hospitals, scheduled 
to end in 2021, chose in February of this past year to withdraw 
effective September 2019. Therefore, the budget neutrality 
calculations in this final rule are based on 22 hospitals. For seven 
of the remaining 10 hospitals among the original group, 
participation will end during FY 2021, with participation ending for 
the other three on December 31, 2021. The newly participating 
hospitals are all scheduled to end their participation either at the 
end of FY 2022 or during FY 2023.
    In the FY 2018 IPPS/LTCH PPS final rule, we finalized the budget 
neutrality methodology in accordance with our policies for 
implementing the demonstration, adopting the general methodology 
used in previous years, whereby we estimated the additional payments 
made by the program for each of the participating hospitals as a 
result of the demonstration. In order to achieve budget neutrality, 
we adjusted the national IPPS rates by an amount sufficient to 
account for the added costs of this demonstration. In other words, 
we have applied budget neutrality across the payment system as a 
whole rather than across the participants of this demonstration. The 
language of the statutory budget neutrality requirement permits the 
agency to implement the budget neutrality provision in this manner. 
The statutory language requires that aggregate payments made by the 
Secretary do not exceed the amount which the Secretary would have 
paid if the demonstration was not implemented, but does not identify 
the range across which aggregate payments must be held equal.
    For this final rule, the resulting amount applicable to FY 2021 
is $39,825,670, which we are including in the budget neutrality 
offset adjustment for FY 2021. This estimated amount is based on the 
specific assumptions regarding the data sources used, that is, 
recently available ``as submitted'' cost reports and historical and 
currently finalized update factors for cost and payment.
    In previous years, we have incorporated a second component into 
the budget neutrality offset amounts identified in the final IPPS 
rules. As finalized cost reports became available, we determined the 
amount by which the actual costs of the demonstration for an 
earlier, given year differed from the estimated costs for the 
demonstration set forth in the final IPPS rule for the corresponding 
fiscal year, and we incorporated that amount into the budget 
neutrality offset amount for the upcoming fiscal year. We have 
calculated this difference for FYs 2005 through 2015 between the 
actual costs of the demonstration as determined from finalized cost 
reports once available, and estimated costs of the demonstration as 
identified in the applicable IPPS final rules for these years.
    With the extension of the demonstration for another 5-year 
period, as authorized by section 15003 of Public Law 114-255, we 
will continue this general procedure. All finalized cost reports are 
not yet all available for the 19 hospitals that completed a cost 
reporting period beginning in FY 2016 according to the demonstration 
cost-based payment methodology. Therefore, we are expecting to 
include in the FY2022 IPPS/LTCH PPS proposed and final rules the 
difference between the actual costs of the demonstration as 
determined from these cost reports and the estimated costs as 
determined in the FY 2016 final rule.
    For this final rule for FY 2021, the total amount that we are 
applying to the national IPPS rates is $39,825,670.
    Comment: A commenter expressed support for the continuation of 
the program, but said, that as a demonstration, the program does not 
offer long-term financial sustainability needed to maintain health 
care access in rural areas.
    Response: We appreciate the comment. We have conducted the 
demonstration program in accordance with Congressional mandates.

10. Effects of Continued Implementation of the Frontier Community 
Health Integration Project (FCHIP) Demonstration

    In section VI.B.2. of the preamble of this final rule we discuss 
the implementation of the FCHIP demonstration, which allowed 
eligible entities to develop and test new models for the delivery of 
health care services in eligible counties in order to improve access 
to and better integrate the delivery of acute care, extended care, 
and other health care services to Medicare beneficiaries in no more 
than four States. Budget neutrality estimates for the demonstration 
will be based on the demonstration period of August 1, 2016, through 
July 31, 2019. The demonstration included three intervention prongs, 
under which specific waivers of Medicare payment rules allowed for 
enhanced payment: Telehealth, skilled nursing facility/nursing 
facility services, and ambulance services. These waivers were 
implemented with the goal of increasing access to care with no net 
increase in costs. (We also discussed this policy in the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38294 through 38296), the FY 2019 
IPPS/LTCH PPS final rule (83 FR 41516 through 41517), and the FY 
2020 IPPS/LTCH PPS final rule (84 FR 42044 through 42701), but did 
not make any changes to the policy that was adopted in FY 2017.)
    We specified the payment enhancements for the demonstration and 
selected CAHs for participation with the goal of maintaining the 
budget neutrality of the demonstration on its own terms (that is, 
the demonstration would produce savings from reduced transfers and 
admissions to other health care providers, thus offsetting any 
increase in payments resulting from the demonstration). However, 
because of the small size of this demonstration program and 
uncertainty associated with projected Medicare utilization and 
costs, in the FY 2017 IPPS/LTCH PPS final rule we adopted a 
contingency plan (81 FR 57064 through 57065) to ensure that the 
budget neutrality requirement in section 123 of Public Law 110-275 
is met. Accordingly, if analysis of claims data for the Medicare 
beneficiaries receiving services at each of the participating CAHs, 
as well as of other data sources, including cost reports, shows that 
increases in Medicare payments under the demonstration during the 3-
year period are not sufficiently offset by reductions elsewhere, we 
will recoup the additional expenditures attributable to the 
demonstration through a reduction in payments to all CAHs 
nationwide. The demonstration is projected to impact payments to 
participating CAHs under both Medicare Part A and Part B. Thus, in 
the

[[Page 59087]]

event that we determine that aggregate payments under the 
demonstration exceed the payments that would otherwise have been 
made, we will recoup payments through reductions of Medicare 
payments to all CAHs under both Medicare Part A and Part B. Because 
of the small scale of the demonstration, it would not be feasible to 
implement budget neutrality by reducing payments only to the 
participating CAHs. Therefore, we would make the reduction to 
payments to all CAHs, not just those participating in the 
demonstration, because the FCHIP demonstration is specifically 
designed to test innovations that affect delivery of services by 
this provider category. As we explained in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57064 through 57065), we believe that the language 
of the statutory budget neutrality requirement at section 
123(g)(1)(B) of the Act permits the agency to implement the budget 
neutrality provision in this manner. The statutory language merely 
refers to ensuring that aggregate payments made by the Secretary do 
not exceed the amount which the Secretary estimates would have been 
paid if the demonstration project was not implemented, and does not 
identify the range across which aggregate payments must be held 
equal.
    Under the policy adopted in FY 2017 IPPS/LTCH PPS final rule, in 
the event the demonstration is found not to have been budget 
neutral, any excess costs will be recouped beginning in CY 2020. 
Based on the currently available data, the determination of budget 
neutrality results is preliminary and the amount of any reduction to 
CAH payments that would be needed in order to recoup excess costs 
under the demonstration remains uncertain. Therefore, in this final 
rule, we are finalizing our proposal in the FY 2021 IPPS/LTCH PPS 
proposed rule to revise the policy originally adopted in the FY 2017 
IPPS/LTCH PPS final rule, to delay the implementation of any budget 
neutrality adjustment. We will revisit this policy in rulemaking for 
FY 2022 when we expect to have complete data for the demonstration 
period. Since our data analysis is incomplete, it is not possible to 
determine the impact of this policy for any national payment system 
for FY 2021.

11. Effects of the Submission of Electronic Medical Records to Quality 
Improvement Organizations (QIOs)

    In section IX.A. of this final rule, we specify the changes we 
are adopting regarding the reimbursement to providers, practitioners 
and institutions for electronic submission of patient records 
required for QIO purposes. Over the last several years, numerous 
healthcare providers subject to QIO review activity under Sec. Sec.  
476.78 and 480.111 have requested reimbursement for submitting 
requested patient records in an electronic format. However, our 
regulations concerning reimbursement to providers and practitioners 
for submitting patient records and information required for QIO 
review activity under Sec.  476.78 only permitted reimbursement for 
records sent via photocopying and mailing or facsimile. This had the 
unintended consequence of discouraging providers from using the more 
efficient and cost effective means of submitting patient records and 
information to the QIOs in an electronic format solely because 
reimbursement was available only for patient records and information 
submitted via photocopying and mailing.
    The updates we are making to the regulation with this final rule 
respond to requests from providers, by addressing reimbursement for 
submitting records to the QIO in electronic format as well as by 
photocopying and mailing and facsimile. According to 2017 Office of 
National Coordinator survey result, 96 percent of all non-federal 
acute care hospitals possessed certified health IT. Ninety-nine 
percent of large hospitals (more than 300 beds) had certified health 
IT, while 97 percent of medium-sized hospitals (more than 100 beds) 
had certified health IT. Also nearly 9 in 10 (86 percent) of office-
based physicians had adopted any EHR, and nearly 4 in 5 (80 percent) 
had adopted a certified EHR (https://dashboard.healthit.gov/quickstats/quickstats.php). Given the widespread adoption of the 
Certified Electronic Health Record Technology (CEHRT), we believe 
that the providers and QIOs now have the capacity to send and 
receive patient records in electronic format. In light of these 
facts, we believe that it is now appropriate to require providers, 
practitioners and institutions to submit patient records to the QIOs 
in electronic format. Our updates to the regulations also provide 
appropriate reimbursement for patient records submitted to the QIOs 
in an electronic format. We believe these changes will result in a 
large shift among providers, practitioners and institutions, which 
are subject to QIO review and which submit information and documents 
for the QIOs to perform their QIO functions under Sec. Sec.  476.78 
and 480.111, toward submitting patient records in electronic format. 
As discussed later in this section, we believe these provisions will 
help reduce our costs for QIO-labor associated with scanning and 
uploading patient records they receive by mail or facsimile, as well 
as reducing the time to complete QIO reviews as electronic records 
are generally easier to store and search. Thus, the requirement for 
providers to submit patient records to QIOs in electronic format 
will be advantageous for CMS. Providers and practitioners who are 
unable to send patient records to the QIOs in an electronic format 
will be able to obtain a waiver to permit them to submit records to 
the QIO via facsimile or photocopying and mailing under this 
provision. We proposed an updated reimbursement rate for patient 
records submitted by facsimile or by photocopying and mailing to 
account for current wage and materials costs, and a waiver process 
that is minimally burdensome for providers, practitioners, and 
institutions.
    We expect that implementation of the requirement for providers 
and practitioners to submit records to QIOs in and electronic format 
will have significant implications in terms of cost savings. Because 
CMS reimburses the QIOs directly for all payments to providers and 
practitioners for sending records to the QIOs and pays QIOs for 
their work, including the additional time and overhead expenses 
related to using paper records instead of electronic records. 
Therefore, any cost savings to the QIOs as a result of the adoption 
of electronic formats for submission of patient records would result 
in a cost savings to CMS. The less it costs to send records to the 
QIOs, the less CMS has to reimburse for those costs.
    To estimate savings, we assumed 100 percent compliance with the 
proposed requirements at Sec.  476.78(c). Although we assumed that 
20 percent of providers, practitioners or institutions would seek a 
waiver, given the percentage of providers that currently have access 
to Certified Electronic Health Record Technology (CEHRT), we believe 
that ultimately all providers will be able to submit patient records 
in electronic format in the future.
    We did not receive any comments regarding our proposal to 
require providers to submit requested patient records to QIOs for 
the purpose of fulfilling one or more QIO functions unless they have 
an approved waiver. We continue to believe that it is reasonable to 
require providers to submit patient records in electronic format 
unless they have a QIO approved waiver.
    We estimated the total savings by subtracting the total cost of 
sending records electronically from the total cost of sending 
records by photocopying and mailing. Over the last 5 years, 
providers and practitioners have sent about 1.2 million patient 
records to the QIOs, totaling approximately 342 million pages of 
documents. Currently, providers are reimbursed at the rate of $0.12 
per page, which results in a total reimbursement cost of about $41 
million over 5 years. In contrast, we proposed, sending 1.2 million 
records electronically at a rate of reimbursement of $3 per record 
would amount to a total reimbursement cost of roughly $3.6 million. 
Subtracting $3.6 million (the estimated cost of sending records 
electronically over 5 years) from $41 million (the cost of sending 
records by fax or by mail), would result in a total estimated 
savings to CMS of $37.4 million. We would save money on the efforts 
of the QIOs to scan and process the paper records before sending 
them on for review electronically. However, these longer-run savings 
would be preceded by short-run transition costs, which we have not 
estimated.
    Based on our estimates for case volume set forth previously, and 
assuming the QIOs cost for scanning and labor is $0.10 per page, 
based on the information set out in Table 1 of this Appendix, we 
estimate that it would save CMS about $34.3 million if the agency no 
longer needed to scan 342 million pages of records. Savings in 
payments for the labor and materials costs provided to both 
providers and QIOs for photocopying, scanning, and uploading results 
in total savings to CMS of $71.8 million. Tables 2 and 3 of this 
Appendix illustrate the cost savings to CMS over 5 years.
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    The BFCC-QIO contracts under the 12th scope of work currently 
have four task orders that are awarded on a staggered 5-year basis. 
Currently CMS has budgeted $95.8 million per year for each of the 
four BFCC-QIOs task orders, for an estimated 5-year cost of $479 
million. We estimate that the costs of file transfer through 
photocopying and mailing, facsimile and in electronic formats would 
be a small fraction of the total operations budget of the QIOs. We 
believe that the changes we are adopting to the requirements 
governing reimbursement to providers, practitioners and institutions 
for submitting requested patient records to the QIO would also 
benefit providers, practitioners and institutions in fulfilling 
their responsibilities under Sec.  476.78 (obligating providers and 
practitioners to, among other things, furnish records to QIOs) and 
Sec.  480.111 (obligating institutions and practitioners to provide 
access, records and information to QIOs), by providing reimbursement 
for the submission of requested patient records to the QIOs in an 
electronic format.
    Given our estimate, discussed in section IX.A.2.d. of this final 
rule that an appropriate employee can reasonably photocopy 6 pages 
of documents per minute and scan documents at the rate of 6 
documents per minute, we estimate that the changes we are adopting 
would save providers and CMS a total of approximately 1.9 million 
labor hours over 5 years. We expect these proposed changes would 
also result in a positive environmental impact by avoiding printing, 
photocopying, faxing, scanning, and recycling about 342.2 million 
pages of medical records by providers and QIOs over 5 years.
    We did not receive public comments on the methodologies used to 
calculate the reimbursement rates for electronic submission of 
patient records, submission of patient records via photocopying and 
mailing, or submission of patient records via facsimile. Since we 
did not receive comments on the methodologies used to calculate 
these rates, we continue to believe that the rates are reasonable, 
and that the cost savings we have calculated for the adopted changes 
are reasonable.

12. Effects of the Changes To Prepare for Implementation of Mandatory 
PRRB Electronic Filing

    In section IX.B. of the preamble of this final rule, we are 
implementing the proposed changes regarding PRRB appeals. The burden 
associated with the requirements is the time and effort necessary to 
review instructions and register for the electronic submission 
system as well as the time and effort to gather, develop and submit 
various documents associated with a PRRB appeal. We also believe 
that requiring all parties involved in PRRB appeals to use OH CDMS 
would create efficiencies and reduce the burden and cost to external 
users in that, when a file or document is uploaded into the system 
and filed with the Board, the system simultaneously serves it on the 
opposing party. As a result, the system will eliminate the need to 
print documents and pay for postage for most submissions. 
Additionally, there is no material out-of-pocket direct cost or 
investment to utilize OH CDMS; parties do not need to purchase 
separate software. Finally, the required use of the system would 
also reduce the administrative burden on OH staff to enter data and 
scan correspondence, and will free up government resources to 
adjudicate cases and manage the docket. Similarly, it will enhance 
the PRRB's ability to strategically manage the PRRB's complex docket 
as it will provide better analytics for case management activities 
such as scheduling, jurisdictional and procedural reviews, and long-
range docket planning. Last, the required use of the system would 
also reduce paper documents and the related costs associated with 
processing and securely storing the PRRB's records.

13. Effects of the Proposed Revisions of Medicare Bad Debt Policy

    In section IX.C. of the preamble of this final rule, we are 
implementing the proposed clarifications and codification of certain 
longstanding Medicare bad debt reimbursement provisions and 
requirements for all Medicare providers, suppliers, and other 
entities eligible to receive Medicare payment for bad debt by 
revising 42 CFR 413.89, Bad debts, charity, and courtesy allowances. 
We are also implementing our proposal to codify our longstanding 
reasonable collection effort to require a Medicaid remittance advice 
(RA) for dual eligible beneficiaries. In the proposed rule, we 
sought suggestions from stakeholders regarding the best alternative 
documentation to the Medicaid RA that a provider could obtain and 
submit to Medicare to evidence the State's Medicare cost sharing 
liability (or absence thereof) in instances where the State does not 
process a Medicare crossover claim and issue a Medicaid RA for 
certain dual eligible beneficiaries. In addition, we are finalizing 
our proposal to recognize the new Accounting Standard Update--Topic 
606 for revenue recognition and classification of Medicare bad 
debts. We also made a technical correction to the cross references 
in 42 CFR 412.622(b)(2)(i) and 42 CFR 417.536(g) to Medicare bad 
debt reimbursement policy. As a result of our proposed changes, 
there would be no costs to the Medicare Program and no increased 
burden placed upon providers, suppliers or other entities. In 
addition, there would be a savings to the Medicare Program by the 
reduction of appeal and litigation costs. Providers would benefit 
and realize a burden reduction with the finalization of a policy to 
accept alternative documentation to evidence a provider's reasonable 
collection effort for certain dual eligible beneficiaries, as doing 
so would serve an important public interest by allowing providers 
with cases currently pending before the PRRB an avenue for timely 
and cost-effective resolution, as well as an avenue for providers 
and contractors to resolve open cost reports containing these dual 
eligible crossover bad debt matters.
    Comment: While some commenters were supportive of our efforts to 
clarify longstanding Medicare bad debt policies, many commenters 
expressed disagreement with proposals to codify some longstanding 
Medicare bad debt policies with retroactive effective dates. 
Commenters were generally supportive of our solicitation for 
suggestions to accept alternative documentation to the Medicaid RA 
for Medicare crossover bad debts to evidence a provider's reasonable 
collection effort for certain dual eligible beneficiaries. Some 
commenters suggested that a retroactive codification of some 
policies would create a burden and cause providers to re-submit 
prior cost reports. Other commenters submitted suggestions for the 
acceptance of alternative documentation to the Medicaid RA, 
asserting that it will provide a burden reduction to providers, 
including those with pending PRRB cases. Many commenters requested 
regulation text edits regarding to our proposal to adopt the 
Accounting Standard Update--Topic 606 for revenue recognition and 
classification of Medicare bad debts. Some commenters also inquired 
whether the PRM would also be updated.
    Response: We appreciate commenters' support of our efforts to 
clarify longstanding Medicare bad debt policies. We believe the 
clarification and codification of many longstanding bad debt 
policies will benefit stakeholders when processing Medicare bad debt 
for reimbursement. Our acceptance of commenters' suggestions for 
alternative documentation to the Medicaid RA will allow providers an 
avenue for resolution of pending PRRB cases. We agree with some 
commenters' suggestions to further edit and clarify the regulation 
text proposals regarding the Accounting Standard Update--Topic 606 
for revenue recognition and classification of Medicare bad debts. We 
plan to update the PRM to coincide with the policy clarifications to 
further assist providers with policy guidance.
    After consideration of the public comments we received, we are 
finalizing our proposals to codify some of our longstanding Medicare 
bad debt policies as set forth in section IX.C. of this final rule. 
Some of the longstanding bad debt policy clarifications will be 
effective retroactively, while others will have effective dates for 
cost reporting periods beginning on or after October 1, 2020. We 
believe the retroactive effective dates of the policy clarifications 
and acceptance of alternative documentation to the Medicaid RA will 
serve to benefit providers with greater clarity and resolution of 
pending PRRB cases.

14. Effects of a Potential Market-Based MS-DRG Relative Weight 
Methodology

    In section IV.P.4. of the preamble of this final rule, we 
finalizing the adoption of a market-based methodology for estimating 
the MS-DRG relative weights beginning in FY 2024, utilizing the 
median payer-specific negotiated charge information we are 
finalizing to collect on the Medicare cost report. We are finalizing 
our data collection proposal with modification to only collect the 
median payer-specific negotiated charge by MS-DRG for payers that 
are MA organizations, rather than collecting both the median payer-
specific negotiated charge by MS-DRG for payers that are MA 
organization and third party payers, as proposed. We note that in 
response to comments, we have increased the estimated total annual 
burden hours by 5 hours for this data collection requirement; 20 
hours per hospital times 3,189 total hospitals equals 63,780 annual 
burden hours and $4,315,993 annually for all hospitals nationally. 
We refer readers to

[[Page 59090]]

section XI.B.11. of the preamble of this final rule for further 
analysis of this assessment.
    We are applying a budget neutrality factor to ensure that the 
overall payment impact of any MS-DRG relative weight changes is 
budget neutral, as required by section 1886(d)(4)(C)(iii) of the Act 
and consistent with our current practice.
    Once we have access to the payer-specific negotiated charge 
information at the MS-DRG level, we will be able to more precisely 
estimate the payment impact of adopting this market based MS-DRG 
relative weight methodology for payments beginning in FY 2024. 
However, to explore the potential impacts more generally, we 
conducted a literature review to compare the payment rates of 
Medicare FFS, MA organizations, and other commercial payers. As 
noted in section IV.P.2.b. of the preamble of the proposed rule and 
this final rule, Berenson et al.\531\ surveyed senior hospital and 
health plan executives and found that MA plans nominally pay only 
100 to 105 percent of traditional Medicare rates and, in real 
economic terms, possibly less. Respondents broadly identified three 
primary reasons for near-payment equivalence: Statutory and 
regulatory provisions that limit out-of-network payments to 
traditional Medicare rates, de facto budget constraints that MA 
plans face because of the need to compete with traditional Medicare 
and other MA plans, and a market equilibrium that permits relatively 
lower MA rates as long as commercial rates remain well above the 
traditional Medicare rates.
---------------------------------------------------------------------------

    \531\ Berenson RA, Sunshine JH, Helms D, Lawton E. Why Medicare 
Advantage plans pay hospitals traditional Medicare prices. Health 
Aff (Millwood). 2015;34(8):1289-1295.
---------------------------------------------------------------------------

    We next researched empirically based comparisons of Medicare FFS 
rates, MA organization rates, and rates of other commercial payers. 
Baker et al.\532\ used data from Medicare and the Health Care Cost 
Institute (HCCI) to identify the prices paid for hospital services 
by FFS Medicare, MA plans, and commercial insurers in 2009 and 2012. 
They calculated the average price per admission, and its trend over 
time, in each of the three types of insurance for fixed baskets of 
hospital admissions across metropolitan areas. After accounting for 
differences in hospital networks, geographic areas, and case-mix 
between MA and FFS Medicare, they found that MA plans paid 5.6 
percent less for hospital services compared to FFS Medicare. For the 
time period studied, the authors suggest that at least one channel 
through which MA plans paid lower prices was by obtaining greater 
discounts on types of FFS Medicare admissions that were known to 
have very short lengths-of-stay. They also found that the rates paid 
by commercial plans were much higher than those of either MA or FFS 
Medicare, and growing. At least some of this difference they 
indicated came from the much higher prices that commercial plans 
paid for profitable service lines.
---------------------------------------------------------------------------

    \532\ Baker LC, Bundorf MK, Devlin AM, Kessler DP. Medicare 
Advantage plans pay less than traditional Medicare pays. Health Aff 
(Millwood). 2016;35(8):1444-1451.
---------------------------------------------------------------------------

    Maeda and Nelson \533\ also analyzed data from the HCCI in their 
research. They compared the hospital prices paid by MA organizations 
and commercial plans with Medicare FFS prices using 2013 claims from 
the HCCI. The HCCI claims were used to calculate hospital prices for 
private insurers, and Medicare's payment rules were used to estimate 
Medicare FFS prices. The authors focused on stays at acute care 
hospitals in metropolitan statistical areas (MSAs). They found MA 
prices to be roughly equal to Medicare FFS prices, on average, but 
commercial prices were 89 percent higher than FFS prices. In 
addition, commercial prices varied greatly across and within MSAs, 
but MA prices varied much less. The authors considered their results 
generally consistent with the Baker et al. study findings in that 
hospital payments by MA plans were much more similar to Medicare FFS 
levels than they were to commercial payment levels, although they 
noted that they used slightly different methods to calculate 
Medicare FFS prices.
---------------------------------------------------------------------------

    \533\ Maeda JLK, Nelson L. How Do the Hospital Prices Paid by 
Medicare Advantage Plans and Commercial Plans Compare with Medicare 
Fee-for-Service Prices? The Journal of Health Care Organization, 
Provision, and Financing. 2018;55(1-8).
---------------------------------------------------------------------------

    In their study, Maeda and Nelson also examined whether the ratio 
of MA prices to FFS prices varied across DRGs to assess whether 
there were certain DRGs for which MA plans tended to pay more or 
less than FFS. They ranked the ratio of MA prices to FFS prices and 
adjusted for outlier payments. They found that there were some DRGs 
where the average MA price was much higher than FFS and there were 
some DRGs where the average MA price was a bit lower than FFS. For 
example, for the time period in question on average MA plans paid 
129 percent more than FFS for rehabilitation stays (DRG 945), 33 
percent more for depressive neuroses (DRG 881), and 27 percent more 
for stays related to psychoses (DRG 885). But MA plans paid an 
average of 9 percent less than FFS for stays related to pathological 
fractures (DRG 542) and wound debridement and skin graft (DRG 464) 
(see Online Appendix Table 5 from their study). The authors state 
these results suggest that there may be certain services where MA 
plans pay more than FFS, possibly because the FFS rate for those 
services is too low, but there may be other services where MA plans 
pay less than FFS, possibly because the FFS rate for those DRGs is 
too high.
    As described previously, this body of research suggests that 
while the payer-specific charges negotiated between hospitals and MA 
organizations are generally well-correlated with Medicare IPPS 
payment rates, there may be instances where those negotiated charges 
may reflect the relative hospital resources used within an MS-DRG 
differently than our current cost-based methodology. Payer-specific 
charges negotiated between hospitals and commercial payers are 
generally not as well-correlated with Medicare IPPS payment rates.
    As previously noted, once we have access to the payer-specific 
negotiated charge information at the MS-DRG level, we can more 
precisely estimate the potential payment impact, which we intend to 
do in future rulemaking, prior to the FY 2024 effective date of the 
market-based MS-DRG relative weight methodology. As under the 
current methodology, the impact of any MS-DRG relative weight 
changes on an individual hospital would depend on the mix of 
services provided by that particular hospital.

I. Effects of Changes in the Capital IPPS

1. General Considerations

    For the impact analysis presented in this section, we used data 
from the March 2020 update of the FY 2019 MedPAR file and the March 
2020 update of the Provider-Specific File (PSF) that was used for 
payment purposes. Although the analyses of the changes to the 
capital prospective payment system do not incorporate cost data, we 
used the March 2020 update of the most recently available hospital 
cost report data (FYs 2017 and 2018) to categorize hospitals. Our 
analysis has several qualifications. We use the best data available 
and make assumptions about case-mix and beneficiary enrollment, as 
described later in this section.
    Due to the interdependent nature of the IPPS, it is very 
difficult to precisely quantify the impact associated with each 
change. In addition, we draw upon various sources for the data used 
to categorize hospitals in the tables. In some cases (for instance, 
the number of beds), there is a fair degree of variation in the data 
from different sources. We have attempted to construct these 
variables with the best available sources overall. However, it is 
possible that some individual hospitals are placed in the wrong 
category.
    Using cases from the March 2020 update of the FY 2019 MedPAR 
file, we simulated payments under the capital IPPS for FY 2020 and 
the payments for FY 2021 for a comparison of total payments per 
case. Short-term, acute care hospitals not paid under the general 
IPPS (for example, hospitals in Maryland) are excluded from the 
simulations.
    The methodology for determining a capital IPPS payment is set 
forth at Sec.  412.312. The basic methodology for calculating the 
capital IPPS payments in FY 2021 is as follows:
    (Standard Federal rate) x (DRG weight) x (GAF) x (COLA for 
hospitals located in Alaska and Hawaii) x (1 + DSH adjustment factor 
+ IME adjustment factor, if applicable).
    In addition to the other adjustments, hospitals may receive 
outlier payments for those cases that qualify under the threshold 
established for each fiscal year. We modeled payments for each 
hospital by multiplying the capital Federal rate by the GAF and the 
hospital's case-mix. Then we added estimated payments for indirect 
medical education, disproportionate share, and outliers, if 
applicable. For purposes of this impact analysis, the model includes 
the following assumptions:
     The capital Federal rate was updated, beginning in FY 
1996, by an analytical framework that considers changes in the 
prices associated with capital-related costs and adjustments to 
account for forecast error, changes in the case-mix index, allowable

[[Page 59091]]

changes in intensity, and other factors. As discussed in section 
III.A.1. of the Addendum to this final rule, the update to the 
capital Federal rate is 1.1 percent for FY 2021.
     In addition to the FY 2021 update factor, the FY 2021 
capital Federal rate was calculated based on a GAF/DRG budget 
neutrality adjustment factor of 0.9971 and an outlier adjustment 
factor of 0.9466.

2. Results

    We used the payment simulation model previously described in 
section I.I. of Appendix A of this final rule to estimate the 
potential impact of the changes for FY 2021 on total capital 
payments per case, using a universe of 3,201 hospitals. As 
previously described, the individual hospital payment parameters are 
taken from the best available data, including the March 2020 update 
of the FY 2019 MedPAR file, the March 2020 update to the PSF, and 
the most recent cost report data from the March 2020 update of 
HCRIS. In Table III, we present a comparison of estimated proposed 
total payments per case for FY 2020 and estimated total payments per 
case for FY 2021 based on the FY 2021 payment policies. Column 2 
shows estimates of payments per case under our model for FY 2020. 
Column 3 shows estimates of payments per case under our model for FY 
2021. Column 4 shows the total percentage change in payments from FY 
2020 to FY 2021. The change represented in Column 4 includes the 1.1 
percent update to the capital Federal rate and other changes in the 
adjustments to the capital Federal rate. The comparisons are 
provided by: (1) Geographic location; (2) region; and (3) payment 
classification.
    The simulation results show that, on average, capital payments 
per case in FY 2021 are expected to increase as compared to capital 
payments per case in FY 2020. This expected increase overall is 
primarily due to the 1.1 percent update to the capital Federal rate 
for FY 2021, in conjunction with estimated changes in outlier 
payments and DSH payments. Under Sec.  412.320, in order to receive 
capital DSH payments a hospital must be located in an urban area for 
payment purposes and have 100 or more beds. As discussed in section 
III.A.2. of the preamble of this final rule, there are counties that 
will become rural beginning October 1, 2020 based on our adoption of 
the revised OMB delineations, and therefore, hospitals in those 
areas (that have 100 or more beds) will no longer be eligible for 
capital DSH payments beginning in FY 2021. In general, regional 
variations in estimated capital payments per case in FY 2021 as 
compared to capital payments per case in FY 2020 are primarily due 
to changes in GAFs, and are generally consistent with the projected 
changes in payments due to changes in the wage index (and policies 
affecting the wage index), as shown in Table I in section I.G. of 
this Appendix A.
    The net impact of these changes is an estimated 0.3 percent 
increase in capital payments per case from FY 2020 to FY 2021 for 
all hospitals (as shown in Table III).
    The geographic comparison shows that, on average, hospitals in 
both urban and rural classifications would experience an increase in 
capital IPPS payments per case in FY 2021 as compared to FY 2020. 
Capital IPPS payments per case would increase by an estimated 0.3 
percent for hospitals in urban areas while payments to hospitals in 
rural areas would increase by 0.6 percent in FY 2020 to FY 2021.
    The comparisons by region show that the estimated changes in 
capital payments per case from FY 2020 to FY 2021 would increase in 
certain urban areas, ranging from a 0.6 percent increase for the 
East South Central region to a 1.0 percent increase for the New 
England region. We estimate a decrease for certain other urban 
regions ranging from 0.1 percent for the South Atlantic region to 
0.8 percent for the Mountain region for the capital payments per 
case from FY 2020 to FY 2021. We estimate no change for the East 
North Central region for the capital payments per case from FY 2020 
to FY 2021. However, nearly all rural regions are expected to 
increase in capital payments per case from FY 2020 to FY 2021, 
ranging from 0.1 percent for the West North Central to a 1.3 percent 
increase for the East North Central rural region. We estimate no 
change in capital payment per case from FY 2020 to FY 2021 for the 
South Atlantic rural region. These regional differences are 
primarily due to the changes in the GAFs and estimated changes in 
outlier and DSH payments.
    All Hospital ownership types are expected to experience an 
increase in capital payments per case from FY 2020 to FY 2021. 
Voluntary hospitals are expected to experience an increase in 
capital IPPS payments of 0.2 percent, and the projected increase in 
capital payments for Proprietary hospitals is estimated to be 0.3 
percent. We also estimate an increase in capital payments per case 
from FY 2020 to FY 2021 for the Government type hospital to be 0.5 
percent.
    Section 1886(d)(10) of the Act established the MGCRB. Hospitals 
may apply for reclassification for purposes of the wage index for FY 
2021. Reclassification for wage index purposes also affects the GAFs 
because that factor is constructed from the hospital wage index. To 
present the effects of the hospitals being reclassified as of the 
publication of this final rule for FY 2021, we show the average 
capital payments per case for reclassified hospitals for FY 2021. 
Urban reclassified hospitals are expected to experience a decrease 
in capital payments of 0.3 percent; urban nonreclassified hospitals 
are expected to experience an increase in capital payments of 0.7 
percent. The estimated percentage increase for rural reclassified 
hospitals is 0.6 percent, and for rural nonreclassified hospitals, 
the estimated percentage increase in capital payments is 0.5 
percent.
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BILLING CODE 4120-01-C

J. Effects of Payment Rate Changes and Policy Changes Under the 
LTCH PPS

1. Introduction and General Considerations

    In section VII. of the preamble of this final rule and section 
V. of the Addendum to this final rule, we set forth the annual 
update to the payment rates for the LTCH PPS for FY 2021. In the 
preamble of this final rule, we specify the statutory authority for 
the provisions that are presented, identify the policies for FY 
2021, and present rationales for our decisions as well as 
alternatives that were considered. In this section of Appendix A to 
this final rule, we discuss the impact of the changes to the payment 
rate, factors, and other payment rate policies related to the LTCH 
PPS that are presented in the preamble of this final rule in terms 
of their estimated fiscal impact on the Medicare budget and on 
LTCHs.
    There are 363 LTCHs included in this impact analysis. We note 
that, although there are currently approximately 373 LTCHs, for 
purposes of this impact analysis, we excluded the data of all-
inclusive rate providers consistent with the development of the FY 
2021 MS-LTC-DRG relative weights (discussed in section VII.B.3.c. of 
the preamble of this final rule. Moreover, in the claims data used 
for this final rule, 3 of these 363 LTCHs only have claims for site 
neutral payment rate cases and, therefore, do not affect our impact 
analysis for LTCH PPS standard Federal payment rate cases.) In the

[[Page 59094]]

impact analysis, we used the payment rate, factors, and policies 
presented in this final rule, the 2.3 percent annual update to the 
LTCH PPS standard Federal payment rate, the permanent one-time 
budget neutrality adjustment factor for the estimated cost of 
eliminating the 25-percent threshold policy in FY 2021 as discussed 
in section VII.D. of the preamble of this final rule, the update to 
the MS-LTC-DRG classifications and relative weights, the update to 
the wage index values, labor-related share, and changes to the 
geographic labor-market area designations, and the 5-percent cap 
transition policy, and the best available claims and CCR data to 
estimate the change in payments for FY 2021.
    Under the dual rate LTCH PPS payment structure, payment for LTCH 
discharges that meet the criteria for exclusion from the site 
neutral payment rate (that is, LTCH PPS standard Federal payment 
rate cases) is based on the LTCH PPS standard Federal payment rate. 
Consistent with the statute, the site neutral payment rate is the 
lower of the IPPS comparable per diem amount as determined under 
Sec.  412.529(d)(4), including any applicable outlier payments as 
specified in Sec.  412.525(a), reduced by 4.6 percent for FYs 2018 
through 2026; or 100 percent of the estimated cost of the case as 
determined under Sec.  412.529(d)(2). In addition, there are two 
separate high cost outlier targets--one for LTCH PPS standard 
Federal payment rate cases and one for site neutral payment rate 
cases. The statute also establishes a transitional payment method 
for cases that are paid the site neutral payment rate for LTCH 
discharges occurring in cost reporting periods beginning during FY 
2016 through FY 2019. For FY 2021, we expected no site neutral 
payment rate cases would still be eligible for the transitional 
payment method since it only applies to those site neutral payment 
rate cases whose discharges occur during a LTCH's cost reporting 
period that begins before October 1, 2019. Site neutral payment rate 
cases whose discharges from an LTCH occur during the LTCH's cost 
reporting period that begins on or after October 1, 2019 are paid 
the site neutral payment rate amount determined under Sec.  
412.522(c)(1).
    Based on the best available data for the 363 LTCHs in our 
database that were considered in the analyses used for this final 
rule, we estimate that overall LTCH PPS payments in FY 2021 will 
decrease by approximately 1.1 percent (or approximately $40 million) 
based on the rates and factors presented in section VII. of the 
preamble and section V. of the Addendum to this final rule.
    The applicability of this transitional payment method for site 
neutral payment rate cases is dependent upon both the discharge date 
of the case and the start date of the LTCH's FY 2020 cost reporting 
period. The statutory transitional payment method for cases that are 
paid the site neutral payment rate for LTCH discharges occurring in 
cost reporting periods beginning during FY 2019 uses a blended 
payment rate, which is determined as 50 percent of the site neutral 
payment rate amount for the discharge and 50 percent of the LTCH PPS 
standard Federal prospective payment rate amount for the discharge 
(Sec.  412.522(c)(3)). There are LTCHs that have a cost reporting 
period that began during FY 2019 that includes discharges that occur 
during Federal FY 2020. For example, an LTCH with a January 1, 2019 
through December 31, 2019 cost reporting period had 3 months of 
discharges that occurred during Federal FY 2020 (that is, discharges 
that occur from October 1, 2019 through December 31, 2019).
    Therefore, when estimating FY 2020 LTCH PPS payments for site 
neutral payment rate cases for this impact analysis, because the 
statute specifies that the site neutral payment rate effective date 
for a given LTCH is based on the date that the LTCH's cost reporting 
period begins during FY 2020, we included an adjustment to account 
for this rolling effective date, consistent with the general 
approach used for the LTCH PPS impact analysis presented in the FY 
2016 IPPS/LTCH PPS proposed rule (80 FR 49831). This approach 
accounts for the fact that site neutral payment rate cases in FY 
2020 that are in an LTCH's cost reporting period that begins before 
October 1, 2019 continue to be paid under the transitional payment 
method until the start of the LTCH's first cost reporting period 
beginning on or after October 1, 2019. Site neutral payment rate 
cases whose discharges from LTCHs occurring during an LTCH's cost 
reporting period that begins on or after October 1, 2019 will no 
longer be paid under the transitional payment method and will 
instead be paid the site neutral payment rate amount as determined 
under Sec.  412.522(c)(1).
    For purposes of this impact analysis, to estimate total FY 2020 
LTCH PPS payments for site neutral payment rate cases, as we 
proposed, we used the same general approach as was used in the FY 
2016 IPPS/LTCH PPS proposed rule with modifications to account for 
the rolling end date to the transitional blended payment rate in FY 
2020 instead of the rolling effective date for implementation of the 
transitional site neutral payment rate in FY 2016. (We note, this is 
the same approach as was used in the FY 2018 IPPS/LTCH PPS proposed 
and final rules, which was prior to the extension of the 
transitional blended payment for LTCH cost reporting periods 
beginning in FY 2018 and FY 2019 provided by the provisions of 
section 51005(a) of the Bipartisan Budget Act of 2018 (Pub. L. 115-
123). In summary, under this approach, we grouped LTCHs based on the 
quarter their cost reporting periods will begin during FY 2020. For 
example, LTCHs with cost reporting periods that begin during October 
through December 2020 begin during the first quarter of FY 2020. For 
LTCHs grouped in each quarter of FY 2020, we modeled those LTCHs' 
estimated FY 2020 site neutral payment rate payments under the 
transitional blended payment rate based on the quarter in which the 
LTCHs in each group will continue to be paid the transitional 
payment method for the site neutral payment rate cases.
    For purposes of this estimate, then, we assume the cost 
reporting period is the same for all LTCHs in each of the quarterly 
groups and that this cost reporting period begins on the first day 
of that quarter. (For example, the first group consists of 38 LTCHs 
whose cost reporting period begins in the first quarter of FY 2020 
so that, for purposes of this estimate, we assume all 38 LTCHs began 
their FY 2020 cost reporting period on October 1, 2019.) Second, we 
estimated the proportion of FY 2020 site neutral payment rate cases 
in each of the quarterly groups, and we then assume this proportion 
is applicable for all four quarters of FY 2020. (For example, as 
discussed in more detail later in this section, we estimate the 
first quarter group will discharge 7.9 percent of all FY 2020 site 
neutral payment rate cases; and therefore, we estimate that group of 
LTCHs will discharge 7.9 percent of all FY 2020 site neutral payment 
rate cases in each quarter of FY 2020.) Then, we modeled estimated 
FY 2020 payments on a quarterly basis under the LTCH PPS standard 
Federal payment rate based on the assumptions described previously. 
We continue to believe that this approach is a reasonable means of 
taking the rolling effective date into account when estimating FY 
2020 payments.
    For purposes of this impact analysis, to estimate total FY 2021 
LTCH PPS payments for site neutral payment rate cases, the 
transitional blended payment rate was not applied to such cases 
because all discharges in FY 2021 are either in the LTCH's cost 
reporting period that began during FY 2020 or in the LTCH's cost 
reporting period that will begin during FY 2021. Site neutral 
payment rate cases whose discharges from an LTCH occur during the 
LTCH's cost reporting period that begins on or after October 1, 2019 
are paid the site neutral payment rate amount determined under Sec.  
412.522(c)(1).
    Based on the fiscal year begin date information in the March 
2020 update of the provider specific file (PSF) and the LTCH claims 
from the March 2020 update of the FY 2019 MedPAR files for the 363 
LTCHs in our database used for this final rule, we found the 
following: 7.9 percent of site neutral payment rate cases are from 
38 LTCHs whose cost reporting periods began during the first quarter 
of FY 2020; 19.8 percent of site neutral payment rate cases are from 
81 LTCHs whose cost reporting periods will begin in the second 
quarter of FY 2020; 9.4 percent of site neutral payment rate cases 
are from 48 LTCHs whose cost reporting periods will begin in the 
third quarter of FY 2020; and 62.9 percent of site neutral payment 
rate cases are from 193 LTCHs whose cost reporting periods will 
begin in the fourth quarter of FY 2020. (We note, three of the 363 
LTCHs in our database used for this final rule did not have any site 
neutral payment rate cases.) Therefore, the following percentages 
apply in the approach described previously:
     First Quarter FY 2020: 7.9 percent of site neutral 
payment rate cases (that is, the percentage of discharges from LTCHs 
whose FY 2020 cost reporting period began in the first quarter of FY 
2020) are no longer eligible for the transitional blended payment 
method, while the remaining 92.1 percent of site neutral payment 
rate discharges are eligible to be paid under the transitional 
payment method.
     Second Quarter FY 2020: 27.7 percent of site neutral 
payment rate second quarter discharges (that is, the percentage of 
discharges from LTCHs whose FY 2020 cost reporting period that 
begins in the first or second quarter of FY 2020) are no longer

[[Page 59095]]

eligible for the transitional blended payment method, while the 
remaining 72.3 percent of site neutral payment rate second quarter 
discharges are eligible to be paid under the transitional payment 
method.
     Third Quarter FY 2020: 37.1 percent of site neutral 
payment rate third quarter discharges (that is, the percentage of 
discharges from LTCHs whose FY 2020 cost reporting period that 
begins in the first, second, or third quarter of FY 2020) are no 
longer eligible for the transitional blended payment method while 
the remaining 62.9 percent of site neutral payment rate third 
quarter discharges are eligible to be paid under the transitional 
payment method.
     Fourth Quarter FY 2021: 100.0 percent of site neutral 
payment rate fourth quarter discharges (that is, the percentage of 
discharges from LTCHs whose FY 2020 cost reporting period that 
begins in the first, second, third, or fourth quarter of FY 2020) 
are no longer eligible for the transitional blended payment method.
    Based on the FY 2019 LTCH cases that were used for the analysis 
in this final rule, approximately 25 percent of those cases were 
classified as site neutral payment rate cases (that is, 25 percent 
of LTCH cases did not meet the patient-level criteria for exclusion 
from the site neutral payment rate). Our Office of the Actuary 
currently estimates that the percent of LTCH PPS cases that will be 
paid at the site neutral payment rate in FY 2021 will not change 
significantly from the most recent historical data. Taking into 
account the transitional blended payment rate and other changes that 
will apply to the site neutral payment rate cases in FY 2021, we 
estimate that aggregate LTCH PPS payments for these site neutral 
payment rate cases will decrease by approximately 24 percent (or 
approximately $114 million). We note, we estimate payments to site 
neutral payment rate cases in FY 2021 represent approximately 10 
percent of estimated aggregate FY 2021 LTCH PPS payments.
    Based on the FY 2019 LTCH cases that were used for the analysis 
in this final rule, approximately 75 percent of LTCH cases will meet 
the patient-level criteria for exclusion from the site neutral 
payment rate in FY 2021, and will be paid based on the LTCH PPS 
standard Federal payment rate for the full year. We estimate that 
total LTCH PPS payments for these LTCH PPS standard Federal payment 
rate cases in FY 2021 will increase approximately 2.2 percent (or 
approximately $74 million). This estimated increase in LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases in FY 2021 
is primarily due to the 2.3 percent annual update to the LTCH PPS 
standard Federal payment rate for FY 2021.
    Based on the 363 LTCHs that were represented in the FY 2019 LTCH 
cases that were used for the analyses in this final rule presented 
in this Appendix, we estimate that aggregate FY 2020 LTCH PPS 
payments will be approximately $3.774 billion, as compared to 
estimated aggregate FY 2021 LTCH PPS payments of approximately 
$3.733 billion, resulting in an estimated overall decrease in LTCH 
PPS payments of approximately $40 million. As discussed earlier, 
this estimated decrease in payments is primarily due to the rolling 
end to the statutory transitional blended payment rate for site 
neutral payment rate cases. We also note that the estimated $40 
million decrease in LTCH PPS payments in FY 2021 does not reflect 
changes in LTCH admissions or case-mix intensity, which will also 
affect the overall payment effects of the policies in this final 
rule.
    The LTCH PPS standard Federal payment rate for FY 2020 is 
$42,677.64. For FY 2021, we are establishing an LTCH PPS standard 
Federal payment rate of $43,755.34 which reflects the 2.3 percent 
annual update to the LTCH PPS standard Federal payment rate, the 
incremental change in the one-time budget neutrality adjustment 
factor of 0.991249 for eliminating the 25-percent threshold policy 
in FY 2021 as discussed in section VII.D. of the preamble of this 
final rule, and the budget neutrality factor for general updates to 
the area wage level adjustment of 1.0016837 (discussed in section 
V.B.6. of the Addendum to this final rule). For LTCHs that fail to 
submit data for the LTCH QRP, in accordance with section 
1886(m)(5)(C) of the Act, we are establishing an LTCH PPS standard 
Federal payment rate of $42,899.90. This LTCH PPS standard Federal 
payment rate reflects the updates and factors previously described, 
as well as the required 2.0 percentage point reduction to the annual 
update for failure to submit data under the LTCH QRP. We note that 
the factors previously described to determine the FY 2021 LTCH PPS 
standard Federal payment rate are applied to the FY 2020 LTCH PPS 
standard Federal rate set forth under Sec.  412.523(c)(3)(xvi) (that 
is, $42,677.64).
    Table IV shows the estimated impact for LTCH PPS standard 
Federal payment rate cases. The estimated change attributable solely 
to the annual update of 2.3 percent to the LTCH PPS standard Federal 
payment rate is projected to result in an increase of 2.3 percent in 
payments per discharge for LTCH PPS standard Federal payment rate 
cases from FY 2020 to FY 2021, on average, for all LTCHs (Column 6). 
The estimated increase of 2.3 percent shown in Column 6 of Table IV 
also includes estimated payments for short-stay outlier (SSO) cases, 
a portion of which are not affected by the annual update to the LTCH 
PPS standard Federal payment rate, as well as the reduction that is 
applied to the annual update for LTCHs that do not submit the 
required LTCH QRP data. However, for most hospital categories, the 
projected increase in payments based on the LTCH PPS standard 
Federal payment rate to LTCH PPS standard Federal payment rate cases 
still rounds to approximately 2.3 percent, the same as the annual 
update for FY 2021.
    For FY 2021, we are updating the wage index values based on the 
most recent available data (data from cost reporting periods 
beginning during FY 2017 which is the same data used for the FY 2021 
IPPS wage index), the labor-related share of 68.1 for FY 2021, based 
on the most recent available data (IGI's second quarter 2020 
forecast) on the relative importance of the labor-related share of 
operating and capital costs of the 2017-based LTCH market basket, 
and the changes to the labor market areas based on the revisions to 
the CBSA delineations. We also are applying an area wage level 
budget neutrality factor of 1.0016837 to ensure that the changes to 
the area wage level adjustment, including the 5-percent cap 
transition policy, would not result in any change in estimated 
aggregate LTCH PPS payments to LTCH PPS standard Federal payment 
rate cases.
    For LTCH PPS standard Federal payment rate cases, we currently 
estimate high cost outlier payments as a percentage of total LTCH 
PPS standard Federal payment rate payments will decrease slightly 
from FY 2020 to FY 2021. Based on the FY 2019 LTCH cases that were 
used for the analyses in this final rule, we estimate that the FY 
2020 high cost outlier threshold of $26,778 (as established in the 
FY 2020 IPPS/LTCH PPS final rule) would result in estimated high 
cost outlier payments for LTCH PPS standard Federal payment rate 
cases in FY 2020 that are projected to exceed the 7.975 percent 
target. Specifically, we currently estimate that high cost outlier 
payments for LTCH PPS standard Federal payment rate cases will be 
approximately 8.005 percent of the estimated total LTCH PPS standard 
Federal payment rate payments in FY 2020. Combined with our estimate 
that FY 2021 high cost outlier payments for LTCH PPS standard 
Federal payment rate cases will be 7.975 percent of estimated total 
LTCH PPS standard Federal payment rate payments in FY 2021, this 
will result in an estimated decrease in high cost outlier payments 
of approximately 0.03 percent between FY 2020 and FY 2021. We note 
that, consistent with past practice, in calculating these estimated 
high cost outlier payments, we increased estimated costs by an 
inflation factor of 4.3 percent (determined by the Office of the 
Actuary) to update the FY 2019 costs of each case to FY 2021.
    Table IV shows the estimated impact of the payment rate and 
policy changes on LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases for FY 2021 by comparing estimated FY 2020 LTCH 
PPS payments to estimated FY 2021 LTCH PPS payments. (As noted 
earlier, our analysis does not reflect changes in LTCH admissions or 
case-mix intensity.) We note that these impacts do not include LTCH 
PPS site neutral payment rate cases for the reasons discussed in 
section I.J.3. of this Appendix.
    As we discuss in detail throughout this final rule, based on the 
most recent available data, we believe that the provisions of this 
final rule relating to the LTCH PPS, which are projected to result 
in an overall decrease in estimated aggregate LTCH PPS payments, and 
the resulting LTCH PPS payment amounts will result in appropriate 
Medicare payments that are consistent with the statute.
    Comment: Several commenters expressed support for the proposed 
LTCH PPS standard Federal payment rate and the estimated increase in 
payments for LTCH PPS standard Federal payment rate cases.
    Response: We thank the commenters for their support.
    Comment: Some commenters objected that total LTCH PPS payments 
are estimated to decrease.
    Response: As discussed previously and in the proposed rule, the 
estimated decrease in

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LTCH PPS payments is largely due to the statutory rolling end of the 
blended payment rate. While we understand commenter's concerns, we 
believe that our estimate is correct and appropriately reflects the 
statute.
    Comment: As they have since its inception, several commenters 
opposed the application of the site neutral payment rate. Some 
commenters also requested CMS revise or expand the criteria for 
exclusion from the site neutral payment rate.
    Response: As we have stated since its inception, the application 
of and criteria for exclusion from the site neutral payment rate is 
statutory. CMS therefore lacks the authority to do as these 
commenters request. (We note however that under section 3711(b)(2) 
of the CARES Act, Pub. L. 116-136, all LTCH cases admitted during 
the COVID-19 public health emergency period will be paid the 
relatively higher LTCH PPS standard Federal rate.)
    Comment: Multiple commenters stated their belief that cases paid 
at the site neutral payment rate will continue to be underpaid as 
those cases, according to commenters, have on average higher levels 
of clinical complexity and costs that significantly exceed IPPS-
level reimbursement. These commenters acknowledged that CMS is 
unable to change this policy but request that CMS take into 
consideration the costs of site neutral payment rate cases when 
proposing any future changes to the LTCH PPS.
    A commenter stated that since FY 2019 site neutral payment rate 
cases have seen a significant drop in reimbursement as a result of 
the end of the transitional blended payment rate. The commenter 
stated that the payment-to-cost ratio for site neutral payment rate 
cases without the blended payment rate will be 45 percent and 
treatment costs for these cases are comparable to LTCH PPS standard 
Federal payment rate cases as these site neutral cases have 
significant comorbidities which make it difficult to discharge them 
to lower levels of care. They also stated that their site neutral 
payment rate cases are almost three times costlier than IPPS cases 
with fewer than three ICU days.
    A commenter acknowledged that the number of site neutral payment 
rate cases have dropped to 25 percent of total LTCH PPS cases in FY 
2019. Because site neutral payment rate cases will longer receive 
the transitional blended payment rate in the FY 2021, the commenter 
believes this will lead to a continued decrease in the overall LTCH 
case volume.
    Response: FY 2019 LTCH claims data are currently the best 
available data, and as noted previously, LTCH site neutral payment 
rate cases discharged during FY 2019 were partially paid the blended 
payment rate under the rolling end of the statutory transitional 
period. Due to the end of that transitional period for site neutral 
payment rate cases we continue to expect that costs and resource use 
for cases paid at the site neutral payment rate will likely be lower 
on average as compared to cases paid both prior to the 
implementation of the site neutral payment and during the 
transitional period and would continue to more closely resemble the 
costs and resource use for IPPS cases assigned to the same MS-DRG. 
We refer readers to 84 FR 42647 through 42648 for more information 
on our responses to these comments. We acknowledge commenters' 
concerns about the costs of treating site neutral cases, however, as 
noted by some commenters and discussed previously, the site neutral 
payment rate is a statutory requirement. We will consider the costs 
of site neutral payment rate cases as appropriate in future 
rulemaking.
    Comment: Some commenters stated appreciation for the quick 
actions of CMS in its response to the COVID-19 pandemic and LTCH PPS 
policy changes, specifically CMS' implementation of section 3711(b) 
of the CARES Act which provides for a waiver of the site neutral 
payment rate for discharges that do not meet the LTCH patient 
criteria during the PHE period. These commenters expressed concern 
that the COVID-19 pandemic would affect relevant data used to 
determine payment rates for site neutral and LTCH PPS standard 
Federal payment rate cases and urged CMS to carefully consider these 
potential data distortions in collaboration with stakeholders in 
advance of rulemaking for FY 2022 and subsequent years. One 
commenter recommended CMS revise the estimated decrease in total 
LTCH PPS payments to an increase of 3.0 percent or more to help 
LTCHs meet the needs of COVID-19 patients.
    Response: We appreciate the comments in regard to CMS' response 
to the COVID-19 pandemic and LTCH PPS payment policy. We understand 
the concerns expressed by commenters related to data used for future 
LTCH PPS payments and will take them in to account for future 
rulemaking. 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. Under section 3711(b)(2) of the 
CARES Act, Public Law 116-136, all LTCH cases admitted during the 
COVID-19 public health emergency period will be paid the relatively 
higher LTCH PPS standard Federal payment rate. As discussed 
previously, we project that payments to LTCH PPS standard Federal 
payment rate cases in FY 2021 will increase approximately 2.2 
percent. We also note that our projected 1.1 percent decrease in 
total LTCH PPS payments does not account for the provisions of 
section 3711(b)(2) of the CARES Act if the PHE extends into FY 2021.

2. Impact on Rural Hospitals

    For purposes of section 1102(b) of the Act, we define a small 
rural hospital as a hospital that is located outside of an urban 
area and has fewer than 100 beds. As shown in Table IV, we are 
projecting a 1.7 percent increase in estimated payments for LTCH PPS 
standard Federal payment rate cases for LTCHs located in a rural 
area. This estimated impact is based on the FY 2019 data for the 18 
rural LTCHs (out of 363 LTCHs) that were used for the impact 
analyses shown in Table IV.

3. Anticipated Effects of LTCH PPS Payment Rate Changes and Policy 
Changes

a. Budgetary Impact

    Section 123(a)(1) of the BBRA requires that the PPS developed 
for LTCHs ``maintain budget neutrality.'' We believe that the 
statute's mandate for budget neutrality applies only to the first 
year of the implementation of the LTCH PPS (that is, FY 2003). 
Therefore, in calculating the FY 2003 standard Federal payment rate 
under Sec.  412.523(d)(2), we set total estimated payments for FY 
2003 under the LTCH PPS so that estimated aggregate payments under 
the LTCH PPS were estimated to equal the amount that would have been 
paid if the LTCH PPS had not been implemented.
    Section 1886(m)(6)(A) of the Act establishes a dual rate LTCH 
PPS payment structure with two distinct payment rates for LTCH 
discharges beginning in FY 2016. Under this statutory change, LTCH 
discharges that meet the patient-level criteria for exclusion from 
the site neutral payment rate (that is, LTCH PPS standard Federal 
payment rate cases) are paid based on the LTCH PPS standard Federal 
payment rate. LTCH discharges paid at the site neutral payment rate 
are generally paid the lower of the IPPS comparable per diem amount, 
reduced by 4.6 percent for FYs 2018 through 2026, including any 
applicable HCO payments, or 100 percent of the estimated cost of the 
case, reduced by 4.6 percent. The statute also establishes a 
transitional payment method for cases that are paid at the site 
neutral payment rate for LTCH discharges occurring in cost reporting 
periods beginning during FY 2016 through FY 2019, under which the 
site neutral payment rate cases are paid based on a blended payment 
rate calculated as 50 percent of the applicable site neutral payment 
rate amount for the discharge and 50 percent of the applicable LTCH 
PPS standard Federal payment rate for the discharge.
    As discussed in section I.J.2. of this Appendix, we project a 
decrease in aggregate LTCH PPS payments in FY 2021 of approximately 
$40 million. This estimated decrease in payments reflects the 
projected increase in payments to LTCH PPS standard Federal payment 
rate cases of approximately $74 million and the projected decrease 
in payments to site neutral payment rate cases of approximately $114 
million under the dual rate LTCH PPS payment rate structure required 
by the statute beginning in FY 2016. (We note that these 
calculations are based on unrounded numbers and thus may not sum as 
expected.)
    As discussed in section V.D. of the Addendum to this final rule, 
our actuaries project cost and resource changes for site neutral 
payment rate cases due to the site neutral payment rates required 
under the statute. Specifically, our actuaries project that the 
costs and resource use for cases paid at the site neutral payment 
rate will likely be lower, on average, than the costs and resource 
use for cases paid at the LTCH PPS standard Federal payment rate, 
and will likely mirror the costs and resource use for IPPS cases 
assigned to the same MS-DRG.

[[Page 59097]]

While we are able to incorporate this projection at an aggregate 
level into our payment modeling, because the historical claims data 
that we are using in this final rule to project estimated FY 2021 
LTCH PPS payments (that is, FY 2019 LTCH claims data) do not reflect 
this actuarial projection, we are unable to model the impact of the 
change in LTCH PPS payments for site neutral payment rate cases at 
the same level of detail with which we are able to model the impacts 
of the changes to LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases. Therefore, Table IV only reflects changes in 
LTCH PPS payments for LTCH PPS standard Federal payment rate cases 
and, unless otherwise noted, the remaining discussion in section 
I.J.3. of this Appendix refers only to the impact on LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases. In the 
following section, we present our provider impact analysis for the 
changes that affect LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases.

b. Impact on Providers

    The basic methodology for determining a per discharge payment 
for LTCH PPS standard Federal payment rate cases is currently set 
forth under Sec. Sec.  412.515 through 412.533 and 412.535. In 
addition to adjusting the LTCH PPS standard Federal payment rate by 
the MS-LTC-DRG relative weight, we make adjustments to account for 
area wage levels and SSOs. LTCHs located in Alaska and Hawaii also 
have their payments adjusted by a COLA. Under our application of the 
dual rate LTCH PPS payment structure, the LTCH PPS standard Federal 
payment rate is generally only used to determine payments for LTCH 
PPS standard Federal payment rate cases (that is, those LTCH PPS 
cases that meet the statutory criteria to be excluded from the site 
neutral payment rate). LTCH discharges that do not meet the patient-
level criteria for exclusion are paid the site neutral payment rate, 
which we are calculating as the lower of the IPPS comparable per 
diem amount as determined under Sec.  412.529(d)(4), reduced by 4.6 
percent for FYs 2018 through 2026, including any applicable outlier 
payments, or 100 percent of the estimated cost of the case as 
determined under existing Sec.  412.529(d)(2). In addition, when 
certain thresholds are met, LTCHs also receive HCO payments for both 
LTCH PPS standard Federal payment rate cases and site neutral 
payment rate cases that are paid at the IPPS comparable per diem 
amount.
    To understand the impact of the changes to the LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases presented in this 
final rule on different categories of LTCHs for FY 2021, it is 
necessary to estimate payments per discharge for FY 2020 using the 
rates, factors, and the policies established in the FY 2020 IPPS/
LTCH PPS final rule and estimate payments per discharge for FY 2021 
using the rates, factors, and the policies in this FY 2021 IPPS/LTCH 
PPS final rule (as discussed in section VII. of the preamble of this 
final rule and section V. of the Addendum to this final rule). As 
discussed elsewhere in this final rule, these estimates are based on 
the best available LTCH claims data and other factors, such as the 
application of inflation factors to estimate costs for HCO cases in 
each year. The resulting analyses can then be used to compare how 
our policies applicable to LTCH PPS standard Federal payment rate 
cases affect different groups of LTCHs.
    For the following analysis, we group hospitals based on 
characteristics provided in the OSCAR data, cost report data in 
HCRIS, and PSF data. Hospital groups included the following:
     Location: large urban/other urban/rural.
     Participation date.
     Ownership control.
     Census region.
     Bed size.

c. Calculation of LTCH PPS Payments for LTCH PPS Standard Federal 
Payment Rate Cases

    For purposes of this impact analysis, to estimate the per 
discharge payment effects of our policies on payments for LTCH PPS 
standard Federal payment rate cases, we simulated FY 2020 and FY 
2021 payments on a case-by-case basis using historical LTCH claims 
from the FY 2019 MedPAR files that met or would have met the 
criteria to be paid at the LTCH PPS standard Federal payment rate if 
the statutory patient-level criteria had been in effect at the time 
of discharge for all cases in the FY 2019 MedPAR files. For modeling 
FY 2020 LTCH PPS payments, we used the FY 2020 standard Federal 
payment rate of $42,677.64 (or $41,844.90 for LTCHs that failed to 
submit quality data as required under the requirements of the LTCH 
QRP). Similarly, for modeling payments based on the FY 2021 LTCH PPS 
standard Federal payment rate, we used the FY 2021 standard Federal 
payment rate of $43,755.34 (or $42,899.90 for LTCHs that failed to 
submit quality data as required under the requirements of the LTCH 
QRP). In each case, we applied the applicable adjustments for area 
wage levels and the COLA for LTCHs located in Alaska and Hawaii. 
Specifically, for modeling FY 2020 LTCH PPS payments, we used the 
current FY 2020 labor-related share (66.3 percent), the wage index 
values established in the Tables 12A and 12B listed in the Addendum 
to the FY 2020 IPPS/LTCH PPS final rule (which are available via the 
internet on the CMS website), the FY 2020 HCO fixed-loss amount for 
LTCH PPS standard Federal payment rate cases of $26,778 (as 
reflected in the FY 2020 IPPS/LTCH PPS final rule), and the FY 2020 
COLA factors (shown in the table in section V.C. of the Addendum to 
that final rule) to adjust the FY 2020 nonlabor-related share (33.7 
percent) for LTCHs located in Alaska and Hawaii. Similarly, for 
modeling FY 2021 LTCH PPS payments, we used the FY 2021 LTCH PPS 
labor-related share (68.1 percent), the FY 2021 wage index values 
from Tables 12A and 12B listed in section VI. of the Addendum to 
this final rule (which are available via the internet on the CMS 
website), the FY 2021 fixed-loss amount for LTCH PPS standard 
Federal payment rate cases of $27,195 (as discussed in section 
V.D.3. of the Addendum to this final rule), and the FY 2021 COLA 
factors (shown in the table in section V.C. of the Addendum to this 
final rule) to adjust the FY 2021 nonlabor-related share (31.9 
percent) for LTCHs located in Alaska and Hawaii. We note that in 
modeling payments for HCO cases for LTCH PPS standard Federal 
payment rate cases, we applied an inflation factor of 2.0 percent 
(determined by the Office of the Actuary) to update the FY 2019 
costs of each case to FY 2020, and an inflation factor of 4.3 
percent (determined by the Office of the Actuary) to update the FY 
2019 costs of each case to FY 2021.
    The impacts that follow reflect the estimated ``losses'' or 
``gains'' among the various classifications of LTCHs from FY 2020 to 
FY 2021 based on the payment rates and policy changes applicable to 
LTCH PPS standard Federal payment rate cases presented in this final 
rule. Table IV illustrates the estimated aggregate impact of the 
change in LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases among various classifications of LTCHs. (As discussed 
previously, these impacts do not include LTCH PPS site neutral 
payment rate cases.)
     The first column, LTCH Classification, identifies the 
type of LTCH.
     The second column lists the number of LTCHs of each 
classification type.
     The third column identifies the number of LTCH cases 
expected to meet the LTCH PPS standard Federal payment rate 
criteria.
     The fourth column shows the estimated FY 2020 payment 
per discharge for LTCH cases expected to meet the LTCH PPS standard 
Federal payment rate criteria (as described previously).
     The fifth column shows the estimated FY 2021 payment 
per discharge for LTCH cases expected to meet the LTCH PPS standard 
Federal payment rate criteria (as described previously).
     The sixth column shows the percentage change in 
estimated payments per discharge for LTCH cases expected to meet the 
LTCH PPS standard Federal payment rate criteria from FY 2020 to FY 
2021 due to the annual update to the standard Federal rate (as 
discussed in section V.A.2. of the Addendum to this final rule).
     The seventh column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2020 to FY 2021 for changes due to the 
changes to the area wage level adjustment (that is, the updated 
hospital wage data, labor-related share, and the to the geographic 
labor-market area designations, including the 5-percent cap 
transition policy), and the application of the corresponding budget 
neutrality factor (as discussed in section V.B.6. of the Addendum to 
this final rule).
     The eighth column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2020 (Column 4) to FY 2021 (Column 5) for 
all changes.
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d. Results

    Based on the FY 2019 LTCH cases (from 363 LTCHs) that were used 
for the analyses in this final rule, we have prepared the following 
summary of the impact (as shown in Table IV) of the LTCH PPS payment 
rate and policy changes for LTCH PPS standard Federal payment rate 
cases presented in this final rule. The impact analysis in Table IV 
shows that estimated payments per discharge for LTCH PPS standard 
Federal payment rate

[[Page 59100]]

cases are projected to increase 2.2 percent, on average, for all 
LTCHs from FY 2020 to FY 2021 as a result of the payment rate and 
policy changes applicable to LTCH PPS standard Federal payment rate 
cases presented in this final rule. This estimated 2.2 percent 
increase in LTCH PPS payments per discharge was determined by 
comparing estimated FY 2021 LTCH PPS payments (using the final 
payment rates and factors discussed in this final rule) to estimated 
FY 2020 LTCH PPS payments for LTCH discharges which will be LTCH PPS 
standard Federal payment rate cases if the dual rate LTCH PPS 
payment structure was or had been in effect at the time of the 
discharge (as described in section I.J.3. of this Appendix).
    As stated previously, we are updating the LTCH PPS standard 
Federal payment rate for FY 2021 by 2.3 percent. For LTCHs that fail 
to submit quality data under the requirements of the LTCH QRP, as 
required by section 1886(m)(5)(C) of the Act, a 2.0 percentage point 
reduction is applied to the annual update to the LTCH PPS standard 
Federal payment rate. In addition, we are applying the incremental 
change in the one-time budget neutrality adjustment factor of 
0.991249 for the cost of eliminating the 25-percent threshold policy 
in FY 2021 as discussed in section VII.D. of the preamble of this 
final rule. Consistent with Sec.  412.523(d)(4), we also are 
applying a budget neutrality factor for changes to the area wage 
level adjustment of 1.0016837 (discussed in section V.B.6. of the 
Addendum to this final rule), based on the best available data at 
this time, to ensure that any changes to the area wage level 
adjustment will not result in any change (increase or decrease) in 
estimated aggregate LTCH PPS standard Federal payment rate payments. 
As we also explained earlier in this section, for most categories of 
LTCHs (as shown in Table IV, Column 6), the estimated payment 
increase due to the 2.3 percent annual update to the LTCH PPS 
standard Federal payment rate is projected to result in 
approximately a 2.3 percent increase in estimated payments per 
discharge for LTCH PPS standard Federal payment rate cases for all 
LTCHs from FY 2020 to FY 2021. We note our estimate of the changes 
in payments due to the update to the LTCH PPS standard Federal 
payment rate also reflects estimated payments for SSO cases that are 
paid using a methodology that is not entirely affected by the update 
to the LTCH PPS standard Federal payment rate. Consequently, for 
certain hospital categories, we estimate that payments to LTCH PPS 
standard Federal payment rate cases may differ slightly from 2.3 
percent due to the annual update to the LTCH PPS standard Federal 
payment rate for FY 2021.

(1) Location

    Based on the most recent available data, the vast majority of 
LTCHs are located in urban areas. Only approximately 5 percent of 
the LTCHs are identified as being located in a rural area, and 
approximately 4 percent of all LTCH PPS standard Federal payment 
rate cases are expected to be treated in these rural hospitals. The 
impact analysis presented in Table IV shows that the overall average 
percent increase in estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases from FY 2020 to FY 2021 for all 
hospitals is 2.2 percent. The projected increase for urban hospitals 
is 2.3 percent for urban hospitals, while the projected increase for 
rural hospitals is 1.7 percent. This smaller than average projected 
increase for rural LTCHs is primarily due to the changes to the area 
wage adjustment, including the changes to the labor market areas.

(2) Participation Date

    LTCHs are grouped by participation date into four categories: 
(1) Before October 1983; (2) between October 1983 and September 
1993; (3) between October 1993 and September 2002; and (4) October 
2002 and after. Based on the most recent available data, the 
categories of LTCHs with the largest expected percentage of LTCH PPS 
standard Federal payment rate cases (approximately 41 percent and 43 
percent, respectively) are in LTCHs that began participating in the 
Medicare program between October 1993 and September 2002 and after 
October 2002. These LTCHs are expected to both experience an 
increase in estimated payments per discharge for LTCH PPS standard 
Federal payment rate cases from FY 2020 to FY 2021 of 2.2 percent. 
LTCHs that began participating in the Medicare program between 
October 1983 and September 1993 are projected to experience the 
largest percent increase, 2.4 percent, in estimated payments per 
discharge for LTCH PPS standard Federal payment rate cases from FY 
2020 to FY 2021, as shown in Table IV. Approximately 3 percent of 
LTCHs began participating in the Medicare program before October 
1983, and these LTCHs are projected to experience an average percent 
increase of 2.2 percent in estimated payments per discharge for LTCH 
PPS standard Federal payment rate cases from FY 2020 to FY 2021

(3) Ownership Control

    LTCHs are grouped into three categories based on ownership 
control type: Voluntary, proprietary, and government. Based on the 
most recent available data, approximately 17 percent of LTCHs are 
identified as voluntary (Table IV). The majority (approximately 81 
percent) of LTCHs are identified as proprietary, while government 
owned and operated LTCHs represent approximately 3 percent of LTCHs. 
Based on ownership type, voluntary and proprietary LTCHs are each 
expected to experience an increase of 2.3 percent and 2.2 percent in 
payments to LTCH PPS standard Federal payment rate cases, 
respectively. Government owned and operated LTCHs, meanwhile, are 
expected to experience a 2.4 percent increase in payments to LTCH 
PPS standard Federal payment rate cases from FY 2020 to FY 2021.

(4) Census Region

    Estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases for FY 2021 are projected to increase across all 
census regions. LTCHs located in the Pacific region are projected to 
experience the largest increase at 2.9 percent. The remaining 
regions are projected to experience an increase in payments in the 
range of 1.8 to 2.3 percent. These regional variations are primarily 
due to the changes to the area wage adjustment, including the 
changes to the labor market areas.

(5) Bed Size

    LTCHs are grouped into six categories based on bed size: 0-24 
beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater 
than 200 beds. We project that LTCHs with 0-24 beds will experience 
the smallest increase in payments for LTCH PPS standard Federal 
payment rate cases, 1.9 percent. LTCHs with 50-74 beds, 75-124 beds, 
125-199 beds, and with 200 or more beds, will all experience the 
largest increase in payments for LTCH PPS standard Federal payment 
rate cases of 2.3 percent. LTCHs with 25-49 beds are projected to 
experience a 2.1 percent increase in payments.

5. Effect on the Medicare Program

    As stated previously, we project that the provisions of this 
final rule will result in an increase in estimated aggregate LTCH 
PPS payments to LTCH PPS standard Federal payment rate cases in FY 
2021 relative to FY 2020 of approximately $74 million (or 
approximately 2.2 percent) for the 363 LTCHs in our database. 
Although, as stated previously, the hospital-level impacts do not 
include LTCH PPS site neutral payment rate cases, we estimate that 
the provisions of this final rule will result in a decrease in 
estimated aggregate LTCH PPS payments to site neutral payment rate 
cases in FY 2021 relative to FY 2020 of approximately $114 million 
(or approximately -24 percent) for the 363 LTCHs in our database. 
(As noted previously, we estimate payments to site neutral payment 
rate cases in FY 2021 represent approximately 10 percent of total 
estimated FY 2021 LTCH PPS payments.) Therefore, we project that the 
provisions of this final rule will result in a decrease in estimated 
aggregate LTCH PPS payments for all LTCH cases in FY 2021 relative 
to FY 2020 of approximately $40 million (or approximately -1.1 
percent) for the 363 LTCHs in our database.

6. Effect on Medicare Beneficiaries

    Under the LTCH PPS, hospitals receive payment based on the 
average resources consumed by patients for each diagnosis. We do not 
expect any changes in the quality of care or access to services for 
Medicare beneficiaries as a result of this final rule, but we 
continue to expect that paying prospectively for LTCH services will 
enhance the efficiency of the Medicare program. As discussed 
previously, we do not expect the continued implementation of the 
site neutral payment system to have a negative impact on access to 
or quality of care, as demonstrated in areas where there is little 
or no LTCH presence, general short-term acute care hospitals are 
effectively providing treatment for the same types of patients that 
are treated in LTCHs.

K. Effects of Requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program

    In section VIII.A. of the preamble of this final rule, we are 
finalizing our proposed requirements for hospitals to report quality 
data under the Hospital IQR Program in order to receive the full 
annual percentage increase for the FY 2022 payment determination and 
subsequent years.
    In this final rule, we are finalizing our proposed reporting, 
submission, and public

[[Page 59101]]

display requirements for eCQMs, including policies to: (1) 
Progressively increase the numbers of quarters of eCQM data 
reported, from one self-selected quarter of data to four quarters of 
data over a 3-year period, by requiring hospitals to report: (a) Two 
quarters of data for the CY 2021 reporting period/FY 2023 payment 
determination for each of the four self-selected eCQMs; (b) three 
quarters of data for the CY 2022 reporting period/FY 2024 payment 
determination for three self-selected eCQMs and the Safe Use of 
Opioids eCQM; and (c) four quarters of data beginning with the CY 
2023 reporting period/FY 2025 payment determination and for 
subsequent years, while continuing to allow hospitals to report: (i) 
Three self-selected eCQMs, and (ii) the Safe Use of Opioids eCQM; 
and (2) begin public display of eCQM data beginning with data 
reported by hospitals for the CY 2021 reporting period and for 
subsequent years. The Hospital IQR Program eCQM-related proposals 
being finalized are in alignment with proposals that we are 
finalizing under the Promoting Interoperability Program. We are also 
finalizing our proposal to expand the requirement to use EHR 
technology certified to the 2015 Edition for submitting data on not 
only the previously finalized Hybrid Hospital-Wide Readmission 
measure, but all hybrid measures in the Hospital IQR Program. While 
we believe there would be no change to the information collection 
burden estimate due to public display of eCQM data, we acknowledge 
that there is other burden associated with this provision. For 
example, there is burden associated with the optional reviewing of 
hospital-specific reports during the public reporting preview. 
However, we believe this burden is nominal because hospitals already 
review these reports with respect to other types of measures for the 
Hospital IQR Program.
    We also are finalizing several proposed changes to streamline 
validation processes under the Hospital IQR Program. We will: (1) 
Require the use of electronic file submissions via a CMS-approved 
secure file transmission process and no longer allow the submission 
of paper copies of medical records or copies on digital portable 
media such as CD, DVD, or flash drive starting with validation 
affecting the FY 2024 payment determination; (2) combine the 
validation processes for chart-abstracted measures and eCQMs for 
validation affecting the FY 2024 payment determination and 
subsequent years by: (a) Aligning data submission quarters; (b) 
combining hospital selection, including: (i) Reducing the pool of 
hospitals randomly selected for chart-abstracted measure validation; 
and (ii) integrating and applying targeting criteria for eCQM 
validation; (c) removing previous exclusion criteria; and (d) 
combining scoring processes by providing one combined validation 
score for the validation of chart-abstracted measures and eCQMs with 
the eCQM portion of the combined score weighted at zero; and (3) 
formalize the process for conducting educational reviews beginning 
with eCQM validation affecting the FY 2023 payment determination in 
alignment with current processes for providing feedback for chart-
abstracted validation results.
    We estimate that the policies finalized in this final rule will 
result in an increase of 6,533 hours (6,660-67 hours) for 3,300 IPPS 
hospitals across a 4-year period from the CY 2021 reporting period/
FY 2023 payment determination through the CY 2024 reporting period/
FY 2026 payment determination. The total cost increase associated 
with these policies is approximately $253,480 (6,533 hours x $38.80) 
(which also reflects use of an updated hourly wage rate as 
previously discussed). We refer readers to section XI.B.7. of the 
preamble of this final rule (information collection requirements) 
for a detailed discussion of the calculations estimating the changes 
to the information collection burden for submitting data to the 
Hospital IQR Program.
    With regard to our finalized policy to combine the hospital 
selection process, including the reduction of the pool of hospitals 
randomly selected for chart-abstracted measure validation from 400 
hospitals to up to 200 hospitals, while we expect no change to the 
information collection burden for the Hospital IQR Program as 
discussed in section XI.B.7.b. of the preamble of this final rule 
because we directly reimburse hospitals for medical records, we 
believe there may be other cost savings beyond information 
collection burden due to 200 fewer hospitals being selected for 
Hospital IQR Program validation each year.
    Historically, 100 hospitals, on average, that participate in the 
Hospital IQR Program do not receive the full annual percentage 
increase in any fiscal year due to the failure to meet all 
requirements of this Program. We anticipate that the number of 
hospitals not receiving the full annual percentage increase will be 
approximately the same as in past years.
    A number of commenters expressed concern about an increase in 
burden related to our eCQM related proposals to increase the number 
of required reporting quarters for eCQM data and our proposal to 
begin publicly reporting eCQM data.
    We believe the long-term benefits associated with reporting a 
full year of electronic data will outweigh the burdens and that 
increasing the number of quarters for which hospitals are required 
to report eCQM data will produce more comprehensive and reliable 
quality information for patients and providers. We stated our 
intention in the FY 2018 IPPS/LTCH PPS final rule to gradually 
transition toward more robust eCQM reporting (82 FR 38356). We 
reiterated this stated goal to incrementally increase the use of EHR 
data for quality measurement in a subsequent final rule (84 FR 
42502). We believe that taking an incremental approach to increasing 
eCQM reporting over a 3-year period will help to ease the burdens 
associated with reporting larger amounts of data and will provide 
hospitals and vendors with additional time to plan and sufficiently 
allocate resources for more robust eCQM reporting. We also believe 
the increase in reporting quarters does not represent a significant 
increase in burden beyond the existing requirement to report one 
quarter of eCQM data. Once the eCQM updates are implemented in 
hospital EHRs, reporting an additional quarter of data should not 
require the same level of effort as reporting one initial quarter of 
data because hospitals should not need to update the eCQM 
specifications each quarter. Thus, we do not expect hospitals to 
experience a significant amount of added burden reporting three 
additional quarters of data over a 3-year period. The data 
submission deadline for eCQM data under the Hospital IQR Program, 
regardless of how many quarters of data are required to be reported 
for a given calendar year, will continue to be the end of 2 months 
following the close of the respective calendar year. There is no 
additional information collection burden associated with our 
proposal to publically reporting eCQM data, however we acknowledge 
that there are other types of burden associated with this proposal. 
For example, there is burden associated with the optional reviewing 
of hospital-specific reports during the public reporting preview 
period; however, we believe this burden is nominal because hospitals 
already review these reports with respect to other types of measures 
for the Hospital IQR Program.
    We agree with the majority of commenters who expressed that the 
finalization of the validation proposals would be less burdensome 
overall. Combining and aligning the hospital pool for validation 
between the programs would reduce burden by 400 hospitals per year 
starting with validation affecting the FY 2024 payment 
determination. This is supported by the majority of comments that we 
received in response to this proposal, which indicate that most 
hospitals believe that the combined process will be less burdensome. 
In addition, our proposal to reduce the overall number of hospitals 
selected for validation from 800 to up to 400, further reduces the 
overall validation burden.
    For a detailed discussion of comments we received on the 
information collection burden associated with the finalization of 
these proposals, please see section VIII.A.10 of the preamble of 
this final rule. We believe the finalization of these proposals 
effectively balances the burdens associated with increased reporting 
of eCQM data and the benefits of providing that quality data to 
patients and consumers.

L. Effects of Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program

    In section VIII.B. of the preamble of this final rule, we 
finalize our proposed policies for the quality data reporting 
program for PPS-exempt cancer hospitals (PCHs), which we refer to as 
the PPS-exempt Cancer Hospital Quality Reporting (PCHQR) Program. 
The PCHQR Program is authorized under section 1866(k) of the Act, 
which was added by section 3005 of the Affordable Care Act. There is 
no financial impact to PCH Medicare reimbursement if a PCH does not 
submit data.
    In section VIII.B.4. of the preamble of this final rule, we 
adopt refined versions of two existing measures: The Catheter-
Associated Urinary Tract Infection (CAUTI) Outcome Measure and the 
Central Line-Associated Bloodstream Infection (CLABSI) Outcome 
Measure, beginning with the FY 2023

[[Page 59102]]

program year. As explained in section XI.B.8. of the preamble of 
this final rule, we do not anticipate any change in burden hours on 
the PCHs associated with our finalized policy to refine the CAUTI 
and CLABSI measures beginning with the FY 2023 program year because 
there are no changes to the data submission requirements for CAUTI 
and CLABSI.
    We received no comments in response to the effects of 
requirements section specifically discussed above.

M. Effects of Requirements for the Long-Term Care Hospital Quality 
Reporting Program (LTCH QRP)

    We did not propose any policies and, therefore, are not 
finalizing any policies in this final rule for the LTCH QRP.

N. Effects of Proposed Requirements Regarding the Promoting 
Interoperability Programs

    In section VIII.D. of the preamble of this final rule, we 
finalize our proposed requirements for eligible hospitals and CAHs 
participating in the Medicare and Medicaid Promoting 
Interoperability Programs. Specifically, we are finalizing the 
following proposed changes for eligible hospitals and CAHs that 
attest to CMS under the Medicare Promoting Interoperability Program: 
(1) An EHR reporting period of a minimum of any continuous 90-day 
period in CY 2022 for new and returning participants (eligible 
hospitals and CAHs); (2) to maintain the Electronic Prescribing 
Objective's Query of PDMP measure as optional and worth 5 bonus 
points in CY 2021; (3) to modify the name of the Support Electronic 
Referral Loops by Receiving and Incorporating Health Information 
measure; (4) to progressively increase the number of quarters for 
which hospitals are required to report eCQM data, from the current 
requirement of one self-selected calendar quarter of data, to four 
calendar quarters of data, over a 3-year period. Specifically, we 
will require: (a) 2 self-selected calendar quarters of data for the 
CY 2021 reporting period; (b) 3 self-selected calendar quarters of 
data for the CY 2022 reporting period; and (c) 4 calendar quarters 
of data beginning with the CY 2023 reporting period, where the 
submission period for the Medicare Promoting Interoperability 
Program will be the 2 months following the close of the respective 
calendar year; (5) to begin publicly reporting eCQM performance data 
beginning with the eCQM data reported by eligible hospitals and CAHs 
for the reporting period in CY 2021 on the Hospital Compare and/or 
data.medicare.gov websites or successor websites; (6) to correct 
errors and amend regulation text under Sec.  495.104(c)(5)(viii)(B) 
through (D) regarding transition factors under section 
1886(n)(2)(E)(i) for the incentive payments for Puerto Rico eligible 
hospitals; and (7) to correct errors and amend regulation text under 
Sec.  495.20(e)(5)(iii) and (l)(11)(ii)(C)(1) for regulatory 
citations for the ONC certification criteria. We are amending our 
regulations as necessary to incorporate these changes. For the EHR 
reporting period in CY 2021, the provisions summarized in this 
section are mainly continuations of existing policies. However, two 
updated instances of a previous miscalculation and an updated Bureau 
of Labor Statistics wage rate will result in both a minor reduction 
of program burden hours (-44) as well as a small increase in total 
cost (+$24,024) for CY 2021.
    We did not receive individual comments in response to the 
numerical impacts specifically discussed above, therefore, we are 
finalizing our impacts as proposed without modification. For a 
complete, detailed discussion of comments we received on the 
Promoting Interoperability Program's policy proposals, please see 
section VIII.D. of the preamble of this final rule.

O. Alternatives Considered

    This final rule contains a range of policies. It also provides 
descriptions of the statutory provisions that are addressed, 
identifies the final policies, and presents rationales for our 
decisions and, where relevant, alternatives that were considered.

1. Implementation of Revised Labor Market Area Delineations

    As discussed in section III.A.2. of the preamble of this final 
rule, the wage index is calculated and assigned to hospitals on the 
basis of the labor market area in which the hospital is located. 
Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we 
delineate hospital labor market areas based on OMB-established Core-
Based Statistical Areas (CBSAs). Generally, OMB issues major 
revisions to statistical areas every 10 years, based on the results 
of the decennial census. However, OMB occasionally issues minor 
updates and revisions to statistical areas in the years between the 
decennial censuses through OMB Bulletins. On September 14, 2018, OMB 
issued OMB Bulletin No. 18-04. While OMB Bulletin No. 18-04 is not 
based on new census data, it includes some material changes to the 
OMB statistical area delineations. Specifically, under the revised 
OMB delineations, there are some new CBSAs, urban counties that 
become rural, rural counties that become urban, and existing CBSAs 
that are split apart. In addition, the revised OMB delineations will 
affect various hospital reclassifications, the out-migration 
adjustment (established by section 505 of Pub. L. 108-173), and 
treatment of hospitals located in certain rural counties (that is, 
``Lugar'' hospitals) under section 1886(d)(8)(B) of the Act.
    We considered whether we should finalize the implementation of 
the revised OMB delineations as described in OMB Bulletin No. 18-04, 
beginning with the FY 2021 IPPS wage index, or whether we should 
wait to implement any further changes to the hospital labor market 
areas until OMB issues revisions to the statistical areas based on 
the results of the upcoming decennial census. We believe it is 
important for the IPPS to use updated labor market area delineations 
as soon as reasonably possible in order to maintain a more accurate 
and up-to-date payment system that reflects the reality of 
population shifts and labor market conditions. Furthermore, we 
believe that using the updated delineations in OMB Bulletin No. 18-
04 will increase the integrity of the IPPS wage index system by 
creating a more accurate representation of geographic variations in 
wage levels. Therefore, we decided not to wait until OMB issues 
revisions to the statistical areas based on the results of the 
upcoming decennial census, but are finalizing the implementation of 
the revised OMB delineations as described in the September 14, 2018 
OMB Bulletin No. 18-04, effective October 1, 2020 beginning with the 
FY 2021 IPPS wage index. We note that as described in section 
III.A.2.c. of the preamble of this final rule, we are finalizing a 
transition for hospitals that would see a decrease of more than 5 
percent in their FY 2021 wage index compared to their FY 2020 wage 
index.

2. Market-Based MS-DRG Relative Weight Estimation Data Collection and 
Change in Methodology for Calculating MS-DRG Relative Weights

    In section IV.P.2.c. of the preamble of this final rule, we are 
finalizing the adoption of a market-based methodology for estimating 
the MS-DRG relative weights beginning in FY 2024, based on the 
median payer-specific negotiated charge information we are 
finalizing to collect on the cost report. We are finalizing our data 
collection proposal with modification to only collect the median 
payer-specific negotiated charge by MS-DRG for payers that are MA 
organizations, rather than collecting both the median payer-specific 
negotiated charge by MS-DRG for payers that are MA organizations and 
for all third party payers, as proposed. The market-based rate 
information we are finalizing to collect on the Medicare cost report 
would be the median of the payer-specific negotiated charges by MS-
DRG, as described previously, for a hospital's MA organization 
payers. The payer-specific negotiated charges used by hospitals to 
calculate these medians would be the payer-specific negotiated 
charges for service packages that hospitals are required to make 
public under the requirements finalized in the Hospital Price 
Transparency final rule (84 FR 65524) that can be cross-walked to an 
MS-DRG. Hospitals would use the payer-specific negotiated charge 
data that they would be required to make public, as a result of the 
Hospital Price Transparency final rule, to then calculate the median 
payer-specific negotiated charges (as described further in section 
IV.P.2.c. of this final rule) to report on the Medicare cost report. 
We are not finalizing the collection of alternative market-based 
data, such as the median negotiated reimbursement amount, as 
initially discussed in section IV.P.2.c. of the proposed rule, or 
any refinements to the definition of median payer-specific 
negotiated charge.
    In section IV.P.2.d. of the preamble of this final rule, we also 
finalize the adoption of a new market-based methodology for 
estimating the MS-DRG relative weights, beginning in FY 2024. This 
market-based methodology is based on the median payer-specific 
negotiated charge information collected on the Medicare cost report. 
In the proposed rule we considered alternatives to this approach, 
such as the use of the median payer-specific negotiated charge for 
all third-party payers (instead of the median payer-specific 
negotiated charge for all MA organizations), other alternative 
collections

[[Page 59103]]

of payer-specific negotiated charges, or other market-based 
information such as a median negotiated reimbursement amount that a 
hospital negotiates with its MA organizations or third party payers 
(as described further in section IV.P.2.c of the preamble of the 
proposed rule), within the MS-DRG relative weight methodology.
    We stated in the proposed rule that the same MS-DRG relative 
weight calculation described in section IV.P.2.d. would be used if 
we finalized an alternative to the median payer-specific negotiated 
charge information that we proposed to collect on the Medicare cost 
report, as further described in that section. We are not finalizing 
at this time a transition period to this market-based MS-DRG 
relative weight methodology, but did consider this, and will 
continue to consider this for future rulemaking prior to the FY 2024 
effective date. We remain open to adjusting any finalized policy, 
through future rulemaking, prior to the FY 2024 effective date.

P. Reducing Regulation and Controlling Regulatory Costs

    Executive Order 13771, titled Reducing Regulation and 
Controlling Regulatory Costs, was issued on January 30, 2017. This 
final rule is considered to be an E.O. 13771 regulatory action.

Q. Overall Conclusion

1. Acute Care Hospitals

    Acute care hospitals are estimated to experience an increase of 
approximately $3.528 billion in FY 2021, including operating, 
capital, and new technology changes as modeled for this final rule. 
The estimated change in operating payments is approximately $3.022 
billion (discussed in section I.G. and I.H. of this Appendix). The 
estimated change in capital payments is approximately $0.027 billion 
(discussed in section I.I. of this Appendix). The estimated change 
in new technology add-on payments is approximately $0.479 billion as 
discussed in section I.H. of this Appendix. The change in new 
technology add-on payments reflects the net impact of new, 
continuing, and expiring current new technology add on payments. 
Total may differ from the sum of the components due to rounding.
    Table I. of section I.G. of this Appendix also demonstrates the 
estimated redistributional impacts of the IPPS budget neutrality 
requirements for the final MS-DRG and wage index changes, and for 
the wage index reclassifications under the MGCRB.
    We estimate that hospitals would experience a 0.2 percent 
increase in capital payments per case, as shown in Table III. of 
section I.I. of this Appendix. We project that there would be a $27 
million increase in capital payments in FY 2021 compared to FY 2020.
    The discussions presented in the previous pages, in combination 
with the remainder of this final rule, constitute a regulatory 
impact analysis.

2. LTCHs

    Overall, LTCHs are projected to experience a decrease in 
estimated payments in FY 2021. In the impact analysis, we are using 
the final rates, factors, and policies presented in this final rule 
based on the best available claims and CCR data to estimate the 
change in payments under the LTCH PPS for FY 2021. Accordingly, 
based on the best available data for the 363 LTCHs in our database, 
we estimate that overall FY 2021 LTCH PPS payments will decrease 
approximately $40 million relative to FY 2020 primarily as a result 
of the end of the statutory transition period for site neutral 
payment rate cases.

R. Regulatory Review Costs

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret a rule, we should 
estimate the cost associated with regulatory review. In the FY 2021 
IPPS/LTCH PPS proposed rule, due to the uncertainty involved with 
accurately quantifying the number of entities that would review the 
proposed rule, we assumed that the total number of timely pieces of 
correspondence on last year's proposed rule will be the number of 
reviewers of this proposed rule. We acknowledge that this assumption 
may understate or overstate the costs of reviewing the rule. It is 
possible that not all commenters reviewed last year's rule in 
detail, and it is also possible that some reviewers chose not to 
comment on the proposed rule. For those reasons, and consistent with 
our approach in previous rulemakings (82 FR 38585; 83 FR 41777), we 
believe that the number of past commenters would be a fair estimate 
of the number of reviewers of the rule. We welcomed any public 
comments on the approach in estimating the number of entities that 
will review this final rule. We did not receive any public comments 
specific to our solicitation.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of the rule. 
Therefore, for the purposes of our estimate, and consistent with our 
approach in previous rulemaking (82 FR 38585; 83 FR 41777), we 
assume that each reviewer read approximately 50 percent of the rule. 
In the proposed rule, we welcomed public comments on this 
assumption. We did not receive any public comments specific to our 
solicitation.
    We have used the number of timely pieces of correspondence on 
the FY 2021 IPPS/LTCH PPS proposed rule as our estimate for the 
number of reviewers of the final rule. We continue to acknowledge 
the uncertainty involved with using this number, but we believe it 
is a fair estimate due to the variety of entities affected and the 
likelihood that some of them choose to rely (in full or in part) on 
press releases, newsletters, fact sheets, or other sources rather 
than the comprehensive review of preamble and regulatory text. Using 
the wage information from the BLS for medical and health service 
managers (Code 11-9111), we estimate that the cost of reviewing this 
rule is $110.74 per hour, including overhead and fringe benefits 
https://www.bls.gov/oes/current/oes_nat.htm. Assuming an average 
reading speed, we estimate that it would take approximately 25.94 
hours for the staff to review half of this proposed or final rule. 
For each entity that reviews the rule, the estimated cost is $2,873 
(25.94 hours x $110.74). Therefore, we estimate that the total cost 
of reviewing this regulation is $2,476,579 ($2,873 x 862).

II. Accounting Statements and Tables

A. Acute Care Hospitals

    As required by OMB Circular A-4 (available at https://obamawhitehouse.archives.gov/omb/circulars_a-004_a-4/ and https://georgewbush-whitehouse.archives.gov/omb/circulars/a004/a-4.html), in 
Table V. of this Appendix, we have prepared an accounting statement 
showing the classification of the expenditures associated with the 
provisions of this final rule as they relate to acute care 
hospitals. This table provides our best estimate of the change in 
Medicare payments to providers as a result of the final changes to 
the IPPS presented in this final rule. All expenditures are 
classified as transfers to Medicare providers.
    As shown in Table V. of this Appendix, the net costs to the 
Federal Government associated with the policies adopted in this 
final rule are estimated at $3.528 billion.
[GRAPHIC] [TIFF OMITTED] TR18SE20.290

B. LTCHs

    As discussed in section I.J. of this Appendix, the impact 
analysis of the final payment rates and factors presented in this 
final rule under the LTCH PPS is projected to result in a decrease 
in estimated aggregate LTCH PPS payments in FY 2021 relative to FY 
2020 of approximately $40 million based on the data for 363 LTCHs in 
our database

[[Page 59104]]

that are subject to payment under the LTCH PPS. Therefore, as 
required by OMB Circular A-4 (available at: https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/ and https://georgewbush-whitehouse.archives.gov/omb/circulars/a004/a-4.html), in 
Table VI. of this Appendix, we have prepared an accounting statement 
showing the classification of the expenditures associated with the 
provisions of this final rule as they relate to the changes to the 
LTCH PPS. Table VI. of this Appendix provides our best estimate of 
the estimated change in Medicare payments under the LTCH PPS as a 
result of the final payment rates and factors and other provisions 
presented in this final rule based on the data for the 363 LTCHs in 
our database. All expenditures are classified as transfers to 
Medicare providers (that is, LTCHs).
    As shown in Table VI. of this Appendix, the net cost to the 
Federal Government associated with the policies for LTCHs in this 
final rule are estimated at -$40 million.
[GRAPHIC] [TIFF OMITTED] TR18SE20.291

III. Regulatory Flexibility Act (RFA) Analysis

    The RFA requires agencies to analyze options for regulatory 
relief of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
government jurisdictions. We estimate that most hospitals and most 
other providers and suppliers are small entities as that term is 
used in the RFA. The great majority of hospitals and most other 
health care providers and suppliers are small entities, either by 
being nonprofit organizations or by meeting the SBA definition of a 
small business (having revenues of less than $7.5 million to $38.5 
million in any 1 year). (For details on the latest standards for 
health care providers, we refer readers to page 36 of the Table of 
Small Business Size Standards for NAIC 622 found on the SBA website 
at: http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)
    For purposes of the RFA, all hospitals and other providers and 
suppliers are considered to be small entities. Individuals and 
States are not included in the definition of a small entity. We 
believe that the provisions of this final rule relating to acute 
care hospitals will have a significant impact on small entities as 
explained in this Appendix. For example, because all hospitals are 
considered to be small entities for purposes of the RFA, the 
hospital impacts described in this final rule are impacts on small 
entities. For example, we refer readers to ``Table I.--Impact 
Analysis of Changes to the IPPS for Operating Costs for FY 2021.'' 
Because we lack data on individual hospital receipts, we cannot 
determine the number of small proprietary LTCHs. Therefore, we are 
assuming that all LTCHs are considered small entities for the 
purpose of the analysis in section I.J. of this Appendix. MACs are 
not considered to be small entities because they do not meet the SBA 
definition of a small business. Because we acknowledge that many of 
the affected entities are small entities, the analysis discussed 
throughout the preamble of this final rule constitutes our 
regulatory flexibility analysis. This final rule contains a range of 
policies. It provides descriptions of the statutory provisions that 
are addressed, identifies the policies, and presents rationales for 
our decisions and, where relevant, alternatives that were 
considered.
    For purposes of the RFA, as stated previously, all hospitals and 
other providers and suppliers are considered to be small entities. 
We estimate the provisions of this final rule would result in an 
estimated $3.528 billion increase in FY 2021 payments to IPPS 
hospitals, primarily driven by the applicable percentage increase to 
the IPPS rates in conjunction with other payment changes including 
uncompensated care payments, capital payments, and new technology 
add-on payments, as discussed in section I.B. of this Appendix. As 
discussed in section I.J. of this Appendix, the impact analysis of 
the payment rates and factors presented in this final rule under the 
LTCH PPS is projected to result in a decrease in estimated aggregate 
LTCH PPS payments in FY 2021 relative to FY 2020 of approximately 
$40 million. We solicited public comments on our estimates and 
analysis of the impact of our proposals on those small entities. Any 
public comments that we received and our responses are presented 
throughout this final rule.

IV. Impact on Small Rural Hospitals

    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis for any proposed or final rule that may have a 
significant impact on the operations of a substantial number of 
small rural hospitals. This analysis must conform to the provisions 
of section 604 of the RFA. With the exception of hospitals located 
in certain New England counties, for purposes of section 1102(b) of 
the Act, we define a small rural hospital as a hospital that is 
located outside of an urban area and has fewer than 100 beds. 
Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 
98-21) designated hospitals in certain New England counties as 
belonging to the adjacent urban area. Thus, for purposes of the IPPS 
and the LTCH PPS, we continue to classify these hospitals as urban 
hospitals. (As shown in Table I. in section I.G. of this Appendix, 
rural IPPS hospitals with 0-49 beds and 50-99 beds are expected to 
experience an increase in payments from FY 2020 to FY 2021 of 2.0 
percent and 2.1 percent, respectively. We refer readers to Table I. 
in section I.G. of this Appendix for additional information on the 
quantitative effects of the final policy changes under the IPPS for 
operating costs.)

V. Unfunded Mandates Reform Act (UMRA) Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4) also requires that agencies assess anticipated costs and 
benefits before issuing any rule whose mandates require spending in 
any 1 year of $100 million in 1995 dollars, updated annually for 
inflation. In 2020, that threshold level is approximately $156 
million. This final rule would not mandate any requirements for 
State, local, or tribal governments, nor would it affect private 
sector costs.

VI. Executive Order 13175

    Executive Order 13175 directs agencies to consult with Tribal 
officials prior to the formal promulgation of regulations having 
tribal implications. Section 1880(a) of the Act states that a 
hospital of the Indian Health Service, whether operated by such 
Service or by an Indian tribe or tribal organization, is eligible 
for Medicare payments so long as it meets all of the conditions and 
requirements for such payments which are applicable generally to 
hospitals. Consistent with section 1880(a) of the Act, this final 
rule contains general provisions also applicable to hospitals and 
facilities operated by the Indian Health Service or Tribes or Tribal 
organizations under the Indian Self-Determination and Education 
Assistance Act.
    As discussed in section IV.G.4 of the preamble of this final 
rule, CMS sought comment in the proposed rule on a potential 
restructuring of the Medicare DSH and uncompensated care payments 
specific to IHS and Tribal hospitals beginning in FY 2022. 
Consistent with Executive Order 13175, we continue to engage in 
consultation with Tribal officials on this issue. We intend to use 
input received from these consultations with Tribal officials, as 
well as the comments on the proposed rule, to inform future 
rulemaking.

VII. Executive Order 12866

    In accordance with the provisions of Executive Order 12866, the 
Executive Office of Management and Budget reviewed this final rule.

[[Page 59105]]

Appendix B: Recommendation of Update Factors for Operating Cost Rates 
of Payment for Inpatient Hospital Services

I. Background

    Section 1886(e)(4)(A) of the Act requires that the Secretary, 
taking into consideration the recommendations of MedPAC, recommend 
update factors for inpatient hospital services for each fiscal year 
that take into account the amounts necessary for the efficient and 
effective delivery of medically appropriate and necessary care of 
high quality. Under section 1886(e)(5) of the Act, we are required 
to publish update factors recommended by the Secretary in the 
proposed and final IPPS rules. Accordingly, this Appendix provides 
the recommendations for the update factors for the IPPS national 
standardized amount, the hospital-specific rate for SCHs and MDHs, 
and the rate-of-increase limits for certain hospitals excluded from 
the IPPS, as well as LTCHs. In prior years, we made a recommendation 
in the IPPS proposed rule and final rule for the update factors for 
the payment rates for IRFs and IPFs. However, for FY 2021, 
consistent with our approach for FY 2020, we are including the 
Secretary's recommendation for the update factors for IRFs and IPFs 
in separate Federal Register documents at the time that we announce 
the annual updates for IRFs and IPFs. We also discuss our response 
to MedPAC's recommended update factors for inpatient hospital 
services.

II. Inpatient Hospital Update for FY 2021

A. FY 2021 Inpatient Hospital Update

    As discussed in section IV.B. of the preamble to this final 
rule, for FY 2021, consistent with section 1886(b)(3)(B) of the Act, 
as amended by sections 3401(a) and 10319(a) of the Affordable Care 
Act, we are setting the applicable percentage increase by applying 
the following adjustments in the following sequence. Specifically, 
the applicable percentage increase under the IPPS is equal to the 
rate-of-increase in the hospital market basket for IPPS hospitals in 
all areas, subject to a reduction of one-quarter of the applicable 
percentage increase (prior to the application of other statutory 
adjustments; also referred to as the market basket update or rate-
of-increase (with no adjustments)) for hospitals that fail to submit 
quality information under rules established by the Secretary in 
accordance with section 1886(b)(3)(B)(viii) of the Act and a 
reduction of three-quarters of the applicable percentage increase 
(prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals not considered to be meaningful 
electronic health record (EHR) users in accordance with section 
1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment 
based on changes in economy-wide productivity (the multifactor 
productivity (MFP) adjustment). Section 1886(b)(3)(B)(xi) of the 
Act, as added by section 3401(a) of the Affordable Care Act, states 
that application of the MFP adjustment may result in the applicable 
percentage increase being less than zero. (We note that section 
1886(b)(3)(B)(xii) of the Act required an additional reduction each 
year only for FYs 2010 through 2019.)
    We note that, in compliance with section 404 of the MMA, in the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38158 through 38175), we 
replaced the FY 2010-based IPPS operating and capital market baskets 
with the rebased and revised 2014-based IPPS operating and capital 
market baskets effective beginning in FY 2018.
    In the FY 2021 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, we proposed to base the proposed 
FY 2021 market basket update used to determine the applicable 
percentage increase for the IPPS on IGI's fourth quarter 2019 
forecast of the 2014-based IPPS market basket rate-of-increase with 
historical data through third quarter 2019, which was estimated to 
be 3.0 percent. In accordance with section 1886(b)(3)(B) of the Act, 
as amended by section 3401(a) of the Affordable Care Act, in section 
IV.B. of the preamble of the FY 2021 IPPS/LTCH PPS proposed rule, 
based on IGI's fourth quarter 2019 forecast, we proposed a MFP 
adjustment of 0.4 percentage point for FY 2021. We also proposed 
that if more recent data subsequently became available, we would use 
such data, if appropriate, to determine the FY 2021 market basket 
update and MFP adjustment for the final rule.
    In the FY 2021 IPPS/LTCH PPS proposed rule, based on IGI's 
fourth quarter 2019 forecast of the 2014-based IPPS market basket 
and the MFP adjustment, depending on whether a hospital submits 
quality data under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a 
hospital that is a meaningful EHR user), we presented four possible 
applicable percentage increases that could be applied to the 
standardized amount.
    In accordance with section 1886(b)(3)(B) of the Act, as amended 
by section 3401(a) of the Affordable Care Act, we are establishing 
the applicable percentages increase for the FY 2021 updates based on 
IGI's second quarter 2020 forecast of the 2014-based IPPS market 
basket of 2.4 percent and the MFP adjustment of 0.0 percentage 
point, as discussed in section IV.B., depending on whether a 
hospital submits quality data under the rules established in 
accordance with section 1886(b)(3)(B)(viii) of the Act and is a 
meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act, as 
shown in the table in this section.
[GRAPHIC] [TIFF OMITTED] TR18SE20.292

B. Update for SCHs and MDHs for FY 2021

    Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2021 
applicable percentage increase in the hospital-specific rate for 
SCHs and MDHs equals the applicable percentage increase set forth in 
section 1886(b)(3)(B)(i) of the Act (that is, the same update factor 
as for all other hospitals subject to the IPPS). Under current law, 
the MDH program is effective for discharges through September 30, 
2022, as discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 
41429 through 41430).
    As previously stated, the update to the hospital specific rate 
for SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, 
as amended by sections 3401(a) and 10319(a) of the Affordable Care 
Act. Accordingly, depending on whether a hospital submits quality 
data and is a meaningful EHR user, we are establishing the same four 
possible applicable percentage increases in the previous table for 
the hospital-specific rate applicable to SCHs and MDHs.

[[Page 59106]]

C. FY 2021 Puerto Rico Hospital Update

    As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
56939), prior to January 1, 2016, Puerto Rico hospitals were paid 
based on 75 percent of the national standardized amount and 25 
percent of the Puerto Rico-specific standardized amount. Section 601 
of Public Law 114-113 amended section 1886(d)(9)(E) of the Act to 
specify that the payment calculation with respect to operating costs 
of inpatient hospital services of a subsection (d) Puerto Rico 
hospital for inpatient hospital discharges on or after January 1, 
2016, shall use 100 percent of the national standardized amount. 
Because Puerto Rico hospitals are no longer paid with a Puerto Rico-
specific standardized amount under the amendments to section 
1886(d)(9)(E) of the Act, there is no longer a need for us to make 
an update to the Puerto Rico standardized amount. Hospitals in 
Puerto Rico are now paid 100 percent of the national standardized 
amount and, therefore, are subject to the same update to the 
national standardized amount discussed under section IV.B.1. of the 
preamble of this final rule. Accordingly, for FY 2021, we are 
establishing an applicable percentage increase of 2.4 percent to the 
standardized amount for hospitals located in Puerto Rico.

D. Update for Hospitals Excluded From the IPPS for FY 2021

    Section 1886(b)(3)(B)(ii) of the Act is used for purposes of 
determining the percentage increase in the rate-of-increase limits 
for children's hospitals, cancer hospitals, and hospitals located 
outside the 50 States, the District of Columbia, and Puerto Rico 
(that is, short-term acute care hospitals located in the U.S. Virgin 
Islands, Guam, the Northern Mariana Islands, and America Samoa). 
Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in 
the rate-of-increase limits equal to the market basket percentage 
increase. In accordance with Sec.  403.752(a) of the regulations, 
RNHCIs are paid under the provisions of Sec.  413.40, which also use 
section 1886(b)(3)(B)(ii) of the Act to update the percentage 
increase in the rate-of-increase limits.
    Currently, children's hospitals, PPS-excluded cancer hospitals, 
RNHCIs, and short-term acute care hospitals located in the U.S. 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa are among the remaining types of hospitals still paid under 
the reasonable cost methodology, subject to the rate-of-increase 
limits. In addition, in accordance with Sec.  412.526(c)(3) of the 
regulations, extended neoplastic disease care hospitals (described 
in Sec.  412.22(i) of the regulations) also are subject to the rate-
of-increase limits. As discussed in section VI. of the preamble of 
this final rule, in the FY 2018 IPPS/LTCH PPS final rule, we 
finalized the use of the percentage increase in the 2014-based IPPS 
operating market basket to update the target amounts for children's 
hospitals, PPS-excluded cancer hospitals, RNHCIs, and short-term 
acute care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa for FY 2018 and 
subsequent fiscal years. In addition, as discussed in section IV.B. 
of the preamble of this final rule, the update to the target amount 
for extended neoplastic disease care hospitals for FY 2021 is the 
percentage increase in the 2014-based IPPS operating market basket. 
Accordingly, for FY 2021, the rate-of-increase percentage to be 
applied to the target amount for these children's hospitals, cancer 
hospitals, RNHCIs, extended neoplastic disease care hospitals, and 
short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa is the FY 
2021 percentage increase in the 2014-based IPPS operating market 
basket. For this final rule, the current estimate of the IPPS 
operating market basket percentage increase for FY 2021 is 2.4 
percent.

E. Update for LTCHs for FY 2021

    Section 123 of Public Law 106-113, as amended by section 307(b) 
of Public Law 106-554 (and codified at section 1886(m)(1) of the 
Act), provides the statutory authority for updating payment rates 
under the LTCH PPS.
    As discussed in section V.A. of the Addendum to this final rule, 
we are establishing an update to the LTCH PPS standard Federal 
payment rate for FY 2021 of 2.3 percent, consistent with section 
1886(m)(3) of the Act which provides that any annual update be 
reduced by the productivity adjustment of 0.0 percentage point 
described in section 1886(b)(3)(B)(xi)(II) of the Act (that is, the 
MFP adjustment). Furthermore, in accordance with the LTCHQR Program 
under section 1886(m)(5) of the Act, we are reducing the annual 
update to the LTCH PPS standard Federal rate by 2.0 percentage 
points for failure of a LTCH to submit the required quality data. 
Accordingly, we are establishing an update factor of 1.023 in 
determining the LTCH PPS standard Federal rate for FY 2021. For 
LTCHs that fail to submit quality data for FY 2021, we are 
establishing an annual update to the LTCH PPS standard Federal rate 
of 0.3 percent (that is, the annual update for FY 2021 of 2.3 
percent less 2.0 percentage points for failure to submit the 
required quality data in accordance with section 1886(m)(5)(C) of 
the Act and our rules) by applying a update factor of 1.003 in 
determining the LTCH PPS standard Federal rate for FY 2021. (We note 
that, as discussed in section VII.D. of the preamble of this final 
rule, the update to the LTCH PPS standard Federal payment rate of 
2.3 percent for FY 2021 does not reflect any budget neutrality 
factors).

III. Secretary's Recommendations

    MedPAC is recommending an inpatient hospital update of 2.0 
percent. MedPAC's rationale for this update recommendation is 
described in more detail in this section. As previously stated, 
section 1886(e)(4)(A) of the Act requires that the Secretary, taking 
into consideration the recommendations of MedPAC, recommend update 
factors for inpatient hospital services for each fiscal year that 
take into account the amounts necessary for the efficient and 
effective delivery of medically appropriate and necessary care of 
high quality. Consistent with current law, depending on whether a 
hospital submits quality data and is a meaningful EHR user, we are 
recommending the four applicable percentage increases to the 
standardized amount listed in the table under section II. of this 
Appendix B. We are recommending that the same applicable percentage 
increases apply to SCHs and MDHs.
    In addition to making a recommendation for IPPS hospitals, in 
accordance with section 1886(e)(4)(A) of the Act, we are 
recommending update factors for certain other types of hospitals 
excluded from the IPPS. Consistent with our policies for these 
facilities, we are recommending an update to the target amounts for 
children's hospitals, cancer hospitals, RNHCIs, short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa and extended neoplastic 
disease care hospitals of 2.4 percent.
    For FY 2021, consistent with policy set forth in section VII. of 
the preamble of this final rule, for LTCHs that submit quality data, 
we are recommending an update of 2.3 percent to the LTCH PPS 
standard Federal rate. For LTCHs that fail to submit quality data 
for FY 2021, we are recommending an annual update to the LTCH PPS 
standard Federal rate of 0.3 percent.

IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating 
Payments in Traditional Medicare

    In its March 2020 Report to Congress, MedPAC assessed the 
adequacy of current payments and costs, and the relationship between 
payments and an appropriate cost base. MedPAC recommended an update 
to the hospital inpatient rates by 2 percent with the difference 
between this and the update amount specified in current law to be 
used to increase payments under MedPAC's Medicare quality program, 
the ``Hospital Value Incentive Program (HVIP).'' MedPAC stated that 
together, these recommendations, paired with the recommendation to 
eliminate the current hospital quality program incentives, would 
increase hospital payments by increasing the base payment rate and 
by increasing the average rewards hospitals receive under MedPAC's 
Medicare HVIP. We refer readers to the March 2020 MedPAC report, 
which is available for download at www.medpac.gov, for a complete 
discussion on these recommendations.
    Response: With regard to MedPAC's recommendation of an update to 
the hospital inpatient rates equal to 2 percent, with the remainder 
of the applicable percentage increase specified in current law to be 
used to fund its recommended Medicare HVIP, section 1886(b)(3)(B) of 
the Act sets the requirements for the FY 2021 applicable percentage 
increase. Therefore, consistent with the statute, we are 
establishing an applicable percentage increase for FY 2021 of 2.4 
percent, provided the hospital submits quality data and is a 
meaningful EHR user consistent with these statutory requirements. 
Furthermore, we appreciate MedPAC's recommendation concerning a new 
HVIP. We agree that continual improvement motivated by quality 
programs is an important incentive of the IPPS.
    We note that, because the operating and capital payments in the 
IPPS remain

[[Page 59107]]

separate, we are continuing to use separate updates for operating 
and capital payments in the IPPS. The update to the capital rate is 
discussed in section III. of the Addendum to this final rule.

[FR Doc. 2020-19637 Filed 9-2-20; 4:15 pm]
BILLING CODE 4120-01-P