The objectives of this proposed rule are to:

• Consolidate, reorganize, and update our regulations governing FCA's appointment of FCSIC as the conservator or receiver of any System bank, association, service corporation, or the Funding Corporation.

• Ensure that our conservatorship and receivership regulations in part 627 are consistent with section 5412 of the 2018 Farm Bill, which added section 5.61C to the Farm Credit Act of 1971, as amended (Act). 1

• Restructure and reorganize part 627 so it is easier for FCA examiners, FCS institutions and other interested parties to understand and use, and to make conforming or technical revisions to other FCA regulations.

• Make conforming changes to two definitions in part 619 to implement various provisions in section 5.61C(h) of the Act that create specific exceptions so that bridge System banks are not subject to certain provisions of laws, including FCA regulations, that apply to FCS banks, associations, and service corporations.

Section 4.12 of the Act governs the dissolution of System institutions through voluntary and involuntary liquidations, mergers, and conservatorships or receiverships. 2 The FCA has “exclusive power and jurisdiction” under section 4.12(b) of the Act to appoint FCSIC as the conservator or receiver for any FCS institution  3 that meets one or more of six specific statutory criteria for determining whether it is insolvent or unviable. 4 Since 1992, FCA regulations in part 627 have implemented section 4.12 of the Act.

As noted earlier, the 2018 Farm Bill added a new section to the Act, 5.61C, which strengthens, clarifies, and updates the powers and duties of FCSIC after FCA appoints it as the conservator or receiver of any FCS institution. Additionally, section 5.61C of the Act enhances FCSIC's authority to handle claims by various parties against a System institution in conservatorship or receivership. FCSIC's new statutory conservatorship and receivership authorities are comparable to those of the Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), and Federal Housing Finance Agency (FHFA), and the legislative history further reveals that Congress intended FCSIC's authorities “to be functionally equivalent to the parallel authorities of the [FDIC].”  5

Bridge System banks are one of the new tools that the 2018 Farm Bill gave FCSIC, in its capacity as receiver, for the resolution or liquidation of failing or failed System banks. Section 5.61C(h) of the Act authorizes FCA to charter bridge System banks at FCSIC's request and dissolve them once a failing or failed Farm Credit bank is resolved. 6 The statutory provisions governing the creation, operation, capitalization, and termination and dissolution of bridge System banks are comprehensive, unambiguous, and prescriptive. 7

This is our second rulemaking within the last year to update our conservatorship and receivership regulations to address changes that section 5412 of the 2018 Farm Bill made to the Act. In March of 2021, we issued a direct final rule that rescinded ten regulations in part 627 that section 5412 of the 2018 Farm Bill superseded and rendered obsolete. 8 The preamble to the direct final rule indicated that future rulemakings could revise our conservatorship and receivership regulations in part 627 to make them consistent with new section 5.61C of the Act.

In this phase of the rulemaking, FCA proposes to update, restructure, and consolidate its regulations governing the appointment and role of FCSIC as the conservator or receiver of an FCS institution, other than Farmer Mac. More specifically, the proposed rule combines the four remaining conservatorship regulations into a single regulation, while the three receivership regulations that we retained are also consolidated together. We believe that consolidating and restructuring the conservatorship and receivership regulations in part 627 will make it easier for both FCA examiners and FCS institutions to understand and follow them. We explain these revisions in greater detail in the section-by-section analysis below.

As explained above, section 5.61C(h) of the Act establishes unambiguous, comprehensive, and prescriptive requirements concerning FCA's authority over bridge System banks. For this reason, new regulations are not necessary to implement FCA's statutory authority regarding bridge System banks, and we are not proposing any in this rulemaking. Instead, FCA relies on its chartering and supervisory powers, as well as coordination with FCSIC, to fulfill its responsibilities and obligations under the Act concerning bridge System banks. Other Federal regulators of financial institutions, such as the Comptroller of the Currency, the NCUA, and the FHFA have not enacted regulations to implement similar statutory provisions. Additionally, section 5.61C of the Act grants FCSIC authority to organize, control, manage, and operate bridge System banks.

Under this new statutory framework, the successor to the bridge System bank is created by a: (1) Merger or consolidation with an existing System institution, (2) sale of the bridge System bank's capital stock and converting its charter to that of the new institution, or (3) purchase or assumption transaction by the replacement institution. At the end of this process, FCA cancels the bridge System bank's charter. As noted earlier, bridge System banks are a new instrument for resolving a failing or failed FCS bank. Replacing the bridge System bank with a successor FCS institution raises novel issues of first impression for both FCA and FCSIC. 9 Both agencies are exploring and consulting about this matter. FCA may propose new regulations in the future to implement sections 5.61C(h)(9) and (h)(10) concerning the processes and procedures for replacing a bridge System bank with a solvent and viable FCS bank.

Although we are not proposing substantive regulations governing the chartering, operations, activities, and termination of bridge System banks, we are introducing the concept into FCA regulations for the first time. As discussed below, we are adding two new regulations that exclude bridge System banks, chartered pursuant to section 5.61C(h) of the Act, from the definitions of FCS institutions and System banks. The first place that this proposed amendment appears is in subpart A of the conservatorship and receivership regulations in part 627. We also propose to exclude bridge System banks from the definitions of “Farm Credit bank” and “Farm Credit institutions” in part 619, which apply to all FCA regulations in chapter VI of the Code of Federal Regulations, unless specific regulations provide a specific and specialized definition of these terms. These two amendments are consistent with section 5.61C(h)(4) of the Act, which states that bridge System banks have all corporate powers, and are subject to the same provisions of law, as any System bank, except for specific exceptions enumerated in various provisions of section 5.61C(h).

We discuss the specifics of our proposal for part 627 in the same chronological order they appear in the regulations. Conforming changes to part 619 appear last in this section-by-section analysis.

FCA proposes to restructure, redesignate, and renumber the regulations in part 627. As noted earlier, section 5412 of the 2018 Farm Bill strengthened, clarified, and updated FCSIC's conservatorship and receivership authorities. As a result, new section 5.61C of the Act superseded several regulations in part 627 and rendered them obsolete. For this reason, our recent direct final rule repealed ten regulations that were no longer consistent with FCSIC's new statutory authorities to administer conservatorships and receiverships of System institutions. The 2018 Farm Bill also realigned and clarified the roles of FCA and FCSIC pertaining to the conservatorship and receivership of failing and failed FCS institutions. Accordingly, we are restructuring and reorganizing our regulations in part 627 so they focus on the implementation of FCA's specific conservatorship and receivership authorities under section 4.12(b) and 5.61C of the Act, while deferring to FCSIC about how to carry out its own statutory authorities.

Additionally, we propose to restructure, reorganize, redesignate, renumber, and revise the style and language of our regulations in part 627 to improve their clarity and readability. Our intent is to make it easier for FCA examiners, System institutions and borrowers, and other members of the public who may be affected by the conservatorship or receivership of an FCS institution, to understand, use, and rely on these regulations. We do not intend to change the substantive meaning of the affected regulatory provisions unless the preamble discussion of a specific provision explicitly states otherwise.

Reorganizing and restructuring the conservatorship and receivership regulations in part 627 are intended to consolidate similar provisions, eliminate redundancies, and improve their clarity. More specifically, we propose to consolidate the four remaining conservatorship regulations in existing subpart C, §§ 627.2770, 627.2775, 627.2785, and 627.2790, in a single regulation: New § 627.10. Similarly, the proposed rule also combines the three remaining receivership regulations, §§ 627.2720, 627.2735, and 627.2765 in current subpart B, into new § 627.20. As explained in greater detail below, both proposed §§ 627.10 and 627.20 implement provisions in sections 4.12(b) and 5.61C pertaining to FCA's powers and responsibilities when it places a System institution into conservatorship or receivership. Ten separate regulations in part 627 were superseded by the 2018 Farm Bill and repealed by FCA because authority over the priority of claims and other aspects relating to the administration and management of conservatorships and receiverships are now among FCSIC's enhanced powers. For all these reasons, consolidating and reorganizing the remaining regulations achieves FCA's goal of simplifying, clarifying, and making them more user-friendly.

The proposed rule also reverses the chronological order of the existing regulations by presenting the conservatorship regulation first and the receivership regulation second. This change is logical from FCA's perspective because: (1) It follows the order and flow of section 4.12 of the Act, and (2) an institution in conservatorship can be placed into receivership if its condition worsens. FCA is also simplifying the numbering system for the regulations in part 627. As a result, these regulations will have no more than a two-digit number after the decimal point, which is consistent with the way FCA has numbered regulations in recent years.

The proposed rule changes the title of subpart A from “General” to “General Provisions.” Existing §§ 627.2700, 627.2705, 627.2710, and 627.2715 are redesignated as §§ 627.1, 627.2, 627.3, and 627.4, respectively. All of the amendments are stylistic and non-substantive.

Proposed § 627.1 states that the “provisions in this part apply to conservatorships, receiverships, and voluntary liquidations of System institutions chartered under titles I, II, III, IV, and VII of the Act.” This provision is similar, but not identical, to existing § 627.2700. The only substantive difference is that we propose to add specific references to System institutions chartered under titles I, II, III, IV, and VII of the Act. This proposed amendment clarifies that the regulations in part 627 do not apply to Farmer Mac. Instead, as mentioned earlier, the regulations in subpart B of part 650 govern the conservatorship, receivership, or voluntary liquidation of Farmer Mac.

Separately, we propose two minor amendments to redesignated § 627.1, which do not substantively change the regulation's meaning. First, the proposed rule omits the word “General” and the hyphen after it from the title. Second, we are making a grammatical correction in the first sentence so the verb “apply” appears in the present, not future, tense.

The definitions that apply to part 627 are located in proposed and redesignated § 627.2. We propose to remove the paragraph designations for the definitions in existing § 627.2705 and instead list these definitions alphabetically, which is the practice that FCA has followed in recent rulemakings. Under this proposal, the regulations in part 627 refer to the Farm Credit System Insurance Corporation as “FCSIC” instead of the “Insurance Corporation” as they do now. As a result, references to FCSIC are the same throughout all FCA regulations. We also propose to amend the definition of “Farm Credit institution(s) or institution(s)” by: (1) Removing the reference to the now-defunct Farm Credit System Financial Assistance Corporation;  10 and (2) adding a final sentence to this provision stating that these terms do not include bridge System banks chartered by FCA, in accordance with section 5.61C(h)(2) of the Act. Finally, we propose to improve the clarity of the regulatory definitions of “conservator” and “receiver” in redesignated § 627.2 by adding the words “of a Farm Credit institution” at the end of each.

The proposed rule redesignates § 627.2710 as § 627.3 and amend this regulation, which specifies the grounds for FCA appointing FCSIC as the conservator or receiver of a System institution pursuant to sections 4.12(b) and 5.61C(l) of the Act. We propose to delete outdated provisions in redesignated § 627.3 and streamline its language so it is concise and clear. These proposed amendments are technical and stylistic, rather than substantive.

As amended, proposed § 627.3(a) provides that FCA may, in its discretion, appoint a conservator or receiver of a Farm Credit institution if it determines that one or more of the conditions in § 627.3(b) exists. FCA must also appoint FCSIC as conservator or receiver of a Farm Credit institution. We are deleting obsolete language in this regulation from 1992 that states that FCSIC is the “sole entity” that FCA can appoint as conservator or receiver after January 5, 1993. Proposed § 627.2 identifies which FCS institutions are subject to these conservatorship and receivership regulations. For this reason, we propose to remove the reference to “any bank, association, or other institution of the System” from this provision. Finally, we add a new sentence at the end of proposed § 627.3(a) to implement new section 5.61C(l)(1) of the Act, which requires FCA, to the extent practicable, to consult with FCSIC before taking a pre-resolution action that could result in a conservatorship or receivership for a distressed FCS institution. 11

As before, paragraph (b) of this regulation identifies six grounds for FCA appointing FCSIC as the conservator or receiver of a System institution, which derives from section 4.12(b) of the Act. We are proposing the following revisions to redesignated § 627.3, which will bring it into conformity with more recent amendments to other FCA regulations, or make technical, grammatical, or language corrections that will improve its clarity and readability:

• In the first sentence of paragraph (b)(1), “in that the assets of the institution” changes to “because the value of its assets.” The reason for this revision is that referring to the values of the institution's assets and liabilities improves the technical accuracy of this provision. Replacing “in that” with “because” is a plain language and a grammatical correction.

• In the second sentence of paragraph (b)(1), which excludes borrower stock and allocated equities from the phrase “obligations to members,” we change “shall not” to “does not” to improve this provision's clarity by expressing it in the present, rather than future tense.

• In paragraph (b)(2), we replace “the conduct of an unsafe or unsound practice” with “one or more unsafe or unsound practice(s)” which is more technically accurate and grammatically correct.

• In the introductory paragraph of paragraph (b)(3), we change “this regulation” to “this part” because it applies to all conservatorship and receivership regulations in part 627.

• Existing paragraph (b)(3)(ii) is redesignated as paragraph (b)(3)(i), which was previously reserved. Existing paragraph (b)(3)(iii) is redesignated as paragraph (b)(3)(ii).

• In redesignated paragraph (b)(3)(i), “funding bank” replaces “affiliated bank” to improve the accuracy and clarity of this provision.

• Existing paragraph (b)(3)(iv) is redesignated as paragraph (b)(3)(iii), with no other changes. Existing paragraph (b)(3)(iv) was previously reserved.

FCA proposes no changes to the grounds for appointing FCSIC as the conservator or receiver of FCS institutions in redesignated § 627.3(b)(4) and (5). However, we propose to substitute “A Farm Credit bank” for “The institution” in redesignated § 627.3(b)(6) because only FCS banks have authority to issue debt obligations insured by FCSIC to fund System loans and other assets.

The proposed rule redesignates § 627.2715 as § 627.4. This regulation implements provisions in section 4.12(b) of the Act that allows an FCS institution, within 30 days after FCA appoints FCSIC as its conservator or receiver, to bring an action in certain United States district courts to remove the conservator or receiver. Only the board of directors of the institution has authority under this regulation to initiate an action to remove the conservator or receiver. As discussed later in greater detail, once an institution is placed in conservatorship or receivership, all of the powers, rights, and privileges of its board, management, and employees are transferred to FCSIC, and the charter of an institution in receivership is canceled. Redesignated § 627.4 carves out an exception so the institution's board subsequent to the appointment of FCSIC as conservator or receiver can bring this legal action.

We propose two revisions to redesignated § 627.4. First, we streamlined the language in the first sentence of this regulation and rewrote it in the active voice. Second, we deleted language that stated that the institution's board is empowered to bring an action to remove the conservator or receiver in Federal court “notwithstanding any other provision in subparts B or C of this part.” Instead, we propose to cross-reference this regulation in §§ 627.10 and 627.20.

As discussed above, the proposed rule relocates our conservator and conservatorship regulations from subpart C to subpart B of part 627, and it combines the four remaining applicable regulations into a single regulation. As proposed, redesignated § 627.10 is not substantively different from the four regulations it replaces, which are existing §§ 627.2770, 627.2775, 627.2785, and 627.2790. This is because the current regulations effectively carry out FCA's statutory powers and responsibilities concerning the conservatorship of FCS institutions. A conservator continues the ongoing operations of the financial institution while taking measures to preserve its assets and restore its financial viability so it can resume its normal business activities when it emerges from conservatorship. The purpose of a conservatorship is to resuscitate a troubled institution, not to liquidate it. In this context, our conservatorship regulations implement FCA's authority to: (1) Appoint FCSIC as the conservator of a System institution; (2) turn the day-to-day operations of the institution over to FCSIC; (3) examine the institution in conservatorship; (4) require audits and published financial reports of such institutions; (5) terminate the conservatorship and discharge FCSIC as conservator.

Proposed § 627.10(a) replaces existing § 627.2775 as the regulation governing the appointment of the conservator. According to proposed § 627.10(a)(1), the FCA Board may exercise its authority under section 4.12(b) of the Act and § 627.3 to appoint FCSIC as the conservator of a System institution once it finds that one or more of the grounds in § 627.3(b) exists. This provision also allows FCA to appoint FCSIC as the conservator of a System institution ex parte and without notice. Proposed § 627.10(a)(1) is substantively the same as existing § 627.2775(a). However, we propose to change the order and flow of this regulatory provision. As rewritten, the redesignated rule recognizes that we must first find that legal grounds exist for appointing the conservator before we decide to do so ex parte and without notice. This revision makes the regulation more logical and easier to read and understand.

Proposed § 627.10(a)(2) is virtually the same as the first sentence of existing § 627.2775(b). Upon the appointment of the conservator, this regulation requires the FCA Chairman to immediately notify the affected institution, and if it is an association, its funding bank. This regulation also requires FCA to publish notice in the Federal Register whenever it appoints FCSIC as the conservator of a System institution. The proposed rule makes two non-substantive, stylistic changes to this regulation. First, we propose to change “district bank” to “funding bank.” Second, the provision about publishing the notice in the Federal Register becomes a separate sentence in proposed § 627.10(a)(2). We propose to delete the rest of existing § 627.2775(b), which requires FCSIC to notify all holders of the institution's voting stock and participation certificates, by first class mail, about the establishment of the conservatorship, and its effects on the: (1) Institution's operations, and (2) borrowers' loans and equity holdings. Section 5.61C strengthened FCSIC's powers as the conservator of FCS institutions, and under the circumstances, FCA regulations should not instruct FCSIC how to administer conservatorships unless a specific statutory provision explicitly requires us to do so. Providing notice and information to the shareholders of System institutions about how a conservatorship will affect them is now within FCSIC's jurisdiction.

Proposed § 627.10(b) addresses FCA's responsibilities, powers, and prerogatives once it places an FCS institution into conservatorship. It incorporates many of the provisions that are currently scattered throughout existing §§ 627.2775 and 627.2785.

We propose to redesignate existing § 627.2775(c) as § 627.10(b)(1). According to this regulation, once the FCA Board issues an order placing an FCS institution into conservatorship, all rights, privileges, and powers of its members, board of directors, and employees are transferred to and vested exclusively in FCSIC as conservator. Except for a few insignificant word changes, both versions of this regulation are identical in substance and meaning. The proposed rule, however, adds a passage at the end of redesignated § 627.10(b)(1) that states “the board of directors of the institution retains authority to initiate an action in Federal court to remove the conservator pursuant to proposed § 627.4.” As explained in the preamble to § 627.4, this provision replaces the more ambiguous “notwithstanding” passage in existing § 627.2715.

FCA proposes to transfer all but one of the provisions in existing § 627.2785 to the next four paragraphs of redesignated § 627.10(b). The existing regulation establishes requirements concerning the inventory, examination, auditing, and financial reporting of a System institution in conservatorship.

First, we propose to repeal § 627.2785(a), which requires the conservator to take an inventory of the assets and liabilities of the institution from the date that FCA places it into conservatorship. This regulatory provision also requires the conservator to file one copy of the inventory with FCA. Conducting an inventory of the assets and liabilities of a System institution in conservatorship falls within FCSIC's new powers and duties under section 5.61C(b) of the Act. Indeed, it is routine practice for conservators to conduct inventories of the assets and liabilities of the financial institution immediately after appointment. FCA has the right to obtain a copy of the inventory because a System institution in conservatorship is still chartered as an ongoing FCS institution and remains subject to FCA examination, supervision, and regulation. Yet, FCA regulations apply to FCS institutions, including those in conservatorship, but not to FCSIC. FCA still has authority under the 2018 Farm Bill to receive a copy of the conservator's inventory of the institution's assets and liabilities. However, in light of the new legislation, a regulation is no longer necessary to require FCSIC, as conservator, to conduct the inventory and share a copy of it with us.

The proposed rule redesignates existing § 627.2785(b), which confirms FCA's authority to examine an institution in conservatorship pursuant to section 5.19 of the Act, as § 627.10(b)(2). Similarly, the requirement in § 627.2785(b) that a certified public accountant audit a System institution in conservatorship pursuant to part 621 becomes a separate regulatory provision, which we redesignate as § 627.10(b)(3). We also rewrote these two provisions in the active voice. Although these revisions improve the clarity and readability of these provisions, they do not change the substantive meaning or scope of these regulatory requirements.

The proposed rule also redesignates existing § 627.2785(c) and (d) as § 627.10(b)(4) and (5), respectively. Proposed and redesignated § 627.10(b)(4) continues to require each System institution in conservatorship to file the financial reports required by part 621. Under § 621.14, each System institution must certify that its financial reports have been prepared in accordance with applicable regulations and instructions, and they are a true and accurate representation of the institution's financial condition and performance. Additionally, § 621.14 also requires an officer of the institution to certify these financial reports. Since FCSIC replaces the management of an FCS institution in conservatorship, FCSIC is required by both existing § 627.2785(c) and redesignated § 627.10(b)(4) to certify the reports of financial conditions that the institution submits to FCA. The proposed rule condenses the two sentences in existing § 627.2785(c) into a single, shorter sentence, without changing its meaning. Existing § 627.2785(d) requires System institutions in conservatorship to prepare and publish financial reports for their shareholders in accordance with part 620. Under this regulation, the conservator must sign and certify the disclosures that the institution's former board of directors or management previously provided to shareholders pursuant to § 620.3. The substance and meaning of redesignated § 627.10(b)(5) is the same as the existing regulation. However, we shortened the passage requiring FCSIC, as conservator, to sign and certify the disclosure to the institution's shareholders.

Proposed § 627.10(c) addresses the termination of the conservatorship. Essentially, a conservatorship ends in one of two ways. In the first scenario, the conservatorship corrects and resolves the problems and conditions that beleaguered the institution, and FCA determines that it is ready to resume normal operations under new management. In the alternative, the institution's conditions continue to deteriorate, and FCA decides to place it into receivership. In this scenario, FCA appoints FCSIC as the receiver, and FCSIC determines the best course of action for liquidating and resolving the institution, as we will discuss in greater detail below.

Proposed § 627.10(c) is a restatement of the last two sentences of existing § 627.2770(a). Under proposed § 627.10(c)(1), the FCA Board may terminate the conservatorship by determining that the institution is in a position to resume normal operations. In this situation, our Board will instruct FCSIC to turn the institution's operations over to management that we designate. Once new management is in place, the conservatorship terminates and FCA discharges FCSIC as conservator. In the alternative, the conservatorship will end when the FCA places the institution in receivership and appoints FCSIC as receiver pursuant to § 627.10(c)(2). The proposed rule makes minor wording changes to the current regulatory provisions but does not change their meaning.

We propose to rescind the requirement in existing § 627.2790 that FCSIC submit a report to FCA on its conservatorship activities before its discharge as the institution's conservator. Filing a report is not a statutory requirement for terminating a conservatorship. FCA and FCSIC will jointly determine what documentation is appropriate to share at the end of the conservatorship.

FCA proposes to consolidate its remaining receivership regulations into a single regulation, § 627.20, and transfer it from subpart B to subpart C of part 627. To a large extent, proposed and redesignated § 627.20 follows the same format and structure as the revised conservatorship regulation, § 627.20. However, a receivership is fundamentally different from a conservatorship. A receivership liquidates and resolves a failing institution rather than correcting its problems. For this reason, there are some key distinctions between these two regulations, and many of the amendments that we propose to the receivership regulation are more substantive than those for the conservatorship regulation.

Proposed § 627.20(a) addresses FCA's appointment of FCSIC as the receiver of an FCS institution. Paragraph (a)(1) of proposed § 627.20(a) states that the FCA Board “may exercise its authority under section 4.12(b) of the Act and § 627.3 to appoint FCSIC as the receiver of an FCS institution upon finding that one or more of the grounds identified in § 627.3(b) exists.” Under proposed § 627.20(a)(1), the FCA Board may appoint FCSIC as the receiver of any System institution ex parte and without notice.

In this context, § 627.20(a)(1) is virtually identical to § 627.10(a)(1), which is the corresponding provision in the proposed conservatorship regulation above. The proposed rule also makes the same technical and stylistic changes to the existing receivership regulation, § 627.20(a), as it does to the current conservatorship regulation. We explained the reasons for these changes in the preamble to § 627.10(a)(1), which discusses the appointment of a conservator, and the same rationale applies to the appointment of receiver under proposed § 627.20(a)(1).

Upon the appointment of FCSIC as receiver, proposed § 627.20(a)(2) requires FCA's Chairman to immediately notify the affected institution and its funding bank if it is an association. This regulation also requires FCA to publish a notice in the Federal Register whenever it appoints FCSIC as the conservator of a System institution. Again, the technical changes we propose for this provision mirror our proposed changes to redesignated § 627.10(a)(2), which is the companion provision in the conservatorship regulations. The explanation and rationale for these changes in the applicable preamble passage for the conservatorship regulations above apply to this receivership regulation as well.

The proposed rule redesignates existing § 627.2720(d) as § 627.20(b). This regulation continues to require the funding bank, in the event of a voluntary or involuntary liquidation of an affiliated association, to institute appropriate measures to minimize the adverse effect of liquidation on those borrowers whose loans are purchased or otherwise transferred to another institution. At this time, we propose only two minor word changes to this provision. As noted earlier, FCA does not propose substantive amendments to its voluntary liquidation regulations in this rulemaking. For this reason, redesignated § 627.20(b) continues to apply to both voluntary liquidations and receiverships for the time being.

The proposed rule, which redesignates existing § 627.2720(e) as § 627.20(c), continues to state that “all rights, privileges, and powers of its members, the board of directors, officers, and employees are transferred to and vested exclusively in FCSIC” once the FCA Board issues the order that places it into receivership. The proposed rule adds a provision at the end § 627.20(c)(1) that carves out an exception that enables the board of directors of the institution to initiate an action in Federal court to remove the receiver pursuant to § 627.4. The reasons for these changes have already been explained twice above.

Proposed § 627.20(c)(2) revises the last sentence of existing § 627.2720(e). This provision pertains to the cancelation of a System institution's charter when the FCA appoints FCSIC as its receiver. Under the existing regulation, FCA may cancel the charter either simultaneously or at any time thereafter. Research reveals that in 1992 we added the provision to the final rule that allows us to cancel the charter at a later time in response to a comment from a System trade association. 12 FCA decided that the final rule should provide flexibility so it could consider the merits about when to cancel the charter on a case-by-case basis. 13 However, the preamble expressed FCA's expectation that it would ordinarily cancel the charter when it appointed FCSIC as the receiver of a System institution. 14

We propose to amend this provision to require cancelation of the charter when FCSIC is appointed as the institution's receiver. Canceling the charter means that the institution is out of business and undergoing liquidation and resolution. A “live” corporate charter is inconsistent with the rights, powers, and duties of the receiver in section 5.61C of the Act, as added by Congress in 2018. As long as the charter is active, the institution is not defunct as a matter of law, and FCSIC's authority and ability to resolve the estate by disposing of its assets and liabilities can more easily be challenged by creditors, shareholder-members, and other parties, contrary to Congressional intent to provide for an orderly liquidation process comparable to that of other federally chartered financial institutions. Federal statutes comparable to section 4.12(b) of the Act permit commercial banks, credit unions, and Federal Home Loan Banks to challenge, in Federal court, decisions by the three Federal banking regulatory agencies, the NCUA, and FHFA to appoint receivers and seek their removal. These agencies cancel the charters of institutions they supervise at the time they place them into receivership to ensure an orderly liquidation and resolution.

Redesignated and amended § 627.20(d) implements section 4.37 of the Act, 15 which addresses the treatment of uninsured voluntary and involuntary accounts of a System institution that is in receivership. As revised, this regulation provides that once the FCA Board has placed an institution into receivership, FCSIC, in accordance with section 4.37 of the Act, will, as soon as practicable, notify every borrower who holds an uninsured voluntary or involuntary account, as described in § 614.4175, at the institution that: (1) [s]uch accounts ceased earning interest from the date that the FCA Board placed the institution into receivership; and (2) FCSIC, as receiver, will immediately apply the funds in a borrower's account(s) as payment against the outstanding balance of the borrower's loan(s). The only substantive amendment we propose to this regulation is to delete the provision in existing § 627.2735(a) that allows the borrower, within 15 days of receiving the notice, to direct FCSIC to apply the funds in the account for some other purpose specified in the loan documents. We propose to delete this provision because these accounts are uninsured and unsecured, and section 4.37 of the Act explicitly states that these funds must be applied to reduce the outstanding balance of the borrower's loans. All other proposed changes to this regulation are designed to improve its readability and clarity.

Section 4.37 requires FCA to enact regulations about how uninsured voluntary and involuntary accounts at System institutions in receivership are to be resolved by FCSIC, as receiver. For this reason, redesignated § 627.20(d) specifies how FCSIC will address the resolution of these specific liabilities of an FCS institution in receivership.

FCA proposes to repeal existing § 627.2735(b), which requires FCSIC to provide certain notices to the stockholders of FCS institutions in liquidation. Existing § 627.2735(b) is not needed to implement statutory provisions that protect the rights of borrowers. Section 4.9A(c) of the Act, which requires FCSIC to retire borrower stock at par at a System institution in receivership, provides clear and unambiguous guidance to FCSIC.

Finally, redesignated § 627.20(e) is a restatement of existing § 627.2765, which addresses the final discharge and release of the receiver. According to this regulation, a receivership terminates once FCSIC makes a final distribution of the assets of the liquidated institution. At that time, the regulation specifies that FCA's Board will cancel the charter if it has not done so earlier, and it completely and finally releases and discharges the receiver. The proposed rule removes a provision in the existing regulation that states that FCA will cancel the charter if it has not done so previously because, as discussed earlier, proposed § 627.20(c)(2) requires FCA to cancel the charter when the FCA Board places the institution in receivership.

We propose conforming amendments to other regulations in parts 619 and 627.

Our regulations in part 619 define terms that apply to all FCA regulations unless a part, subpart, or section states a different definition applies. We propose to amend the definitions of “Farm Credit bank” in § 619.9140 and “Farm Credit institutions” in § 619.9146, so both terms explicitly exclude bridge System banks that FCA charters at FCSIC's request under section 5.61C(h)(2) of the Act. As discussed in great detail above, bridge System banks are vehicles to resolve FCS banks. These conforming amendments to §§ 619.9140 and 619.9146 explicitly exempt bridge System banks from FCA regulations that govern the activities and operations of ongoing FCS institutions. Thus, FCA regulations governing the organization and governance, capitalization, funding, and other activities of other System institutions do not apply to bridge System banks unless we enact a regulation in part 627 or elsewhere that explicitly states otherwise.

Separately, we propose to delete the explicit reference to the Funding Corporation from the definition of the “Farm Credit institution” in § 619.9146. The reason for this revision is that section 5411(2) of the 2018 Farm Bill amended section 1.2(a) of the Act to expressly identify the Funding Corporation as a System institution.

We noted earlier that FCA does not propose to revise its voluntary liquidation regulations in subpart D of part 627. However, we propose non-substantive conforming amendments, so these regulations are consistent with other changes to conservatorship and receivership regulations in part 627. First, we propose to renumber the two regulations in subpart D so they conform to numbering changes we are making to subparts A, B, and C of part 627. As a result, this proposed rule redesignates § 627.2795 as § 627.40 and § 627.2797 as § 627.41. Second, the proposed rule changes the reference to “subpart B” in redesignated § 627.40(a) to “subpart C” because we propose to relocate our receivership regulations to subpart C. Finally, we propose to remove the passage at the end of the final sentence in existing § 627.2797(a), which states, “except that if the Farm Credit institution is placed in receivership, the provisions of § 627.2730(a) shall govern further disposition of the equities of the Farm Credit institution.” We are deleting this passage because the direct final rule that FCA enacted in 2021 repealed § 627.2730.

Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), FCA hereby certifies that the proposed rule will not have a significant economic impact on a substantial number of small entities. Each of the banks in the Farm Credit System, considered together with its affiliated associations, has assets and annual income in excess of the amounts that would qualify them as small entities. Therefore, Farm Credit System institutions are not “small entities” as defined in the Regulatory Flexibility Act.

For the reasons stated in the preamble, parts 619 and 627 of chapter VI, title 12 of the Code of Federal Regulations are proposed to be amended as follows:

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2022-0384; Project Identifier AD-2022-00027-E” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend the proposal because of those comments.

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

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Mark Taylor, Aviation Safety Engineer, ECO Branch, FAA, 1200 District Avenue, Burlington, MA 01803. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The FAA issued AD 2021-14-06, Amendment 39-21633 (86 FR 36061, July 8, 2021), (AD 2021-14-06), for all PW PW1519G, PW1521G, PW1521G-3, PW1521GA, PW1524G, PW1524G-3, PW1525G, PW1525G-3, PW1919G, PW1921G, PW1922G, PW1923G, and PW1923G-A model turbofan engines. AD 2021-14-06 was prompted by reports of in-flight shutdowns due to failure of the LPC R1 and by subsequent findings of cracked LPC R1s during inspection. Additionally, the manufacturer performed further root cause analysis of the LPC R1 failures and determined the need to update the EEC FADEC software to automate rotor speed management and limit the maximum climb and maximum continuous thrust ratings. AD 2021-14-06 requires repetitive BSIs of certain LPC R1s until replacement of EEC FADEC software with the updated software, and a BSI after installation of the updated EEC FADEC software if certain Onboard Maintenance Message fault codes are displayed and meet specified criteria. AD 2021-14-06 also requires, depending on the results of the BSI, replacement of the LPC R1. The agency issued AD 2021-14-06 to prevent failure of the LPC R1.

Since the FAA issued AD 2021-14-06, the manufacturer performed further analysis and determined the need for corrective action. The manufacturer redesigned the CIC assembly to incorporate a shortened bleed duct configuration. The shortened bleed duct will address the unsafe condition by preventing the coincidence between bleed and the acoustic excitation. The manufacturer also updated the EEC FADEC software to provide compatibility with both current and future operation of engines and airplanes with the redesigned CIC assembly installed.

The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.

The FAA reviewed PW Service Bulletin (SB) PW1000G-A-73-00-0025-00B-930A-D, Issue No. 001, dated November 23, 2021; PW SB PW1000G-A-72-00-0125-00A-930A-D, Issue No. 004, dated October 13, 2021; PW SB PW1000G-A-72-00-0075-00B-930A-D, Issue No. 004, dated July 21, 2021; PW SB PW1000G-A-73-00-0052-00A-930A-D, Issue No. 001, dated October 7, 2021; PW SB PW1000G-A-72-00-0121-00B-930A-D, Issue No. 001, dated July 9, 2021; PW SB PW1000G-A-72-00-0175-00A-930A-D, Issue No. 001, dated July 1, 2021.

PW SB PW1000G-A-73-00-0025-00B-930A-D, Issue No. 001, dated November 23, 2021, describes procedures for replacing or modifying the EEC to incorporate EEC FADEC software version V9.6.5.6 in PW1919G, PW1921G, PW1922G, PW1923G, and PW1923G-A model turbofan engines. PW SBs PW1000G-A-72-00-0125-00A-930A-D, Issue No. 004, dated October 13, 2021, and PW1000G-A-72-00-0075-00B-930A-D, Issue No. 004, dated July 21, 2021, describe procedures for performing repetitive BSIs of LPC R1s. PW SB PW1000G-A-73-00-0052-00A-930A-D, Issue No. 001, dated October 7, 2021, describes procedures for replacing or modifying the EEC to incorporate EEC FADEC software version V2.11.12 in PW1519G, PW1521G, PW1521G-3, PW1521GA, PW1524G, PW1524G-3, PW1525G, PW1525G-3 model turbofan engines. PW SBs PW1000G-A-72-00-0121-00B-930A-D, Issue No. 001, dated July 9, 2021, and PW1000G-A-72-00-0175-00A-930A-D, Issue No. 001, dated July 1, 2021, describe procedures for replacing or modifying the CIC assembly.

The FAA also reviewed Section PW1000G-A-72-00-00-02A-0B5A-A of PW engine maintenance manual (EMM), Issue No. 016, dated January 15, 2021; and Section PW1000G-A-72-31-00-00A-312A-D of PW EMM, Issue No. 017, dated March 19, 2021. Section PW1000G-A-72-00-00-02A-0B5A-A of PW EMM, Issue No. 016, dated January 15, 2021, describes procedures for inspecting the engine for possible engine damage after receiving notification of an N1 or N2 overspeed operation. Section PW1000G-A-72-31-00-00A-312A-D of PW EMM, Issue No. 017, dated March 19, 2021, describes procedures for performing a BSI of the LPC.

This proposed AD would retain certain requirements of AD 2021-14-06. This proposed AD would continue to require removal from service of certain EEC FADEC software and the installation of a software version eligible for installation. This proposed AD would require a BSI of LPC R1 for damage and cracks after replacing certain EEC FADEC software versions and would continue to require a BSI of LPC R1 after installation of an eligible EEC FADEC software version if certain Onboard Maintenance Message fault codes are displayed and meet specified criteria. This proposed AD would continue to require, depending on the results of the BSI, replacement of the LPC R1. This proposed AD would also require removal and replacement of certain CIC assemblies, identified by part number, with a CIC assembly eligible for installation.

The FAA estimates that this AD, if adopted as proposed, would affect 114 engines installed on airplanes of U.S. registry. The FAA estimates that five percent of engines installed on airplanes of U.S. registry would require BSI of the LPC R1, as proposed in paragraph (g)(3) of this AD, after installation of the EEC FADEC software version eligible for installation.

The FAA estimates the following costs to comply with this proposed AD:

The FAA estimates the following costs to do any necessary inspection if certain Onboard Maintenance Message fault codes are displayed or if any necessary replacement would be required based on the results of the proposed inspection. The agency has no way of determining the number of aircraft that might need these replacements or inspections:

The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected individuals.

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

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

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

For the reasons discussed above, I certify that the proposed regulation:

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

(2) Would not affect intrastate aviation in Alaska, and

(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify the route structure as necessary to preserve the safe and efficient flow of air traffic within the National Airspace System (NAS).

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.

Communications should identify both docket numbers (FAA Docket No. FAA-2022-0311; Airspace Docket No. 22-AAL-20) and be submitted in triplicate to the Docket Management Facility (see ADDRESSES section for address and phone number). You may also submit comments through the internet at https://www.regulations.gov.

Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0311; Airspace Docket No. 22-AAL-20.” The postcard will be date/time stamped and returned to the commenter.

All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.

An electronic copy of this document may be downloaded through the internet at https://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at https://www.faa.gov/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see ADDRESSES section for address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Operations Support Group, Western Service Center, Federal Aviation Administration, 2200 South 216th St., Des Moines, WA 98198.

This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the ADDRESSES section of this document. FAA Order JO 7400.11F lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from the dependency on NDBs. The advances in technology have allowed for alternate navigation methods to support decommissioning of high cost ground navigation equipment. The FAA conducted a non-rulemaking study in accordance with FAA Order JO 7400.2, Procedures for Handling Airspace Matters in 2021 on SQM due to the ongoing high cost of maintenance and repairs. As a result of the study, there were no objections received and the FAA added SQM to the schedule to be decommissioned.

Colored Federal airway B-37 navigates from SQM to the Elephant, AK, (EEF) NDB and then to an intersecting point on Amber 1 (A-1) to the west of EEF. The decommissioning of SQM would render the segment of the route between SQM and EEF unusable. This proposal would revoke B-37 in its entirety. The mitigation to the loss of B-37 is currently in place with VHF Omnidirectional Range (VOR) Federal airway V-317 overlying the entire route. Additionally, United States Navigational (RNAV) route T-278 provides guidance along the route west of EEF to V-440 and T-269.

The FAA is proposing an amendment to 14 CFR part 71 to revoke Colored Federal airway B-37 in the vicinity of Level Island, AK due to the decommissioning of SQM. B-37 currently navigates from SQM to a point west of EEF that intersects A-1. The FAA proposes to revoke B-37 in its entirety.

Colored Federal airways are published in paragraph 6009(d) of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The Colored Federal airway listed in this document would be removed subsequently in FAA Order JO 7400.11.

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

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

This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify the route structure as necessary to preserve the safe and efficient flow of air traffic within the National Airspace System (NAS).

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.

Communications should identify both docket numbers (FAA Docket No. FAA-2022-0299; Airspace Docket No. 22-AAL-18) and be submitted in triplicate to the Docket Management Facility (see ADDRESSES section for address and phone number). You may also submit comments through the internet at https://www.regulations.gov.

Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0299; Airspace Docket No. 22-AAL-18.” The postcard will be date/time stamped and returned to the commenter.

All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.

An electronic copy of this document may be downloaded through the internet at https://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at https://www.faa.gov/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see ADDRESSES section for address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Operations Support Group, Western Service Center, Federal Aviation Administration, 2200 South 216th St., Des Moines, WA 98198.

This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the ADDRESSES section of this document. FAA Order JO 7400.11F lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from the dependency on NDBs. The advances in technology have allowed for alternate navigation methods to support decommissioning of high cost ground navigation equipment. The FAA conducted a non-rulemaking study in accordance with FAA Order JO 7400.2, Procedures for Handling Airspace Matters in 2021 on SMA, due to the high cost of maintenance and repairs. As a result of the study, there were no objections received and the FAA added SMA to the schedule to be decommissioned.

Colored Federal airway A-6 navigates from SMA to the North River, AK, (JNR) NDB. The decommissioning of SMA would result in A-6 being unusable. Therefore, the FAA is proposing to revoke A-6. The proposed revocation will be mitigated by a future United States Area Navigation route that would overlay the current route.

The FAA is proposing an amendment to 14 CFR part 71 to revoke Colored Federal airway A-6 in the vicinity of St. Mary's, AK due to the decommissioning of SMA. A-6 currently navigates between SMA and JNR. The FAA proposes to revoke A-6 in its entirety.

Colored Federal airways are published in paragraph 6009(c) of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The Colored Federal airway listed in this document would be removed subsequently in FAA Order JO 7400.11.

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

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

This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This proposed rulemaking is promulgated under the authority described in Subtitle VII, part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority, as it would remove Class E airspace extending upward from 700 feet above the surface at I-10 Helistop Heliport, Winfield, FL, due to the closing of the heliport.

Interested persons are invited to comment on this rule by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.

Communications should identify both docket numbers (FAA Docket No. FAA-2021-0267 and Airspace Docket No. 22-ASO-4) and be submitted in triplicate to the DOT Docket Operations (see ADDRESSES section for address and phone number). You may also submit comments through the internet at https://www.regulations.gov.

Persons wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2021-0267; Airspace Docket No. 22-ASO-4.” The postcard will be date/time stamped and returned to the commenter.

All communications received before the specified closing date for comments will be considered before taking action on the proposed rule. The proposal contained in this notice may be changed in light of the comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.

An electronic copy of this document may be downloaded through the internet at https://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at https://www.faa.gov/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see the ADDRESSES section for address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except federal holidays. An informal docket may also be examined between 8:00 a.m. and 4:30 p.m., Monday through Friday, except federal holidays, at the office of the Eastern Service Center, Federal Aviation Administration, Room 350, 1701 Columbia Avenue, College Park, GA 30337.

This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated July 21, 2020, and effective September 15, 2020. FAA Order JO 7400.11F is publicly available as listed in the ADDRESSES section of this document. FAA Order JO 7400.11F lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

The FAA proposes an amendment to 14 CFR 71 to remove Class E airspace extending upward from 700 feet above the surface at I-10 Helistop Heliport, Winfield, FL, as the heliport has closed. Therefore, the airspace is no longer necessary. This action would enhance the safety and management of controlled airspace within the national airspace system.

Class E airspace designations are published in Paragraph 6005 of FAA Order JO 7400.11F, dated August 10, 2021, and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in FAA Order JO 7400.11F.

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

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

This proposal would be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.

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

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would modify the route structure as necessary to preserve the safe and efficient flow of air traffic within the National Airspace System (NAS).

Interested parties are invited to participate in this proposed rulemaking by submitting such written data, views, or arguments as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal.

Communications should identify both docket numbers (FAA Docket No. FAA-2022-0301; Airspace Docket No22-AAL-21) and be submitted in triplicate to the Docket Management Facility (see ADDRESSES section for address and phone number). You may also submit comments through the internet at https://www.regulations.gov.

Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA-2022-0301; Airspace Docket No. 22-AAL-21.” The postcard will be date/time stamped and returned to the commenter.

All communications received on or before the specified comment closing date will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the comment closing date. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.

An electronic copy of this document may be downloaded through the internet at https://www.regulations.gov. Recently published rulemaking documents can also be accessed through the FAA's web page at https://www.faa.gov/air_traffic/publications/airspace_amendments/.

You may review the public docket containing the proposal, any comments received and any final disposition in person in the Dockets Office (see ADDRESSES section for address and phone number) between 9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal holidays. An informal docket may also be examined during normal business hours at the office of the Operations Support Group, Western Service Center, Federal Aviation Administration, 2200 South 216th St., Des Moines, WA 98198.

This document proposes to amend FAA Order JO 7400.11F, Airspace Designations and Reporting Points, dated August 10, 2021, and effective September 15, 2021. FAA Order JO 7400.11F is publicly available as listed in the ADDRESSES section of this document. FAA Order JO 7400.11F lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

The aviation industry/users have indicated a desire for the FAA to transition the Alaskan en route navigation structure away from the dependency on NDBs. The advances in technology have allowed for alternate navigation methods to support decommissioning of high cost ground navigation equipment. The FAA conducted a non-rulemaking study in accordance with FAA Order JO 7400.2, Procedures for Handling Airspace Matters in 2021 on FDV due to the ongoing high cost of maintenance and repairs. As a result of the study, there were no objections received and the FAA added FDV to the schedule to be decommissioned.

Colored Federal airway G-7 navigates from the Gambell, AK, (GAM) NDB to the Norton Bay, AK, (OAY) NDB. The decommissioning of FDV would render G-7 unusable. This proposal would revoke G-7 in its entirety. The loss of G-7 would be mitigated by utilizing VHF Omnidirectional Range (VOR) Federal airways V-414 and V-452.

The FAA is proposing an amendment to 14 CFR part 71 to revoke Colored Federal airway G-7 in the vicinity of Nome, AK due to the decommissioning of FDV. G-7 currently navigates between GAM and OAY. The FAA proposes to revoke G-7 in its entirety.

Colored Federal airways are published in paragraph 6009(a) of FAA Order JO 7400.11F dated August 10, 2021 and effective September 15, 2021, which is incorporated by reference in 14 CFR 71.1. The Colored Federal airway listed in this document would be removed subsequently in FAA Order JO 7400.11.

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

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

This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.

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

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to view public comments. CMS will not post on Regulations.gov public comments that make threats to individuals or institutions or suggest that the individual will take actions to harm the individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments.

Addendum A to this proposed rule summarizes the FY 2023 IPF PPS payment rates, outlier threshold, cost of living adjustment factors (COLA) for Alaska and Hawaii, national and upper limit cost-to-charge ratios, and adjustment factors. In addition, the B Addenda to this proposed rule shows the complete listing of ICD-10 Clinical Modification (CM) and Procedure Coding System (PCS) codes, the FY 2023 IPF PPS comorbidity adjustment, and electroconvulsive therapy (ECT) procedure codes. The A and B Addenda are available online at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.

Tables setting forth the FY 2023 Wage Index for Urban Areas Based on Core-Based Statistical Area (CBSA) Labor Market Areas and the FY 2023 Wage Index Based on CBSA Labor Market Areas for Rural Areas are available exclusively through the internet, on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/IPFPPS/WageIndex.html.

This proposed rule would update the prospective payment rates, the outlier threshold, and the wage index for Medicare inpatient hospital services provided by Inpatient Psychiatric Facilities (IPFs) for discharges occurring during Fiscal Year (FY) 2023 beginning October 1, 2022 through September 30, 2023. This proposed rule would also establish a permanent mitigation policy to smooth the impact of year-to-year changes in IPF payments related to changes in the IPF wage index. In addition, this proposed rule includes a request for comment on the results of the data analysis of the IPF Prospective Payment System (PPS) adjustments. Lastly, this proposed rule requests information on Measuring Equity and Healthcare Quality Disparities Across CMS Quality Programs.

For the IPF PPS, we are proposing to—

• Establish a permanent mitigation policy in order to smooth the impact of year-to-year changes in IPF payments related to decreases to the IPF wage index.

• Solicit comments on the results of the data analysis of the IPF PPS adjustments, which have been summarized in a technical report posted to the Centers for Medicare & Medicaid Services (CMS) website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS .

• Update the IPF PPS base rate by the 2016-based IPF market basket update (3.1 percent) adjusted for economy-wide productivity (0.4 percentage point) as required by section 1886(s)(2)(A)(i) of the Social Security Act (the Act), resulting in a proposed IPF payment rate update of 2.7 percent for FY 2023.

• Make technical rate setting updates: The IPF PPS payment rates would be adjusted annually for inflation, as well as statutory and other policy factors. This rule proposes to update:

++ The IPF PPS Federal per diem base rate from $832.94 to $856.80.

++ The IPF PPS Federal per diem base rate for providers who failed to report quality data to $840.11.

++ The ECT payment per treatment from $358.60 to $368.87.

++ The ECT payment per treatment for providers who failed to report quality data to $361.69.

++ The labor-related share from 77.2 percent to 77.4 percent.

++ The wage index budget-neutrality factor to 1.0016.

++ The fixed dollar loss threshold amount from $16,040 to $24,270 to maintain estimated outlier payments at 2 percent of total estimated aggregate IPF PPS payments.

We are not proposing any changes to the IPFQR Program. However, we are including a request for information (RFI) on the Overarching Principles for Measuring Healthcare Quality Disparities Across CMS Quality Programs. Feedback provided will inform future efforts in all CMS Quality programs and, as applicable, may be introduced in the IPFQR as future RFIs or proposals.

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

Section 405(g)(2) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173) extended the IPF PPS to psychiatric distinct part units of CAHs. Sections 3401(f) and 10322 of the Patient Protection and Affordable Care Act (Pub. L. 111-148) as amended by section 10319(e) of that Act and by section 1105(d) of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) (hereafter referred to jointly as “the Affordable Care Act”) added subsection (s) to section 1886 of the Act.

Section 1886(s)(1) of the Act titled “Reference to Establishment and Implementation of System,” refers to section 124 of the BBRA, which relates to the establishment of the IPF PPS. Section 1886(s)(2)(A)(i) of the Act requires the application of the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act to the IPF PPS for the rate year (RY) beginning in 2012 (that is, a RY that coincides with a FY) and each subsequent RY.

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

Sections 1886(s)(4)(A) through (D) of the Act require that for RY 2014 and each subsequent RY, IPFs that fail to report required quality data with respect to such a RY will have their annual update to a standard Federal rate for discharges reduced by 2.0 percentage points. This may result in an annual update being less than 0.0 for a RY, and may result in payment rates for the upcoming RY being less than such payment rates for the preceding RY. Any reduction for failure to report required quality data will apply only to the RY involved, and the Secretary will not consider such reduction in computing the payment amount for a subsequent RY. Additional information about the specifics of the current Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program is available in the FY 2020 IPF PPS and Quality Reporting Updates for FY Beginning October 1, 2019 final rule (84 FR 38459 through 38468).

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

On November 15, 2004, we published the IPF PPS final rule in the Federal Register (69 FR 66922). The November 2004 IPF PPS final rule established the IPF PPS, as required by section 124 of the BBRA and codified at 42 CFR part 412, subpart N. The November 2004 IPF PPS final rule set forth the Federal per diem base rate for the implementation year (the 18-month period from January 1, 2005 through June 30, 2006), and provided payment for the inpatient operating and capital costs to IPFs for covered psychiatric services they furnish (that is, routine, ancillary, and capital costs, but not costs of approved educational activities, bad debts, and other services or items that are outside the scope of the IPF PPS). Covered psychiatric services include services for which benefits are provided under the fee-for-service Part A (Hospital Insurance Program) of the Medicare program.

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

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

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

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

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

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

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

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

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

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

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

The most recent IPF PPS annual update was published in a final rule on August 4, 2021 in the Federal Register titled, “Medicare Program; FY 2022 Inpatient Psychiatric Facilities Prospective Payment System and Quality Reporting Updates for Fiscal Year Beginning October 1, 2021 (FY 2022)” (86 FR 42608), which updated the IPF PPS payment rates for FY 2022. That final rule updated the IPF PPS Federal per diem base rates that were published in the FY 2021 IPF PPS Rate Update final rule (85 FR 47042) in accordance with our established policies.

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

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

For FY 2023 (beginning October 1, 2022 and ending September 30, 2023), we are proposing to update the IPF PPS payments by a market basket increase factor with a productivity adjustment as required by section 1886(s)(2)(A)(i) of the Act. Consistent with historical practice, we are proposing to estimate the market basket update for the IPF PPS based on the most recent forecast available at the time of rulemaking from IHS Global Inc. (IGI). IGI is a nationally recognized economic and financial forecasting firm with which CMS contracts to forecast the components of the market baskets and productivity adjustment. For the proposed rule, based on IGI's fourth quarter 2021 forecast with historical data through the third quarter of 2021, the 2016-based IPF market basket increase factor for FY 2023 is 3.1 percent.

Section 1886(s)(2)(A)(i) of the Act requires that, after establishing the increase factor for a FY, the Secretary shall reduce such increase factor for FY 2012 and each subsequent FY, by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the Act sets forth the definition of this productivity adjustment. The statute defines the productivity adjustment to be equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable FY, year, cost reporting period, or other annual period) (the “productivity adjustment”). The United States Department of Labor's Bureau of Labor Statistics (BLS) publishes the official measures of productivity for the United States economy. We note that previously the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private nonfarm business MFP. Beginning with the November 18, 2021 release of productivity data, BLS replaced the term “multifactor productivity” with “total factor productivity” (TFP). BLS noted that this is a change in terminology only and will not affect the data or methodology. As a result of the BLS name change, the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as private nonfarm business total factor productivity. However, as mentioned previously, the data and methods are unchanged. We refer readers to www.bls.gov for the BLS historical published TFP data. A complete description of IGI's TFP projection methodology is available on the CMS website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch. In addition, in the FY 2022 IPF final rule (86 FR 42611), we noted that effective with FY 2022 and forward, CMS changed the name of this adjustment to refer to it as the productivity adjustment rather than the MFP adjustment.

Section 1886(s)(2)(A)(i) of the Act requires the application of the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act to the IPF PPS for the RY beginning in 2012 (a RY that coincides with a FY) and each subsequent RY. For this FY 2023 IPF PPS proposed rule, based on IGI's fourth quarter 2021 forecast, the proposed productivity adjustment for FY 2023 (the 10-year moving average of TFP for the period ending FY 2023) is projected to be 0.4 percent. Accordingly, we are proposing to reduce the 3.1 percent IPF market basket update by this 0.4 percentage point productivity adjustment, as mandated by the Act. This results in a proposed FY 2023 IPF PPS payment rate update of 2.7 percent (3.1−0.4 = 2.7). We are also proposing that if more recent data become available, we would use such data, if appropriate, to determine the FY 2023 IPF market basket update and productivity adjustment for the final rule.

Due to variations in geographic wage levels and other labor-related costs, we believe that payment rates under the IPF PPS should continue to be adjusted by a geographic wage index, which would apply to the labor-related portion of the Federal per diem base rate (hereafter referred to as the labor-related share). The labor-related share is determined by identifying the national average proportion of total costs that are related to, influenced by, or vary with the local labor market. We are proposing to continue to classify a cost category as labor-related if the costs are labor-intensive and vary with the local labor market.

Based on our definition of the labor-related share and the cost categories in the 2016-based IPF market basket, we are proposing to continue to include in the labor-related share the sum of the relative importance of Wages and Salaries; Employee Benefits; Professional Fees: Labor-related; Administrative and Facilities Support Services; Installation, Maintenance, and Repair Services; All Other: Labor-related Services; and a portion of the Capital-Related relative importance from the 2016-based IPF market basket. For more details regarding the methodology for determining specific cost categories for inclusion in the 2016-based IPF labor-related share, see the FY 2020 IPF PPS final rule (84 FR 38445 through 38447).

The relative importance reflects the different rates of price change for these cost categories between the base year (FY 2016) and FY 2023. Based on IGI's fourth quarter 2021 forecast of the 2016-based IPF market basket, the sum of the FY 2023 relative importance moving average 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 is 74.4 percent. We also propose, consistent with prior rulemaking, that the portion of Capital-Related costs that are influenced by the local labor market is 46 percent. Since the relative importance for Capital-Related costs are 6.6 percent of the 2016-based IPF market basket for FY 2023, we propose to take 46 percent of 6.6 percent to determine a labor-related share of Capital-Related costs for FY 2023 of 3.0 percent. Therefore, we propose a total labor-related share for FY 2023 of 77.4 percent (the sum of 74.4 percent for the labor-related share of operating costs and 3.0 percent for the labor-related share of Capital-Related costs). We are also proposing that if more recent data become available, we would use such data, if appropriate, to determine the FY 2023 labor-related share for the final rule. For more information on the labor-related share and its calculation, we refer readers to the FY 2020 IPF PPS final rule (84 FR 38445 through 38447).

Table 1 shows the proposed FY 2023 labor-related share and the final FY 2022 labor-related share using the 2016-based IPF market basket relative importance.

We invite public comments on the proposed labor-related share for FY 2023.

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

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

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

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

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

IPFs must include a valid procedure code for ECT services provided to IPF beneficiaries in order to bill for ECT services, as described in our Medicare Claims Processing Manual, Chapter 3, Section 190.7.3 (available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf. ) There were no changes to the ECT procedure codes used on IPF claims as a result of the final update to the ICD-10-PCS code set for FY 2023. Addendum B to this proposed rule shows the ECT procedure codes for FY 2023 and is available on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.

The current (FY 2022) Federal per diem base rate is $832.94 and the ECT payment per treatment is $358.60. For the proposed FY 2023 Federal per diem base rate, we applied the payment rate update of 2.7 percent—that is, the proposed 2016-based IPF market basket increase for FY 2023 of 3.1 percent less the proposed productivity adjustment of 0.4 percentage point—and the proposed wage index budget-neutrality factor of 1.0016 (as discussed in section III.D.1 of this proposed rule) to the FY 2022 Federal per diem base rate of $832.94, yielding a proposed Federal per diem base rate of $856.80 for FY 2023. Similarly, we applied the proposed 2.7 percent payment rate update and the proposed 1.0016 wage index budget-neutrality factor to the FY 2022 ECT payment per treatment of $358.60, yielding a proposed ECT payment per treatment of $368.87 for FY 2023.

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

• For IPFs that fail to report required data under the IPFQR Program, we applied a 0.7 percent payment rate update—that is, the proposed IPF market basket increase for FY 2023 of 3.1 percent less the proposed productivity adjustment of 0.4 percentage point for an update of 2.7 percent, and further reduced by 2.0 percentage points in accordance with section 1886(s)(4)(A)(i) of the Act—and the proposed wage index budget-neutrality factor of 1.0016 to the FY 2022 Federal per diem base rate of $832.94, yielding a proposed Federal per diem base rate of $840.11 for FY 2023.

• For IPFs that fail to report required data under the IPFQR Program, we applied the proposed 0.7 percent annual payment rate update and the proposed 1.0016 wage index budget-neutrality factor to the FY 2022 ECT payment per treatment of $358.60, yielding a proposed ECT payment per treatment of $361.69 for FY 2023.

Lastly, we are also proposing that if more recent data become available, we would use such data, if appropriate, to determine the FY 2023 Federal per diem base rate and ECT payment per treatment for the final rule.

The IPF PPS payment adjustments were derived from a regression analysis of 100 percent of the FY 2002 Medicare Provider and Analysis Review (MedPAR) data file, which contained 483,038 cases. For a more detailed description of the data file used for the regression analysis, see the November 2004 IPF PPS final rule (69 FR 66935 through 66936). We are proposing to continue to use the existing regression-derived adjustment factors established in 2005 for FY 2023. However, we have used more recent claims data to simulate payments to finalize the outlier fixed dollar loss threshold amount and to assess the impact of the IPF PPS updates.

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

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

The IPF PPS includes payment adjustments for designated psychiatric DRGs assigned to the claim based on the patient's principal diagnosis. The DRG adjustment factors were expressed relative to the most frequently reported psychiatric DRG in FY 2002, that is, DRG 430 (psychoses). The coefficient values and adjustment factors were derived from the regression analysis discussed in detail in the November 28, 2003 IPF proposed rule (68 FR 66923; 66928 through 66933) and the November 15, 2004 IPF final rule (69 FR 66933 through 66960). Mapping the DRGs to the MS-DRGs resulted in the current 17 IPF MS-DRGs, instead of the original 15 DRGs, for which the IPF PPS provides an adjustment. For FY 2023, we are not proposing any changes to the IPF MS-DRG adjustment factors. Therefore, we are retaining the existing IPF MS-DRG adjustment factors.

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

For FY 2023, we are proposing to continue to make the existing payment adjustment for psychiatric diagnoses that group to one of the existing 17 IPF MS-DRGs listed in Addendum A. Addendum A is available on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html. Psychiatric principal diagnoses that do not group to one of the 17 designated MS-DRGs will still receive the Federal per diem base rate and all other applicable adjustments; however, the payment will not include an MS-DRG adjustment. The diagnoses for each IPF MS-DRG will be updated as of October 1, 2022, using the final IPPS FY 2023 ICD-10-CM/PCS code sets. The FY 2023 IPPS/LTCH PPS final rule includes tables of the changes to the ICD-10-CM/PCS code sets, which underlie the FY 2023 IPF MS-DRGs. Both the FY 2023 IPPS final rule and the tables of final changes to the ICD-10-CM/PCS code sets, which underlie the FY 2023 MS-DRGs, are available on the CMS IPPS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

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

For more information on the code first policy, we refer readers to the November 2004 IPF PPS final rule (69 FR 66945) and see sections I.A.13 and I.B.7 of the FY 2020 ICD-10-CM Coding Guidelines, available at https://www.cdc.gov/nchs/data/icd/10cmguidelines-FY2020_final.pdf. In the FY 2015 IPF PPS final rule, we provided a code first table for reference that highlights the same or similar manifestation codes where the code first instructions apply in ICD-10-CM that were present in ICD-9-CM (79 FR 46009). In FY 2022 there were 18 codes finalized for deletion from the ICD-10-CM codes in the IPF Code First table. For FY 2023, we are proposing to delete 2 ICD-10-PCS codes and proposing to add 48 ICD-10-PCS codes to the IPF Code First table. The proposed FY 2023 Code First table is shown in Addendum B on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.

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

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

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

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

As noted previously, it is our policy to maintain the same diagnostic coding set for IPFs that is used under the IPPS for providing the same psychiatric care. The 17 comorbidity categories formerly defined using ICD-9-CM codes were converted to ICD-10-CM/PCS in our FY 2015 IPF PPS final rule (79 FR 45947 through 45955). The goal for converting the comorbidity categories is referred to as replication, meaning that the payment adjustment for a given patient encounter is the same after ICD-10-CM implementation as it will be if the same record had been coded in ICD-9-CM and submitted prior to ICD-10-CM/PCS implementation on October 1, 2015. All conversion efforts were made with the intent of achieving this goal. For FY 2023, we are proposing to continue to use the same comorbidity adjustment factors in effect in FY 2022. The proposed FY 2023 comorbidity adjustment factors are found in Addendum A, available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.

For FY 2023, we are proposing to add 10 ICD-10-CM/PCS codes and remove 1 ICD-10-CM/PCS code from the Coagulation Factor category; proposing to add 3 ICD-10-CM/PCS codes and remove 11 ICD-10-CM/PCS codes from the Oncology Treatment comorbidity category; and proposing to add 4 ICD-10-CM/PCS codes to the Poisoning comorbidity category. The proposed FY 2023 comorbidity codes are shown in Addenda B, available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html.

In accordance with the policy established in the FY 2015 IPF PPS final rule (79 FR 45949 through 45952), we reviewed all new FY 2023 ICD-10-CM codes to remove codes that were site “unspecified” in terms of laterality from the FY 2023 ICD-10-CM/PCS codes in instances where more specific codes are available. As we stated in the FY 2015 IPF PPS final rule, we believe that specific diagnosis codes that narrowly identify anatomical sites where disease, injury, or a condition exists should be used when coding patients' diagnoses whenever these codes are available. We finalized in the FY 2015 IPF PPS rule, that we would remove site “unspecified” codes from the IPF PPS ICD-10-CM/PCS codes in instances when laterality codes (site specified codes) are available, as the clinician should be able to identify a more specific diagnosis based on clinical assessment at the medical encounter. There were no proposed changes to the FY 2023 ICD-10-CM/PCS codes, therefore, we are not proposing to remove any of the new codes.

As explained in the November 2004 IPF PPS final rule (69 FR 66922), we analyzed the impact of age on per diem cost by examining the age variable (range of ages) for payment adjustments. In general, we found that the cost per day increases with age. The older age groups are costlier than the under 45 age group, the differences in per diem cost increase for each successive age group, and the differences are statistically significant. For FY 2023, we are proposing to continue to use the patient age adjustments currently in effect in FY 2022, as shown in Addendum A of this rule (see https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html ).

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

For FY 2023, we are proposing to continue to use the variable per diem adjustment factors currently in effect, as shown in Addendum A to this rule, which is available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html. A complete discussion of the variable per diem adjustments appears in the November 2004 IPF PPS final rule (69 FR 66946).

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

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

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

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

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

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

We explained in the FY 2020 proposed rule (84 FR 16973), that using the concurrent pre-floor, pre-reclassified IPPS hospital wage index will result in the most up-to-date wage data being the basis for the IPF wage index. We noted that it would also result in more consistency and parity in the wage index methodology used by other Medicare payment systems. We indicated that the Medicare SNF PPS already used the concurrent IPPS hospital wage index data as the basis for the SNF PPS wage index. CMS proposed and finalized similar policies to use the concurrent pre-floor, pre-reclassified IPPS hospital wage index data in other Medicare payment systems, such as hospice and inpatient rehabilitation facilities. Thus, the wage adjusted Medicare payments of various provider types are based upon wage index data from the same timeframe. For FY 2023, we propose to continue to use the concurrent pre-floor, pre-reclassified IPPS hospital wage index as the basis for the IPF wage index.

The wage index used for the IPF PPS is calculated using the unadjusted, pre-reclassified and pre-floor IPPS wage index data and is assigned to the IPF on the basis of the labor market area in which the IPF is geographically located. IPF labor market areas are delineated based on the Core-Based Statistical Area (CBSAs) established by the OMB.

Generally, OMB issues major revisions to statistical areas every 10 years, based on the results of the decennial census. However, OMB occasionally issues minor updates and revisions to statistical areas in the years between the decennial censuses through OMB Bulletins. These bulletins contain information regarding CBSA changes, including changes to CBSA numbers and titles. OMB bulletins may be accessed online at https://www.whitehouse.gov/omb/information-for-agencies/bulletins/. In accordance with our established methodology, the IPF PPS has historically adopted any CBSA changes that are published in the OMB bulletin that corresponds with the IPPS hospital wage index used to determine the IPF wage index and, when necessary and appropriate, has proposed and finalized transition policies for these changes.

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

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

Subsequently, CMS adopted the changes that were published in past OMB bulletins in the FY 2016 IPF PPS final rule (80 FR 46682 through 46689), the FY 2018 IPF PPS rate update (82 FR 36778 through 36779), the FY 2020 IPF PPS final rule (84 FR 38453 through 38454), and the FY 2021 IPF PPS final rule (85 FR 47051 through 47059). We direct readers to each of these rules for more information about the changes that were adopted and any associated transition policies.

In part due to the scope of changes involved in adopting the CBSA delineations for FY 2021, we finalized a 2-year transition policy in the FY 2021 IPF PPS final rule consistent with our past practice of using transition policies to help mitigate negative impacts on hospitals of certain wage index policy changes. We applied a 5-percent cap on wage index decreases to all IPF providers that had any decrease in their wage indexes, regardless of the circumstance causing the decline, so that an IPF's final wage index for FY 2021 would not be less than 95 percent of its final wage index for FY 2020, regardless of whether the IPF was part of an updated CBSA. We refer readers to the FY 2021 IPF PPS final rule (85 FR 47058 through 47059) for a more detailed discussion about the wage index transition policy for FY 2021.

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 ). In considering whether to adopt this bulletin, we analyzed whether the changes in this bulletin would have a material impact on the IPF PPS wage index. This bulletin creates only one Micropolitan statistical area. As discussed in further detail in section III.D.1.b.ii of this proposed rule since Micropolitan areas are considered rural for the IPF PPS wage index, this bulletin has no material impact on the IPF PPS wage index. That is, the constituent county of the new Micropolitan area was considered rural effective as of FY 2021 and would continue to be considered rural if we adopted OMB Bulletin 20-01. Therefore, we did not propose to adopt OMB Bulletin 20-01 in the FY 2022 IPF PPS proposed rule.

OMB defines a “Micropolitan Statistical Area” as a CBSA associated with at least one urban cluster that has a population of at least 10,000, but less than 50,000 (75 FR 37252). We refer to these as Micropolitan Areas. After extensive impact analysis, consistent with the treatment of these areas under the IPPS as discussed in the FY 2005 IPPS final rule (69 FR 49029 through 49032), we determined the best course of action would be to treat Micropolitan Areas as “rural” and include them in the calculation of each state's IPF PPS rural wage index. We refer readers to the FY 2007 IPF PPS final rule (71 FR 27064 through 27065) for a complete discussion regarding treating Micropolitan Areas as rural.

As discussed in section III.D.1.b.(1) of this proposed rule, we have proposed and finalized temporary transition policies in the past to mitigate significant changes to payments due to changes to the IPF PPS wage index. Specifically, for FY 2016 (80 FR 46652), we implemented a 50/50 blend for all geographic areas consisting of the wage index values computed using the then-current OMB area delineations and the wage index values computed using new area delineations based on OMB Bulletin No. 13-01. In FY 2021 (85 FR 47059), we implemented a 2-year transition to mitigate any negative effects of wage index changes by applying a 5-percent cap on any decrease in an IPF's wage index from the IPF's final wage index from FY 2020. We explained that we believed the 5-percent cap would provide greater transparency and would be administratively less complex than the prior methodology of applying a 50/50 blended wage index. We indicated that no cap would be applied to the reduction in the wage index for the second year, that is, FY 2022, and that this transition approach struck an appropriate balance by providing a transition period to mitigate the resulting short-term instability and negative impacts on providers and time for them to adjust to their new labor market area delineations and wage index values.

In FY 2022 (86 FR 42616 through 42617), a couple of commenters recommended CMS extend the transition period adopted in the FY 2021 IPF PPS final rule. Because we did not propose to modify the transition policy that was finalized in the FY 2021 IPF PPS final rule, we did not extend the transition period for FY 2022. In the FY 2022 IPF PPS final rule, we stated that we continued to believe that applying the 5-percent cap transition policy in year one provided an adequate safeguard against any significant payment reductions associated with the adoption of the revised CBSA delineations in FY 2021, allowed for sufficient time to make operational changes for future FYs, and provided a reasonable balance between mitigating some short-term instability in IPF payments and improving the accuracy of the payment adjustment for differences in area wage levels. However, we acknowledged that certain changes to wage index policy may significantly affect Medicare payments. In addition, we reiterated that our policy principles with regard to the wage index include generally using the most current data and information available and providing that data and information, as well as any approaches to addressing any significant effects on Medicare payments resulting from these potential scenarios, in notice and comment rulemaking. With these policy principles in mind, we considered for this FY 2023 proposed rule how best to address the potential scenarios about which commenters raised concerns; that is, scenarios in which changes to wage index policy may significantly affect Medicare payments.

In the past, we have established transition policies of limited duration to phase in significant changes to labor market areas. In taking this approach in the past, we sought to mitigate short-term instability and fluctuations that can negatively impact providers due to wage index changes. In accordance with the requirements of the IPF PPS wage index regulations at § 412.424(a)(2), we use an appropriate wage index based on the best available data, including the best available labor market area delineations, to adjust IPF PPS payments for wage differences. We have previously stated that, because the wage index is a relative measure of the value of labor in prescribed labor market areas, we believe it is important to implement new labor market area delineations with as minimal a transition as is reasonably possible. However, we recognize that changes to the wage index have the potential to create instability and significant negative impacts on certain providers even when labor market areas do not change. In addition, year-to-year fluctuations in an area's wage index can occur due to external factors beyond a provider's control, such as the COVID-19 PHE, and for an individual provider, these fluctuations can be difficult to predict. We also recognize that predictability in Medicare payments is important to enable providers to budget and plan their operations.

In light of these considerations, we are proposing a permanent approach to smooth year-to-year changes in providers' wage indexes. We are proposing a policy that we believe increases the predictability of IPF PPS payments for providers and mitigates instability and significant negative impacts to providers resulting from changes to the wage index.

As previously discussed, we believed applying a 5-percent cap on wage index decreases for FY 2021 provided greater transparency and was administratively less complex than prior transition methodologies. In addition, we believed this methodology mitigated short-term instability and fluctuations that can negatively impact providers due to wage index changes. Lastly, we believed the 5-percent cap applied to all wage index decreases for FY 2021 provided an adequate safeguard against significant payment reductions related to the adoption of the revised CBSAs. However, as discussed earlier in this section of the proposed rule, we recognize there are circumstances that a 1-year mitigation policy, like the one adopted for FY 2021, would not effectively address future years in which providers continue to be negatively affected by significant wage index decreases.

Typical year-to-year variation in the IPF PPS wage index has historically been within 5 percent, and we expect this will continue to be the case in future years. Because providers are usually experienced with this level of wage index fluctuation, we believe applying a 5-percent cap on all wage index decreases each year, regardless of the reason for the decrease, would effectively mitigate instability in IPF PPS payments due to any significant wage index decreases that may affect providers in a year. Therefore, we believe this approach would address concerns about instability that commenters raised in the FY 2022 IPF PPS rule. In addition, we believe that applying a 5-percent cap on all wage index decreases would support increased predictability about IPF PPS payments for providers, enabling them to more effectively budget and plan their operations. Lastly, because applying a 5-percent cap on all wage index decreases would represent a small overall impact on the labor market area wage index system, we believe it would ensure the wage index is a relative measure of the value of labor in prescribed labor market areas. As discussed in further detail in section III.D.1.e of this proposed rule, we estimate that applying a 5-percent cap on all wage index decreases will have a very small effect on the wage index budget neutrality factor for FY 2023. Because the wage index is a measure of the value of labor (wage and wage-related costs) in a prescribed labor market area relative to the national average, we anticipate that in the absence of proposed policy changes most providers will not experience year-to-year wage index declines greater than 5 percent in any given year. Therefore, we anticipate that the impact to the wage index budget neutrality factor in future years would continue to be minimal. We also believe that when the 5-percent cap would be applied under this proposal, it is likely that it would be applied similarly to all IPFs in the same labor market area, as the hospital average hourly wage data in the CBSA (and any relative decreases compared to the national average hourly wage) would be similar. While this policy may result in IPFs in a CBSA receiving a higher wage index than others in the same area (such as situations when delineations change), we believe the impact would be temporary.

The Secretary has broad authority to establish appropriate payment adjustments under the IPF PPS, including the wage index adjustment. As discussed earlier in this section, the IPF PPS regulations require us to use an appropriate wage index based on the best available data. For the reasons discussed in this section, we believe a 5-percent cap on wage index decreases would be appropriate for the IPF PPS. Therefore, for FY 2023 and subsequent years, we are proposing to apply a 5-percent cap on any decrease to a provider's wage index from its wage index in the prior year, regardless of the circumstances causing the decline. That is, we are proposing that an IPF's wage index for FY 2023 would not be less than 95 percent of its final wage index for FY 2022, regardless of whether the IPF is part of an updated CBSA, and that for subsequent years, a provider's wage index would not be less than 95 percent of its wage index calculated in the prior FY. This also means that if an IPF's prior FY wage index is calculated with the application of the 5-percent cap, the following year's wage index would not be less than 95 percent of the IPF's capped wage index in the prior FY. For example, if an IPF's wage index for FY 2023 is calculated with the application of the 5-percent cap, then its wage index for FY 2024 would not be less than 95 percent of its capped wage index in FY 2023. Lastly, we propose that a new IPF would be paid the wage index for the area in which it is geographically located for its first full or partial FY with no cap applied, because a new IPF would not have a wage index in the prior FY. We would reflect the proposed permanent cap on wage index decreases at § 412.424(d)(1)(i).

As previously discussed, we believe this proposed methodology would maintain the IPF PPS wage index as a relative measure of the value of labor in prescribed labor market areas, increase predictability of IPF PPS payments for providers, and mitigate instability and significant negative impacts to providers resulting from significant changes to the wage index. In section VIII.C.2 of this proposed rule, we estimate the impact to payments for providers in FY 2023 based on this proposed policy. We also note that we would examine the effects of this policy on an ongoing basis in the future in order to assess its appropriateness.

In the November 2004 IPF PPS final rule, (69 FR 66954) we provided a 17 percent payment adjustment for IPFs located in a rural area. This adjustment was based on the regression analysis, which indicated that the per diem cost of rural facilities was 17 percent higher than that of urban facilities after accounting for the influence of the other variables included in the regression. This 17 percent adjustment has been part of the IPF PPS each year since the inception of the IPF PPS. For FY 2023, we propose to continue to apply a 17 percent payment adjustment for IPFs located in a rural area as defined at § 412.64(b)(1)(ii)(C) (see 69 FR 66954 for a complete discussion of the adjustment for rural locations).

Changes to the wage index are made in a budget-neutral manner so that updates do not increase expenditures. Therefore, for FY 2023, we are proposing to continue to apply a budget-neutrality adjustment in accordance with our existing budget-neutrality policy. This policy requires us to update the wage index in such a way that total estimated payments to IPFs for FY 2023 are the same with or without the changes (that is, in a budget-neutral manner) by applying a budget neutrality factor to the IPF PPS rates. We use the following steps to ensure that the rates reflect the FY 2023 update to the wage indexes (based on the FY 2019 hospital cost report data) and the labor-related share in a budget-neutral manner:

Step 1: Simulate estimated IPF PPS payments, using the FY 2022 IPF wage index values (available on the CMS website) and labor-related share (as published in the FY 2022 IPF PPS final rule (86 FR 42608).

Step 2: Simulate estimated IPF PPS payments using the proposed FY 2023 IPF wage index values (available on the CMS website), the proposed 5-percent cap on any decrease to a provider's wage index from its wage index in the prior year, and the proposed FY 2023 labor-related share (based on the latest available data as discussed previously).

Step 3: Divide the amount calculated in step 1 by the amount calculated in step 2. The resulting quotient is the proposed FY 2023 budget-neutral wage adjustment factor of 1.0016.

Step 4: Apply the FY 2023 budget-neutral wage adjustment factor from step 3 to the FY 2022 IPF PPS Federal per diem base rate after the application of the market basket update described in section III.A of this proposed rule, to determine the FY 2023 IPF PPS Federal per diem base rate.

For this proposed rule, we also followed these steps to separately calculate the budget neutrality factor associated with the proposed 5-percent cap on any decrease to a provider's wage index from its wage index in the prior year. First, we calculated the budget neutrality factor associated with the proposed FY 2023 IPF wage index and proposed FY 2023 labor-related share. We divided the amount of simulated payments using the FY 2022 IPF wage index and labor-related share by the amount of simulated payments using the proposed FY 2023 wage index and proposed FY 2023 labor-related share. The resulting quotient is 1.0017.

Next, we calculated the budget neutrality factor associated with the proposed 5-percent cap on any decrease to a provider's wage index from its wage index in the prior year. We divided the amount of simulated payments using the proposed FY 2023 wage index and proposed FY 2023 labor-related share by the amount of simulated payments using the proposed FY 2023 wage index, the proposed 5-percent cap on any decrease to a provider's wage index from its wage index in the prior year, and the proposed FY 2023 labor-related share. The resulting quotient is 0.9999. The combined budget neutrality factor, which is the proposed FY 2023 budget-neutral wage adjustment factor as discussed earlier in this section, is 1.0016.

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

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

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

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

In the regression analysis, the logarithm of the teaching variable had a coefficient value of 0.5150. We converted this cost effect to a teaching payment adjustment by treating the regression coefficient as an exponent and raising the teaching variable to a power equal to the coefficient value. We note that the coefficient value of 0.5150 was based on the regression analysis holding all other components of the payment system constant. A complete discussion of how the teaching adjustment was calculated appears in the November 2004 IPF PPS final rule (69 FR 66954 through 66957) and the RY 2009 IPF PPS notice (73 FR 25721). As with other adjustment factors derived through the regression analysis, we do not plan to rerun the teaching adjustment factors in the regression analysis until we more fully analyze IPF PPS data. Therefore, in this FY 2023 proposed rule, we are proposing to continue to retain the coefficient value of 0.5150 for the teaching adjustment to the Federal per diem base rate.

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

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

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

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

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

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

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

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

• Rest of the state of Alaska.

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

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

In the FY 2013 IPPS/LTCH final rule (77 FR 53700 through 53701), we established a new methodology to update the COLA factors for Alaska and Hawaii, and adopted this methodology for the IPF PPS in the FY 2015 IPF final rule (79 FR 45958 through 45960). We adopted this new COLA methodology for the IPF PPS because IPFs are hospitals with a similar mix of commodities and services. We believe it is appropriate to have a consistent policy approach with that of other hospitals in Alaska and Hawaii. Therefore, the IPF COLAs for FY 2015 through FY 2017 were the same as those applied under the IPPS in those years. As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53700 and 53701), the COLA updates are determined every 4 years, when the IPPS market basket labor-related share is updated. Because the labor-related share of the IPPS market basket was most recently updated for FY 2022, the COLA factors were updated in FY 2022 IPPS/LTCH rulemaking (86 FR 45547). As such, we also updated the IPF PPS COLA factors for FY 2022 (86 FR 42621 through 42622) to reflect the updated COLA factors finalized in the FY 2022 IPPS/LTCH rulemaking. Table 2 shows the proposed IPF PPS COLA factors effective for FY 2022 through FY 2025.

The proposed IPF PPS COLA factors for FY 2023 are also shown in Addendum A to this proposed rule, and is available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/tools.html .

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

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

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

Therefore, when patients are discharged from an IPPS hospital or CAH and admitted to the same hospital's or CAH's excluded psychiatric unit, the IPF receives the 1.19 adjustment factor as the variable per diem adjustment for the first day of the patient's stay in the IPF. For FY 2023, we are proposing to continue to retain the 1.31 adjustment factor for IPFs with qualifying EDs. A complete discussion of the steps involved in the calculation of the ED adjustment factors are in the November 2004 IPF PPS final rule (69 FR 66959 through 66960) and the RY 2007 IPF PPS final rule (71 FR 27070 through 27072).

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

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

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

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

Our longstanding methodology for updating the outlier fixed dollar loss threshold involves using the best available data, which is typically the most recent available data. Last year for the FY 2022 IPF PPS final rule, we finalized the use of FY 2019 claims rather than the more recent FY 2020 claims for updating the outlier fixed dollar loss threshold (86 FR 42623). We noted that our use of the FY 2019 claims to set the final outlier fixed dollar loss threshold for FY 2022 deviated from our longstanding practice of using the most recent available year of claims, but remained otherwise consistent with the established outlier update methodology. We explained that we finalized our proposal to deviate from our longstanding practice of using the most recent available year of claims only because, and to the extent that, the “coronavirus disease 2019” (abbreviated “COVID-19”) Public Health Emergency (PHE) appeared to have significantly impacted the FY 2020 IPF claims. We further stated that we intended to continue to analyze further data in order to better understand both the short-term and long-term effects of the COVID-19 PHE on IPFs (86 FR 42624).

For this FY 2023 IPF PPS proposed rulemaking, consistent with our longstanding practice, we analyzed the most recent available data for simulating IPF PPS payments in FY 2023. We observed a continuation of two main trends that we noted in our analysis of FY 2020 claims for FY 2022—that is, an overall increase in average cost per day and an overall decrease in the number of covered days. However, we also identified that some providers had significant increases in their charges, resulting in higher than normal estimated cost per day that would skew our estimate of outlier payments for FY 2022 and FY 2023.

Historically, we have applied statistical trims under the IPF PPS in order to improve the statistical validity of the data used for ratesetting. In the November 2004 final rule, we explained that we applied a 3 standard deviation trim on cost per day prior to calculating the average per diem cost used to calculate the IPF PPS Federal per diem base rate (69 FR 66927). Furthermore, as discussed in section III.E.3 of this proposed rule, our longstanding policy applies a ceiling on a provider's cost-to-charge ratio when it exceeds 3 standard deviations from the mean cost-to-charge ratio for urban or rural providers. We are proposing a similar approach in order to address the skew in estimated cost per day that we observed in the FY 2021 claims. Specifically, we are proposing for FY 2023 to exclude providers from our simulation of IPF PPS payments for FY 2022 and FY 2023 if their change in estimated average cost per day is outside 3 standard deviations from the mean.

Based on an analysis of the December 2021 update of FY 2021 IPF claims and the FY 2022 rate increases, we believe it is necessary to update the fixed dollar loss threshold amount to maintain an outlier percentage that equals 2 percent of total estimated IPF PPS payments. We are proposing to update the IPF outlier threshold amount for FY 2023 using FY 2021 claims data and the same methodology that we used to set the initial outlier threshold amount in the RY 2007 IPF PPS final rule (71 FR 27072 and 27073), which is also the same methodology that we used to update the outlier threshold amounts for years 2008 through 2022. However, as discussed earlier in this section, we also propose for FY 2023 to exclude providers from our impact simulations whose change in simulated cost per day is outside 3 standard deviations from the mean. Based on an analysis of these updated data, we estimate that IPF outlier payments as a percentage of total estimated payments are approximately 3.2 percent in FY 2022. Therefore, we are proposing to update the outlier threshold amount to $24,270 to maintain estimated outlier payments at 2 percent of total estimated aggregate IPF payments for FY 2023. This proposed update is an increase from the FY 2022 threshold of $16,040.

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

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

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

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

For FY 2023, we propose to continue to follow this methodology.

To determine the rural and urban ceilings, we multiplied each of the standard deviations by 3 and added the result to the appropriate national CCR average (either rural or urban). The upper threshold CCR for IPFs in FY 2023 is 2.0472 for rural IPFs, and 1.7279 for urban IPFs, based on CBSA-based geographic designations. If an IPF's CCR is above the applicable ceiling, the ratio is considered statistically inaccurate, and we assign the appropriate national (either rural or urban) median CCR to the IPF.

We apply the national median CCRs to the following situations:

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

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

• Other IPFs for which the MAC obtains inaccurate or incomplete data with which to calculate a CCR.

We are proposing to continue to update the FY 2023 national median and ceiling CCRs for urban and rural IPFs based on the CCRs entered in the latest available IPF PPS PSF. Specifically, for FY 2023, to be used in each of the three situations listed previously, using the most recent CCRs entered in the CY 2022 PSF, we provide an estimated national median CCR of 0.5720 for rural IPFs and a national median CCR of 0.4200 for urban IPFs. These calculations are based on the IPF's location (either urban or rural) using the CBSA-based geographic designations. A complete discussion regarding the national median CCRs appears in the November 2004 IPF PPS final rule (69 FR 66961 through 66964).

As discussed in section III.C.1 of this proposed rule, we are proposing to continue to use the existing regression-derived adjustment factors for FY 2023. In the November 15, 2004 final rule, we indicated that we did not intend to update the regression analysis and the patient-level and facility-level adjustments until we complete further analysis of IPF costs using IPF PPS data that yields as much information as possible regarding the patient-level characteristics of the population that each IPF serves.

Since that time, we undertook analysis to better understand IPF industry practices so that we may refine the IPF PPS in the future, as appropriate. For RY 2012, we identified several areas of concern for future refinement, and we invited comments on these issues in the RY 2012 IPF PPS proposed and final rules. For further discussion of these issues and to review the public comments, we refer readers to the RY 2012 IPF PPS proposed rule (76 FR 4998) and final rule (76 FR 26432).

Our preliminary analysis, which we previously discussed in the FY 2016 IPF PPS final rule (80 FR 46693 through 46694), also revealed variation in cost and claim data, particularly related to labor costs, drugs costs, and laboratory services. We found that some providers have very low labor costs, or very low or missing drug or laboratory costs or charges, relative to other providers. As we noted in the FY 2016 IPF PPS final rule, our preliminary analysis of 2012 to 2013 IPF data found that over 20 percent of IPF stays reported no ancillary costs, such as laboratory and drug costs, in their cost reports, or laboratory or drug charges on their claims. In the past, we stated that we expect that most patients requiring hospitalization for active psychiatric treatment would need drugs and laboratory services, and we reminded providers that the IPF PPS Federal per diem base rate includes the cost of all ancillary services, including drugs and laboratory services.

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

Working in collaboration with a contractor, we have undertaken further analysis of more recent IPF cost and claim information. We have posted a report on the CMS website, which summarizes the results of the latest analysis. For public awareness, this report is available online at https://www.cms.gov/medicare/medicare-fee-for-service-payment/inpatientpsychfacilpps. This updated analysis finds that the existing IPF PPS model continues to be generally appropriate in terms of effectively aligning IPF PPS payments with the cost of providing IPF services, but suggests that certain updates to the codes, categories, adjustment factors, and ECT payment amount per treatment could improve payment accuracy. We are requesting comments on the results of our latest analysis as summarized in the report. In particular, we are interested in comments about the following topics, which are discussed in detail in the report:

• The report summarizes results of the analysis regarding patient-level characteristics, about which we are requesting comments:

++ The updated regression analysis suggests that certain technical changes to the DRG and comorbidity adjustment factors, consolidation of the age categories for the patient age adjustment, and changes to the adjustment factors for age and length of stay could be appropriate.

++ The analysis of ancillary costs for IPF stays with ECT suggests that a higher ECT payment amount per treatment could better align IPF PPS payments with the costs of furnishing ECT.

++ The analysis of the outlier percentage suggests that fewer IPF cases qualify for outliers under the current 2 percent outlier target than were estimated when the IPF PPS was established. We estimate that increasing the outlier percentage would increase the number of IPF cases that qualify for outliers, but would have distributional effects due to budget neutrality.

• The report summarizes the results of analysis regarding facility-level characteristics, about which we are requesting comments:

++ The updated regression analysis suggests that updating the adjustment factors for teaching facilities, rural facilities, and facilities with an ED could improve payment accuracy; however, we estimate such changes could have positive and negative effects on payments for different types of IPFs.

++ The analysis of occupancy-related control variables included in the regression model indicates that these control variables are correlated with the rural adjustment factor, and that removal of these control variables from the model could result in an increase to the rural adjustment factor in the regression model.

• The report summarizes certain areas where we believe additional research is needed. We are requesting comments about the results summarized in the report. We are also requesting comments about additional analyses that we should undertake to better understand how these issues affect the cost of providing IPF services, and how the IPF PPS could better account for these costs:

++ We analyzed the costs associated with social determinants of health, but found that our analysis was confounded by a low frequency of IPF claims reporting the applicable ICD-10 diagnosis codes. We are soliciting public comments about the results of this analysis, and whether there are additional patient characteristics that affect the cost of providing IPF services that may not be consistently reported on claims. Additionally, we are soliciting public comments about how we could better identify such patient characteristics and their effects on costs.

++ We analyzed the costs associated with the percentage of low-income patients that IPFs treat, based on a construction of the Disproportionate Share Hospitals (DSH) percentage that is used in other payment systems using the data currently available for IPFs. We are soliciting public comments about the results of this analysis, which suggest that the addition of an adjustment factor for disproportionate share intensity could improve the accuracy of IPF PPS payments.

Significant and persistent disparities in healthcare outcomes exist in the United States. Belonging to an underserved community is often associated with worse health outcomes. 1 2 3 4 5 6 7 8 9 With this in mind, CMS aims to advance health equity, by which we mean the attainment of the highest level of health for all people, where everyone has a fair and just opportunity to attain their optimal health regardless of race, ethnicity, disability, sexual orientation, gender identity, socioeconomic status, geography, preferred language, or other factors that affect access to care and health outcomes. CMS is working to advance health equity by designing, implementing, and operationalizing policies and programs that support health for all the people served by our programs, eliminating avoidable differences in health outcomes experienced by people who are disadvantaged or underserved, and providing the care and support that our beneficiaries need to thrive. 10

We are committed to achieving equity in healthcare outcomes for our enrollees by supporting healthcare providers' quality improvement activities to reduce health disparities, enabling them to make more informed decisions, and promoting healthcare provider accountability for healthcare disparities. 11 Measuring healthcare disparities in quality measures is a cornerstone of our approach to advancing healthcare equity. Hospital performance results that illustrate differences in outcomes between patient populations have been reported to hospitals confidentially since 2018.

This RFI consists of three sections. The first section discusses a general framework that could be utilized across CMS quality programs to assess disparities in healthcare quality. The next section outlines approaches that could be used in the IPFQR Program to assess drivers of healthcare quality disparities in the IPFQR Program. Additionally, this section discusses measures of health equity that could be adapted for use in the IPFQR Program. Finally, the third section solicits public comment on the principles and approaches listed in the first two sections as well as seeking other thoughts about disparity measurement guidelines for the IPFQR Program.

CMS has identified five key considerations that we could apply consistently across CMS programs when advancing the use of measurement and stratification as tools to address health care disparities and advance health equity. The remainder of this section describes each of these considerations.

By quantifying healthcare disparities through measure stratification (that is, measuring performance differences among subgroups of beneficiaries), we aim to provide useful tools for healthcare providers to drive improvement based on data. We hope that these results support healthcare providers efforts in examining the underlying drivers of disparities in their patients' care and to develop their own innovative and targeted quality improvement interventions. Quantification of health disparities can also support communities in prioritizing and engaging with healthcare providers to execute such interventions, as well as providing additional tools for accountability and decision-making.

There are several different conceptual approaches to reporting health disparities in the acute care setting, including two complementary approaches that are already used to confidentially provide disparity information to hospitals for a subset of existing measures. The first approach, referred to as the “within-hospital disparity method,” compares measure performance results for a single measure between subgroups of patients with and without a given factor. This type of comparison directly estimates disparities in outcomes between subgroups and can be helpful to identify potential disparities in care. This type of approach can be used with most measures that include patient-level data. The second approach, referred to as the “between-hospital disparity methodology,” provides performance on measures for only the subgroup of patients with a particular social risk factor. These approaches can be used by a healthcare provider to compare their own measure performance on a particular subgroup of patients against subgroup-specific state and national benchmarks. Alone, each approach may provide an incomplete picture of disparities in care for a particular measure, but when reported together with overall quality performance, these approaches may provide detailed information about where differences in care may exist or where additional scrutiny may be appropriate. For example, the between-provider disparity method may indicate that an IPF underperformed (when compared to other facilities on average) for patients with a given social risk factor, which would signal the need to improve care for this population. However, if the IPF also underperformed for patients without that social risk factor, the measured difference, or disparity in care, (the “within-hospital” disparity, as described above) could be negligible even though performance for the group that has been historically marginalized remains poor. We refer readers to the technical report describing the CMS Disparity Methods in detail as well as the FY 2018 IPPS/LTCH PPS final rule (82 FR 38405 through 38407) and the posted Disparity methods Updates and Specifications Report posted on the QualityNet website. 12

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to view public comments. CMS will not post on Regulations.gov public comments that make threats to individuals or institutions or suggest that the individual will take actions to harm the individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments.

Wage index addenda will be available only through the internet on our website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/Hospice-Wage-Index.html .

This proposed rule proposes to establish a permanent mitigation policy to smooth the impact of year-to-year changes in the hospice payments related to changes in the hospice wage index. This rule also proposes updates to the hospice wage index as well as updates to the hospice payment rates, and cap amount for FY 2023 as required under section 1814(i) of the Social Security Act (the Act). In addition, in this proposed rule CMS discusses updates to HQRP that include the Hospice Outcomes and Patient Evaluation (HOPE) tool with national beta testing; the Consumer Assessment of Healthcare Providers and Systems (CAHPS) Hospice Survey with Star Ratings; developing a web-based survey; Public Reporting; a request for information that builds from last year's discussion on health equity, and update on advancing a health information exchange.

Lastly, the overall economic impact of this proposed rule is estimated to be $580 million in increased payments to hospices for FY 2023.

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

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

As referenced in our regulations at § 418.22(b)(1), to be eligible for Medicare hospice services, the patient's attending physician (if any) and the hospice medical director must certify that the individual is “terminally ill,” as defined in section 1861(dd)(3)(A) of the Act and our regulations at § 418.3; that is, the individual has a medical prognosis that his or her life expectancy is 6 months or less if the illness runs its normal course. The regulations at § 418.22(b)(2) require that clinical information and other documentation that support the medical prognosis accompany the certification and be filed in the medical record with it. Additionally, the regulations at § 418.22(b)(3) require that the certification and recertification forms include a brief narrative explanation of the clinical findings that support a life expectancy of 6 months or less.

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

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

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

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

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

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

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

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

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

Section 4441(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) established that updates to the hospice payment rates beginning FY 2002 and in subsequent FYs are to be the hospital market basket percentage increase for the current FY. Section 4442 of the BBA amended section 1814(i)(2) of the Act, effective for services furnished on or after October 1, 1997, to require that hospices submit claims for payment for hospice care furnished in an individual's home only on the basis of the geographic location at which the service is furnished. Previously, local wage index values were applied based on the geographic location of the hospice provider, regardless of where the hospice care was furnished. Section 4443 of the BBA amended sections 1812(a)(4) and 1812(d)(1) of the Act to provide for hospice benefit periods of two 90-day periods, followed by an unlimited number of 60-day periods.

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

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

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

In addition, sections 1814(i)(5)(A) through (C) of the Act, as added by section 3132(a) of the Patient Protection and Affordable Care Act (PPACA) (Pub. L. 111-148), required hospices to begin submitting quality data, based on measures specified by the Secretary of the Department of Health and Human Services (the Secretary) for FY 2014 and subsequent FYs. Since FY 2014, hospices that fail to report quality data have their market basket percentage increase reduced by 2 percentage points. Note that with the passage of the Consolidated Appropriations Act, 2021 (hereafter referred to as CAA 2021) (Pub. L. 116-260), the reduction changes to 4 percentage points beginning in FY 2024.

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

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

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

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

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

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

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

In the FY 2016 Hospice Wage Index and Rate Update final rule (80 FR 47142), CMS finalized two different payment rates for RHC: A higher per diem base payment rate for the first 60 days of hospice care and a reduced per diem base payment rate for subsequent days of hospice care. CMS also finalized a service intensity add-on (SIA) payment payable for certain services during the last 7 days of the beneficiary's life. A service intensity add-on payment will be made for the social worker (SW) visits and nursing visits provided by a registered nurse (RN), when provided during routine home care in the last 7 days of life. The SIA payment is in addition to the routine home care rate. The SIA payment is provided for visits of a minimum of 15 minutes and a maximum of 4 hours per day (80 FR 47172).

In addition to the hospice payment reform changes discussed, the FY 2016 Hospice Wage Index and Rate Update final rule implemented changes mandated by the IMPACT Act, in which the cap amount for accounting years that end after September 30, 2016 and before October 1, 2025 would be updated by the hospice payment update percentage rather than using the CPI-U (80 FR 47186). In addition, we finalized a provision to align the cap accounting year for both the inpatient cap and the hospice aggregate cap with the FY for FY 2017 and thereafter. Finally, the FY 2016 Hospice Wage Index and Rate Update final rule (80 FR 47144) clarified that hospices would have to report all diagnoses on the hospice claim as a part of the ongoing data collection efforts for possible future hospice payment refinements.

In the FY 2017 Hospice Wage Index and Rate Update final rule (81 FR 52160), CMS finalized several new policies and requirements related to the HQRP. First, CMS codified the policy that if the National Quality Forum (NQF) made non-substantive changes to specifications for HQRP measures as part of the NQF's re-endorsement process, CMS would continue to utilize the measure in its new endorsed status, without going through new notice-and-comment rulemaking. CMS would continue to use rulemaking to adopt substantive updates made by the NQF to the endorsed measures adopted for the HQRP; determinations about what constitutes a substantive versus non-substantive change would be made on a measure-by-measure basis. Second, we finalized two new quality measures for the HQRP for the FY 2019 payment determination and subsequent years: (1) Hospice Visits when Death is Imminent Measure Pair; and (2) Hospice and Palliative Care Composite Process Measure-Comprehensive Assessment at Admission (81 FR 52173). The data collection mechanism for both of these measures is the Hospice Item Set (HIS), and the measures were effective April 1, 2017. Regarding the CAHPS® Hospice Survey, CMS finalized a policy that hospices that receive their CMS Certification Number (CCN) after January 1, 2017 for the FY 2019 Annual Payment Update (APU) and January 1, 2018 for the FY 2020 APU will be exempted from the Hospice CAHPS® requirements due to newness (81 FR 52182). The exemption is determined by CMS and is only for 1 year.

In the FY 2020 Hospice Wage Index and Rate Update final rule (84 FR 38484), we finalized rebased payment rates for CHC and GIP and set those rates equal to their average estimated FY 2019 costs per day. We also rebased IRC per diem rates equal to the estimated FY 2019 average costs per day, with a reduction of 5 percent to the FY 2019 average cost per day to account for coinsurance. We finalized the FY 2020 proposal to reduce the RHC payment rates by 2.72 percent to offset the increases to CHC, IRC, and GIP payment rates to implement this policy in a budget-neutral manner in accordance with section 1814(i)(6) of the Act (84 FR 38496).

In addition, we finalized a policy to use the current year's pre-floor, pre-reclassified hospital inpatient wage index as the wage adjustment to the labor portion of the hospice rates. Finally, in the FY 2020 Hospice Wage Index and Rate Update final rule (84 FR 38505), we finalized modifications to the hospice election statement content requirements at § 418.24(b), and added a requirement for hospices, upon request, to furnish an election statement addendum effective beginning in FY 2021. The addendum must list items, services, and drugs the hospice has determined to be unrelated to the terminal illness and related conditions, to increase coverage transparency for beneficiaries under a hospice election.

Division CC, section 404 of the CAA 2021 amended section 1814(i)(2)(B) of the Act and extended the provision that currently mandates the hospice cap be updated by the hospice payment update percentage (hospital market basket update reduced by the productivity adjustment) rather than the CPI-U for accounting years that end after September 30, 2016 and before October 1, 2030. Prior to enactment of this provision, the hospice cap update was set to revert to the original methodology of updating the annual cap amount by the CPI-U beginning on October 1, 2025. Division CC, section 407(b) of CAA 2021 revised section 1814(i)(5)(A)(i) to increase the payment reduction for hospices who fail to meet hospice quality measure reporting requirements from 2 percentage points to 4 percentage points beginning with FY 2024.

In the FY 2022 Hospice Wage Index and Rate Update final rule (86 FR 42532 through 42539), we finalized a policy to rebase and revise the labor shares for CHC, RHC, IRC and GIP using Medicare cost report (MCR) data for freestanding hospices (collected via CMS Form 1984-14, OMB NO. 0938-0758) for 2018. We established separate labor shares for CHC, RHC, IRC, and GIP based on the calculated compensation cost weights for each level of care from the 2018 MCR data. The revised labor shares were implemented in a budget neutral manner through the use of labor share standardization factors.

In the FY 2022 final rule, we removed the seven original Hospice Item Set (HIS) measures from the program because a more broadly applicable measure (across settings, populations, or conditions) for the particular topic is available and already publicly reported. The Hospice Comprehensive Assessment Measure, NQF #3235, is one measure that is calculated and rolled up by completion of the seven individual measures. This measure helps to ensure all hospice patients receive a holistic comprehensive assessment. Also, in or after May 2022, we will start publicly reporting the two new claims-based measures. Specifically, this includes the: (1) Hospice Visits in the Last Days of Life (HVLDL) (which replaces the HIS Hospice Visits when Death is Imminent measure pair); and (2) Hospice Care Index (HCI) that includes 10 indicators that collectively represent different aspects of hospice care and aim to convey a comprehensive characterization of the quality of care furnished by a hospice throughout the hospice stay. Related to these changes, we finalized reporting eight quarters of claims data in order to display small providers. We finalized the public reporting of Consumer Assessment of Healthcare Providers and Systems (CAHPS®) Hospice Survey Star ratings on Care Compare to begin no sooner than FY 2022.

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

In general, OMB issues major revisions to statistical areas every 10 years, based on the results of the decennial census. However, OMB occasionally issues minor updates and revisions to statistical areas in the years between the decennial censuses. On March 6, 2020, OMB issued Bulletin No. 20-01, which provided updates to and superseded OMB Bulletin No. 18-04 that was issued on September 14, 2018. The attachments to OMB Bulletin No. 20-01 provided detailed information on the update to statistical areas since September 14, 2018, 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, 2017 and July 1, 2018. (For a copy of this bulletin, we refer readers to the following website: https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf. ) In OMB Bulletin No. 20-01, OMB announced one new Micropolitan Statistical Area, one new component of an existing Combined Statistical Area (CSA), and changes to New England City and Town Area (NECTA) delineations. In the FY 2021 Hospice Wage Index final rule (85 FR 47070) we stated that if appropriate, we would propose any updates from OMB Bulletin No. 20-01 in future rulemaking. After reviewing OMB Bulletin No. 20-01, we determined that the changes in Bulletin 20-01 encompassed delineation changes that would not affect the Medicare wage index for FY 2022. Specifically, the updates consisted of changes to NECTA delineations and the redesignation of a single rural county into a newly created Micropolitan Statistical Area. The Medicare wage index does not utilize NECTA definitions, and, as most recently discussed in the FY 2021 Hospice Wage Index final rule (85 FR 47070), we include hospitals located in Micropolitan Statistical areas in each state's rural wage index. Therefore, in the FY 2022 Hospice Wage Index final rule (86 FR 42528) we adopted the updates set forth in OMB Bulletin No. 20-01 consistent with our longstanding policy of adopting OMB delineation updates.

In the FY 2020 Hospice Wage Index final rule (84 FR 38484), we finalized the proposal to use the current FY's hospital wage index data to calculate the hospice wage index values. In the FY 2021 Hospice Wage Index final rule (85 FR 47070), we adopted the revised OMB delineations with a 5-percent cap on wage index decreases, where the estimated reduction in a geographic area's wage index would be capped at 5-percent in FY 2021 and no cap would be applied to wage index decreases for the second year (FY 2022). For FY 2023, the proposed hospice wage index would be based on the FY 2023 hospital pre-floor, pre-reclassified wage index for hospital cost reporting periods beginning on or after October 1, 2018 and before October 1, 2019 (FY 2019 cost report data). The proposed FY 2023 hospice wage index would not take into account any geographic reclassification of hospitals, including those in accordance with section 1886(d)(8)(B) or 1886(d)(10) of the Act. The proposed FY 2023 hospice wage index would include a 5-percent cap on wage index decreases as discussed later in this section. The appropriate wage index value would be applied to the labor portion of the hospice payment rate based on the geographic area in which the beneficiary resides when receiving RHC or CHC. The appropriate wage index value is applied to the labor portion of the payment rate based on the geographic location of the facility for beneficiaries receiving GIP or IRC.

In the FY 2006 Hospice Wage Index final rule (70 FR 45135), we adopted the policy that, for urban labor markets without a hospital from which hospital wage index data could be derived, all of the CBSAs within the state would be used to calculate a statewide urban average pre-floor, pre-reclassified hospital wage index value to use as a reasonable proxy for these areas. For FY 2023, the only CBSA without a hospital from which hospital wage data can be derived is 25980, Hinesville-Fort Stewart, Georgia. The FY 2023 wage index value for Hinesville-Fort Stewart, Georgia is 0.8620.

There exist some geographic areas where there were no hospitals, and thus, no hospital wage data on which to base the calculation of the hospice wage index. In the FY 2008 Hospice Wage Index final rule (72 FR 50217 through 50218), we implemented a methodology to update the hospice wage index for rural areas without hospital wage data. In cases where there was a rural area without rural hospital wage data, we use the average pre-floor, pre-reclassified hospital wage index data from all contiguous CBSAs, to represent a reasonable proxy for the rural area. The term “contiguous” means sharing a border (72 FR 50217). Currently, the only rural area without a hospital from which hospital wage data could be derived is Puerto Rico. However, for rural Puerto Rico, we would not apply this methodology due to the distinct economic circumstances that exist there (for example, due to the close proximity of almost all of Puerto Rico's various urban areas to non-urban areas, this methodology would produce a wage index for rural Puerto Rico that is higher than that in half of its urban areas); instead, we would continue to use the most recent wage index previously available for that area. For FY 2023, we propose to continue using the most recent pre-floor, pre-reclassified hospital wage index value available for Puerto Rico, which is 0.4047, subsequently adjusted by the hospice floor.

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

The proposed hospice wage index applicable for FY 2023 (October 1, 2022 through September 30, 2023) is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/Hospice-Wage-Index.html.

As discussed in section III.A.1, we have proposed and finalized temporary transition policies in the past to mitigate significant changes to payments due to changes to the hospice wage index. Specifically, in the FY 2016 Hospice Wage Index and Payment Rate Update final rule (80 FR 47142) we implemented a 50/50 blend for all geographic areas consisting of the wage index values using the then-current OMB area delineations and the wage index values using OMB's new area delineations based on OMB Bulletin No. 13-01. In the FY 2021 Hospice Wage Index final rule (85 FR 47070), we adopted the revised OMB delineations with a 5-percent cap on wage index decreases, where the estimated reduction in a geographic area's wage index would be capped at 5-percent in FY 2021 and no cap would be applied to wage index decreases for the second year (FY 2022). As explained, we believed the 5-percent cap would provide greater transparency and be administratively less complex than the prior methodology of applying a 50/50 blended wage index. We noted that this transition approach struck an appropriate balance by providing a transition period to mitigate the resulting -short-term instability and negative impacts on providers and time for them to adjust to their new labor market area delineations and wage index values.

In the FY 2022 Hospice Wage Index and Payment Rate Update final rule (86 FR 42541), a few commenters stated that providers should be protected against substantial payment reductions due to dramatic reductions in wage index values from one year to the next. Because we did not propose to modify the transition policy that was finalized in the FY 2021 Hospice final rule, we did not extend the transition period for FY 2022. In the FY 2022 Hospice final rule, we stated that we continued to believe that applying the 5-percent cap transition policy in year one provided an adequate safeguard against any significant payment reductions associated with the adoption of the revised CBSA delineations in FY 2021, allowed for sufficient time to make operational changes for future FYs, and provided a reasonable balance between mitigating some short-term instability in hospice payments and improving the accuracy of the payment adjustment for differences in area wage levels. However, we acknowledged that certain changes to wage index policy may significantly affect Medicare payments. In addition, we reiterated that our policy principles with regard to the wage index include generally using the most current data and information available and providing that data and information, as well as any approaches to addressing any significant effects on Medicare payments resulting from these potential scenarios, in notice and comment rulemaking. With these policy principles in mind, we considered for this FY 2023 Hospice proposed rule how best to address the potential scenarios, which commenters raised concerns; that is, scenarios in which changes to wage index policy may significantly affect Medicare payments.

In the past, we have established transition policies of limited duration to phase in significant changes to labor market areas. In taking this approach in the past, we sought to mitigate short term instability and fluctuations that can negatively impact providers due to wage index changes. In accordance with the requirement of our regulations at § 418.306(c) each labor market is established using the most current hospital wage data available, including any changes made by the OMB to the Metropolitan Statistical Areas (MSAs) definitions. We have previously stated that, because the wage index is a relative measure of the value of labor in prescribed labor market areas, we believe it is important to implement new labor market area delineations with as minimal a transition as is reasonably possible. However, we recognize that changes to the wage index have the potential to create instability and significant negative impacts on certain providers even when labor market areas do not change. In addition, year-to-year fluctuations in an area's wage index can occur due to external factors beyond a provider's control, such as the COVID-19 PHE, and for an individual provider, these fluctuations can be difficult to predict. We also recognize that predictability in Medicare payments is important to enable providers to budget and plan their operations.

In light of these considerations, we are proposing a permanent approach to smooth year-to-year changes in providers' wage indexes. We are proposing a policy that increases the predictability of hospice payments for providers, and mitigates instability and significant negative impacts to providers resulting from changes to the wage index.

As previously discussed, we believed that applying a 5-percent cap on wage index decreases for FY 2021 provided greater transparency and was administratively less complex than prior transition methodologies. In addition, we believed this methodology mitigated short term instability and fluctuations that can negatively impact providers due to wage index changes. Lastly, we believed the 5-percent cap applied to all wage index decreases for FY 2021 provided an adequate safeguard against significant payment reductions related to the adoption of the revised CBSAs. However, as discussed earlier in this section of the proposed rule, we recognize there are circumstances that a one-year mitigation policy, like the one adopted for FY 2021, would not effectively address future years in which providers continue to be negatively affected by significant wage index decreases.

Typical year-to-year variation in the hospice wage index has historically been within 5-percent, and we expect this will continue to be the case in future years. Therefore, we believe that applying a 5-percent cap on all wage index decreases in future years, regardless of the reason for the decrease, would effectively mitigate instability in hospice payments due to any significant wage index decreases that may affect providers in any year that commenters raised in the FY 2022 Hospice final rule. In addition, we believe that applying a 5-percent cap on all wage index decreases would increase the predictability of hospice payments for providers, enabling them to more effectively budget and plan their operations. Lastly, we believe that applying a 5-percent cap on all wage index decreases, from the prior year, would have a small overall impact on the labor market area wage index system. As discussed in further detail in section III.A.4. of this proposed rule, we estimate that applying a 5-percent cap on all wage index decreases, from the prior year, will have a very small effect on the wage index budget standardization factors for FY 2023. Because the wage index is a measure of the value of labor (wage and wage-related costs) in a prescribed labor market area relative to the national average, we anticipate that most providers will not experience year-to-year wage index declines greater than 5-percent in any given year. We believe that applying a 5-percent cap on all wage index decreases, from the prior year, would continue to maintain the accuracy of the overall labor market area wage index system.

Therefore, for FY 2023 and subsequent years, we are proposing to apply a permanent 5-percent cap on any decrease to a geographic area's wage index from its wage index in the prior year, regardless of the circumstances causing the decline. That is, we are proposing that a geographic area's wage index for FY 2023 would not be less than 95 percent of its final wage index for FY 2022, regardless of whether the geographic area is part of an updated CBSA, and that for subsequent years, a geographic area's wage index would not be less than 95 percent of its wage index calculated in the prior FY. We further propose that if a geographic area's prior FY wage index is calculated based on the 5-percent cap, then the following year's wage index would not be less than 95 percent of the geographic area's capped wage index in the prior FY. For example, if a geographic area's wage index for FY 2023 is calculated with the application of the 5-percent cap, then its wage index for FY 2024 would not be less than 95 percent of its capped wage index in FY 2023. Likewise, we are proposing to make the corresponding regulations text changes at § 418.306(c) as follows: Starting on October 1, 2022, CMS applies a cap on decreases to the hospice wage index such that the wage index applied to a geographic area is not less than 95 percent of the wage index applied to that geographic area in the prior FY. This 5-percent cap on negative wage index changes would be implemented in a budget neutral manner through the use of wage index standardization factors. Furthermore, the 5-percent cap would be applied after the application of the hospice wage index floor. Therefore, pre-floor, pre-reclassified hospital wage index values below 0.8 would be adjusted by the 15 percent increase, subject to a maximum wage index value of 0.8. If there is a 5 percent decrease from the previous FY's wage index value after the application of the hospice wage index floor, then the 5-percent cap on wage index decreases would also be applied.

In section III.A.4 of this proposed rule, we estimate the impact to payments for providers in FY 2023 based on this proposed policy. We also note that we would examine the effects of this policy on an ongoing basis in the future in order to assess its appropriateness.

Section 4441(a) of the BBA (Pub. L. 105-33) amended section 1814(i)(1)(C)(ii)(VI) of the Act to establish updates to hospice rates for FYs 1998 through 2002. Hospice rates were to be updated by a factor equal to the inpatient hospital market basket percentage increase set out under section 1886(b)(3)(B)(iii) of the Act, minus 1 percentage point. Payment rates for FYs since 2002 have been updated according to section 1814(i)(1)(C)(ii)(VII) of the Act, which states that the update to the payment rates for subsequent FYs must be the inpatient market basket percentage increase for that FY. In the FY 2022 IPPS final rule CMS finalized the proposal to rebase and revise the IPPS market baskets to reflect a 2018 base year. We refer readers to the FY 2022 IPPS final rule for further information (86 FR 45194 through 45208).

Section 3401(g) of the Affordable Care Act mandated that, starting with FY 2013 (and in subsequent FYs), the hospice payment update percentage would be annually reduced by changes in economy-wide productivity as specified in section 1886(b)(3)(B)(xi)(II) of the Act. The statute defines the productivity adjustment to be equal to the 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity (MFP) as projected by the Secretary for the 10-year period ending with the applicable FY, year, cost reporting period, or other annual period) (the “productivity adjustment”). The United States Department of Labor's Bureau of Labor Statistics (BLS) publishes the official measures of productivity for the United States economy. We note that previously the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) was published by BLS as private nonfarm business multifactor productivity. Beginning with the November 18, 2021 release of productivity data, BLS replaced the term “multifactor productivity” with “total factor productivity” (TFP). BLS noted that this is a change in terminology only and will not affect the data or methodology. As a result of the BLS name change, the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as “private nonfarm business total factor productivity”. However, as mentioned, the data and methods are unchanged. We refer readers to http://www.bls.gov for the BLS historical published TFP data. A complete description of IGI's TFP projection methodology is available on the CMS website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch. In addition, in the FY 2022 IPPS final rule (86 FR 45214), we noted that beginning with FY 2022, CMS changed the name of this adjustment to refer to it as the “productivity adjustment” rather than the “MFP adjustment”.

The proposed hospice payment update percentage for FY 2023 is based on the proposed inpatient hospital market basket update of 3.1 percent (based on IHS Global Inc.'s fourth quarter 2021 forecast with historical data through the third quarter 2021). Due to the requirements at sections 1886(b)(3)(B)(xi)(II) and 1814(i)(1)(C)(v) of the Act, the proposed inpatient hospital market basket update for FY 2023 of 3.1 percent must be reduced by a productivity adjustment as mandated by the Affordable Care Act (currently estimated to be 0.4 percentage point for FY 2023). In effect, the proposed hospice payment update percentage for FY 2023 would be 2.7 percent. We also propose that if more recent data become available after the publication of this proposed rule and before the publication of the final rule (for example, more recent estimates of the inpatient hospital market basket update and productivity adjustment), we would use such data, if appropriate, to determine the hospice payment update percentage for FY 2023 in the final rule. We continue to believe it is appropriate to routinely update the hospice payment system so that it reflects the best available data about differences in patient resource use and costs among hospices as required by the statute. Therefore, we are proposing to: (1) Update hospice payments using the methodology outlined and apply the 2018-based IPPS market basket update for FY 2023 of 3.1 percent, reduced by the statutorily required productivity adjustment of 0.4 percentage point along with the wage index budget neutrality adjustment to update the payment rates; and (2) use the FY 2023 hospice wage index which uses the FY 2023 pre-floor, pre-reclassified IPPS hospital wage index as its basis.

In the FY 2022 Hospice Wage Index final rule (86 FR 42532 through 42539), we rebased and revised the labor shares for RHC, CHC, GIP and IRC using MCR data for freestanding hospices (CMS Form 1984-14, OMB Control Number 0938-0758) from 2018. The current labor portion of the payment rates are: For RHC, 66.0 percent; for CHC, 75.2 percent; for GIP, 63.5 percent; and for IRC, 61.0 percent. The non-labor portion is equal to 100 percent minus the labor portion for each level of care. The non-labor portion of the payment rates are as follows: For RHC, 34.0 percent; for CHC, 24.8 percent; for GIP, 36.5 percent; and for IRC, 39.0 percent.

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

As discussed in the FY 2016 Hospice Wage Index and Rate Update final rule (80 FR 47172), we implemented two different RHC payment rates, one RHC rate for the first 60 days and a second RHC rate for days 61 and beyond. In addition, in that final rule, we implemented an SIA payment for RHC when direct patient care is provided by an RN or social worker during the last 7 days of the beneficiary's life. The SIA payment is equal to the CHC hourly rate multiplied by the hours of nursing or social work provided (up to 4 hours total) that occurred on the day of service, if certain criteria are met. In order to maintain budget neutrality, as required under section 1814(i)(6)(D)(ii) of the Act, the new RHC rates were adjusted by a service intensity add-on budget neutrality factor (SBNF). The SBNF is used to reduce the overall RHC rate in order to ensure that SIA payments are budget-neutral. At the beginning of every FY, SIA utilization is compared to the prior year in order calculate a budget neutrality adjustment. In the FY 2017 Hospice Wage Index and Rate Update final rule (81 FR 52156), we initiated a policy of applying a wage index standardization factor to hospice payments in order to eliminate the aggregate effect of annual variations in hospital wage data. Typically, the wage index standardization factor is calculated using the most recent, complete hospice claims data available. However, due to the COVID-19 PHE, in the FY 2022 Hospice Wage Index and Payment Rate Update proposed rule we looked at using hospice claims data before the declaration of the COVID-19 PHE (FY 2019) to determine if there were significant differences between utilizing 2019 and 2020 claims data. The difference between using FY 2019 and FY 2020 hospice claims data was minimal. Therefore, in the FY 2022 Hospice Wage Index and Payment Rate Update final rule (86 FR 42543), we stated that we would continue our practice of using the most recent, complete hospice claims data available. For FY 2023 hospice rate setting, we saw minimal differences in using the updated data; therefore, we are continuing our longstanding policy of using the most recent data available. Specifically, we are using FY 2021 claims data with the FY 2023 payment rate updates. In order to calculate the wage index standardization factor, we simulate total payments using FY 2021 hospice utilization claims data with the FY 2022 wage index (pre-floor, pre-reclassified hospital wage index with the hospice floor, without the 5-percent cap on wage index decreases) and FY 2022 payment rates and compare it to our simulation of total payments using the FY 2023 hospice wage index (pre-floor, pre-reclassified hospital wage index with hospice floor, with the 5-percent cap on wage index decreases) and FY 2022 payment rates. By dividing payments for each level of care (RHC days 1 through 60, RHC days 61+, CHC, IRC, and GIP) using the FY 2022 wage index and payment rates for each level of care by the FY 2023 wage index and FY 2022 payment rates, we obtain a wage index standardization factor for each level of care. The wage index standardization factors for each level of care are shown in the Tables 1 and 2.

The proposed FY 2023 RHC rates are shown in Table 1. The proposed FY 2023 payment rates for CHC, IRC, and GIP are shown in Table 2.

Background

On August 25, 2021, we published a proposed rule (86 FR 47457) to list Amur sturgeon as an endangered species under the Endangered Species Act of 1973, as amended (16 U.S.C. 1531 et seq. ). The proposed rule opened a 60-day public comment period, ending October 25, 2021. During the open comment period, we received a request for a public hearing on the proposed rule. Therefore, we are announcing a public hearing and a reopening of the comment period (see DATES , above) to allow the public an additional opportunity to provide comments on the proposed rule to list the Amur sturgeon.

For a description of previous Federal actions concerning the Amur sturgeon and information on the types of comments that would be helpful to us in promulgating this rulemaking action, please refer to the August 25, 2021, proposed rule (86 FR 47457).

We are holding a public hearing to accept comments on the proposed rule to list the Amur sturgeon on the date and at the time listed in DATES . We are holding the public hearing via the Zoom online video platform and via teleconference so that participants can attend remotely. For security purposes, registration is required. All participants must register in order to listen and view the hearing via Zoom, listen to the hearing by telephone, or provide oral public comments at the hearing by Zoom or telephone. For information on how to register, or if technical problems occur joining Zoom on the day of the hearing, visit https://www.fws.gov/event/public-hearing-proposed-listing-amur-sturgeon.

Registrants will receive the Zoom link and the telephone number for the public hearing. If applicable, interested members of the public not familiar with the Zoom platform should view the Zoom video tutorials ( https://support.zoom.us/hc/en-us/articles/206618765-Zoom-video-tutorials ) prior to the public hearing.

The public hearing will provide interested parties an opportunity to present verbal testimony (formal, oral comments) regarding the August 25, 2021, proposed rule to list the Amur sturgeon as an endangered species (86 FR 47457). The public hearing will not be an opportunity for dialogue with the Service, but rather a forum for accepting formal verbal testimony. In the event there is a large attendance, the time allotted for oral statements may be limited. Therefore, anyone wishing to make an oral statement at the public hearing for the record is encouraged to provide a prepared written copy of their statement to us through the Federal eRulemaking Portal or U.S. mail (see ADDRESSES , above). There are no limits on the length of written comments submitted to us. Anyone wishing to make an oral statement at the public hearing must register before the hearing ( https://www.fws.gov/event/public-hearing-proposed-listing-amur-sturgeon ). The use of a virtual public hearing is consistent with our regulations at 50 CFR 424.16(c)(3).

The Service is committed to providing access to the public hearing for all participants. Closed captioning will be available during the public hearing. Further, a full audio and video recording and transcript of the public hearing will be posted online at https://www.fws.gov/event/public-hearing-proposed-listing-amur-sturgeon after the hearing. Participants will also have access to live audio during the public hearing via their telephone or computer speakers. Persons with disabilities requiring reasonable accommodations to participate in the meeting and/or hearing should contact the person listed under FOR FURTHER INFORMATION CONTACT at least 5 business days prior to the date of the meeting and hearing to help ensure availability. An accessible version of the Service's public informational meeting presentation will also be posted online at https://www.fws.gov/event/public-hearing-proposed-listing-amur-sturgeon prior to the meeting and hearing (see DATES , above). See https://www.fws.gov/event/public-hearing-proposed-listing-amur-sturgeon for more information about reasonable accommodation.

If you submit information via https://www.regulations.gov, your entire submission—including your personal identifying information—will be posted on the website. If your submission is made via a hardcopy that includes personal identifying information, you may request at the top of your document that we withhold this information from public review. However, we cannot guarantee that we will be able to do so. We will post all hardcopy submissions on https://www.regulations.gov.

Comments and materials we receive, as well as supporting documentation we used in preparing the proposed rule, will be available for public inspection on https://www.regulations.gov.

The primary authors of this document are the staff members of the Branch of Delisting and Foreign Species, Ecological Services Program.

The authority for this action is the Endangered Species Act of 1973, as amended (16 U.S.C. 1531 et seq. ).