[Federal Register Volume 87, Number 153 (Wednesday, August 10, 2022)]
[Rules and Regulations]
[Pages 48780-49499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-16472]
[[Page 48779]]
Vol. 87
Wednesday,
No. 153
August 10, 2022
Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 412, 413, et al.
Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long Term Care Hospital Prospective
Payment System and Policy Changes and Fiscal Year 2023 Rates; Quality
Programs and Medicare Promoting Interoperability Program Requirements
for Eligible Hospitals and Critical Access Hospitals; Costs Incurred
for Qualified and Non-qualified Deferred Compensation Plans; and
Changes to Hospital and Critical Access Hospital Conditions of
Participation; Final Rule
Federal Register / Vol. 87 , No. 153 / Wednesday, August 10, 2022 /
Rules and Regulations
[[Page 48780]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 413, 482, 485, and 495
[CMS-1771-F]
RIN 0938-AU84
Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Policy Changes and Fiscal Year 2023 Rates; Quality
Programs and Medicare Promoting Interoperability Program Requirements
for Eligible Hospitals and Critical Access Hospitals; Costs Incurred
for Qualified and Non-Qualified Deferred Compensation Plans; and
Changes to Hospital and Critical Access Hospital Conditions of
Participation
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Final rule.
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SUMMARY: This final rule will: revise the Medicare hospital inpatient
prospective payment systems (IPPS) for operating and capital-related
costs of acute care hospitals; make changes relating to Medicare
graduate medical education (GME) for teaching hospitals; update the
payment policies and the annual payment rates for the Medicare
prospective payment system (PPS) for inpatient hospital services
provided by long-term care hospitals (LTCHs). In addition it will
establish new requirements and revise existing requirements for
eligible hospitals and critical access hospitals (CAHs) participating
in the Medicare Promoting Interoperability Program; and update policies
for the Hospital Readmissions Reduction Program, Hospital Inpatient
Quality Reporting (IQR) Program, Hospital VBP Program, Hospital-
Acquired Condition (HAC) Reduction Program, PPS-Exempt Cancer Hospital
Reporting (PCHQR) Program, and the Long-Term Care Hospital Quality
Reporting Program (LTCH QRP). It will also revise the hospital and
critical access hospital (CAH) conditions of participation (CoPs) for
infection prevention and control and antibiotic stewardship programs;
and codify and clarify policies related to the costs incurred for
qualified and non-qualified deferred compensation plans. Lastly, this
final rule will provide updates on the Rural Community Hospital
Demonstration Program and the Frontier Community Health Integration
Project.
DATES: This final rule is effective October 1, 2022.
FOR FURTHER INFORMATION CONTACT: Donald Thompson, and Michele Hudson,
(410) 786-4487 or [email protected], Operating Prospective Payment, MS-
DRG Relative Weights, Wage Index, Hospital Geographic
Reclassifications, Graduate Medical Education, Capital Prospective
Payment, Excluded Hospitals, Medicare Disproportionate Share Hospital
(DSH) Payment Adjustment, Sole Community Hospitals (SCHs), Medicare-
Dependent Small Rural Hospital (MDH) Program, Low-Volume Hospital
Payment Adjustment, and Critical Access Hospital (CAH) Issues.
Emily Lipkin, and Jim Mildenberger, [email protected], Long-Term Care
Hospital Prospective Payment System and MS-LTC-DRG Relative Weights
Issues.
Adina Hersko, [email protected], New Technology Add-On
Payments and New COVID-19 Treatments Add-on Payments Issues.
Mady Hue, [email protected], and Andrea Hazeley,
[email protected], MS-DRG Classifications Issues.
Siddhartha Mazumdar, siddhartha.mazumdar @cms.hhs,gov, Rural
Community Hospital Demonstration Program Issues.
Jeris Smith, [email protected], Frontier Community Health
Integration Project Demonstration Issues.
Sophia Chan, [email protected], Hospital Readmissions
Reduction Program--Administration Issues.
Tyson Nakashima, [email protected], Hospital Readmissions
Reduction Program--Measures Issues.
Jennifer Tate, [email protected], Hospital-Acquired
Condition Reduction Program--Administration Issues
Yuling Li, [email protected], Hospital-Acquired Condition
Reduction Program--Measures Issues.
Julia Venanzi, [email protected], Hospital Inpatient
Quality Reporting Program and Hospital Value-Based Purchasing Program--
Administration Issues
Melissa Hager, [email protected] and Ngozi Uzokwe,
[email protected]--Hospital Inpatient Quality Reporting Program
and Hospital Value-Based Purchasing Program--Measures Issues Except
Hospital Consumer Assessment of Healthcare Providers and Systems
Issues.
Elizabeth Goldstein, [email protected], Hospital
Inpatient Quality Reporting and Hospital Value-Based Purchasing--
Hospital Consumer Assessment of Healthcare Providers and Systems
Measures Issues.
Ora Dawedeit, [email protected], PPS-Exempt Cancer Hospital
Quality Reporting--Administration Issues.
Leah Domino, [email protected], PPS-Exempt Cancer Hospital
Quality Reporting Program-Measure Issues
Ariel Cress, [email protected], Long-Term Care Hospital
Quality Reporting Program--Data Reporting Issues.
Elizabeth Holland, [email protected], Medicare
Promoting Interoperability Program.
Dawn Linn, [email protected], Lela Strong,
[email protected], and Alpha Wilson, [email protected],
Conditions of Participation (CoP) Requirements for Hospitals and
Critical Access Hospitals (CAHs) to Continue Reporting Data for COVID-
19 and Influenza After the PHE ends as Determined by the Secretary.
SUPPLEMENTARY INFORMATION:
Tables Available Through the internet on the CMS website
The IPPS tables for this fiscal year (FY) 2023 final rule are
available through the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left side of the
screen titled ``FY 2023 IPPS Final rule Home Page'' or ``Acute
Inpatient--Files for Download.'' The LTCH PPS tables for this FY 2023
final rule are available through the internet on the CMS website at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for Regulation
Number CMS-1771-F. For further details on the contents of the tables
referenced in this final rule, we refer readers to section VI. of the
Addendum to this FY 2023 IPPS/LTCH PPS final rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS websites, as previously identified, should
contact Michael Treitel, [email protected].
Table of Contents
I. Executive Summary and Background
A. Executive Summary
B. Background Summary
C. Summary of Provisions of Recent Legislation Implemented in
This Final Rule
[[Page 48781]]
D. Issuance of Proposed Rulemaking
E. Advancing Health Information Exchange
F. Use of FY 2021 Data and Methodology Modifications for the FY
2023 IPPS and LTCH PPS Ratesetting
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
B. Adoption of the MS-DRGs and MS-DRG Reclassifications
C. FY 2023 MS-DRG Documentation and Coding Adjustment
D. Changes to Specific MS-DRG Classifications
E. Recalibration of the FY 2023 MS-DRG Relative Weights
F. Add-On Payments for New Services and Technologies for FY 2023
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
B. Worksheet S-3 Wage Data for the FY 2022 Wage Index
C. Verification of Worksheet S-3 Wage Data
D. Method for Computing the FY 2022 Unadjusted Wage Index
E. Occupational Mix Adjustment to the FY 2023 Wage Index
F. Analysis and Implementation of the Occupational Mix
Adjustment and the FY 2023 Occupational Mix Adjusted Wage Index
G. Application of the Rural Floor, Application of the State
Frontier Floor, and Continuation of the Low Wage Index Hospital
Policy, and Budget Neutrality Adjustment
H. FY 2023 Wage Index Tables
I. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
J. Out-Migration Adjustment Based on Commuting Patterns of
Hospital Employees
K. Reclassification From Urban to Rural Under Section
1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103
L. Process for Requests for Wage Index Data Corrections
M. Labor-Related Share for the FY 2023 Wage Index
IV. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) for FY 2023 (Sec. 412.106)
A. General Discussion
B. Eligibility for Empirically Justified Medicare DSH Payments
and Uncompensated Care Payments
C. Empirically Justified Medicare DSH Payments
D. Uncompensated Care Payments
E. Supplemental Payment for Indian Health Service and Tribal
Hospitals and Puerto Rico Hospitals for FY 2023 and Subsequent
Fiscal Years
F. Counting Days Associated With Section 1115 Demonstrations in
the Medicaid Fraction
V. Other Decisions and Changes to the IPPS for Operating Costs
A. Changes in the Inpatient Hospital Updates for FY 2022 (Sec.
412.64(d))
B. Rural Referral Centers (RRCs)--Annual Updates to Case-Mix
Index (CMI) and Discharge Criteria (Sec. 412.96)
C. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
D. Changes in the Medicare-Dependent, Small Rural Hospital (MDH)
Program (Sec. 412.108)
E. Indirect Medical Education (IME) Payment Adjustment Factor
(Sec. 412.105)
F. Payment for Indirect and Direct Graduate Medical Education
Costs (Sec. Sec. 412.105 and 413.75 Through 413.83)
G. Payment Adjustment for Certain Clinical Trial and Expanded
Access Use Immunotherapy Cases (Sec. Sec. 412.85 and 412.312)
H. Hospital Readmissions Reduction Program: Updates and Changes
(Sec. Sec. 412.150 Through 412.154)
I. Hospital Value-Based Purchasing (VBP) Program: Policy Changes
J. Hospital-Acquired Conditions (HAC) Reduction Program: Updates
and Changes (Sec. 412.170)
K. Rural Community Hospital Demonstration Program
VI. Changes to the IPPS for Capital-Related Costs
A. Overview
B. Additional Provisions
C. Annual Update for FY 2023
VII. Changes for Hospitals Excluded From the IPPS
A. Rate-of-Increase in Payments to Excluded Hospitals for FY
2023
B. Critical Access Hospitals (CAHs)
VIII. Changes to the Long-Term Care Hospital Prospective Payment
System (LTCH PPS) for FY 2023
A. Background of the LTCH PPS
B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights for FY 2023
C. Changes to the LTCH PPS Payment Rates and Other Changes to
the LTCH PPS for FY 2023
IX. Quality Data Reporting Requirements for Specific Providers and
Suppliers
A. Assessment of the Impact of Climate Change and Health Equity
B. Overarching Principles for Measuring Healthcare Quality
Disparities Across CMS Quality Programs--Request for Information
C. Continuing To Advance to Digital Quality Measurement and the
Use of Fast Healthcare Interoperability Resources (FHIR) in Hospital
Quality Programs--Request for Information
D. Advancing the Trusted Exchange Framework and Common
Agreement--Request for Information
E. Hospital Inpatient Quality Reporting (IQR) Program
F. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
G. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
H. Changes to the Medicare Promoting Interoperability Program
X. Changes for Hospitals and Other Providers and Suppliers
A. Codification of the Costs Incurred for Qualified and Non-
Qualified Deferred Compensation Plans
B. Condition of Participation (CoP) Requirements for Hospitals
and CAHs To Continue Reporting Data for COVID-19 and Influenza After
the PHE Ends as Determined by the Secretary
C. Request for Public Comments on IPPS Payment Adjustment for
N95 Respirators That Are Wholly Domestically Made
XI. MedPAC Recommendations
XII. Other Required Information
A. Publicly Available Files
B. Collection of Information Requirements
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
This FY 2023 IPPS/LTCH PPS final rule makes payment and policy
changes under the Medicare inpatient prospective payment systems (IPPS)
for operating and capital-related costs of acute care hospitals as well
as for certain hospitals and hospital units excluded from the IPPS. In
addition, it makes payment and policy changes for inpatient hospital
services provided by long-term care hospitals (LTCHs) under the long-
term care hospital prospective payment system (LTCH PPS). This final
rule also makes policy changes to programs associated with Medicare
IPPS hospitals, IPPS-excluded hospitals, and LTCHs. In this FY 2023
final rule, we are implementing a permanent policy to cap wage index
decreases as well as continuing policies to address wage index
disparities impacting low wage index hospitals. We also are making
changes relating to Medicare graduate medical education (GME) for
teaching hospitals and new technology add-on payments.
We are establishing new requirements and revising existing
requirements for eligible hospitals and CAHs participating in the
Medicare Promoting Interoperability Program.
This final rule also acknowledges feedback we received on requests
for information on health impacts due to climate change, on overarching
principles in measuring healthcare quality disparities in hospital
quality programs and value-based purchasing programs, the LTCH QRP, and
on advancing the Trusted Exchange Framework and Common Agreement
(TEFCA). We thank commenters for their feedback.
Additionally, due to the impact of the COVID-19 PHE on measure data
used in the Hospital VBP Program and HAC Reduction Program, we are
finalizing our proposals to suppress several measures in both of those
programs for purposes of FY 2023 scoring and payment adjustments. For
transparency, we will continue to publicly report measure information
for all measures, including suppressed measures. In addition to these
measure suppressions
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for the Hospital VBP Program, we are finalizing our proposal to
implement a special scoring methodology for FY 2023 that results in
each hospital receiving a value-based incentive payment amount that
matches their 2 percent reduction to the base operating MS-DRG payment
amount. Similarly, we are finalizing our proposal to suppress all six
measures in the HAC Reduction Program for the FY 2023 program year. We
are not finalizing our proposal to not calculate measure results or
scores for the CMS PSI 90 measure. Although we will not calculate or
report the CMS PSI 90 measure results for use in the HAC Reduction
Program scoring calculations for the program year, we will still
calculate and report CMS PSI 90 that is displayed on the main pages of
the Care Compare tool hosted by HHS after confidentially reporting
these results to hospitals via hospital-specific reports and a 30-day
preview period. Additionally, we will continue to calculate and report
measure results for the NHSN CDC HAI measures. For the FY 2023 program
year, hospitals participating in the HAC Reduction Program will not be
given a Total HAC score, nor will hospitals receive a payment penalty.
We are also providing estimated and newly established performance
standards for the Hospital VBP Program. For the Hospital Readmissions
Reduction Program, we are resuming the use of the one measure (which
was previously suppressed for the FY 2023 applicable period) for the FY
2024 applicable period, and incorporating measure updates to the six
condition/procedure measures addressed by the Hospital Readmission
Reduction Program to account for patient history of COVID-19.
Under various statutory authorities, we either discuss continued
program implementation or make changes to the Medicare IPPS, the LTCH
PPS, other related payment methodologies and programs for FY 2023 and
subsequent fiscal years, and other policies and provisions included in
this rule. These statutory authorities include, but are not limited to,
the following:
Section 1886(d) of the Social Security Act (the Act),
which sets forth a system of payment for the operating costs of acute
care hospital inpatient stays under Medicare Part A (Hospital
Insurance) based on prospectively set rates. Section 1886(g) of the Act
requires that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; cancer
hospitals; extended neoplastic disease care hospitals, and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa). Religious nonmedical
health care institutions (RNHCIs) are also excluded from the IPPS.
Sections 123(a) and (c) of the BBRA (Public Law (Pub. L.)
106-113) and section 307(b)(1) of the BIPA (Pub. L. 106-554) (as
codified under section 1886(m)(1) of the Act), which provide for the
development and implementation of a prospective payment system for
payment for inpatient hospital services of LTCHs described in section
1886(d)(1)(B)(iv) of the Act.
Sections 1814(l), 1820, and 1834(g) of the Act, which
specify that payments are made to critical access hospitals (CAHs)
(that is, rural hospitals or facilities that meet certain statutory
requirements) for inpatient and outpatient services and that these
payments are generally based on 101 percent of reasonable cost.
Section 1886(a)(4) of the Act, which specifies that costs
of approved educational activities are excluded from the operating
costs of inpatient hospital services. Hospitals with approved graduate
medical education (GME) programs are paid for the direct costs of GME
in accordance with section 1886(h) of the Act.
Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage increase that would
otherwise apply to the standardized amount applicable to a subsection
(d) hospital for discharges occurring in a fiscal year if the hospital
does not submit data on measures in a form and manner, and at a time,
specified by the Secretary.
Section 1866(k) of the Act, which provides for the
establishment of a quality reporting program for hospitals described in
section 1886(d)(1)(B)(v) of the Act, referred to as ``PPS-exempt cancer
hospitals.''
Section 1886(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program, under
which value-based incentive payments are made in a fiscal year to
hospitals meeting performance standards established for a performance
period for such fiscal year.
Section 1886(p) of the Act, which establishes a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to
applicable hospitals are adjusted to provide an incentive to reduce
hospital-acquired conditions.
Section 1886(q) of the Act, as amended by section 15002 of
the 21st Century Cures Act, which establishes the Hospital Readmissions
Reduction Program. Under the program, payments for discharges from an
applicable hospital as defined under section 1886(d) of the Act will be
reduced to account for certain excess readmissions. Section 15002 of
the 21st Century Cures Act directs the Secretary to compare hospitals
with respect to the number of their Medicare-Medicaid dual-eligible
beneficiaries (dual-eligibles) in determining the extent of excess
readmissions.
Section 1886(r) of the Act, as added by section 3133 of
the Affordable Care Act, which provides for a reduction to
disproportionate share hospital (DSH) payments under section
1886(d)(5)(F) of the Act and for a new uncompensated care payment to
eligible hospitals. Specifically, section 1886(r) of the Act requires
that, for fiscal year 2014 and each subsequent fiscal year, subsection
(d) hospitals that would otherwise receive a DSH payment made under
section 1886(d)(5)(F) of the Act will receive two separate payments:
(1) 25 percent of the amount they previously would have received under
section 1886(d)(5)(F) of the Act for DSH (``the empirically justified
amount''), and (2) an additional payment for the DSH hospital's
proportion of uncompensated care, determined as the product of three
factors. These three factors are: (1) 75 percent of the payments that
would otherwise be made under section 1886(d)(5)(F) of the Act; (2) 1
minus the percent change in the percent of individuals who are
uninsured; and (3) a hospital's uncompensated care amount relative to
the uncompensated care amount of all DSH hospitals expressed as a
percentage.
Section 1886(m)(5) of the Act, which requires the
Secretary to reduce by two percentage points the annual update to the
standard Federal rate for discharges for a long-term care hospital
(LTCH) during the rate year for LTCHs that do not submit data in the
form, manner, and at a time, specified by the Secretary.
Section 1886(m)(6) of the Act, as added by section
1206(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act
of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the
Bipartisan Budget Act of 2018 (Pub.
[[Page 48783]]
L. 115-123), which provided for the establishment of site neutral
payment rate criteria under the LTCH PPS, with implementation beginning
in FY 2016. Section 51005(b) of the Bipartisan Budget Act of 2018
amended section 1886(m)(6)(B) by adding new clause (iv), which
specifies that the IPPS comparable amount defined in clause (ii)(I)
shall be reduced by 4.6 percent for FYs 2018 through 2026.
Section 1899B of the Act, as added by section 2(a) of the
Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT
Act) (Pub. L. 113-185), which provides for the establishment of
standardized data reporting for certain post-acute care providers,
including LTCHs.
Section 1861(e) of the Act provides the specific statutory
authority for the hospital CoPs; section 1820(e) of the Act provides
similar authority for CAHs. The hospital provision at section
1861(e)(9) of the Act authorizes the Secretary to issue regulations the
Secretary deems necessary to protect the health and safety of patients
receiving services in those facilities; the CAH provision at section
1820(e)(3) of the Act authorizes the Secretary to issue such other
criteria as the Secretary may require.
2. Summary of the Major Provisions
The following is a summary of the major provisions in this final
rule. In general, these major provisions are being finalized as part of
the annual update to the payment policies and payment rates, consistent
with the applicable statutory provisions. A general summary of the
changes in this final rule is presented in section I.D. of the preamble
of this final rule.
a. MS-DRG Documentation and Coding Adjustment
Section 631 of the American Taxpayer Relief Act of 2012 (ATRA, Pub.
L. 112- 240) amended section 7(b)(1)(B) of Pub. L. 110-90 to require
the Secretary to make a recoupment adjustment to the standardized
amount of Medicare payments to acute care hospitals to account for
changes in MS-DRG documentation and coding that do not reflect real
changes in case-mix, totaling $11 billion over a 4-year period of FYs
2014, 2015, 2016, and 2017. The FY 2014 through FY 2017 adjustments
represented the amount of the increase in aggregate payments as a
result of not completing the prospective adjustment authorized under
section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the
ATRA, this amount could not have been recovered under Public Law 110-
90. Section 414 of the Medicare Access and CHIP Reauthorization Act of
2015 (MACRA) (Pub. L. 114-10) replaced the single positive adjustment
we intended to make in FY 2018 with a 0.5 percent positive adjustment
to the standardized amount of Medicare payments to acute care hospitals
for FYs 2018 through 2023. (The FY 2018 adjustment was subsequently
adjusted to 0.4588 percent by section 15005 of the 21st Century Cures
Act.) Therefore, for FY 2023, we are making an adjustment of + 0.5
percent to the standardized amount.
b. Use of FY 2021 Data and Methodology Modifications for the FY 2023
IPPS and LTCH PPS Ratesetting
For the IPPS and LTCH PPS ratesetting, our longstanding goal is
always to use the best available data overall. In section I.F. of the
preamble of this final rule, we discuss our return to our historical
practice of using the most recent data available for purposes of FY
2023 ratesetting, including the FY 2021 MedPAR claims and FY 2020 cost
report data, with certain modifications to our usual ratesetting
methodologies to account for the anticipated decline in COVID-19
hospitalizations of Medicare beneficiaries at IPPS hospitals and LTCHs
as compared to FY 2021. As discussed in greater detail in section I.F.
of the preamble of this final rule, we believe that it is reasonable to
assume that some Medicare beneficiaries will continue to be
hospitalized with COVID-19 at IPPS hospitals and LTCHs in FY 2023.
Given this expectation, we believe it is appropriate to use FY 2021
data, as the most recent available data during the period of the COVID-
19 PHE, for purposes of the FY 2023 IPPS and LTCH PPS ratesetting.
However, as also discussed in greater detail in section I.F. of the
preamble of this final rule, we believe it is reasonable to assume
based on the information available at this time that there will be
fewer COVID-19 hospitalizations in FY 2023 than in FY 2021. Therefore,
we are finalizing our proposal to use the FY 2021 data for purposes of
the FY 2023 IPPS and LTCH PPS ratesetting but with modifications to our
usual ratesetting methodologies to account for the anticipated decline
in COVID-19 hospitalizations of Medicare beneficiaries at IPPS
hospitals and LTCHs as compared to FY 2021.
c. Continuation of the Low Wage Index Hospital Policy
To help mitigate wage index disparities between high wage and low
wage hospitals, in the FY 2020 IPPS/LTCH PPS rule (84 FR 42326 through
42332), we adopted a policy to increase the wage index values for
certain hospitals with low wage index values (the low wage index
hospital policy). This policy was adopted in a budget neutral manner
through an adjustment applied to the standardized amounts for all
hospitals. We also indicated our intention that this policy would be
effective for at least 4 years, beginning in FY 2020, in order to allow
employee compensation increases implemented by these hospitals
sufficient time to be reflected in the wage index calculation. We are
finalizing our proposals for the low wage index hospital policy to
continue for FY 2023, and to apply this policy in a budget neutral
manner by applying an adjustment to the standardized amounts.
d. Permanent Cap on Wage Index Decreases
Consistent with section 1886(d)(3)(E) of the Act, we adjust the
IPPS standardized amounts for area differences in hospital wage levels
by a factor (established by the Secretary) reflecting the relative
hospital wage level in the geographic area of the hospital compared to
the national average hospital wage level and update the wage index
annually based on a survey of wages and wage-related costs of short-
term, acute care hospitals. As described in section III.N. of the
preamble of this final rule, we have further considered the comments we
received during the FY 2022 rulemaking recommending a permanent 5-
percent cap policy to prevent large year-to-year variations in wage
index values as a means to reduce overall volatility for hospitals.
Under the authority at sections 1886(d)(3)(E) and 1886(d)(5)(I)(i) of
the Act, for FY 2023 and subsequent years, we proposed to apply a 5-
percent cap on any decrease to a hospital's wage index from its wage
index in the prior FY, regardless of the circumstances causing the
decline. That is, we proposed that a hospital's wage index for FY 2023
would not be less than 95 percent of its final wage index for FY 2022,
and that for subsequent years, a hospital's wage index would not be
less than 95 percent of its final wage index for the prior FY. We also
proposed to apply the proposed wage index cap policy in a budget
neutral manner through a national adjustment to the standardized amount
under our authority in sections 1886(d)(3)(E) and 1886(d)(5)(I)(i) of
the Act. After consideration of the public comments received, we are
finalizing these proposals without modification.
e. Application of the Rural Floor
As discussed in section III.G.1. of the preamble of this final
rule, based on the
[[Page 48784]]
district court's decision in Citrus HMA, LLC, d/b/a Seven Rivers
Regional Medical Center v. Becerra, No. 1:20-cv-00707 (D.D.C.)
(hereafter referred to as Citrus) and the comments we received, we are
not finalizing our rural floor wage index policy as proposed, which
would have excluded Sec. 412.103 hospitals from the calculation of the
rural floor and from the calculation of ``the wage index for rural
areas in the State in which the county is located'' as referred to in
section 1886(d)(8)(C)(iii) of the Act. Rather, we are finalizing a
policy that calculates the rural floor as it was calculated before FY
2020. For FY 2023 and subsequent years, we are finalizing a policy to
include the wage data of hospitals that have reclassified from urban to
rural under section 1886(d)(8)(E) of the Act (as implemented in the
regulations at Sec. 412.103) and have no additional form of
reclassification (MGCRB or Lugar) in the calculation of the rural
floor, and to include the wage data of such hospitals in the
calculation of ``the wage index for rural areas in the State in which
the county is located'' as referred to in section 1886(d)(8)(C)(iii) of
the Act.
f. DSH Payment Adjustment and Additional Payment for Uncompensated Care
Under section 1886(r) of the Act, which was added by section 3133
of the Affordable Care Act, starting in FY 2014, Medicare
disproportionate share hospitals (DSHs) receive 25 percent of the
amount they previously would have received under the statutory formula
for Medicare DSH payments in section 1886(d)(5)(F) of the Act. The
remaining amount, equal to 75 percent of the amount that otherwise
would have been paid as Medicare DSH payments, is paid as additional
payments after the amount is reduced for changes in the percentage of
individuals that are uninsured. Each Medicare DSH will receive an
additional payment based on its share of the total amount of
uncompensated care for all Medicare DSHs for a given time period.
In this final rule, we are updating our estimates of the three
factors used to determine uncompensated care payments for FY 2023. We
are also continuing to use uninsured estimates produced by CMS' Office
of the Actuary (OACT) as part of the development of the National Health
Expenditure Accounts (NHEA) in conjunction with more recently available
data in the calculation of Factor 2. For FY 2023, we are using the 2
most recent years of audited data on uncompensated care costs from
Worksheet S-10 of the FY 2018 cost reports and the FY 2019 cost reports
to calculate Factor 3 in the uncompensated care payment methodology for
all eligible hospitals. In addition, for FY 2024 and subsequent fiscal
years, we are using a 3-year average of the data on uncompensated care
costs from Worksheet S-10 for the 3 most recent fiscal years for which
audited data are available. Beginning in FY 2023, we are discontinuing
the use of low-income insured days as a proxy for uncompensated care to
determine Factor 3 for Indian Health Service (IHS) and Tribal hospitals
and hospitals located in Puerto Rico. In addition, we are implementing
certain methodological changes for calculating Factor 3 for FY 2023 and
subsequent fiscal years.
We recognize that discontinuing the use of the low-income insured
days proxy to calculate uncompensated care payments for Indian Health
Service (IHS) and Tribal hospitals and hospitals located in Puerto Rico
could result in a significant financial disruption for these hospitals.
Accordingly, we are using our exceptions and adjustments authority
under section 1886(d)(5)(I) of the Act to establish a new supplemental
payment for IHS and Tribal hospitals and hospitals located in Puerto
Rico, beginning in FY 2023.
As noted in section IV.F. of this final rule, we are not moving
forward with the proposed revisions to the regulations relating to the
treatment of section 1115 demonstration days for purposes of the DSH
adjustment in this final rule. We expect to revisit the issue of
section 1115 demonstration days in future rulemaking, and we encourage
interested parties to review any future proposal on this issue and to
submit their comments at that time.
g. Changes to GME Payments Based on Milton S. Hershey Medical Center,
et al. v. Becerra Litigation
On May 17, 2021, the U.S. District Court for the District of
Columbia ruled against CMS's method of calculating direct GME payments
to teaching hospitals when those hospitals' weighted full-time
equivalent (FTE) counts exceed their direct GME FTE cap. In Milton S.
Hershey Medical Center, et al. v. Becerra, the court ordered CMS to
recalculate reimbursement owed, holding that CMS's regulation
impermissibly modified the statutory weighting factors. The plaintiffs
in these consolidated cases alleged that as far back as 2005, the
proportional reduction that CMS applied to the weighted FTE count when
the weighted FTE count exceeded the FTE cap conflicted with the
Medicare statute, and it was an arbitrary and capricious exercise of
agency discretion under the Administrative Procedure Act. The court
held that the proportional reduction methodology impermissibly modified
the weighting factors statutorily assigned to residents and fellows.
The court granted the motion for summary judgment to plaintiffs'
motions, denied defendant's, and remanded to the Agency so that it
could recalculate plaintiffs' reimbursement payments consistent with
the court's opinion.
After reviewing the statutory language regarding the direct GME FTE
cap and the court's opinion, we have decided implement a modified
policy to be applied prospectively for all teaching hospitals, as well
as retroactively to the providers and cost years in Hershey and certain
other providers as described in greater detail in section V.F.2. of the
preamble of this final rule. The modified policy will address
situations for applying the FTE cap when a hospital's weighted FTE
count is greater than its FTE cap, but would not reduce the weighting
factor of residents that are beyond their initial residency period to
an amount less than 0.5. Specifically, effective for cost reporting
periods beginning on or after October 1, 2001, we are specifying that
if the hospital's unweighted number of FTE residents exceeds the FTE
cap, and the number of weighted FTE residents also exceeds that FTE
cap, the respective primary care and obstetrics and gynecology weighted
FTE counts and other weighted FTE counts are adjusted to make the total
weighted FTE count equal the FTE cap. If the number of weighted FTE
residents does not exceed that FTE cap, then the allowable weighted FTE
count for direct GME payment is the actual weighted FTE count.
h. Reduction of Hospital Payments for Excess Readmissions
We are making changes to policies for the Hospital Readmissions
Reduction Program, which was established under section 1886(q) of the
Act, as amended by section 15002 of the 21st Century Cures Act. The
Hospital Readmissions Reduction Program requires a reduction to a
hospital's base operating MS-DRG payment to account for excess
readmissions of selected applicable conditions. For FY 2023, the
reduction is based on a hospital's risk-adjusted readmission rate
during a multi-year period for acute myocardial infarction (AMI), heart
failure (HF), chronic obstructive pulmonary disease (COPD), elective
primary total hip arthroplasty/total knee arthroplasty (THA/TKA), and
coronary artery bypass graft (CABG)
[[Page 48785]]
surgery.\1\ In this FY 2023 IPPS/LTCH PPS final rule, we are discussing
the following policies: (1) resuming use of the Hospital 30-Day, All-
Cause, Risk-Standardized Readmission Rate (RSRR) following Pneumonia
Hospitalization measure (NQF #0506) for the FY 2024 program year; (2)
modification of the Hospital 30-Day, All-Cause, Risk-Standardized
Readmission Rate (RSRR) following Pneumonia Hospitalization measure
(NQF #0506) to exclude patients with COVID-19 diagnosis present on
admission from the measure numerator (outcome) and denominator
(cohort),\2\ beginning with the Hospital Specific Reports (HSRs) for
the FY 2023 program year; and (3) modification of all six condition/
procedure specific measures to include a covariate adjustment for
patient history of COVID-19 within 12 months prior to the index
admission beginning with the FY 2023 program year. In the FY 2023 IPPS/
LTCH PPS proposed rule we also sought comment on updating the Hospital
Readmissions Reduction Program to incorporate provider performance for
socially at-risk populations.
---------------------------------------------------------------------------
\1\ We note that in the FY 2023 IPPS/LTCH PPS proposed rule we
described the policy for FY 2017 and subsequent years, without
reference to flexibility due to the COVID-19 PHE. We have updated
this information to describe the policy for FY 2023.
\2\ We note that in the FY 2023 IPPS/LTCH PPS proposed rule (87
FR 28113) we inadvertently omitted reference to removing COVID-19
diagnosed patients from the numerator. We have corrected this
omission here.
---------------------------------------------------------------------------
i. Hospital Value-Based Purchasing (VBP) Program
Section 1886(o) of the Act requires the Secretary to establish a
Hospital VBP Program under which value-based incentive payments are
made in a fiscal year to hospitals based on their performance on
measures established for a performance period for such fiscal year. In
this final rule, we are finalizing our proposals to: (1) suppress the
Hospital Consumer Assessment of Healthcare Providers and Systems
(HCAHPS) and five Hospital-Acquired Infection (HAI) measures for the FY
2023 program year; and (2) update the baseline periods for certain
measures for the FY 2025 program year. We are also finalizing our
proposal to revise the scoring and payment methodology for the FY 2023
program year such that hospitals will not receive Total Performance
Scores (TPSs). Additionally, we are finalizing our proposal to award
each hospital a payment incentive multiplier that results in a value-
based incentive payment that is equal to the amount withheld for the
fiscal year (2 percent). We note that we are also announcing technical
updates to the measures in the Clinical Outcomes Domain.
j. Hospital-Acquired Condition (HAC) Reduction Program
In this FY 2023 IPPS/LTCH PPS final rule we are finalizing several
changes to the HAC Reduction Program, which was established under
section 1886(p) of the Act, to provide an incentive to hospitals to
reduce the incidence of hospital-acquired conditions. We refer readers
to the FY 2022 IPPS/LTCH PPS final rule for further details on our
measure suppression policy (86 FR 45301 through 45304). In this FY 2023
IPPS/LTCH PPS final rule, we are not finalizing our proposal to not
calculate or report measure results for the CMS PSI 90 measure for the
FY 2023 HAC Reduction Program. Although we will not calculate or report
CMS PSI 90 measure results for use in the HAC Reduction Program scoring
calculations for the program year, we will still calculate and report
CMS PSI 90 that is displayed on the main pages of the Compare tool
hosted by HHS after confidentially reporting these results to hospitals
via CMS PSI 90 specific HSRs and a 30-day preview period. We will
continue to calculate and report measure results for the NHSN CDC HAI
measures.
In this FY 2023 IPPS/LTCH PPS final rule, we are finalizing our
proposals to: (1) suppress the CMS PSI 90 measure and the five CDC NHSN
HAI measures from the calculation of measure scores and the Total HAC
Score, thereby not penalizing any hospital under the HAC Reduction
Program FY 2023 program year; (2) suppress CY 2021 CDC NHSN HAI
measures data from the FY 2024 HAC Reduction Program Year; (3) update
the measure specification to the minimum volume threshold for the CMS
PSI 90 measure beginning with the FY 2023 program year; (4) update the
measure specifications to risk-adjust for COVID-19 diagnosis in the CMS
PSI 90 measure beginning with the FY 2024 HAC Reduction Program Year;
and (5) update the NHSN CDC HAI data submission requirements for newly
opened hospitals beginning in the FY 2024 HAC Reduction Program.
In this FY 2023 IPPS/LTCH PPS final rule, we acknowledge feedback
we received on Requests for Information from stakeholders on two
topics: (1) the potential adoption of two digital National Healthcare
Safety Network (NHSN) measures: the NHSN Healthcare-associated
Clostridioides difficile Infection Outcome measure and NHSN Hospital-
Onset Bacteremia & Fungemia Outcome measure; and (2) on overarching
principles for measuring healthcare quality disparities across CMS
Quality Programs. In the FY 2023 IPPS/LTCH PPS proposed rule and this
final rule, we also clarified the removal of the no mapped location
policy beginning with the FY 2023 program year.
k. Hospital Inpatient Quality Reporting (IQR) Program
Under section 1886(b)(3)(B)(viii) of the Act, subsection (d)
hospitals are required to report data on measures selected by the
Secretary for a fiscal year in order to receive the full annual
percentage increase.
In this FY 2023 IPPS/LTCH PPS final rule, we are finalizing several
changes to the Hospital IQR Program. We are adopting 10 new measures:
(1) Hospital Commitment to Health Equity beginning with the CY 2023
reporting period/FY 2025 payment determination; (2) Screening for
Social Drivers of Health beginning with voluntary reporting for the CY
2023 reporting period and mandatory reporting beginning with the CY
2024 reporting period/FY 2026 payment determination; (3) Screen
Positive Rate for Social Drivers of Health beginning with voluntary
reporting for the CY 2023 reporting period and mandatory reporting
beginning with the CY 2024 reporting period/FY 2026 payment
determination; (4) Cesarean Birth electronic clinical quality measure
(eCQM) with inclusion in the eCQM measure set beginning with the CY
2023 reporting period/FY 2025 payment determination, and mandatory
reporting beginning with the CY 2024 reporting period/FY 2026 payment
determination; (5) Severe Obstetric Complications eCQM with inclusion
in the eCQM measure set beginning with the CY 2023 reporting period/FY
2025 payment determination, and mandatory reporting beginning with the
CY 2024 reporting period/FY 2026 payment determination; (6) Hospital-
Harm--Opioid-Related Adverse Events eCQM (NQF #3501e) inclusion in the
eCQM measure set beginning with the CY 2024 reporting period/FY 2026
payment determination; (7) Global Malnutrition Composite Score eCQM
(NQF #3592e) inclusion in the eCQM measure set beginning with the CY
2024 reporting period/FY 2026 payment determination; (8) Hospital-
Level, Risk Standardized Patient-Reported Outcomes Performance Measure
Following Elective Primary Total Hip Arthroplasty (THA) and/or Total
Knee Arthroplasty (TKA) (NQF #3559) beginning with two voluntary
periods, followed by mandatory reporting for the
[[Page 48786]]
reporting period which runs from July 1, 2025 through June 30, 2026,
impacting the FY 2028 payment determination; (9) Medicare Spending Per
Beneficiary (MSPB) Hospital measure (NQF #2158) beginning with the FY
2024 payment determination; and (10) Hospital-Level Risk-Standardized
Complication Rate (RSCR) Following Elective Primary THA/TKA (NQF #1550)
beginning with the FY 2024 payment determination. We are refining two
current measures beginning with the FY 2024 payment determination: (1)
Hospital[hyphen]Level, Risk[hyphen]Standardized Payment Associated with
an Episode-of-Care for Primary Elective THA/TKA measure; and (2) Excess
Days in Acute Care (EDAC) After Hospitalization for Acute Myocardial
Infarction (AMI) measure (NQF #2881). In this FY 2023 IPPS/LTCH PPS
final rule, we acknowledge feedback we received on the potential future
development and inclusion of two National Healthcare Safety Network
(NHSN) measures: (1) Healthcare-Associated Clostridioides difficile
Infection Outcome; and (2) Hospital-Onset Bacteremia & Fungemia
Outcome. We thank commenters for their feedback.
We are finalizing changes to current policies related to eCQMs and
hybrid measures: (1) Modification of the eCQM reporting and submission
requirements to increase the number of eCQMs to be reported beginning
with the CY 2024 reporting period/FY 2026 payment determination; (2)
removal of the zero denominator declarations and case threshold
exemption policies for hybrid measures beginning with the FY 2026
payment determination; (3) adoption of data submission and reporting
requirements for patient-reported outcome-based performance measures
(PRO-PMs) beginning with the FY 2026 payment determination; and (4)
modification of the eCQM validation policy to increase the requirement
from 75 percent to 100 percent of requested medical records, beginning
with the FY 2025 payment determination.
With respect to public reporting, we are establishing a hospital
designation related to maternity care to be publicly-reported on a
public-facing website beginning in Fall 2023. In the FY 2023 IPPS/PPS
LTCH PPS proposed rule, we sought comments on other potential
associated activities regarding this designation (87 FR 28549 through
28550). Additionally, we sought comments on ongoing ways we can advance
digital quality measurement and use of Fast Healthcare Interoperability
Resources (FHIR) (87 FR 28486 through 28489). We thank commenters for
their feedback.
l. PPS-Exempt Cancer Hospital Quality Reporting Program
Section 1866(k)(1) of the Act requires, for purposes of FY 2014 and
each subsequent fiscal year, that a hospital described in section
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH)
submit data in accordance with section 1866(k)(2) of the Act with
respect to such fiscal year. There is no financial impact to PCH
Medicare payment if a PCH does not participate.
In this FY 2023 IPPS/LTCH PPS final rule, we are finalizing our
proposal to adopt a patient safety exception into the measure removal
policy. We are also finalizing our proposal to begin public display of
the 30-Day Unplanned Readmissions for Cancer Patients measure (NQF
#3188) (PCH-36). We are finalizing with modification our proposal to
begin public display of the Proportion of Patients Who Died from Cancer
Receiving Chemotherapy in the Last 14 Days of Life measure (NQF #0210)
(PCH-32), the Proportion of Patients Who Died from Cancer Not Admitted
to Hospice measure (NQF #0215) (PCH-34), the Proportion of Patients Who
Died from Cancer Admitted to the ICU in the Last 30 Days of Life
measure (NQF #0213) (PCH-33), and the Proportion of Patients Who Died
from Cancer Admitted to Hospice for Less Than Three Days measure (NQF
#0216) (PCH-35). In addition, along with the Hospital IQR and HAC
Reduction Programs, we respond to comments received on our request for
comment on the potential adoption of two digital National Healthcare
Safety Network (NHSN) measures: the NHSN Healthcare-associated
Clostridioides difficile Infection Outcome measure and NHSN Hospital-
Onset Bacteremia and Fungemia Outcome measure.
m. Medicare Promoting Interoperability Program
For CY 2023, we are finalizing several proposed changes to the
Medicare Promoting Interoperability Program. Specifically, we are: (1)
requiring the Electronic Prescribing Objective's Query of Prescription
Drug Monitoring Program (PDMP) measure while maintaining the associated
points at 10 points beginning with the EHR reporting period in CY 2023;
(2) expanding the Query of PDMP measure to not only include Schedule II
opioids but also Schedule III and IV drugs beginning with the CY 2023
EHR reporting period and are adding exclusions; (3) adding a new Health
Information Exchange (HIE) Objective option, the Enabling Exchange
under the Trusted Exchange Framework and Common Agreement (TEFCA)
measure (requiring a yes/no response), as an optional alternative to
fulfill the objective, beginning with the CY 2023 EHR reporting period;
(4) modifying the Public Health and Clinical Data Exchange Objective by
adding an Antibiotic Use and Antibiotic Resistance (AUR) measure in
addition to the current four required measures (Syndromic Surveillance
Reporting, Immunization Registry Reporting, Electronic Case Reporting,
and Electronic Reportable Laboratory Result Reporting) beginning with
the CY 2024 EHR reporting period; (5) consolidating the current options
from three to two levels of active engagement for the Public Health and
Clinical Data Exchange Objective, requiring the reporting of the active
engagement option selected for the measures under the objective
beginning with the CY 2023 EHR reporting period, and modifying the
amount of time spent at the option 1 level of active engagement (pre-
production and validation) to one EHR reporting period beginning with
the CY 2024 EHR reporting period; (6) modifying the scoring methodology
for the Medicare Promoting Interoperability Program beginning in CY
2023; (7) instituting public reporting of certain Medicare Promoting
Interoperability Program data beginning with the CY 2023 EHR reporting
period; (8) removing regulation text for the objectives and measures in
the Medicare Promoting Interoperability Program from paragraph (e)
under 42 CFR 495.24 and adding new paragraph (f) beginning in CY 2023;
and (9) adopting two new eCQMs in the Medicare Promoting
Interoperability Program's eCQM measure set beginning with the CY 2023
reporting period, two new eCQMs in the Medicare Promoting
Interoperability Program's eCQM measure set beginning with the CY 2024
reporting period, and modifying the eCQM data reporting and submission
requirements to increase the number of eCQMs required to be reported
and the total number of eCQMs to be reported beginning with the CY 2024
reporting period, which is in alignment with the eCQM updates finalized
for the Hospital IQR Program.
n. Condition of Participation (CoP) Requirements for Hospitals and CAHs
to Continue Reporting Data for COVID-19 and Influenza After the PHE
ends as Determined by the Secretary
In this final rule, we are revising the hospital and CAH infection
prevention and control CoP requirements to continue COVID-19-related
reporting requirements commencing either upon the conclusion of the
current COVID-19 PHE declaration or the effective date of
[[Page 48787]]
this proposed rule, whichever is later, and lasting until April 30,
2024 (unless the Secretary determines an earlier end date). We have
withdrawn our proposal to establish additional data reporting
requirements to address future PHEs related to epidemics and infectious
diseases.
3. Summary of Costs and Benefits
The following table provides a summary of the costs, savings, and
benefits associated with the major provisions described in section
I.A.3. of the preamble of this final rule.
[[Page 48788]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.000
[[Page 48789]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.001
[[Page 48790]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.002
[[Page 48791]]
B. Background Summary
1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Act sets forth a system of payment for the
operating costs of acute care hospital inpatient stays under Medicare
Part A (Hospital Insurance) based on prospectively set rates. Section
1886(g) of the Act requires the Secretary to use a prospective payment
system (PPS) to pay for the capital-related costs of inpatient hospital
services for these ``subsection (d) hospitals.'' Under these PPSs,
Medicare payment for hospital inpatient operating and capital-related
costs is made at predetermined, specific rates for each hospital
discharge. Discharges are classified according to a list of diagnosis-
related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the
DRG relative weight.
If the hospital treats a high percentage of certain low-income
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the
disproportionate share hospital (DSH) adjustment, provides for a
percentage increase in Medicare payments to hospitals that qualify
under either of two statutory formulas designed to identify hospitals
that serve a disproportionate share of low-income patients. For
qualifying hospitals, the amount of this adjustment varies based on the
outcome of the statutory calculations. The Affordable Care Act revised
the Medicare DSH payment methodology and provides for a new additional
Medicare payment beginning on October 1, 2013, that considers the
amount of uncompensated care furnished by the hospital relative to all
other qualifying hospitals.
If the hospital is training residents in an approved residency
program(s), it receives a percentage add-on payment for each case paid
under the IPPS, known as the indirect medical education (IME)
adjustment. This percentage varies, depending on the ratio of residents
to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. In general, to qualify, a new technology or medical
service must demonstrate that it is a substantial clinical improvement
over technologies or services otherwise available, and that, absent an
add-on payment, it would be inadequately paid under the regular DRG
payment. In addition, certain transformative new devices and certain
antimicrobial products may qualify under an alternative inpatient new
technology add-on payment pathway by demonstrating that, absent an add-
on payment, they would be inadequately paid under the regular DRG
payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments and, beginning in FY 2023 for IHS and Tribal hospitals and
hospitals located in Puerto Rico, the new supplemental payment.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate, which
is determined from their costs in a base year. For example, sole
community hospitals (SCHs) receive the higher of a hospital-specific
rate based on their costs in a base year (the highest of FY 1982, FY
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the
standardized amount. SCHs are the sole source of care in their areas.
Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a
hospital that is located more than 35 road miles from another hospital
or that, by reason of factors such as an isolated location, weather
conditions, travel conditions, or absence of other like hospitals (as
determined by the Secretary), is the sole source of hospital inpatient
services reasonably available to Medicare beneficiaries. In addition,
certain rural hospitals previously designated by the Secretary as
essential access community hospitals are considered SCHs.
Under current law, the Medicare-dependent, small rural hospital
(MDH) program is effective through FY 2022. For discharges occurring on
or after October 1, 2007, but before October 1, 2022, an MDH receives
the higher of the Federal rate or the Federal rate plus 75 percent of
the amount by which the Federal rate is exceeded by the highest of its
FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major
source of care for Medicare beneficiaries in their areas. Section
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is
located in a rural area (or, as amended by the Bipartisan Budget Act of
2018, a hospital located in a State with no rural area that meets
certain statutory criteria), has not more than 100 beds, is not an SCH,
and has a high percentage of Medicare discharges (not less than 60
percent of its inpatient days or discharges in its cost reporting year
beginning in FY 1987 or in two of its three most recently settled
Medicare cost reporting years). As section 50205 of the Bipartisan
Budget Act extended the MDH program through FY 2022 only, for FY 2023,
beginning on October 1, 2022, the MDH program will no longer be in
effect absent a change in law. Because the MDH program is not
authorized by statute beyond September 30, 2022, beginning October 1,
2022, all hospitals that previously qualified for MDH status under
section 1886(d)(5)(G) of the Act will no longer have MDH status and
will be paid based on the IPPS Federal rate.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services in accordance with
a prospective payment system established by the Secretary. The basic
methodology for determining capital prospective payments is set forth
in our regulations at 42 CFR 412.308 and 412.312. Under the capital
IPPS, payments are adjusted by the same DRG for the case as they are
under the operating IPPS. Capital IPPS payments are also adjusted for
IME and DSH, similar to the adjustments made under the operating IPPS.
In addition, hospitals may receive outlier payments for those cases
that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Inpatient rehabilitation facility (IRF)
hospitals and units; long-term care hospitals (LTCHs); psychiatric
hospitals and units; children's hospitals; cancer hospitals; extended
neoplastic disease care hospitals, and hospitals located outside the 50
States, the District of Columbia, and Puerto Rico (that is, hospitals
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands,
and American Samoa). Religious nonmedical health care
[[Page 48792]]
institutions (RNHCIs) are also excluded from the IPPS. Various sections
of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), the
Medicare, Medicaid and SCHIP [State Children's Health Insurance
Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub. L. 106-
113), and the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA, Pub. L. 106-554) provide for the
implementation of PPSs for IRF hospitals and units, LTCHs, and
psychiatric hospitals and units (referred to as inpatient psychiatric
facilities (IPFs)). (We note that the annual updates to the LTCH PPS
are included along with the IPPS annual update in this document.
Updates to the IRF PPS and IPF PPS are issued as separate documents.)
Children's hospitals, cancer hospitals, hospitals located outside the
50 States, the District of Columbia, and Puerto Rico (that is,
hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa), and RNHCIs continue to be paid
solely under a reasonable cost-based system, subject to a rate-of-
increase ceiling on inpatient operating costs. Similarly, extended
neoplastic disease care hospitals are paid on a reasonable cost basis,
subject to a rate-of-increase ceiling on inpatient operating costs.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective
for cost reporting periods beginning on or after October 1, 2002. The
LTCH PPS was established under the authority of sections 123 of the
BBRA and section 307(b) of the BIPA (as codified under section
1886(m)(1) of the Act). Section 1206(a) of the Pathway for SGR Reform
Act of 2013 (Pub. L. 113-67) established the site neutral payment rate
under the LTCH PPS, which made the LTCH PPS a dual rate payment system
beginning in FY 2016. Under this statute, effective for LTCH's cost
reporting periods beginning in FY 2016 cost reporting period, LTCHs are
generally paid for discharges at the site neutral payment rate unless
the discharge meets the patient criteria for payment at the LTCH PPS
standard Federal payment rate. The existing regulations governing
payment under the LTCH PPS are located in 42 CFR part 412, subpart O.
Beginning October 1, 2009, we issue the annual updates to the LTCH PPS
in the same documents that update the IPPS.
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments made
to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v) of the Act and existing regulations under 42 CFR part 413.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR part 413.
C. Summary of Provisions of Recent Legislation Implemented in This
Final Rule
1. The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L.
114-10)
Section 414 of the Medicare Access and CHIP Reauthorization Act of
2015 (MACRA, Pub. L. 114-10) specifies a 0.5 percent positive
adjustment to the standardized amount of Medicare payments to acute
care hospitals for FYs 2018 through 2023. These adjustments follow the
recoupment adjustment to the standardized amounts under section 1886(d)
of the Act based upon the Secretary's estimates for discharges
occurring from FYs 2014 through 2017 to fully offset $11 billion, in
accordance with section 631 of the ATRA. The FY 2018 adjustment was
subsequently adjusted to 0.4588 percent by section 15005 of the 21st
Century Cures Act.
D. Issuance of Proposed Rulemaking
In the FY 2023 IPPS/LTCH PPS proposed rule appearing in the May 10,
2022 Federal Register (87 FR 28108), we set forth proposed payment and
policy changes to the Medicare IPPS for FY 2023 operating costs and
capital-related costs of acute care hospitals and certain hospitals and
hospital units that are excluded from IPPS. In addition, we set forth
proposed changes to the payment rates, factors, and other payment and
policy-related changes to programs associated with payment rate
policies under the LTCH PPS for FY 2023.
The following is a general summary of the changes that we proposed
to make.
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of the proposed rule, we include the
following:
Proposed changes to MS-DRG classifications based on our
yearly review for FY 2023.
Proposed adjustment to the standardized amounts under
section 1886(d) of the Act for FY 2023 in accordance with the
amendments made to section 7(b)(1)(B) of Public Law 110-90 by section
414 of the MACRA.
Proposed recalibration of the MS-DRG relative weights,
including a proposed 10-percent cap on decreases in an MS-DRG relative
weight from one fiscal year to the next.
A discussion of the proposed FY 2023 status of new
technologies approved for add-on payments for FY 2022, a presentation
of our evaluation and analysis of the FY 2023 applicants for add-on
payments for high-cost new medical services and technologies (including
public input, as directed by Pub. L. 108-173, obtained in a town hall
meeting) for applications not submitted under an alternative pathway,
and a discussion of the proposed status of FY 2023 new technology
applicants under the alternative pathways for certain medical devices
and certain antimicrobial products.
A proposal to use National Drug Codes (NDCs) to identify
cases involving use of therapeutic agents approved for new technology
add-on payments.
A proposal to publicly post online future applications for
new technology add-on payments. Specifically, beginning with the FY
2024 application cycle, we proposed to post online the completed
application forms and certain related materials and updated application
information submitted subsequent to the initial application submission
for new technology add-on payments, with the exception of certain cost
and volume information and certain additional materials (as discussed
more fully in section II.F.9. of the proposed rule), no later than the
issuance of the proposed rule.
[[Page 48793]]
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble of the proposed rule, we proposed
to make revisions to the wage index for acute care hospitals and the
annual update of the wage data. Specific issues addressed include, but
were not limited to, the following:
The proposed FY 2023 wage index update using wage data
from cost reporting periods beginning in FY 2019.
Calculation, analysis, and implementation of the proposed
occupational mix adjustment to the wage index for acute care hospitals
for FY 2023 based on the 2019 Occupational Mix Survey.
Proposed application of the rural, imputed and frontier
State floors, and continuation of the low wage index hospital policy.
Proposed revisions to the wage index for acute care
hospitals, based on hospital redesignations and reclassifications under
sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.
Proposed adjustment to the wage index for acute care
hospitals for FY 2023 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
Proposed permanent cap on annual wage index decreases.
Proposed labor-related share for the proposed FY 2023 wage
index.
3. Other Decisions and Proposed Changes to the IPPS for Operating Costs
In section V. of the preamble of the proposed rule, we discuss
proposed changes or clarifications of a number of the provisions of the
regulations in 42 CFR parts 412 and 413, including the following:
Proposed inpatient hospital update for FY 2023.
Proposed updated national and regional case-mix values and
discharges for purposes of determining RRC status.
Proposed payment adjustment for low-volume hospitals for
FY 2023 and subsequent years.
The statutorily required IME adjustment factor for FY
2023.
Proposed changes to the methodologies for determining
Medicare DSH payments and the additional payments for uncompensated
care.
Proposed new supplemental payment for IHS/Tribal and
Puerto Rico hospitals.
Proposed revisions to the regulations regarding the
counting of days associated with section 1115 demonstrations in the
Medicaid fraction.
Discussion of statutory expiration of the MDH program at
the end of FY 2022.
Proposed requirements for payment adjustments under the
Hospital Readmissions Reduction Program for FY 2023.
The provision of estimated and newly established
performance standards for the calculation of value-based incentive
payments, as well as a proposal to suppress multiple measures and
provide net-neutral payment adjustments under the Hospital Value-Based
Purchasing Program.
Proposed requirements for payment adjustments to hospitals
under the HAC Reduction Program for FY 2023.
Discussion of and proposed changes relating to the
implementation of the Rural Community Hospital Demonstration Program in
FY 2023.
Proposed GME payment change in response to Milton S.
Hershey Medical Center et al v. Becerra litigation.
Proposed nursing and allied health education program
Medicare Advantage (MA) add-on rates and direct GME MA percent
reductions for CYs 2020 and 2021.
Proposal to allow Medicare GME affiliation agreements
within certain rural track full-time equivalent limitations.
Proposed payment adjustment for certain clinical trial and
expanded access use immunotherapy cases.
4. Proposed FY 2023 Policy Governing the IPPS for Capital-Related Costs
In section VI. of the preamble to the proposed rule, we discussed
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2023.
5. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VII. of the preamble of the proposed rule, we discussed
the following:
Proposed changes to payments to certain excluded hospitals
for FY 2023.
Proposed continued implementation of the Frontier
Community Health Integration Project (FCHIP) Demonstration.
6. Proposed Changes to the LTCH PPS
In section VIII. of the preamble of the proposed rule, we set forth
proposed changes to the LTCH PPS Federal payment rates, factors, and
other payment rate policies under the LTCH PPS for FY 2023.
7. Proposed Changes Relating to Quality Data Reporting for Specific
Providers and Suppliers
In section IX. of the preamble of the proposed rule, we addressed
the following:
Proposed requirements for the Hospital Inpatient Quality
Reporting (IQR) Program.
Proposed changes to the requirements for the quality
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
For the Long Term Care Hospital Quality Reporting Program
(LTCH QRP), we requested information on CMS' overarching principles for
measuring healthcare disparities across CMS Quality Programs, including
the LTCH QRP. We also requested information on the potential adoption
of one future National Healthcare Safety Network (NHSN) digital quality
measure (dQM) for the LTCH QRP, as well as quality measure concepts
under consideration for future years.
Proposed changes to requirements pertaining to eligible
hospitals and CAHs participating in the Medicare Promoting
Interoperability Program.
8. Other Proposals and Comment Solicitations Included in the Proposed
Rule
Section X. of the preamble to the proposed rule includes the
following:
Proposed codification of policies related to the costs
incurred for qualified and non-qualified deferred compensation plans.
Proposed changes pertaining to the CoPs at 42 CFR part 482
for hospitals, and at 42 CFR part 485, subpart F, for CAHs.
Solicitation of comments on the appropriateness of payment
adjustments that would account for the additional resource costs for
hospitals for the procurement of wholly domestically made NIOSH-
approved surgical N95 respirators.
9. Other Provisions of the Proposed Rule
Section XI. of the preamble to the proposed rule includes our
discussion of the MedPAC Recommendations.
Section XII. of the preamble to the proposed rule included the
following:
A descriptive listing of the public use files associated
with the proposed rule.
The collection of information requirements for entities
based on our proposals.
Information regarding our responses to public comments.
[[Page 48794]]
10. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits for Acute Care Hospitals
In sections II. and III. of the Addendum to the proposed rule, we
set forth proposed changes to the amounts and factors for determining
the proposed FY 2023 prospective payment rates for operating costs and
capital-related costs for acute care hospitals. We proposed to
establish the threshold amounts for outlier cases. In addition, in
section IV. of the Addendum to the proposed rule, we addressed the
proposed update factors for determining the rate-of-increase limits for
cost reporting periods beginning in FY 2023 for certain hospitals
excluded from the IPPS.
11. Determining Prospective Payment Rates for LTCHs
In section V. of the Addendum to the proposed rule, we set forth
proposed changes to the amounts and factors for determining the
proposed FY 2023 LTCH PPS standard Federal payment rate and other
factors used to determine LTCH PPS payments under both the LTCH PPS
standard Federal payment rate and the site neutral payment rate in FY
2023. We are proposed to establish the adjustments for the wage index,
labor-related share, the cost-of-living adjustment, and high-cost
outliers, including the applicable fixed-loss amounts and the LTCH
cost-to-charge ratios (CCRs) for both payment rates.
12. Impact Analysis
In Appendix A of the proposed rule, we set forth an analysis of the
impact the proposed changes would have on affected acute care
hospitals, CAHs, LTCHs and other entities.
13. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
In Appendix B of the proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of
the appropriate percentage changes for FY 2023 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs
and MDHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The LTCH PPS standard Federal payment rate and the site
neutral payment rate for hospital inpatient services provided for LTCH
PPS discharges.
14. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 15 of each year, in which
MedPAC reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2022 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs for hospitals under the IPPS.
We addressed these recommendations in Appendix B of the proposed rule.
For further information relating specifically to the MedPAC March 2022
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's website at https://www.medpac.gov.
E. Advancing Health Information Exchange
The Department of Health and Human Services (HHS) has a number of
initiatives designed to encourage and support the adoption of
interoperable health information technology and to promote nationwide
health information exchange to improve health care and patient access
to their digital health information.
To further interoperability in post-acute care settings, CMS and
the Office of the National Coordinator for Health Information
Technology (ONC) participate in the Post-Acute Care Interoperability
Workgroup (PACIO) to facilitate collaboration with industry
stakeholders to develop Health Level Seven International[supreg] (HL7)
Fast Healthcare Interoperability Resources[supreg] (FHIR) standards.
These standards could support the exchange and reuse of patient
assessment data derived from the post-acute care (PAC) setting
assessment tools, such as Minimum Data Set (MDS), Inpatient
Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI), Long
Term Care Hospital (LTCH) Continuity Assessment Record and Evaluation
(CARE) Data Set (LCDS), Outcome and Assessment Information Set (OASIS),
and other sources.3 4 The PACIO Project has focused on HL7
FHIR implementation guides for functional status, cognitive status and
new use cases on advance directives, re-assessment timepoints, and
Speech, Language, Swallowing Cognitive communications and Hearing
(SPLASCH).\5\ We encourage PAC provider and health information
technology (IT) vendor participation as the efforts advance. The CMS
Data Element Library (DEL) continues to be updated and serves as a
resource for PAC assessment data elements and their associated mappings
to health IT standards, such as Logical Observation Identifiers Names
and Codes (LOINC) and Systematized Nomenclature of Medicine Clinical
Terms (SNOMED).\6\ The DEL furthers CMS' goal of data standardization
and interoperability. Standards in the DEL can be referenced on the CMS
website (https://del.cms.gov/DELWeb/pubHome) and in the ONC
Interoperability Standards Advisory (ISA). The 2022 ISA is available at
https://www.healthit.gov/isa/sites/isa/files/inline-files/2022-ISA-Reference-Edition.pdf.
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\3\ HL7 FHIR Release 4. Available at: https://www.hl7.org/fhir/.
\4\ HL7 FHIR. PACIO Functional Status Implementation Guide.
Available at: https://paciowg.github.io/functional-status-ig/.
\5\ PACIO Project. Available at: http://pacioproject.org/about/.
\6\ CMS Data Element Library Fact Sheet. Available at: https://www.cms.gov/newsroom/fact-sheets/cms-data-element-library-fact-sheet.
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The 21st Century Cures Act (Cures Act) (Pub. L. 114-255, enacted
December 13, 2016) required HHS and ONC to take steps further
interoperability for providers in settings across the care
continuum.\7\ Specifically, section 4003(b) of the Cures Act required
ONC to take steps to advance interoperability through the development
of a a Trusted Exchange Framework and Common Agreement aimed at
establishing full network-to-network exchange of health information
nationally. On January 18, 2022, ONC announced a significant milestone
by releasing the Trusted Exchange Framework \8\ and Common Agreement
Version 1.\9\ The Trusted Exchange Framework is a set of non-binding
principles for health information exchange, and the Common Agreement is
a contract that advances those principles. The Common Agreement and the
incorporated by reference Qualified Health Information Network
Technical Framework Version 1 establish the technical infrastructure
[[Page 48795]]
model and governing approach for different health information networks
and their users to securely share clinical information with each other,
all under commonly agreed to terms. The technical and policy
architecture of how exchange occurs under the Common Agreement follows
a network-of-networks structure, which allows for connections at
different levels and is inclusive of many different types of entities
at those different levels, such as health information networks,
healthcare practices, hospitals, public health agencies, and Individual
Access Services (IAS) Providers.\10\ For more information, we refer
readers to https://www.healthit.gov/topic/interoperability/trusted-exchange-framework-and-common-agreement.
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\7\ Public Law 114-255, sections 4001 through 4008. Available
at: https://www.govinfo.gov/content/pkg/PLAW-114publ255/html/PLAW-114publ255.htm.
\8\ The Trusted Exchange Framework (TEF): Principles for Trusted
Exchange (Jan. 2022). Available at: https://www.healthit.gov/sites/default/files/page/2022-01/Trusted_Exchange_Framework_0122.pdf.
\9\ Common Agreement for Nationwide Health Information
Interoperability Version 1 (Jan. 2022). Available at: https://www.healthit.gov/sites/default/files/page/2022-01/Common_Agreement_for_Nationwide_Health_Information_Interoperability_Version_1.pdf.
\10\ The Common Agreement defines Individual Access Services
(IAS) as ``with respect to the Exchange Purposes definition, the
services provided utilizing the Connectivity Services, to the extent
consistent with Applicable Law, to an Individual with whom the QHIN,
Participant, or Subparticipant has a Direct Relationship to satisfy
that Individual's ability to access, inspect, or obtain a copy of
that Individual's Required Information that is then maintained by or
for any QHIN, Participant, or Subparticipant.'' The Common Agreement
defines ``IAS Provider'' as: ``Each QHIN, Participant, and
Subparticipant that offers Individual Access Services.'' See Common
Agreement for Nationwide Health Information Interoperability Version
1, at 7 (Jan. 2022), https://www.healthit.gov/sites/default/files/page/2022-01/Common_Agreement_for_Nationwide_Health_Information_Interoperability_Version_1.pdf.
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We invite providers to learn more about these important
developments and how they are likely to affect LTCHs.
Comment: A commenter expressed support for efforts across HHS to
advance health information technology exchange and encouraged use of a
standard set of data by providers and health IT vendors, including
efforts through the PACIO project. The commenter also noted a recent
National Academies report describing technology barriers for PAC
settings due to not being eligible for previous incentives to purchase
technology certified under the ONC Health IT Certification Program. The
commenter supported recommendations in the report for HHS to pursue
financial incentives for post-acute care settings to adopt certified
health information technology in order to enable health information
exchange.
Response: We will take this comment into consideration as we
coordinate with Federal partners, including ONC, on interoperability
initiatives, and to inform future rulemaking.
F. Use of FY 2021 Data and Methodology Modifications for the FY 2023
IPPS and LTCH PPS Ratesetting
We primarily use two data sources in the IPPS and LTCH PPS
ratesetting: claims data and cost report data. The claims data source
is the MedPAR file, which includes fully coded diagnostic and procedure
data for all Medicare inpatient hospital bills for discharges in a
fiscal year. The cost report data source is the Medicare hospital cost
report data files from the most recent quarterly Healthcare Cost Report
Information System (HCRIS) release. Our goal is always to use the best
available data overall for ratesetting. Ordinarily, the best available
MedPAR data is the most recent MedPAR file that contains claims from
discharges for the fiscal year that is 2 years prior to the fiscal year
that is the subject of the rulemaking. Ordinarily, the best available
cost report data is based on the cost reports beginning 3 fiscal years
prior to the fiscal year that is the subject of the rulemaking.
However, in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44789 through
44793), as discussed in more detail below, we finalized our proposal to
use FY 2019 data for the FY 2022 ratesetting for circumstances where
the FY 2020 data (the most recently available data at the time of
rulemaking) was significantly impacted by the COVID-19 PHE.
As we discussed in the FY 2022 IPPS/LTCH PPS final rule, the FY
2020 MedPAR claims file and the FY 2019 HCRIS dataset both contained
data that was significantly impacted by the COVID-19 PHE, primarily in
that the utilization of services at IPPS hospitals and LTCHs was
generally markedly different for certain types of services in FY 2020
than would have been expected in the absence of the PHE. However, the
most recent vaccination and hospitalization data from the CDC at the
time of development of that rule supported our belief at the time that
the risk of COVID-19 in FY 2022 would be significantly lower than the
risk of COVID-19 in FY 2020 and there would be fewer COVID-19
hospitalizations for Medicare beneficiaries in FY 2022 than there were
in FY 2020. Therefore, we finalized our proposal to use FY 2019 data
for the FY 2022 ratesetting for circumstances where the FY 2020 data
was significantly impacted by the COVID-19 PHE, based on the belief
that FY 2019 data from before the COVID-19 PHE would be a better
overall approximation of the FY 2022 inpatient experience at both IPPS
hospitals and LTCHs. For example, we used the FY 2019 MedPAR claims
data for purposes where we ordinarily would have used the FY 2020
MedPAR claims data. We also used cost report data from the FY 2018
HCRIS file for purposes where we ordinarily would have used the FY 2019
HCRIS file (since the FY 2019 cost report data from HCRIS contained
many cost reports ending in FY 2020 based on each hospital's cost
reporting period).
Similar to our analysis of the FY 2020 MedPAR claims file and the
FY 2019 HCRIS dataset for the FY 2022 IPPS/LTCH PPS rulemaking, in the
FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28123 through 28125) we
discussed that the FY 2021 MedPAR claims file and the FY 2020 HCRIS
dataset also both contain data that was significantly impacted by the
virus that causes COVID-19, primarily in that the utilization of
services at IPPS hospitals and LTCHs was again generally markedly
different for certain types of services in FY 2021 than would have been
expected in the absence of the virus that causes COVID-19.
Specifically, the share of admissions at IPPS hospitals and LTCHs for
MS-DRGs and MS-LTC-DRGs associated with the treatment of COVID-19
continued to remain significantly higher than levels prior to the
COVID-19 PHE. For example, in FY 2019, the share of IPPS cases and LTCH
PPS standard Federal payment rate cases grouped to MS-DRG and MS-LTC-
DRG 177 (Respiratory infections and inflammations with MCC) was
approximately 1 percent and 2 percent, respectively. In comparison, in
FY 2021, the share of IPPS cases and LTCH PPS standard Federal payment
rate cases grouped to MS-DRG 177 was approximately 6 percent and 8
percent, respectively.
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28123 through
28124), we reviewed the most recent data from the CDC on new inpatient
hospital admissions of patients with confirmed COVID-19. We presented
this CDC graph which illustrates new inpatient hospital admissions of
patients with confirmed COVID-19 from August 1, 2020 through February
15, 2022 (https://www.cdc.gov/coronavirus/2019-ncov/covid-data/covidview/02182022/images/hospitalizations_02182022.jpg?_=35767,
accessed February 22, 2022).
[[Page 48796]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.003
We stated that the low point of the graph (late June 2021)
approximately coincides with the time of the development of the FY 2022
IPPS/LTCH PPS final rule and generally supports, in conjunction with
the other factors discussed in that rulemaking (including the most
recent vaccination data from the CDC), our assumption in the final rule
that the FY 2022 time period would be more similar to the time period
prior to the PHE. We stated that the graph also shows that the virus
that causes COVID-19 has continued to significantly impact
hospitalizations for the time period subsequent to the development of
the FY 2022 IPPS/LTCH PPS final rule.
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28124), we also
presented information from the CDC on the likelihood of future COVID-19
variants. We noted that the most recent increase in hospitalizations
was primarily associated with the Omicron variant of the virus \11\ and
that the CDC has stated that new variants will continue to emerge.
Viruses constantly change through mutation and sometimes these
mutations result in a new variant of the virus. The CDC and other
public health organizations monitor all variants of the virus that
causes COVID-19 in the United States and globally. Scientists monitor
all variants but may classify certain ones as variants being monitored,
variants of interest, variants of concern and variants of high
consequence. Some variants spread more easily and quickly than other
variants, which may lead to more cases of COVID-19. Even if a variant
causes less severe disease in general, an increase in the overall
number of cases could cause an increase in hospitalizations (see
https://www.cdc.gov/coronavirus/2019-ncov/variants/about-variants.html,
accessed February 25, 2022).
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\11\ https://www.cdc.gov/coronavirus/2019-ncov/variants/omicron-variant.html.
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Given the effects of the virus that causes COVID-19 in the Medicare
FY 2020 data, the Medicare FY 2021 data, and the CDC hospitalization
data, coupled with the expectation for future variants, in the proposed
rule we stated our belief that it is reasonable to assume that some
Medicare beneficiaries will continue to be hospitalized with COVID-19
at IPPS hospitals and LTCHs in FY 2023. Accordingly, we stated that we
believe it would be appropriate to use FY 2021 data, specifically the
FY 2021 MedPAR claims file and the FY 2020 HCRIS dataset (which
contains data from many cost reports ending in FY 2021 based on each
hospital's cost reporting period) as the most recent available data
during the period of the COVID-19 PHE, for purposes of the FY 2023 IPPS
and LTCH PPS ratesetting. However, we also stated our belief that it
would be reasonable to assume based on the information available at the
time that there will be fewer COVID-19 hospitalizations in FY 2023 than
in FY 2021 given the more recent trends in the CDC hospitalization data
since the Omicron variant peak in January, 2022. Accordingly, because
we anticipated Medicare inpatient hospitalizations for COVID-19 would
continue in FY 2023 but at a lower level, we proposed to use FY 2021
data for purposes of the FY 2023 IPPS and LTCH PPS ratesetting but with
modifications to our usual ratesetting methodologies to account for the
anticipated decline in COVID-19 hospitalizations of Medicare
beneficiaries at IPPS hospitals and LTCHs as compared to FY 2021.
First, we proposed to modify the calculation of the FY 2023 MS-DRG
and MS-LTC-DRG relative weights. We observed that COVID-19 cases were
impacting the relative weights as calculated using the FY 2021 MedPAR
data for a few COVID-19-related MS-DRGs and MS-LTC-DRGs. As an example,
for MS-DRG and MS-LTC-DRG 870 (Septicemia or Severe Sepsis with MV >96
hours), the MS-DRG and MS-LTC-DRG relative weights calculated using the
FY 2021 MedPAR data are approximately 9 and 3 percent higher,
respectively, compared to their relative weights if calculated
excluding COVID-19 cases. Because this MS-DRG contains a mix of COVID-
19 cases and non-COVID-19 cases with different average costs, the
relative weight for this MS-DRG is dependent on that mix of cases. As
stated in the proposed rule, we believed it is reasonable to assume
that there would be fewer COVID-19 hospitalizations among Medicare
beneficiaries in FY 2023 than there were in FY 2021; however, we also
stated that it is not possible to know precisely how COVID-19
hospitalizations in FY 2023 will compare to FY 2021. We stated our
belief that averaging the relative weights as calculated with and
without the COVID-19 cases reflected in the FY 2021 MedPAR data would
reflect a reasonable estimation of the case mix for FY 2023 based on
the information available at the time, and more accurately estimate the
relative resource use for the cases treated in FY 2023. Therefore, we
proposed to calculate the relative weights for FY 2023 by first
calculating two sets of weights, one including and one excluding COVID-
19 claims, and then averaging the two sets of relative weights to
determine the proposed FY 2023 relative weight values. We believed this
proposed modification to our relative weight setting methodology would
appropriately reduce, but not remove entirely, the effect of COVID-19
cases
[[Page 48797]]
on the relative weight calculations, consistent with our expectation
that Medicare inpatient hospitalizations for COVID-19 will continue in
FY 2023 at a lower level as compared to FY 2021, and provide a more
accurate estimate of relative resource use for FY 2023 than if we were
to calculate the proposed relative weights using all applicable cases
in the FY 2021 data.
We also proposed to modify our methodologies for determining the FY
2023 outlier fixed-loss amount for IPPS cases and LTCH PPS standard
Federal payment rate cases. The methodologies for determining both of
these outlier fixed-loss amounts include calculating and applying a
charge inflation factor to increase charges from the claim year to the
rulemaking year, as well as calculating and applying cost-to-charge
ratio (CCR) adjustment factors to adjust CCRs used to make payments in
the current year to the rulemaking year. The charge inflation factors
calculated using the 2 most recently available years of MedPAR claims
data (FY 2020 and FY 2021) that would ordinarily be used for the FY
2023 proposed rule to inflate the charges on the FY 2021 MedPAR claims
were abnormally high as compared to recent historical levels prior to
the PHE (for example, for the IPPS, approximately 10 percent based on
the FY 2020 and FY 2021 MedPAR claims data as compared to approximately
6 percent based on the FY 2018 and FY 2019 MedPAR claims data).
Furthermore, the IPPS operating and capital CCR adjustment factors
calculated based on the percentage changes in the CCRs from the
December 2020 update of the Provider Specific File (PSF) to the
December 2021 update of the PSF that would ordinarily be used for the
FY 2023 proposed rule to adjust the CCRs from the December 2021 update
of the PSF were also abnormally high as compared to recent historical
levels prior to the PHE (for example, for the IPPS operating CCR
adjustment factor, a factor of approximately 1.03 based on the December
2020 and December 2021 updates to the PSF as compared to a factor of
approximately 0.97 based on the March 2019 and March 2020 updates to
the PSF). In the proposed rule, we stated our belief that these
abnormally high charge inflation and CCR adjustment factors as compared
to historical levels were partially due to the high number of COVID-19
cases with higher charges that were treated in IPPS hospitals and LTCHs
in FY 2021. We also stated our belief that there will be fewer COVID-19
cases in FY 2023 than in FY 2021 and that therefore, we do not believe
it is reasonable to assume charges and CCRs will continue to increase
at these abnormally high rates. Consequently, when determining the FY
2023 outlier fixed-loss amounts for IPPS cases and LTCH PPS standard
Federal payment rate cases, we proposed to inflate the charges on the
FY 2021 MedPAR claims using charge inflation factors computed by
comparing the average covered charge per case in the March 2019 MedPAR
file of FY 2018 to the average covered charge per case in the March
2020 MedPAR file of FY 2019, which is the last 1-year period prior to
the COVID-19 PHE. We also proposed to adjust the CCRs from the December
2021 update of the PSF by comparing the percentage change in the
national average case-weighted CCR from the March 2019 update of the
PSF to the national average case-weighted CCR from the March 2020
update of the PSF, which is the last 1-year period prior to the COVID-
19 PHE. We stated our belief that using the charge inflation factors
and CCR adjustment factors derived from data prior to the COVID-19 PHE
would provide a more reasonable approximation of the increase in costs
that will occur from FY 2021 to FY 2023 because we do not believe the
charge inflation that has occurred during the PHE will continue as the
number of higher cost COVID-19 cases declines.
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28740 through
28741) we also requested comments on, as an alternative to our proposed
approach, the use of the FY 2021 data for purposes of FY 2023
ratesetting without these proposed modifications to our usual
methodologies for the calculation of the FY 2023 MS-DRG and MS-LTC-DRG
relative weights or the usual methodologies used to determine the FY
2023 outlier fixed-loss amount for IPPS cases and LTCH PPS standard
Federal payment rate cases. We noted that the FY 2023 outlier fixed-
loss amount would be significantly higher under this alternative
approach. In order to illustrate the effect of our proposed
modifications on the relative weights and fixed loss amount, we made
available supplemental information, including the relative weights and
fixed-loss amount calculated without the proposed modifications to our
usual methodologies.
The comments we received on our proposal to use FY 2021 data for
purposes of the FY 2023 IPPS and LTCH PPS ratesetting were focused on
the specific use of FY 2021 data when determining the FY 2023 relative
weights or outlier fixed-loss amounts. Therefore, we refer the reader
to section II.E. of the preamble of this final rule for our summary and
response to comments received on our proposed use of FY 2021 data and
our proposed modifications to our usual methodology when determining
the FY 2023 IPPS MS-DRG relative weights. We refer the reader to
section VIII.B. of the preamble of this final rule for our summary and
response to comments received on our proposed use of FY 2021 data and
our proposed modifications to our usual methodology when determining
the FY 2023 LTCH PPS MS-LTC-DRG relative weights. We refer the reader
to section II.A.4. of the addendum to this final rule for our summary
and response to comments received on our proposed use of FY 2021 data
and our proposed modifications to our usual methodology when
determining the FY 2023 outlier fixed-loss amounts for IPPS cases. We
refer the reader to section V.D.3. of the Addendum to this final rule
for our summary and response to comments received on our proposed use
of FY 2021 data and our proposed modifications to our usual methodology
when determining the FY 2023 outlier fixed-loss amounts for LTCH PPS
standard Federal payment rate cases.
Since the publication of the proposed rule, we have continued to
monitor hospitalization data reported by the CDC. This CDC graph
illustrates new inpatient hospital admissions of patients with
confirmed COVID-19 from August 1, 2020 through July 6, 2022 (https://www.cdc.gov/coronavirus/2019-ncov/covid-data/covidview/07082022/images/Hospitalizations.png?_=90548, accessed July 08, 2022).
[[Page 48798]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.004
The graph shows that new COVID-19 hospital admissions reached a low
point in early April 2022, however have steadily increased since.
After reviewing the latest CDC hospitalization data, coupled with
the expectation for future variants,\12\ we continue to believe that it
is reasonable to assume that some Medicare beneficiaries will continue
to be hospitalized with COVID-19 at IPPS hospitals and LTCHs in FY
2023. We also continue to believe that it would be reasonable to assume
based on the information available at this time that there will be
fewer COVID-19 hospitalizations in FY 2023 than in FY 2021 given that
the current levels of hospitalizations are much lower than the Omicron
variant peak in January 2022.
---------------------------------------------------------------------------
\12\ https://www.cdc.gov/coronavirus/2019-ncov/variants/about-variants.html.
---------------------------------------------------------------------------
Therefore, after considering the comments received and based on our
evaluation of the information available at this time, we are finalizing
our proposal to use FY 2021 data for purposes of the FY 2023 IPPS and
LTCH PPS ratesetting. (That is, the FY 2021 MedPAR claims file and the
FY 2020 HCRIS dataset (which contains data from many cost reports
ending in FY 2021 based on each hospital's cost reporting period).) We
are also finalizing, as proposed, modifications to our usual
methodology for determining the FY 2023 IPPS MS-DRG relative weights
and FY 2023 LTCH PPS MS-LTC-DRG relative weights. Specifically, for FY
2023, we calculated the relative weights by first calculating two sets
of weights, one including and one excluding COVID-19 claims, and then
averaging the two sets of relative weights to determine the final
relative weight values. The finalization of our proposal to use FY 2021
data and to modify our methodology for determining the FY 2023 IPPS MS-
DRG relative weights is discussed in greater detail in section II.E. of
the preamble of this final rule. The finalization of our proposal to
use FY 2021 data and to modify our methodology for determining the FY
2023 LTCH PPS MS-LTC-DRG relative weights is discussed in greater
detail in section VIII.B. of the preamble of this final rule.
As discussed in section II.A.4. and section V.D.3. of the addendum
to this final rule, we received many comments supportive of our
proposed modifications to our usual methodologies for determining the
FY 2023 IPPS and LTCH PPS outlier fixed-loss amounts. As discussed in
these sections, after considering comments received, we are finalizing
our proposal to inflate the charges on the FY 2021 MedPAR claims using
charge inflation factors computed by comparing the average covered
charge per case in the March 2019 MedPAR file of FY 2018 to the average
covered charge per case in the March 2020 MedPAR file of FY 2019, which
is the last 1-year period prior to the COVID-19 PHE. We are also
finalizing our proposal to adjust the CCRs from the March 2021 update
of the PSF by comparing the percentage change in the national average
case-weighted CCR from the March 2019 update of the PSF to the national
average case-weighted CCR from the March 2020 update of the PSF, which
is the last 1-year period prior to the COVID-19 PHE.
We also received many comments that suggested other modifications
CMS should make to our usual methodologies for determining the FY 2023
IPPS and LTCH PPS outlier fixed-loss amounts. As also discussed in
section II.A.4. and section V.D.3. of the addendum to this final rule,
after consideration of the comments received, we are modifying our
proposed methodologies for establishing the FY 2023 IPPS and LTCH PPS
outlier fixed-loss amounts by calculating the FY 2023 IPPS and LTCH PPS
outlier fixed-loss amounts as averages of the fixed-loss amounts as
calculated including and excluding COVID-19 claims. We believe this
adjustment to our proposed methodology will better reflect a reasonable
estimation of the case mix for FY 2023 based on the information
available at this time and is also consistent with the approach we are
finalizing for determining the FY 2023 IPPS MS-DRG and LTCH PPS MS-LTC-
DRG relative weights.
In addition, as discussed in section II.A.4. of the Addendum to
this final rule, after consideration of comments received, we are also
further modifying our proposed methodology for establishing the FY 2023
IPPS outlier fixed-loss amount by including the increases in payments
for COVID-19 cases provided by the CARES Act in the calculation of the
outlier fixed-loss amount.
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as diagnosis-related
groups (DRGs)) for inpatient discharges and adjust payments under the
IPPS based on appropriate weighting factors assigned to each DRG.
Therefore, under the IPPS, Medicare pays for inpatient hospital
services on a rate per discharge basis that varies according to the DRG
to which a beneficiary's stay is assigned. The formula used to
calculate payment
[[Page 48799]]
for a specific case multiplies an individual hospital's payment rate
per case by the weight of the DRG to which the case is assigned. Each
DRG weight represents the average resources required to care for cases
in that particular DRG, relative to the average resources used to treat
cases in all DRGs.
Section 1886(d)(4)(C) of the Act requires that the Secretary adjust
the DRG classifications and relative weights at least annually to
account for changes in resource consumption. These adjustments are made
to reflect changes in treatment patterns, technology, and any other
factors that may change the relative use of hospital resources.
B. Adoption of the MS-DRGs and MS-DRG Reclassifications
For information on the adoption of the MS-DRGs in FY 2008, we refer
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189).
For general information about the MS-DRG system, including yearly
reviews and changes to the MS-DRGs, we refer readers to the previous
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766) and the FYs 2011 through 2022 IPPS/LTCH PPS final
rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR
53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; 81 FR 56787 through
56872; 82 FR 38010 through 38085, 83 FR 41158 through 41258, 84 FR
42058 through 42165, 85 FR 58445 through 58596, 86 FR 44795 through
44961, respectively).
C. FY 2023 MS-DRG Documentation and Coding Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Pub. L. 110-90 and
the Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA).
In the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189), we adopted the MS-DRG patient classification system for
the IPPS, effective October 1, 2007, to better recognize severity of
illness in Medicare payment rates for acute care hospitals. The
adoption of the MS-DRG system resulted in the expansion of the number
of DRGs from 538 in FY 2007 to 745 in FY 2008. By increasing the number
of MS-DRGs and more fully taking into account patient severity of
illness in Medicare payment rates for acute care hospitals, MS-DRGs
encourage hospitals to improve their documentation and coding of
patient diagnoses.
In the FY 2008 IPPS final rule with comment period (72 FR 47175
through 47186), we indicated that the adoption of the MS-DRGs had the
potential to lead to increases in aggregate payments without a
corresponding increase in actual patient severity of illness due to the
incentives for additional documentation and coding. In that final rule
with comment period, we exercised our authority under section
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget
neutrality by adjusting the national standardized amount, to eliminate
the estimated effect of changes in coding or classification that do not
reflect real changes in case-mix. Our actuaries estimated that
maintaining budget neutrality required an adjustment of -4.8 percentage
points to the national standardized amount. We provided for phasing in
this -4.8 percentage point adjustment over 3 years. Specifically, we
established prospective documentation and coding adjustments of -1.2
percentage points for FY 2008, -1.8 percentage points for FY 2009, and
-1.8 percentage points for FY 2010.
On September 29, 2007, Congress enacted the TMA [Transitional
Medical Assistance], Abstinence Education, and QI [Qualifying
Individuals] Programs Extension Act of 2007 (Pub. L. 110-90). Section
7(a) of Public Law 110-90 reduced the documentation and coding
adjustment made as a result of the MS-DRG system that we adopted in the
FY 2008 IPPS final rule with comment period to -0.6 percentage point
for FY 2008 and -0.9 percentage point for FY 2009.
As discussed in prior year rulemakings, and most recently in the FY
2017 IPPS/LTCH PPS final rule (81 FR 56780 through 56782), we
implemented a series of adjustments required under sections 7(b)(1)(A)
and 7(b)(1)(B) of Public Law 110-90, based on a retrospective review of
FY 2008 and FY 2009 claims data. We completed these adjustments in FY
2013 but indicated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274
through 53275) that delaying full implementation of the adjustment
required under section 7(b)(1)(A) of Public Law 110-90 until FY 2013
resulted in payments in FY 2010 through FY 2012 being overstated, and
that these overpayments could not be recovered under Public Law 110-90.
In addition, as discussed in prior rulemakings and most recently in
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38008 through 38009),
section 631 of the American Taxpayer Relief Act of 2012 (ATRA) amended
section 7(b)(1)(B) of Public Law 110-90 to require the Secretary to
make a recoupment adjustment or adjustments totaling $11 billion by FY
2017. This adjustment represented the amount of the increase in
aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90
until FY 2013.
2. Adjustments Made for FYs 2018, 2019, 2020, 2021, and 2022 as
Required Under Section 414 of Public Law 114-10 (MACRA) and Section
15005 of Public Law 114-255
As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785),
once the recoupment required under section 631 of the ATRA was
complete, we had anticipated making a single positive adjustment in FY
2018 to offset the reductions required to recoup the $11 billion under
section 631 of the ATRA. However, section 414 of the MACRA (which was
enacted on April 16, 2015) replaced the single positive adjustment we
intended to make in FY 2018 with a 0.5 percentage point positive
adjustment for each of FYs 2018 through 2023. In the FY 2017
rulemaking, we indicated that we would address the adjustments for FY
2018 and later fiscal years in future rulemaking. Section 15005 of the
21st Century Cures Act (Pub. L. 114-255), which was enacted on December
13, 2016, amended section 7(b)(1)(B) of the TMA, as amended by section
631 of the ATRA and section 414 of the MACRA, to reduce the adjustment
for FY 2018 from a 0.5 percentage point positive adjustment to a 0.4588
percentage point positive adjustment. As we discussed in the FY 2018
rulemaking, we believe the directive under section 15005 of Public Law
114-255 is clear. Therefore, in the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38009) for FY 2018, we implemented the required +0.4588
percentage point adjustment to the standardized amount. In the FY 2019
IPPS/LTCH PPS final rule (83 FR 41157), the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42057), the FY 2021 IPPS/LTCH PPS final rule (85 FR 58444
and 58445), and the FY 2022 IPPS/LTCH PPS final rule (86 FR 44794 and
44795), consistent with the requirements of section 414 of the MACRA,
we implemented 0.5 percentage point positive adjustments to the
standardized amount for FY 2019, FY 2020, FY 2021, and FY 2022,
respectively. We indicated the FY 2018, FY 2019, FY 2020, FY 2021, and
FY 2022 adjustments were permanent adjustments to payment rates. We
also
[[Page 48800]]
stated that we plan to propose a future adjustment required under
section 414 of the MACRA for FY 2023 in future rulemaking.
3. Adjustment for FY 2023
Consistent with the requirements of section 414 of the MACRA, we
proposed to implement a 0.5 percentage point positive adjustment to the
standardized amount for FY 2023. We stated that this would constitute a
permanent adjustment to payment rates. We also stated that this
proposed 0.5 percentage point positive adjustment is the final
adjustment prescribed by section 414 of the MACRA. Along with the
0.4588 percentage point positive adjustment for FY 2018, and the 0.5
percentage point positive adjustments for FY 2019, FY 2020, FY 2021,
and FY 2022, this final adjustment will result in combined positive
adjustment of 2.9588 percentage points (or the sum of the adjustments
for FYs 2018 through 2023) to the standardized amount.
We received no public comments on the proposed adjustment for FY
2023 and are finalizing our proposal to implement a 0.5 percentage
point positive adjustment to the standardized amount for FY 2023. As
indicated, this finalized 0.5 percentage point positive adjustment for
FY 2023 is the final adjustment prescribed by section 414 of the MACRA.
D. Changes to Specific MS-DRG Classifications
1. Discussion of Changes to Coding System and Basis for FY 2023 MS-DRG
Updates
a. Conversion of MS-DRGs to the International Classification of
Diseases, 10th Revision (ICD-10)
As of October 1, 2015, providers use the International
Classification of Diseases, 10th Revision (ICD-10) coding system to
report diagnoses and procedures for Medicare hospital inpatient
services under the MS-DRG system instead of the ICD-9-CM coding system,
which was used through September 30, 2015. The ICD-10 coding system
includes the International Classification of Diseases, 10th Revision,
Clinical Modification (ICD-10-CM) for diagnosis coding and the
International Classification of Diseases, 10th Revision, Procedure
Coding System (ICD-10-PCS) for inpatient hospital procedure coding, as
well as the ICD-10-CM and ICD-10-PCS Official Guidelines for Coding and
Reporting. For a detailed discussion of the conversion of the MS-DRGs
to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81
FR 56787 through 56789).
b. Basis for FY 2023 MS-DRG Updates
Given the need for more time to carefully evaluate requests and
propose updates, as discussed in the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38010), we changed the deadline to request updates to the MS-
DRGs to November 1 of each year, which provided an additional five
weeks for the data analysis and review process. In the FY 2021 IPPS/
LTCH PPS proposed rule (85 FR 32472), we stated that with the continued
increase in the number and complexity of the requested changes to the
MS-DRG classifications since the adoption of ICD-10 MS-DRGs, and to
consider as many requests as possible, more time is needed to carefully
evaluate the requested changes, analyze claims data, and consider any
proposed updates. We further stated we were changing the deadline to
request changes to the MS-DRGs to October 20 of each year to allow for
additional time for the review and consideration of any proposed
updates. However, in the FY 2021 IPPS/LTCH PPS final rule (85 FR
58445), due to the unique circumstances for the FY 2021 IPPS/LTCH PPS
final rule for which we waived the delayed effective date, we
maintained the deadline of November 1, 2020 for FY 2022 MS-DRG
classification change requests. We also noted that we expected to
reconsider a change in the deadline beginning with comments and
suggestions submitted for FY 2023. In the FY 2022 IPPS/LTCH PPS
proposed rule, we stated that while we continue to believe that a
change in the deadline from November 1 to October 20 would provide
hospitals sufficient time to assess potential impacts and inform future
MS-DRG recommendations, we were maintaining the deadline of November 1
for FY 2023 MS-DRG classification change requests. As discussed in the
FY 2022 IPPS/LTCH PPS final rule (86 FR 44795), we received public
comments expressing support for a future change to the deadline for
requesting updates to the MS-DRG classifications from November 1 to
October 20, and we noted in response that we may consider any changes
to the deadline or frequency for submissions of requests for MS-DRG
classification changes for future fiscal years. Beginning with FY 2024
MS-DRG classification change requests, we are changing the deadline to
request changes to the MS-DRGs to October 20 of each year to allow for
additional time for the review and consideration of any proposed
updates. As previously discussed, we continue to believe such a change
would allow hospitals sufficient time to assess potential impacts and
inform future MS-DRG recommendations, while also providing CMS the
additional time needed for evaluation of the requested changes,
analysis of claims data, and consideration of any proposed updates.
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule, we are
also changing the process for submitting requested updates to the MS-
DRG classifications, beginning with the FY 2024 MS-DRG classification
change requests. CMS is in the process of implementing a new electronic
application intake system, Medicare Electronic Application Request
Information SystemTM (MEARIS\TM\), for users to submit new
technology add-on payment applications, requests for ICD-10-PCS
procedure codes, and other requests. To simplify and streamline the
process for submission of standardized applications and requests that
inform payment policy under the IPPS, we will also be using this new
system for submission of MS-DRG classification change requests. We
believe that submission of MS-DRG reclassification requests through
MEARIS\TM\ will not only help CMS to track such requests, but it will
also create efficiencies for requestors when compared to the previous
submission process.
Accordingly, beginning with the FY 2024 MS-DRG classification
change requests, CMS will only accept such requests submitted via
MEARIS,\TM\ and will no longer consider any such requests that are sent
via email. We note that, beginning April 5, 2022, MEARIS\TM\ became
available for users to begin gaining familiarity with this new approach
for submitting MS-DRG classification change requests. MEARIS,\TM\
including the mechanism for submitting MS-DRG classification change
requests, can be accessed at: https://mearis.cms.gov. As stated in the
proposed rule, within MEARIS\TM\ we have built in several resources to
support users, including a ``Resources'' section (available at https://mearis.cms.gov/public/resources) and technical support available under
``Useful Links'' at the bottom of the MEARIS\TM\ site. Questions
regarding the MEARIS\TM\ system can be submitted to CMS using the form
available under ``Contact'' at: https://mearis.cms.gov/public/resources?app=msdrg.
We also note that, as discussed in section II.D.17. of the preamble
of the proposed rule and this final rule, effective January 5, 2022,
MEARIS\TM\ was made available for users to begin gaining familiarity
with a new approach
[[Page 48801]]
and process to submit ICD-10-PCS procedure code requests.
As noted previously, interested parties had to submit MS-DRG
classification change requests for FY 2023 by November 1, 2021. As we
have discussed in prior rulemaking, we may not be able to fully
consider all of the requests that we receive for the upcoming fiscal
year. We have found that, with the implementation of ICD-10, some types
of requested changes to the MS-DRG classifications require more
extensive research to identify and analyze all of the data that are
relevant to evaluating the potential change. We note in the discussion
that follows those topics for which further research and analysis are
required, and which we will continue to consider in connection with
future rulemaking. Interested parties should submit any comments and
suggestions for FY 2024 by October 20, 2022 via the new electronic
intake system, Medicare Electronic Application Request Information
SystemTM (MEARISTM) at: https://mearis.cms.gov/public/home.
We provided a test version of the ICD-10 MS-DRG GROUPER Software,
Version 40, in connection with the FY 2023 IPPS/LTCH PPS proposed rule
so that the public can better analyze and understand the impact of the
proposals included in the proposed rule. We noted that this test
software reflected the proposed GROUPER logic for FY 2023. Therefore,
it included the new diagnosis and procedure codes that are effective
for FY 2023 as reflected in Table 6A.--New Diagnosis Codes--FY 2023 and
Table 6B.--New Procedure Codes--FY 2023 that were associated with the
proposed rule and did not include the diagnosis codes that are invalid
beginning in FY 2023 as reflected in Table 6C.--Invalid Diagnosis
Codes--FY 2023 associated with the proposed rule. We noted that at the
time of the development of the proposed rule there were no procedure
codes designated as invalid for FY 2023, and therefore, there was no
Table 6D--Invalid Procedure Codes--FY 2023 associated with the proposed
rule. Those tables were not published in the Addendum to the proposed
rule, but are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the
Addendum to the proposed rule. Because the diagnosis codes no longer
valid for FY 2023 are not reflected in the test software, we made
available a supplemental file in Table 6P.1a that includes the mapped
Version 40 FY 2023 ICD-10-CM codes and the deleted Version 39.1 FY 2022
ICD-10-CM codes that should be used for testing purposes with users'
available claims data. Therefore, users had access to the test software
allowing them to build case examples that reflect the proposals that
were included in the proposed rule. In addition, users were able to
view the draft version of the ICD-10 MS-DRG Definitions Manual, Version
40.
The test version of the ICD-10 MS-DRG GROUPER Software, Version 40,
the draft version of the ICD-10 MS-DRG Definitions Manual, Version 40,
and the supplemental mapping files in Table 6P.1a of the FY 2022 and FY
2023 ICD-10-CM diagnosis codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
Following are the changes that we proposed to the MS-DRGs for FY
2023. We invited public comments on each of the MS-DRG classification
proposed changes, as well as our proposals to maintain certain existing
MS-DRG classifications discussed in the proposed rule. In some cases,
we proposed changes to the MS-DRG classifications based on our analysis
of claims data and consultation with our clinical advisors. In other
cases, we proposed to maintain the existing MS-DRG classifications
based on our analysis of claims data and consultation with our clinical
advisors. As discussed in section I.F of the preamble of the proposed
rule, we proposed to use the FY 2021 MedPAR data for purposes of this
FY 2023 IPPS rulemaking, with certain proposed modifications to the
relative weight and outlier methodologies. For the FY 2023 IPPS/LTCH
PPS proposed rule, our MS-DRG analysis was based on ICD-10 claims data
from the September 2021 update of the FY 2021 MedPAR file, which
contains hospital bills received from October 1, 2020 through September
30, 2021, for discharges occurring through September 30, 2021. In our
discussion of the proposed MS-DRG reclassification changes, we referred
to these claims data as the ``September 2021 update of the FY 2021
MedPAR file.''
In this FY 2023 IPPS/LTCH PPS final rule, we summarize the public
comments we received on our proposals, present our responses, and state
our final policies. For this FY 2023 final rule, we generally did not
perform any further MS-DRG analysis of claims data. Therefore, the MS-
DRG analysis is based on ICD-10 claims data from the September 2021
update of the FY 2021 MedPAR file, as set forth in the proposed rule,
except as otherwise noted.
As explained in previous rulemaking (76 FR 51487), in deciding
whether to propose to make further modifications to the MS-DRGs for
particular circumstances brought to our attention, we consider whether
the resource consumption and clinical characteristics of the patients
with a given set of conditions are significantly different than the
remaining patients represented in the MS-DRG. We evaluate patient care
costs using average costs and lengths of stay and rely on the judgment
of our clinical advisors to determine whether patients are clinically
distinct or similar to other patients represented in the MS-DRG. In
evaluating resource costs, we consider both the absolute and percentage
differences in average costs between the cases we select for review and
the remainder of cases in the MS-DRG. We also consider variation in
costs within these groups; that is, whether observed average
differences are consistent across patients or attributable to cases
that are extreme in terms of costs or length of stay, or both. Further,
we consider the number of patients who will have a given set of
characteristics and generally prefer not to create a new MS-DRG unless
it would include a substantial number of cases.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58448), we finalized
our proposal to expand our existing criteria to create a new
complication or comorbidity (CC) or major complication or comorbidity
(MCC) subgroup within a base MS-DRG. Specifically, we finalized the
expansion of the criteria to include the NonCC subgroup for a three-way
severity level split. We stated our belief that applying these criteria
to the NonCC subgroup would better reflect resource stratification as
well as promote stability in the relative weights by avoiding low
volume counts for the NonCC level MS-DRGs. We noted that in our
analysis of MS-DRG classification requests for FY 2021 that were
received by November 1, 2019, as well as any additional analyses that
were conducted in connection with those requests, we applied these
criteria to each of the MCC, CC, and NonCC subgroups. We also noted
that the application of the NonCC subgroup criteria going forward may
result in modifications to certain MS-DRGs that are currently split
into three severity levels and result in MS-DRGs that are split into
two severity levels. We stated that any proposed modifications to the
MS-DRGs would be addressed in future rulemaking consistent with our
annual process and reflected in Table 5--Proposed List of Medicare
Severity Diagnosis Related Groups (MS-DRGs),
[[Page 48802]]
Relative Weighting Factors, and Geometric and Arithmetic Mean Length of
Stay for the applicable fiscal year.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798), we finalized
a delay in applying this technical criterion to existing MS-DRGs until
FY 2023 or future rulemaking, in light of the PHE. Commenters
recommended that a complete analysis of the MS-DRG changes to be
proposed for future rulemaking in connection with the expanded three-
way severity split criteria be conducted and made available to enable
the public an opportunity to review and consider the redistribution of
cases, the impact to the relative weights, payment rates, and hospital
case mix to allow meaningful comment prior to implementation.
In our analysis of the MS-DRG classification requests for FY 2023
that we received by November 1, 2021, as well as any additional
analyses that were conducted in connection with those requests, we
applied these criteria to each of the MCC, CC, and NonCC subgroups, as
described in the following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.005
In general, once the decision has been made to propose to make
further modifications to the MS-DRGs as described previously, such as
creating a new base MS-DRG, or in our evaluation of a specific MS-DRG
classification request to split (or subdivide) an existing base MS-DRG
into severity levels, all five criteria must be met for the base MS-DRG
to be split (or subdivided) by a CC subgroup. We note that in our
analysis of requests to create a new MS-DRG, we typically evaluate the
most recent year of MedPAR claims data available. For example, in the
FY 2023 IPPS/LTCH PPS proposed rule we stated our MS-DRG analysis was
based on ICD-10 claims data from the September 2021 update of the FY
2021 MedPAR file. However, in our evaluation of requests to split an
existing base MS-DRG into severity levels, as noted in prior rulemaking
(80 FR 49368), we typically analyze the most recent 2 years of data.
This analysis includes 2 years of MedPAR claims data to compare the
data results from 1 year to the next to avoid making determinations
about whether additional severity levels are warranted based on an
isolated year's data fluctuation and also, to validate that the
established severity levels within a base MS-DRG are supported. The
first step in our process of evaluating if the creation of a new CC
subgroup within a base MS-DRG is warranted is to determine if all the
criteria are satisfied for a three-way split. If the criteria fail, the
next step is to determine if the criteria are satisfied for a two-way
split. If the criteria for both of the two-way splits fail, then a
split (or CC subgroup) would generally not be warranted for that base
MS-DRG. If the three-way split fails on any one of the five criteria
and all five criteria for both two-way splits (1_23 and 12_3) are met,
we would apply the two-way split with the highest R2 value. We note
that if the request to split (or subdivide) an existing base MS-DRG
into severity levels specifies the request is for either one of the
two-way splits (1_23 or 12_3), in response to the specific request, we
will evaluate the criteria for both of the two-way splits,
[[Page 48803]]
however we do not also evaluate the criteria for a three-way split.
In the FY 2023 IPPS/LTCH PPS proposed rule, we stated that using
the September 2021 update of the FY 2021 MedPAR file, we analyzed how
applying the NonCC subgroup criteria to all MS-DRGs currently split
into three severity levels would affect the MS-DRG structure beginning
in FY 2023. We noted that findings from our analysis indicated that
approximately 41 MS-DRGs would be subject to change based on the three-
way severity level split criterion finalized in FY 2021. Specifically,
we found that applying the NonCC subgroup criteria to all MS-DRGs
currently split into three severity levels would result in the deletion
of 123 MS-DRGs (41 MS-DRGs x 3 severity levels = 123) and the creation
of 75 new MS-DRGs. We further noted that these updates would also
involve a redistribution of cases, which would impact the relative
weights, and, thus, the payment rates proposed for particular types of
cases. We referred the reader to Table 6P.1b associated with the
proposed rule for the list of the 123 MS-DRGs that would be subject to
deletion and the list of the 75 new MS-DRGs that would be proposed for
creation for FY 2023 under this policy if the NonCC subgroup criteria
were applied.
We stated in the proposed rule that in light of the ongoing public
health emergency (PHE), we continue to have concerns about the impact
of implementing this volume of MS-DRG changes at this time, and believe
it may be appropriate to continue to delay application of the NonCC
subgroup criteria to existing MS-DRGs to maintain more stability in the
current MS-DRG structure and until such time additional analyses can be
performed to assess impacts, as discussed in response to comments in
the FY 2022 IPPS/LTCH PPS final rule. Therefore, we proposed to delay
application of the NonCC subgroup criteria to existing MS-DRGs with a
three-way severity level split for FY 2023, and to instead maintain the
current structure of the 41 MS-DRGs that currently have a three-way
severity level split (total of 123 MS-DRGs) that would otherwise be
subject to these criteria. We stated that we intend to address the
application of the NonCC subgroup criteria to existing MS-DRGs with a
three-way severity level split in future rulemaking.
Comment: Commenters expressed overwhelming support for our proposal
to delay application of the NonCC subgroup criteria to existing MS-DRGs
with a three-way severity level split for FY 2023 and to maintain the
current structure of the MS-DRGs. A few commenters who agreed with the
proposal to delay the application of the NonCC subgroup criteria also
requested that CMS provide interested parties with an opportunity to
review and comment on impacts to the relative weights before a proposal
is finalized. The commenters stated it would be helpful if CMS made
claims data available, including volumes by MS-DRG, that support the
proposal to reduce the 123 MS-DRGs.
Response: We thank the commenters for their support. In response to
the commenters who requested the opportunity to review and comment on
impacts to the relative weights before a proposal is finalized, we
intend to provide a comprehensive analysis in future rulemaking based
on the comments and feedback we have received. We are providing the
claims data from the September 2021 update of the FY 2021 MedPAR file
that was reviewed for FY 2023 in our analyses of how applying the NonCC
subgroup criteria to all MS-DRGs currently split into three severity
levels would have potentially affected the MS-DRG structure beginning
in FY 2023. We refer the reader to Table 6P.1b associated with this
final rule and available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
Comment: A commenter who strongly agreed with the proposal to delay
the application of the NonCC subgroup criteria stated that in addition
to providing a detailed explanation and impact files in the future,
that CMS should consider clarifying and addressing the following
issues: why the list of MS-DRGs that were proposed to be removed in FY
2022 is not the same list of MS-DRGs proposed to be removed for FY
2023, why the list of MS-DRGs that were proposed to become a single,
base MS-DRG for FY 2022 now appear to meet the criteria for a three-way
severity level split for FY 2023, and why MS-DRGs proposed to maintain
a three-way severity level split for FY 2022 now appear to meet the
criteria for a two-way or three-way severity level split for FY 2023.
This commenter also stated that the MS-DRGs displayed in Table 6P.1b
associated with the proposed rule include a list of MS-DRGs that would
be subject to deletion and a list of MS-DRGs that would be proposed for
creation with XXX for the numbers. According to the commenter, many of
the listed MS-DRGs have the same narrative description, however, it
appears they would obtain a new MS-DRG number. The commenter questioned
why MS-DRGs with the same description would have new MS-DRG numbers
assigned. This commenter also suggested that CMS consider patient case-
mix with regard to volumes, and stated Medicare would not have the
volume for the obstetric related MS-DRGs. The commenter requested that
CMS also examine the impact of maternal health quality initiatives and
maternity hospital designation in connection with the solicitation for
comments on low volume MS-DRGs. Lastly, the commenter recommended that
CMS utilize two years of good data to examine the impact of the
proposed redistribution in future analyses and determine if the
proposed MS-DRG changes and associated relative weights appropriately
reflect resource consumption.
Response: We appreciate the commenter's feedback. We acknowledge
that the list of MS-DRGs identified as potentially subject to removal
for FY 2022 differs from the list of MS-DRGs identified as potentially
subject to removal and provided for FY 2023 in connection with the
NonCC subgroup criteria discussion. We also acknowledge that the list
of MS-DRGs identified as potentially subject to creation for FY 2022
differs from the list of MS-DRGs identified as potentially subject to
removal and provided for FY 2023 in connection with the NonCC subgroup
criteria discussion. The lists differ as a result of the claims data
that was analyzed for our MS-DRG analysis and rulemaking each fiscal
year. We provided the results of both the FY 2019 and FY 2020 MedPAR
claims data as displayed in Table 6P.11 in association with the FY 2022
IPPS/LTCH PPS final rule (available via the internet on the CMS website
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS).
By comparison, for FY 2023, consistent with our finalized policy to
use the FY 2021 MedPAR data for purposes of this FY 2023 rulemaking, we
have provided the FY 2021 MedPAR claims data for the listed MS-DRGs in
Table 6P.1b in association with this final rule, as noted earlier in
this section. Because there is variation in the claims data reported
from year to year, it is expected that there may be fluctuations in the
data that could affect the list of MS-DRGs potentially subject to
change in connection with the application of the NonCC subgroup
criteria for a particular fiscal year. However, we believe that
reliability and stability of the data is an important consideration
with respect to the
[[Page 48804]]
application of the NonCC subgroup criteria and will give careful
consideration to the number of years of data to analyze in connection
with any future proposed policy changes as well as the impacts on
relative weights, as we continue to assess all the comments and
feedback we have received, particularly in light of the ongoing public
health emergency. We also take this opportunity to note that the listed
MS-DRGs as displayed in the tables (for both FY 2022 and FY 2023) are
for illustrative purposes as the intent was to show the MS-DRGs that
would potentially be subject to deletion and the MS-DRGs that would
potentially be subject to creation if the NonCC subgroup criteria were
to be applied for the applicable fiscal year. Because we did not
propose the application of these criteria to existing MS-DRGs with a
three-way severity level split for either FY 2022 or FY 2023, and we
have not yet completed the comprehensive impact analysis of any such
future proposed changes, as previously discussed, we are clarifying
that both the MS-DRG numbers and MS-DRG titles that may eventually be
subject to change in connection with a future proposal to apply the
NonCC subgroup criteria may, in the interim, be subject to further
modifications as a result of our annual review of the MS-DRG
classifications. As such, any future proposed MS-DRG changes will be
considered in connection with the analysis that is performed for
application of the MCC, CC and NonCC subgroup criteria to the MS-DRGs
that are in effect at that time.
In response to the commenter's question regarding why new MS-DRG
numbers would be considered, we note that new MS-DRG numbers are
preferred because we anticipate that individuals, payers, and
organizations conducting analysis would need to be aware if proposed
changes to base DRG concepts are made to allow them time to adjust
their programs, analyses, or queries that may have hard coded the DRG
numbers. Other agencies that utilize MS-DRGs may perform minimal
updates to their relative weights, quality risk adjustment or exclusion
criteria and only focus on new MS-DRGs, thereby potentially creating
additional operational or system challenges if an existing MS-DRG
number were to be reused. To minimize confusion for those who rely on
MS-DRG concepts year to year, and avoid unintended consequences from
the reuse of an existing DRG number for a different concept, we believe
it is appropriate to consider revisions to both the MS-DRG number and
corresponding description.
Comment: Other commenters requested CMS consider continuing the
delay beyond the period of the public health emergency (PHE). The
commenters indicated that hospital claims and cost report data impacted
by the COVID-19 pandemic should not be used as the basis of MS-DRG
consolidation since utilization may be artificially low during the PHE.
Response: We thank the commenters for their feedback. As stated
earlier in this section, we are giving careful consideration to all the
recommendations and suggestions we have received in connection with the
NonCC subgroup criteria discussion.
Comment: Another commenter expressed concern with regard to how the
NonCC subgroup criteria are to be applied. The commenter stated they
understood the policy to mean that the NonCC subgroup criteria would
only be applied to new requests for MS-DRG splits, not to existing MS-
DRGs. The commenter also stated they were unclear when the proposal was
finalized since, according to the commenter, CMS would have needed to
specify the intent to apply the NonCC subgroup criteria to all existing
MS-DRGs versus only for the creation of new MS-DRGs. Additionally, this
commenter urged CMS to conduct a full analysis that demonstrates the
explanatory power of the proposed new MS-DRGs is an improvement over
the current MS-DRGs, similar to the analysis that was performed for the
transition from CMS DRGs to MS-DRGs in FY 2008. The commenter indicated
that a comprehensive analysis is critical for interested parties to
provide meaningful comments.
Response: In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44796), we
summarized the discussion pertaining to the NonCC subgroup criteria
policy finalized for FY 2021. In that discussion we noted that the
application of the NonCC subgroup criteria going forward may result in
modifications to certain MS-DRGs that are currently split into three
severity levels and result in MS-DRGs that are split into two severity
levels. We stated that any proposed modifications to the MS-DRGs would
be addressed in future rulemaking consistent with our annual process
and reflected in Table 5--Proposed List of Medicare Severity Diagnosis
Related Groups (MS-DRGs), Relative Weighting Factors, and Geometric and
Arithmetic Mean Length of Stay for the applicable fiscal year. As
discussed in the proposed rule, we applied the nonCC subgroup criteria
to each of the MCC, CC, and NonCC subgroups, in our analysis of the MS-
DRG classification requests for FY 2023 that we received by November 1,
2021, as well as any additional analyses that were conducted in
connection with those requests. We also note that new requests to
subdivide a MS-DRG frequently pertain to existing MS-DRGs which differs
from requests to create a new base MS-DRG for which the criteria to
create subgroups is subsequently applied. In response to the
commenter's recommendation that CMS conduct a full analysis similar to
the analysis that was performed for the transition from CMS DRGs to MS-
DRGs in FY 2008, we appreciate the commenter's suggestion and will take
it under advisement.
Comment: Another commenter who recognized differences between the
list of MS-DRGs shown for FY 2022 and FY 2023 requested additional
transparency for the data being presented for review and for CMS to
consider analyzing data from other databases, such as Medicaid or
States, to supplement the MS-DRGs known to have lower volumes among the
Medicare population (for example, Obstetric MS-DRGs). This commenter
also expressed concern about the potential impact to community
hospitals if proposed MS-DRG changes in connection with the NonCC
subgroup criteria result in significant MS-DRG redistribution.
Response: We thank the commenter for their feedback. As discussed
previously, we intend to conduct a comprehensive analysis of the
application of the NonCC subgroup criteria that would be made publicly
available for review and comment in connection with any proposed MS-DRG
changes for future rulemaking.
After consideration of the public comments we received, we are
finalizing our proposal to delay the application of the NonCC subgroup
criteria to existing MS-DRGs with a three-way severity level split
until FY 2024 or later, and are finalizing for FY 2023 to maintain the
current structure of the 41 MS-DRGs that currently have a three-way
severity level split.
We are making the FY 2023 ICD-10 MS-DRG GROUPER and Medicare Code
Editor (MCE) Software Version 40, the ICD-10 MS-DRG Definitions Manual
files Version 40 and the Definitions of Medicare Code Edits Manual
Version 40 available to the public on our CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
[[Page 48805]]
2. Pre-MDC: MS-DRG 018 Chimeric Antigen Receptor (CAR) T-cell and Other
Immunotherapies
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798 through
44806), we finalized our proposal to assign procedure codes describing
CAR T-cell, non-CAR T-cell, and other immunotherapies to Pre-MDC MS-DRG
018 and to revise the title for Pre-MDC MS-DRG 018 to ``Chimeric
Antigen Receptor (CAR) T-cell and Other Immunotherapies'' to reflect
this assignment. In that discussion, we noted that a few commenters
recommended we continue to work with interested parties on ways to
improve the predictability and stability of hospital payments for these
complex, novel cell therapies and that we should continue to monitor
and assess the appropriateness of therapies assigned to MS-DRG 018, if
they continue to be aligned on resource use, and whether additional
refinements or MS-DRGs may be warranted in the future.
We also noted that the process of code creation and proposed
assignment to the most appropriate MS-DRG exists independently,
regardless of whether there is an associated application for a new
technology add-on payment for a product or technology submitted for
consideration in a given fiscal year. Specifically, requests for a new
code(s) or updates to existing codes are addressed through the ICD-10
Coordination and Maintenance Committee meetings, held annually in the
spring and fall, where code proposals are presented and the public is
provided the opportunity to comment. All codes finalized from the fall
meeting are subsequently proposed for assignment under the ICD-10 MS-
DRGs through rulemaking. We refer the reader to section II.D.17 of the
preamble of this final rule for additional information regarding the
ICD-10 Coordination and Maintenance Committee meeting process.
As stated in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28130),
there were no requests or proposals for new procedure codes to describe
the administration of a CAR T-cell or another type of gene or cellular
therapy discussed at the September 14-15, 2021 ICD-10 Coordination and
Maintenance Committee meeting. For the March 8-9, 2022 ICD-10
Coordination and Maintenance Committee meeting, there were topics
included on the agenda and in the related meeting materials that
included proposals for new procedure codes to describe the
administration of a CAR T-cell or another type of gene or cellular
therapy product. The agenda and related meeting materials for these
specific topics are available via the internet on the CMS website at:
https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials.
As stated in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44805) and
noted previously, the process of code creation and proposed assignment
to the most appropriate MS-DRG exists independently, regardless of
whether there is an associated application for a new technology add-on
payment for a product or technology submitted for consideration in a
given fiscal year. We also clarified that the assignment of a procedure
code to a MS-DRG is not dependent upon a product's FDA approval.
Similarly, the creation of a code to describe a technology that is
utilized in the performance of a procedure or service does not require
FDA approval of the technology.
Because the diagnosis and procedure code proposals that are
presented at the March meeting for an October 1 implementation
(upcoming FY) are not finalized in time to include in Table 6A.--New
Diagnosis Codes and Table 6B.--New Procedure Codes in association with
the proposed rule, as noted in prior rulemaking, we use our established
process to examine the MS-DRG assignment for the predecessor codes to
determine the most appropriate MS-DRG assignment. Specifically, we
review the predecessor code and MS-DRG assignment most closely
associated with the new procedure code, and in the absence of claims
data, we consider other factors that may be relevant to the MS-DRG
assignment, including the severity of illness, treatment difficulty,
complexity of service and the resources utilized in the diagnosis or
treatment of the condition. We have noted in prior rulemaking that this
process does not automatically result in the new procedure code being
assigned to the same MS-DRG or to have the same designation (O.R.
versus Non-O.R.) as the predecessor code.
As stated in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28130),
in response to commenters' recommendation that we continue to assess
the appropriateness of the therapies assigned to Pre-MDC MS-DRG 018, we
provided the results of our data analysis using the September 2021
update of the FY 2021 MedPAR file for cases reporting the
administration of a CAR T-cell or other immunotherapy in Pre-MDC MS-DRG
018 and the number of cases reporting a secondary diagnosis of Z00.6
(Encounter for examination for normal comparison and control in
clinical research program). We noted that if a procedure code that is
assigned to the logic for Pre-MDC MS-DRG 018 is not listed it is
because there were no cases found. We also noted there were no cases
reporting diagnosis code Z00.6 as a principal diagnosis. Our findings
are shown in the following table.
[[Page 48806]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.006
The data show that there is a wide range in the volume of cases (4
cases versus 435 cases), average length of stay (11.3 days versus 20.3
days), and average costs ($157,950 versus $310,561) reporting the
administration of CAR T-cell therapies in MS-DRG 018. This is to be
expected since these therapies continue to evolve and the ICD-10-PCS
coding to identify and describe these therapies also continues to be
refined through the ICD-10 Coordination and Maintenance Committee
meeting process. As additional claims data becomes available for these
therapies, we will continue to evaluate to determine if further
modifications to Pre-MDC MS-DRG 018 are warranted.
We noted in the proposed rule that in response to our statement in
the FY 2022 IPPS/LTCH PPS final rule that we plan to continue engaging
with interested parties on additional options for consideration in this
field of cellular and gene therapies, we received additional feedback
and suggestions, including recommendations for Town Hall meetings/
listening sessions to discuss the interconnectedness of these issues;
exploration of what was described as a different set and kind of MS-
DRGs that would reward providers for controlling patient care costs,
without consideration of product costs outside of their control; and
evaluation of the creation and assignment of multiple MS-DRGs for cell
and gene therapy cases: one to cover patient care costs, the other to
cover product costs across therapeutic product categories.
We stated we appreciated this additional feedback and will continue
to consider these issues and suggestions in connection with future
rulemaking. We also stated we intend to continue engaging with
interested parties by sharing updates from our analysis of claims data
as we examine and explore potential refinements for these therapies
under the IPPS.
Comment: Several commenters expressed support and appreciation that
for FY 2023, CMS proposed to maintain the current structure of Pre-MDC
MS-DRG 018 that includes ``Other Immunotherapies'', and to maintain its
current methodology used to determine the relative weight. Some
commenters acknowledged that it is difficult to predict what the
associated costs will be in the future for CAR T-cell and other
immunotherapies that remain under development. These commenters urged
CMS to consider factors such as new or different side effects and how
other therapeutic agents that could be administered simultaneously in
connection with these therapies may potentially lead to toxicity, as
continued monitoring of resource utilization and data analysis for Pre-
MDC MS-DRG 018 occurs. Other commenters commended CMS for its
commitment to engage with interested parties as the agency continues to
analyze claims data and consider the feedback that has been received to
date for these therapies.
Response: We thank the commenters for their support and appreciate
the additional feedback on other factors to consider as we continue to
monitor and analyze the data for Pre-MDC MS-DRG 018. As noted in prior
rulemaking, we have received several suggestions, recommendations, and
options pertaining to how CAR T-cell and other immunotherapies may be
classified under the IPPS in the future. We intend to further examine
the feedback received and maintain transparency in our approach moving
forward, with the shared goal of enabling continued access to these and
other vital treatments for Medicare beneficiaries.
Comment: Similar to the public comments received in response to the
FY 2022 IPPS/LTCH PPS proposed rule, for FY 2023, some commenters again
expressed concerns with the non-CAR T-cell therapies and other
immunotherapies that may be assigned to Pre-MDC MS-DRG 018 and stated
that these potential assignments could lead to fluctuations in the
relative weight. A few commenters requested that Pre-MDC MS-DRG 018 be
limited to CAR T-cell therapies. Other commenters encouraged CMS to
clarify its methodology and criteria for assigning new procedure codes
to Pre-MDC MS-DRG 018. Some commenters expressed continued concern with
the revision to the title for Pre-MDC MS-DRG 018 that was finalized
effective FY
[[Page 48807]]
2022 to include ``Other Immunotherapies''.
Response: In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798
through 44806), we provided detailed summaries and responses to these
same or similar concerns and comments. In the FY 2023 IPPS/LTCH PPS
proposed rule (87 FR 28129 through 28131), we provided an overview of
the assignment of new procedure codes to Pre-MDC MS-DRG 018 and
reiterated much of the discussion from FY 2022 rulemaking. As stated in
prior rulemaking, the MS-DRG system is a system of averages and it is
expected that within the diagnostic related groups, some cases may
demonstrate higher than average costs, while other cases may
demonstrate lower than average costs. We have not made any changes to
our established processes or methodologies for MS-DRG assignment of new
procedure codes, including with regard to case assignment to Pre-MDC
MS-DRG 018, and we refer the reader to the detailed discussion related
to Pre-MDC MS-DRG 018 in the FY 2022 IPPS/LTCH PPS final rule. We note
that additional claims data is needed to fully analyze and consider all
the recommendations we have received, and to potentially develop
alternative proposals with respect to payment for these therapies under
the IPPS. There is also uncertainty with regard to the number and types
of therapies currently under development or undergoing studies and how
soon they will be available. We recognize the concerns that have been
expressed by commenters and we are also continuing to assess the
reliability and stability of the data in light of the ongoing public
health emergency.
Comment: Many commenters expressed appreciation to CMS for
providing transparency with the cases reporting the administration of a
CAR T-cell or other immunotherapy in the FY 2021 MedPAR claims data for
Pre-MDC MS-DRG 018. However, a commenter indicated there was confusion
about the coded claims data as presented in the proposed rule since the
procedure codes described as new technology group 7 became effective
October 1, 2021 (FY 2022), which is one year later than the FY 2021
data that was shown in the table in the preamble of the proposed rule.
The commenter requested that CMS provide clarification to help
eliminate any additional confusion for readers and interested parties
who also analyze the data for these therapies.
Response: We thank the commenters for their support. The FY 2021
MedPAR claims data were regrouped using the proposed FY 2023 MS-DRG
classifications, therefore, coded claims data for the procedure codes
describing the administration of CAR T-cell and other immunotherapy
agents reported in FY 2021 was mapped from the FY 2021 MedPAR coded
claims data to the procedure codes that are effective for FY 2023.
Specifically, the codes that were effective for FY 2021 and are no
longer valid were mapped to the new procedure codes that are valid for
FY 2023. We also note, as generally stated in the preamble of the
proposed rule each year, the diagnosis and procedure codes from the
specified FY MedPAR claims data are grouped through the applicable
version of the proposed FY GROUPER. For example, as discussed in
section II.E.1. of the preamble of the proposed rule (87 FR 28197), the
proposed FY 2023 relative weights are based on the ICD-10-CM diagnosis
codes and ICD-10-PCS procedure codes from the FY 2021 MedPAR claims
data, grouped through the ICD-10 version of the proposed FY 2023
GROUPER (Version 40).
Comment: A commenter suggested that CMS consider establishing a
timeframe that would enable the public to comment on procedure codes
that may be assigned to Pre-MDC MS-DRG 018 upon being approved and
finalized after the spring ICD-10 Coordination and Maintenance
Committee meeting. The commenter stated that currently, because
procedure codes that are discussed at the spring ICD-10 Coordination &
Maintenance (C&M) Committee meeting do not receive proposed assignments
and are not published with the IPPS proposed rule given the timing,
there is no opportunity for interested parties to provide feedback to
CMS about MS-DRG assignments for new codes, including assignment to MS-
DRG-018. The commenter acknowledged the C&M meeting is not the
appropriate forum for the public to provide input on MS-DRG assignment,
however, because Pre-MDC MS-DRG 018 currently has a limited number of
procedure codes assigned to it, the commenter stated that interested
parties should have the opportunity to review and comment on potential
assignment to Pre-MDC MS-DRG 018. This commenter also maintained that
it has a unique relationship with the therapies currently assigned to
Pre-MDC MS-DRG 018 as its membership is the predominant specialty
society associated with these therapies and has the experience and
clinical understanding related to resource utilization associated with
the administration of these therapies.
Response: We appreciate the commenter's feedback. As discussed
elsewhere in this rule as well as in prior rulemaking, because the
procedure code proposals discussed at the Spring ICD-10 Coordination
and Maintenance Committee meeting are not finalized in time to include
in Table 6B.--New Procedure codes associated with the proposed rule,
CMS uses an established process to determine the most appropriate MS-
DRG assignment for these new procedure codes for the upcoming fiscal
year. While we understand and acknowledge the uniqueness of CAR T-cell,
gene, and cellular therapies, we believe it is necessary to further
examine how and when we could alter our current methodology and
timelines to provide the opportunity for interested parties to submit
comments and feedback in the assignment of new procedure codes that are
finalized after the spring meeting. We also note, as discussed in the
proposed rule (87 FR 28130), all codes finalized from the fall meeting
are subsequently proposed for assignment under the ICD-10 MS-DRGs
through rulemaking, therefore, interested parties seeking the
opportunity to more fully comment on potential MS-DRG assignment(s)
have the opportunity to submit requests for consideration of proposed
new procedure codes in association with these therapies to be discussed
at the fall meeting versus the spring meeting. Alternatively,
interested parties may use current coding information as shown in the
ICD-10 Coordination and Maintenance Committee meeting materials to
consider the potential MS-DRG assignments for any procedure codes that
may be finalized after the March meeting and submit public comments for
consideration.
As noted in the proposed rule, for the March 8-9, 2022 ICD-10
Coordination and Maintenance Committee meeting there were two topics
included on the agenda and in the related meeting materials that
included proposals for new procedure codes to describe the
administration of a CAR T-cell or another type of gene or cellular
therapy product. The two topics are Administration of afamitresgene
autoleucel (afami-cel), a specific peptide enhanced affinity receptor
(SPEAR) T-cell therapy and Administration of Tabelecleucel (tab-
cel[supreg]), an allogeneic Epstein-Barr virus (EBV)-specific T-cell
immunotherapy, both of which were approved for new procedure codes
following the March meeting. We refer the reader to the CMS website at
https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials for
additional detailed information regarding these code requests.
[[Page 48808]]
Because the diagnosis and procedure code proposals that are
presented at the March ICD-10-CM Coordination and Maintenance Committee
meeting for an October 1 implementation (upcoming FY) are not finalized
in time to include in Table 6A.--New Diagnosis Codes and Table 6B.--New
Procedure Codes in association with the proposed rule, as we have noted
in prior rulemaking, we use our established process to examine the MS-
DRG assignment for the predecessor codes to determine the most
appropriate MS-DRG assignment. Specifically, we review the predecessor
code and MS-DRG assignment most closely associated with the new
procedure code, and in the absence of claims data, we consider other
factors that may be relevant to the MS-DRG assignment, including the
severity of illness, treatment difficulty, complexity of service and
the resources utilized in the diagnosis and/or treatment of the
condition. We have noted in prior rulemaking that this process does not
automatically result in the new procedure code being assigned to the
same MS-DRG or to have the same designation (O.R. versus Non-O.R.) as
the predecessor code. As shown in Table 6B.--New Procedure Codes
associated with this final rule and available via the internet on the
CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS, new procedure codes for these two therapies
have been finalized for assignment to Pre-MDC MS-DRG 018 effective with
discharges on and after October 1, 2022 (FY 2023).
We appreciate the public comments we received, and, as noted, will
continue to evaluate the recommendations and options provided by
commenters related to these therapies as well as to monitor the
available claims data.
3. MDC 01 (Diseases and Disorders of the Nervous System)
a. Laser Interstitial Thermal Therapy (LITT)
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44812 through
44814), we finalized the reassignment of 31 ICD-10-PCS procedure codes
describing laser interstitial thermal therapy (LITT) of various body
parts to more clinically appropriate MS-DRGs, as shown in Table 6P.2b
associated with the FY 2022 IPPS/LTCH PPS final rule and available via
the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS, including the
reassignment of procedure codes D0Y0KZZ (Laser interstitial thermal
therapy of brain) and D0Y1KZZ (Laser interstitial thermal therapy of
brain stem), which were reassigned from MS-DRG 023 (Craniotomy with
Major Device Implant or Acute Complex CNS Principal Diagnosis with MCC
or Chemotherapy Implant or Epilepsy with Neurostimulator), MS-DRG 024
(Craniotomy with Major Device Implant or Acute Complex CNS Principal
Diagnosis without MCC), and MS-DRGs 025, 026, and 027 (Craniotomy and
Endovascular Intracranial Procedures with MCC, with CC, and without CC/
MCC, respectively) to MS-DRGs 040, 041, and 042 (Peripheral, Cranial
Nerve and Other Nervous System Procedures with MCC, with CC and without
CC/MCC, respectively).
We also finalized the redesignation of these two LITT procedures
(codes D0Y0KZZ and D0Y1KZZ) and the reassignment from extensive O.R.
procedures in MS-DRGs 981, 982 and 983 (Extensive O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively) to non-extensive O.R. procedures in MS-DRGs 987, 989, and
989 (Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with
MCC, with CC, and without CC/MCC, respectively) (86 FR 44889).
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28131), for FY 2023, we received two requests from the manufacturers of
the LITT technology (Medtronic and Monteris[supreg] Medical) to reverse
the MS-DRG reassignment for the ICD-10 procedure codes that identify
LITT of the brain and brain stem (codes D0Y0KZZ and D0Y1KZZ) from the
MS-DRGs for peripheral, cranial nerve and other nervous system
procedures (MS-DRGs 040, 041, and 042) back to the MS-DRGs for
craniotomy and endovascular procedures (MS-DRGs 023, 024, 025, 026, and
027). The first requestor acknowledged that the technique utilized in
the performance of LITT procedures for the brain and brain stem are
minimally invasive and do not involve a craniotomy however, the
requestor also stated the procedures assigned to MS-DRGs 025, 026, and
027 are not exclusive to craniotomies. The requestor further stated
that these LITT procedures involve a twist drill or burr hole and are
similar to other non-craniotomy procedures in MS-DRGs 025, 026, and 027
including radioactive elements and neurostimulator leads that involve
inserting these devices into the brain.
In its review of the other procedures assigned to MS-DRGs 040, 041,
and 042, the requestor stated that there are distinct clinical
differences between the invasiveness of LITT that involves
instrumentation being placed deeply within the brain tissue and the
non-invasiveness of stereotactic radiosurgery that does not involve
entering the brain with instrumentation. The requestor also indicated
LITT utilizes a different modality via direct thermal ablation compared
to stereotactic radiosurgery that utilizes externally-generated
ionizing radiation.
The requestor performed its own data analysis for LITT procedures
of the brain and brain stem using MedPAR data from FY 2019 through FY
2022 impact files. According to the requestor, its findings demonstrate
that the costs of the cases reporting LITT of the brain or brain stem
are better aligned with MS-DRGs 025, 026, and 027 compared to MS-DRGs
040, 041, and 042.
The second requestor similarly discussed the steps and resources
involved in the performance of LITT procedures for the brain and brain
stem, provided its detailed analysis on the indications for LITT (brain
tumors and epileptic foci), compared LITT to other procedures in MS-
DRGs 025, 026, and 027 and stated that the majority of the procedures
currently assigned to MS-DRGs 040, 041, 042 are not performed for the
treatment of brain cancer or epilepsy. The requestor stated that the
LITT procedure is on the inpatient only list and is only performed on
Medicare beneficiaries in the inpatient hospital setting. The requestor
provided the top 10 principal diagnoses associated with LITT of brain
cases it found based on its analysis, and identified the diagnoses for
which there were less than 10 cases with an asterisk, as reflected in
the following table.
[[Page 48809]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.007
The requestor asserted that the statement in the FY 2022 IPPS/LTCH
PPS final rule that the technique to perform the LITT procedure on
brain and brain stem structures is considered minimally invasive and
does not involve a craniotomy, and that therefore, continued assignment
to the craniotomy MS-DRGs is not clinically appropriate,
mischaracterizes both the LITT procedures and universe of services
assigned to MS-DRGs 023 through 027. The requestor acknowledged that
the craniotomy procedures listed in the logic for MS-DRGs 023 through
027 include open procedures but stated the logic also lists less
invasive procedures including percutaneous and percutaneous endoscopic
procedures. The requestor asserted that open procedures are a minority
of the ICD-10-PCS codes assigned to these MS-DRGs.
In addition, the requestor stated that LITT and craniotomy are in
fact very clinically similar; in that both procedures are intended to
remove and destroy the targeted tumor and lesion with a different
surgical tool used (scalpel versus heated ablation probe). According to
the requestor, brain LITT procedures involve insertion of laser probes
into the brain which requires opening both the skull and dura, similar
to a craniotomy. The requestor also stated that craniotomy and LITT
share several procedural characteristics and provided the following
list.
Require an operating room;
Performed under general anesthesia;
Require creation of burr holes and invasive skull
fixation;
Require a sterile field, incision, opening of the skull
and dura;
Cause tissue to be immediately destroyed or excised;
Carry a risk of immediate intracranial bleeding;
Require closure of the scalp wound;
Risk intracranial infection; and
Require a hospital stay of one or more nights.
In contrast, the requestor stated that procedures assigned to MS-
DRGs 040, 041, and 042 are primarily nerve procedures or excision or
detachment procedures performed on parts of the body other than the
head, including the upper and lower extremities. According to the
requestor, none of the procedures in MS-DRGs 040, 041, and 042 require
drilling into the patient's skull, a step which is integral to LITT.
The requestor provided the following top 10 principal diagnoses
associated with cases it found in MS-DRGs 040, 041, and 042 during its
analysis and stated that most of the procedures assigned to MS-DRGs
040, 041, and 042 are not typically performed in the treatment of brain
cancer or epilepsy.
[GRAPHIC] [TIFF OMITTED] TR10AU22.008
[[Page 48810]]
However, the requestor stated an exception is stereotactic
radiosurgery (SRS) procedures performed on the brain and brain stem
that are assigned to MS-DRGs 040, 041, and 042 and are used to treat
brain cancer. According to the requestor, craniotomy, LITT and SRS are
all image-guided procedures used to treat a variety of brain disorders
including tumors and epilepsy, although it stated that is where any
similarity between LITT and SRS ends and where the procedural
similarities between craniotomy and LITT begin.
The requestor stated SRS is a non-invasive procedure that gradually
destroys or inactivates tissues in or around the brain and is typically
performed on an outpatient basis while inpatient SRS treatment is rare.
According to the requestor, SRS does not require an operating room, is
rarely done under general anesthesia (children and highly
claustrophobic individuals being an exception), and does not require
(but can use) rigid skull fixation. In addition, the requestor stated
that because it is non-invasive, there is no need for a sterile field,
incision, opening/closing of the skull, opening/closing of the dura,
suturing/stapling the wound, and produces essentially no risk of
immediate intracranial bleeding or delayed infection. According to the
requestor, LITT is much more invasive than SRS using a head frame and
involves and requires the same surgical skill and hospital resources as
craniotomies.
In the proposed rule we noted that following the submission of the
two FY 2023 MS-DRG classification change requests for LITT, these same
two requestors (the manufacturers of the LITT technology) submitted a
joint code proposal requesting an overall change to how LITT is
classified within the ICD-10-PCS classification and for consideration
as an agenda topic to be discussed at the March 8-9, 2022 ICD-10
Coordination and Maintenance Committee meeting. The proposal was
presented and discussed at the March 8-9, 2022 ICD-10 Coordination and
Maintenance Committee meeting. We referred the reader to the CMS
website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials for additional detailed information regarding the request,
including a recording of the discussion and the related meeting
materials. Public comments in response to the code proposal were due by
April 8, 2022.
Because the diagnosis and procedure code proposals that are
presented at the March ICD-10-CM Coordination and Maintenance Committee
meeting for an October 1 implementation (upcoming FY) are not finalized
in time to include in Table 6A. --New Diagnosis Codes and Table 6B.--
New Procedure Codes in association with the proposed rule, as we have
noted in prior rulemaking and discuss further in this section, we use
our established process to examine the MS-DRG assignment for the
predecessor codes to determine the most appropriate MS-DRG assignment.
Specifically, we review the predecessor code and MS-DRG assignment most
closely associated with the new procedure code, and in the absence of
claims data, we consider other factors that may be relevant to the MS-
DRG assignment, including the severity of illness, treatment
difficulty, complexity of service and the resources utilized in the
diagnosis and/or treatment of the condition. We have noted in prior
rulemaking that this process does not automatically result in the new
procedure code being assigned to the same MS-DRG or to have the same
designation (O.R. versus Non-O.R.) as the predecessor code. Under this
established process, the MS-DRG assignment for the upcoming fiscal year
for any new diagnosis or procedure codes finalized after the March
meeting would be reflected in Table 6A.--New Diagnosis Codes and Table
6B.--New Procedure Codes associated with the final rule for that fiscal
year. However, as stated in the proposed rule, in light of the unique
circumstances relating to these procedures, for which there was a
pending proposal to reclassify LITT within ICD-10-PCS and for new
procedure codes discussed at the March meeting, as well as an MS-DRG
reclassification request to reassign the existing codes describing
these procedures, we addressed in this section first, the code proposal
discussed at the March meeting and the possible MS-DRG assignments for
any new codes that may be approved, and then secondly, the requested
reassignment of the existing codes, in the event the new codes are not
approved.
To summarize, as discussed at the March meeting, the code proposal
was to reclassify LITT procedures from the Radiation Therapy section of
ICD-10-PCS (Section D) to the Medical and Surgical section of ICD-10-
PCS. Specifically, the proposal was to reclassify LITT procedures to
the root operation Destruction. In ICD-10-PCS, the root operation
Destruction is defined as physical eradication of all or a portion of a
body part by the direct use of energy, force, or a destructive agent.
According to the requestors, LITT is misclassified to section D-
Radiation Therapy in ICD-10-PCS possibly because of terminology that
was used for predicate devices, whose indications included the phrase
``interstitial irradiation or thermal therapy'' in describing LITT's
method of action. The requestors stated LITT is thermal therapy,
destroying soft tissue using heat generated by a laser probe at the
target site and that the LITT procedure does not use ionizing
radiation, which is what the term ``radiation'' commonly refers to in
the general medical sense. The requestors also stated that by itself,
radiation is a broad term and provided an example that the spectrum of
electromagnetic radiation technically encompasses low energy non-
ionizing radio waves, microwaves, and infrared to high energy ionizing
X-rays and gamma rays while ionizing radiation creates ions in the
cells it passes through by removing electrons, a process which kills or
alters the cells over time.
The requestors further stated that only certain medical uses of
radiation are classified to section D-Radiation Therapy. For instance,
section D-Radiation Therapy categorizes treatments using ionizing
radiation, including beam radiation, brachytherapy, and stereotactic
radiosurgery. All of these deliver concentrated ionizing radiation to
eradicate abnormal cells, most commonly neoplasms. Other treatments
classified to section D-Radiation Therapy, such as hyperthermia, are
used as adjuncts to ionizing radiation. The requestors asserted that
while LITT eradicates abnormal cells, it does so with heat, not
ionizing radiation and rather than a radiation therapy procedure, LITT
is a surgical procedure. According to the requestors, LITT would be
more appropriately classified as an ablation procedure with the root
operation Destruction.
As stated in the proposed rule, the original request for a new
code(s) to describe the LITT technology was initially discussed at the
September 24-25, 2008 ICD-9-CM Coordination and Maintenance Committee
meeting. At that time, the requestor sought an April 1, 2009
implementation date. Public comments opposed an April 1, 2009
implementation date, therefore, effective October 1, 2009 (FY 2010),
ICD-9-CM procedure codes were created to identify procedures performed
utilizing the LITT technology. The following table lists the ICD-9-CM
procedure codes describing LITT and their respective MDC and MS-DRG
assignments under the ICD-9 based MS-DRGs. We refer the reader to the
ICD-9 and ICD-10 MS-DRG Definitions Manual Files V33 (available via the
[[Page 48811]]
internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download-Items/FY2016-Final-Rule-Correction-Notice-Files in the
Downloads section) for complete documentation of the GROUPER logic for
ICD-9.
[GRAPHIC] [TIFF OMITTED] TR10AU22.009
The requestors maintain that although LITT was used to treat a
variety of anatomic sites when it was first introduced, its current
primary use is intracranial, specifically to treat brain tumors and
epileptic foci. However, the requestors stated it is also used to treat
radiation necrosis, an inflammatory response from prior treatment with
ionizing radiation.
We noted in the proposed rule that currently, in the U.S., there
are only two LITT systems in use, VisualaseTM MRI-Guided
Laser Ablation (Medtronic) and the Neuroblate[supreg] System
(Monteris[supreg] Medical). The requestors also stated that over the
last six years, the Indications for Use (IFU) for one of the two U.S.
approved LITT technologies (Neuroblate[supreg]) has been updated to
reflect the system's current use in the brain and to align with the
intended neurosurgical patient population. The requestor indicated
applications in the spine are also anticipated in the future within the
central nervous system.
As previously noted, the deadline for receipt of public comments
for the proposed reclassification of LITT procedures that was presented
at the March 8-9, 2022 ICD-10 Coordination and Maintenance Committee
meeting along with the corresponding proposal for new procedure codes
was April 8, 2022, and the final code decisions on these proposals were
not yet available for inclusion in Table 6B.--New Procedure Codes
associated with the FY 2023 IPPS/LTCH PPS proposed rule. However, as
discussed in prior rulemaking (86 FR 44805), codes that are finalized
after the March meeting are reviewed and subject to our established
process of initially reviewing the predecessor codes MS-DRG assignment
and designation, while considering other relevant factors (for example,
severity of illness, treatment difficulty, complexity of service and
the resources utilized in the diagnosis and/or treatment of the
condition) as previously described. The codes that are finalized after
the March meeting are specifically identified with a footnote in Tables
6A.--New Diagnosis Codes and Table 6B.--New Procedure Codes that are
made publicly available in association with the final rule via the
internet on the CMS website at https://www.cms.gov/medicare/medicare-
fee-for-service-payment/acuteinpatientpps. The public may provide
feedback on these finalized assignments, which is then taken into
consideration for the following fiscal year.
We stated in the proposed rule that the MS-DRG assignment for any
new procedure codes describing LITT, if finalized following the March
meeting, would be reflected in Table 6B.--New Procedure Codes
associated with the final rule for FY 2023. However, in light of the
unique circumstances with respect to these procedures, for which there
was both a proposal for reclassifying LITT from the Radiation Therapy
section of the procedure code classification to the Medical/Surgical
section with new ICD-10-PCS procedure code(s) and a separate MS-DRG
reclassification request on the existing procedure codes, we provided
the opportunity for public comment on possible MS-DRG assignments for
the requested new procedure codes describing LITT that may apply based
on the application of our established process and analysis, in the
event the new codes were finalized for FY 2023. We also noted that
while we discussed the potential MS-DRG assignments for new procedure
codes describing LITT, interested parties may use current coding
information to consider the potential MS-DRG assignments for any other
procedure codes that may be finalized after the March meeting and
submit public comments for consideration. Specifically, in the ICD-10
Coordination and Maintenance Committee meeting materials (available via
the internet on the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials), for each procedure code
proposal we provide the current coding that is applicable within the
classification and that should be reported in the absence of a more
unique code, or until such time a new code is created and becomes
effective. The procedure code(s) listed in current coding are
generally, but not always, the same code(s) that are considered as the
predecessor code(s) for purposes of MS-DRG assignment. As previously
noted, our process for determining the MS-DRG assignment for a new
procedure code does not automatically result in the new procedure code
being assigned to the
[[Page 48812]]
same MS-DRG or having the same designation (O.R. versus Non-O.R.) as
the predecessor code. However, this current coding information can be
used in conjunction with the GROUPER logic, as set forth in the ICD-10
MS-DRG Definitions Manual and publicly available via the internet on
our CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software
to review the MS-DRG assignment of the current code(s) and examine the
potential MS-DRG assignment of the proposed code(s), to assist in
formulating any public comments for submission to CMS for
consideration.
We noted in the proposed rule that, unlike the typical code request
for a new or revised procedure code that involves a new technology or a
new approach to performing an existing procedure, the circumstances for
this particular request are distinct in that the code request would
reclassify LITT within the ICD-10-PCS classification from section D--
Radiation Therapy to the root operation Destruction in the Medical and
Surgical section of ICD-10-PCS. Therefore, in light of the unique
considerations with respect to the requested reclassification of the
LITT procedures in connection with the pending code proposal, we stated
we believe it was appropriate to utilize the assignments and
designations of the procedure codes describing Destruction of the
respective anatomic body site as predecessor codes rather than the
current codes describing LITT from the Radiation Therapy section of
ICD-10-PCS in considering potential MS-DRG assignment for the requested
new LITT procedure codes.
As previously discussed, under our established process for
determining the MS-DRG assignment for newly approved procedure codes,
we examine the MS-DRG assignment for the predecessor codes to determine
the most appropriate MS-DRG assignment for the new codes. Specifically,
we review the predecessor code and MS-DRG assignment most closely
associated with the new procedure code, and in the absence of claims
data, we consider other factors that may be relevant to the MS-DRG
assignment, including the severity of illness, treatment difficulty,
complexity of service and the resources utilized in the diagnosis and/
or treatment of the condition. As we have noted in prior rulemaking,
this process does not automatically result in the new procedure code
being assigned to the same MS-DRG or to have the same designation (O.R.
versus Non-O.R.) as the predecessor code.
Applying this established review process to the proposed codes for
the LITT procedures, we stated we believe that, based on the
predecessor codes, and as previously noted, the potential assignments
and designations would align with the assignments and designations of
the procedure codes describing Destruction of the respective anatomic
body site. For example, as discussed in the preamble of the proposed
rule and earlier in this section of this final rule, the code request
involved reclassifying LITT procedures from section D--Radiation
Therapy to the root operation Destruction in the Medical and Surgical
section of ICD-10-PCS. The root operation Destruction is appropriate to
identify and report procedures, such as ablation, that are performed on
various body parts. The code request also involved creating what is
referred to as a qualifier value, to uniquely describe LITT as the
modality. The qualifier value is the seventh character or digit, in a
valid ICD-10-PCS procedure code.
We presented the following ICD-10-PCS table in the proposed rule,
which illustrates an example of the proposed procedure codes for LITT
of the brain and brain stem, and cervical, thoracic, and lumbar spinal
cord body parts, including the qualifier value that was presented and
discussed at the March 8-9, 2022 ICD-10 Coordination and Maintenance
Committee meeting.
[GRAPHIC] [TIFF OMITTED] TR10AU22.010
We noted in the proposed rule that the code proposal presented only
provided the body part value 0 Brain, for reporting any LITT procedures
performed on the brain, as well as, the brain stem, consistent with the
current available body part option in Table 005, Destruction of Central
Nervous System and Cranial Nerves, where the predecessor code is
located. We also noted that the predecessor code(s) and associated MS-
DRG assignments for the proposed new procedure code(s) describing LITT
of the brain and spinal cord under MDC 01 are identified as follows.
[[Page 48813]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.011
As shown in the table, the procedure codes describing destruction
of brain with an open, percutaneous or percutaneous endoscopic approach
are assigned to MS-DRGs 023 through 027 (craniotomy and endovascular
procedures) and the procedure codes describing destruction of cervical,
thoracic or lumbar spinal cord with an open, percutaneous or
percutaneous endoscopic approach are assigned to MS-DRG 028 (Spinal
Procedures with MCC), MS-DRG 029 (Spinal Procedures with CC or Spinal
Neurostimulators), and MS-DRG 030 (Spinal Procedures without CC/MCC).
We referred the reader to Table 6P.2a associated with the proposed
rule (and available via the internet at: https://www.cms.gov/medicare/
medicare-fee-for-service-payment/acuteinpatientpps) to review the
potential MDCs, MS-DRGs, and O.R. versus Non-O.R. designations
identified based on this analysis of the proposed new procedure codes
describing LITT as presented and discussed at the meeting. We noted
that Table 6P.2a also includes the predecessor codes that we utilized
to inform this analysis. We stated that if finalized, the new procedure
codes would be included in the FY 2023 code update files that are made
available in late May/early June via the internet on the CMS website
at: https://www.cms.gov/medicare/coding/icd10. Additionally, we noted
that if finalized, the new procedure codes describing LITT would be
displayed in Table 6B.--New Procedure Codes, and the existing codes
describing LITT would be deleted and reflected in Table 6D.--Invalid
Procedure Codes, in association with the FY 2023 IPPS/LTCH PPS final
rule. We referred the reader to section II.D.14. of the preamble of the
proposed rule for further information regarding the files.
We note that the proposal to reclassify LITT procedures of the
brain, brain stem and other anatomic sites in ICD-10-PCS that was
discussed at the March 8-9, 2022 ICD-10 Coordination and Maintenance
Committee meeting was approved and new procedure codes describing LITT
of the brain and other anatomic sites were finalized as reflected in
the FY 2023 ICD-10-PCS Code Update files that were made publicly
available via the internet on the CMS website at https://www.cms.gov/
Medicare/Coding/ICD10 on May 26, 2022. We also note that the new
procedure codes effective October 1, 2022 describing LITT of the brain
and other anatomic sites are displayed in Table 6B.--New Procedure
Codes, and the existing codes describing LITT of the brain, brain stem,
and other anatomic sites that are being deleted effective October 1,
2022 are reflected in Table 6D.--Invalid Procedure Codes, in
association with this FY 2023 IPPS/LTCH PPS final rule and available
via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. Below we summarize
the public comments we received and present our responses.
Comment: Commenters expressed appreciation that the proposal to
reclassify LITT procedures in ICD-10-PCS that was discussed at the
March 8-9, 2022 ICD-10 Coordination and Maintenance Committee meeting
was approved and new procedure codes have been finalized as reflected
in the FY 2023 ICD-10-PCS Code Update files that were made publicly
available via the internet on the CMS website at https://www.cms.gov/
Medicare/Coding/ICD10 on May 26, 2022. Commenters also indicated it is
appropriate to utilize procedure codes with the root operation
Destruction as the predecessor codes for MS-DRG assignment of the new
LITT procedure codes for all the anatomic body sites. Several
commenters expressed support for the assignment of cases reporting new
procedure codes for LITT of brain (includes brain stem) from MS-DRGs
040, 041, and 042 to MS-DRGs 025, 026 and 027 and urged CMS to finalize
this assignment. The commenters commended CMS for recognizing the
unique clinical circumstances related to LITT procedures of the brain
as being more appropriately aligned with MS-DRGs 025, 026 and 027. A
commenter acknowledged that the new procedure codes for LITT of brain
had not yet been finalized at the time of the development of the
proposed rule and therefore, were not reflected in the V40 Test GROUPER
software, however, the commenter encouraged CMS to ensure the final V40
GROUPER logic reflects the new procedure codes for LITT of brain and
assignment to MS-DRGs 025, 026 and 027.
Response: We thank the commenters for their support. In addition to
the new procedure codes describing LITT being made publicly available
in the FY 2023 ICD-10-PCS Code Update files via the internet on the CMS
website at https://www.cms.gov/Medicare/Coding/ICD10, we note that, as
previously stated, the new procedure codes are also reflected in Table
6B.--New Procedure Codes, in association with this final rule and
available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS with their
finalized MS-DRG assignments. As shown in the table, procedure codes
describing LITT of brain (root operation Destruction), are assigned to
MS-DRGs 025, 026 and 027 for FY 2023. This assignment is also reflected
in the final V40 GROUPER logic. Existing procedure
[[Page 48814]]
codes D0Y0KZZ (Laser interstitial thermal therapy of brain) and D0Y1KZZ
(Laser interstitial thermal therapy of brain stem) will be deleted
effective October 1, 2022, as reflected in Table 6D.--Invalid Procedure
Codes, in association with this final rule and available via the
internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
As discussed in the proposed rule and previously discussed in this
final rule, we also received requests to reassign the existing ICD-10
procedure codes that identify LITT of the brain and brain stem (codes
D0Y0KZZ and D0Y1KZZ). We stated in the proposed rule that in the event
there is not support for the proposed reclassification of LITT
procedures and the corresponding new procedure codes as presented at
the March 8-9, 2022 ICD-10 Coordination and Maintenance Committee
meeting, we were also providing the results of our analysis of these
existing codes and our proposed MS-DRG assignments for FY 2023, if
those existing codes are retained.
In the proposed rule we stated that we examined claims data from
the September 2021 update of the FY 2021 MedPAR file for MS-DRGs 023,
024, 025, 026, and 027, in addition to MS-DRGs 040, 041, and 042 for
cases reporting LITT of the brain (code D0Y0KZZ) or brain stem (code
D0Y1KZZ). We noted that if a procedure code is not listed it is because
there were no cases found reporting that procedure code. Our findings
are shown in the following tables.
[GRAPHIC] [TIFF OMITTED] TR10AU22.012
[GRAPHIC] [TIFF OMITTED] TR10AU22.013
As shown, we found a total of 123 cases reporting LITT of the brain
across MS-DRGs 023, 025, 026, and 027. There were no cases found in MS-
DRG 024. The cases reporting LITT of the brain grouped to these MS-DRGs
because another O.R. procedure that is assigned to the respective MS-
DRG was also reported. We referred the reader to Table 6P.2b in
association with the proposed rule for the list of the other
[[Page 48815]]
O.R. procedures we identified that were also reported with LITT of the
brain.
For MS-DRGs 040, 041, and 042, we found a total of 54 cases
reporting LITT of the brain and 2 cases reporting LITT of the brain
stem. While the average costs of the cases reporting LITT of the brain
were higher compared to all the cases in their respective MS-DRGs, the
average length of stay was shorter. For example, the data demonstrates
a shorter average length of stay (8.1 days versus 9.9 days) and higher
average costs ($40,458 versus $30,212) for the 14 cases reporting LITT
of brain in MS-DRG 040 compared to all the cases in MS-DRG 040. There
were no cases found to report LITT of brain stem in MS-DRG 040. For MS-
DRG 041, we found 16 cases reporting LITT of brain with an average
length of stay of 3.4 days and average costs of $23,278 and 1 case
reporting LITT of brain stem with an average length of stay of 1 day
and average costs of $10,222. The average length of stay for all the
cases in MS-DRG 041 is 5 days with average costs of $19,090. The data
demonstrates a shorter average length of stay (3.4 days and 1 day,
respectively, versus 5 days) for the 16 cases reporting LITT of brain
and the 1 case reporting LITT of brain stem. The data also demonstrates
higher average costs ($23,278 versus $19,090) for the 16 cases
reporting LITT of brain, and lower average costs for the 1 case
reporting LITT of brain stem ($10,222 versus $19,090), as compared to
the average costs of all cases in MS-DRG 041. For MS-DRG 042, we found
24 cases reporting LITT of brain with an average length of stay of 1.7
days and average costs of $22,426 and 1 case reporting LITT of brain
stem with an average length of stay of 2 days and average costs of
$32,668. The average length of stay for all the cases in MS-DRG 042 is
2.9 days with average costs of $15,451. The data demonstrates a shorter
average length of stay (1.7 days and 2 days, respectively, versus 2.9
days) for the 24 cases reporting LITT of brain and the 1 case reporting
LITT of brain stem. The data also demonstrate higher average costs
($22,426 and $32,668, respectively versus $15,451) for the 24 cases
reporting LITT of brain and the 1 case reporting LITT of brain stem,
compared to all the cases in MS-DRG 042.
We noted in the proposed rule that, based on the findings from our
analysis, we considered whether other factors, such as the reporting of
secondary MCC and CC diagnoses, may have contributed to the higher
average costs for these cases. Specifically, we conducted additional
analyses of the claims data from the September 2021 update of the FY
2021 MedPAR file to determine what secondary MCC diagnoses were also
reported for the 14 cases reporting LITT of brain in MS-DRG 040 and
what secondary CC diagnoses were reported for the 17 cases (16 for LITT
of brain and 1 for LITT of brain stem) in MS-DRG 041. Our findings are
shown in the following tables.
[GRAPHIC] [TIFF OMITTED] TR10AU22.014
[[Page 48816]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.015
We noted that we did not find any other O.R. procedures reported on
the claims in addition to the procedures for LITT of brain or brain
stem for MS-DRGs 040, 041 and 042.
The data shows that at least one of the listed secondary MCC
diagnoses was reported with each claim for LITT of brain identified in
MS-DRG 040 and the average length of stay for these cases ranged from 9
days to 48 days and the average costs of these cases ranged from
$41,486 to $80,745. We note that this data reflects the frequency with
which each of the listed diagnoses was reported on a claim with LITT of
brain. Therefore, multiple MCCs from this list of diagnoses may have
been reported on a single claim. In addition, while the logic for case
assignment to MS-DRG 040 requires at least one secondary MCC diagnosis,
we conducted additional detailed analyses for MS-DRG 040, as shown in
Table 6P.2f, to determine whether there were also secondary CC
diagnoses reported in conjunction with one or more of the listed MCC
diagnoses that may be contributing to the higher average costs for
cases reporting LITT of brain in MS-DRG 040 in comparison to all the
cases in MS-DRG 040. We found that 6 of the 14 cases reporting at least
one or more secondary MCC diagnosis also reported one or more secondary
CC diagnosis, which would appear to support that the severity of
illness for these patients, as identified by the secondary MCC and CC
diagnoses, may be more directly related to the higher average costs for
these patients than the LITT procedure itself.
Similarly, the data for MS-DRG 041 show the frequency with which
each of the listed secondary CC diagnoses was reported with LITT of
brain or brain stem. Results from the analysis for the 17 cases (16 for
LITT of brain and 1 for LITT of brain stem) show the average length of
stay for these cases ranged from 1 day to 29 days and the average costs
ranged from $9,101 to $57,999. These data analysis findings for MS-DRG
041 also appear to support our belief that the severity of illness for
[[Page 48817]]
these patients, as identified by the listed secondary CC diagnoses, may
be more directly related to the higher average costs for these patients
than the LITT procedure itself.
As stated in the proposed rule and previously in this final rule,
we did not find any other O.R. procedures reported on the claims in
addition to the procedures for LITT of brain or brain stem for MS-DRGs
040, 041 and 042. Since the logic for case assignment to MS-DRG 042 is
not based on the reporting requirement of any CC or MCC diagnoses, we
conducted a detailed analysis of the claims data to determine what
other factors may be contributing to the higher average costs and
shorter average length of stay for these cases in comparison to all the
cases in MS-DRG 042. We refer the reader to Table 6P.2g associated with
the proposed rule for the findings from our analysis. As shown in the
data, the majority of the cases (15 of 25) had a principal diagnosis of
epilepsy, 8 cases had a principal diagnosis related to malignant
neoplasm of the brain or brain structures, 1 case had a principal
diagnosis of hemangioma of intracranial structures and 1 case had a
principal diagnosis of unspecified convulsions. The data also
demonstrate that 16 of the 25 cases reported in MS-DRG 042 include
patients who were under the age of 65, with ages ranging from 32 years
old to 64 years old. We note that patients diagnosed with epilepsy are
eligible for coverage since it is a condition that qualifies under
certain criteria. It is not entirely clear if the age of these patients
had any impact on the average length of stay since the average length
of stay of the 24 cases reporting LITT of brain was 1.7 days and the 1
case reporting LITT of brain stem was 2 days.
As stated previously, the logic for case assignment to MS-DRG 042
is not dependent on the reporting of any CC or MCC diagnoses, however,
based on the diagnoses reflected in the claims data for MS-DRG 042, it
is possible that conditions such as obesity and chronic conditions
requiring the long-term use of certain therapeutic agents may be
contributing factors to the consumption of resources, separately from
the LITT procedure. We found 17 of the 25 cases reporting LITT of brain
or brain stem to also report one or both of these conditions.
We also reviewed the number of cases of LITT of the brain or brain
stem procedures reported in the data since the transition to ICD-10.
Specifically, we examined the claims data for cases reporting LITT of
brain or brain stem as a standalone procedure or with another procedure
in the FY 2016 through FY 2021 MedPAR data files across all MS-DRGs.
The findings from our analysis are shown in table 6P.2e associated with
the proposed rule.
The data demonstrates that since the implementation of ICD-10, a
shift in the reporting of LITT of brain and brain stem procedures has
occurred. For example, the FY 2016, FY 2017 and FY 2018 MedPAR data
reflect that the number of cases for which LITT of brain or brain stem
procedures were reported as a standalone procedure is higher in
comparison to the number of cases reported with another procedure.
Conversely, the FY 2019, FY 2020, and FY 2021 MedPAR data reflect that
the number of cases for which LITT of brain or brain stem procedures
were reported as a standalone procedure is lower in comparison to the
number of cases reported with another procedure. The data also reflect
that the average length of stay is shorter and the average costs are
lower for cases reporting LITT of brain or brain stem as a standalone
procedure in comparison to the average length of stay and average costs
for cases reported with another procedure across the FY 2016 through FY
2021 MedPAR data files. Lastly, the data demonstrate that overall, the
number of cases for which LITT of brain or brain stem procedures was
performed had remained fairly stable at over 100 cases with increases
in the FY 2017, FY 2020 and FY 2021 MedPAR data files of 156, 154 and
185 cases, respectively.
As discussed in the proposed rule, we also analyzed claims data
from the September 2021 update of the FY 2021 MedPAR file for cases
reporting LITT of other anatomic sites across all MS-DRGs. Although the
requestors indicated that LITT is primarily performed on intracranial
lesions, as shown in Table 6P.2c associated with the proposed rule, we
identified a small number of cases reporting LITT of the lung, rectum,
liver, breast, and prostate, for a total of 29 cases where LITT was
performed on other body parts/anatomic sites.
For example, we found a total of 5 cases reporting LITT of lung
across 5 different MS-DRGs. Of these 5 cases, 2 cases had a longer
average length of stay and higher average costs in comparison to all
the cases in their respective MS-DRG. Specifically, for MS-DRG 163
(Major Chest Procedures with MCC), we found 1 case reporting LITT of
lung with an average length of stay of 17 days and average costs of
$41,467. The average length of stay for all cases in MS-DRG 163 is 10.7
days with average costs of $38,367. The data demonstrates a difference
of 6.3 days (17-10.7 = 6.3) for the average length of stay and a
difference of $3,100 in average costs ($41,467-$38,367 = $3,100) for
the 1 case reporting LITT of lung in MS-DRG 163 compared to all the
cases in MS-DRG 163. For MS-DRG 167 (Other Respiratory System O.R.
Procedures with CC), we found 1 case reporting LITT of lung with an
average length of stay of 7 days and average costs of $22,975. The
average length of stay for all cases in MS-DRG 167 is 4.6 days with
average costs of $15,397. The data demonstrates a difference of 2.4
days (7-4.6 = 2.4) for the average length of stay and a difference of
$7,578 in average costs ($22,975-$15,397 = $7,578) for the 1 case
reporting LITT of lung in MS-DRG 167 compared to all the cases in MS-
DRG 167. The data for the remaining 3 cases reporting LITT of lung
demonstrated a shorter average length of stay and lower average costs
in comparison to all the cases in their respective MS-DRGs.
We found 1 case reporting LITT of rectum in MS-DRG 357 (Other
Digestive System O.R. Procedures with CC) with a shorter average length
of stay (4 days versus 5.6 days) and lower average costs ($3,069 versus
$18,065) as compared to all the cases in MS-DRG 357. We also found 1
case reporting LITT of liver in MS-DRG 405 (Pancreas Liver and Shunt
Procedures with MCC) with a longer average length of stay (20 days
versus 12.3 days) and higher average costs ($49,0695 versus $43,771) as
compared to all the cases in MS-DRG 405.We also found 1 case reporting
LITT of right breast in MS-DRG 580 (Other Skin Subcutaneous Tissue and
Breast Procedures with CC) with a longer average length of stay (19
days versus 5.4 days) and higher average costs ($32,064 versus $13,767)
as compared to all the cases in MS-DRG 580.
Lastly, we found 21 cases reporting LITT of prostate across 14 MS-
DRGs. Of those 21 cases, 6 cases had a longer average length of stay or
higher average costs, or both, in comparison to the average length of
stay and average costs of all the cases in their respective MS-DRG. For
example, in MS-DRG 650 (Kidney Transplant with Hemodialysis with MCC)
we found 1 case reporting LITT of prostate with an average length of
stay of 36 days and average costs of $67,238. The average length of
stay for all cases in MS-DRG 650 is 8.1 days with average costs of
$38,139. The data demonstrates a difference of 27.9 days (36-8.1 =
27.9) for the average length of stay and a difference of $29,099 in
average costs ($67,238-$38,139 = $29,099) for the 1 case reporting LITT
of prostate in MS-
[[Page 48818]]
DRG 650 compared to all the cases in MS-DRG 650. We also found 1 case
reporting LITT of prostate in MS-DRG 659 (Kidney and Ureter Procedures
for Non-Neoplasm with MCC) with an average length of stay of 26 days.
The average length of stay for all cases in MS-DRG 659 is 7.8 days,
demonstrating a difference of 18.2 days (26-7.8 = 18.2). We found 1
case reporting LITT of prostate in MS-DRG 712 (Testes Procedures
without CC/MCC) with average costs of $15,669. The average costs for
all cases in MS-DRG 712 is $10,482, demonstrating a difference of
$5,187 ($15,669-$10,482 = $5,187). We found 1 case reporting LITT of
prostate in MS-DRG 987 with an average length of stay of 23 days and
average costs of $35,465. The average length of stay for all cases in
MS-DRG 987 is 10.9 days with average costs of $26,657. The data
demonstrates a difference of 12.1 days (23-10.9 = 12.1) for the average
length of stay and a difference of $8,808 in average costs ($35,465-
$26,657 = $8,808) for the 1 case reporting LITT of prostate in MS-DRG
987 compared to all the cases in MS-DRG 987. Lastly, we found 2 cases
reporting LITT of prostate in MS-DRG 988 (Non-Extensive O.R. Procedures
Unrelated to Principal Diagnosis with CC) with average costs of
$17,126. The average costs for all cases in MS-DRG 988 is $13,670,
demonstrating a difference of $3,456 ($17,126-$13,670 = $3,456) for the
2 cases reporting LITT of prostate in MS-DRG 988.
We refer the reader to Table 6P.2c associated with the proposed
rule for the detailed findings from our analysis. We note that if the
procedure code describing LITT of a specific anatomic site is not
listed it is because there were no cases found.
We noted in the proposed rule that for the 10 cases previously
described, for which LITT of a different anatomic site from the brain
or brain stem was reported and had a longer average length of stay or
higher average costs, or both, in comparison to the average length of
stay and average costs of all the cases in their respective MS-DRG,
that with the exception of MS-DRG 712, all the other MS-DRGs include a
``with MCC'' or ``with CC'' designation, or were reported in a surgical
MS-DRG. We stated we believe that these other factors may have
contributed to the longer average length of stay and higher average
costs for these cases, therefore we conducted additional analyses of
the claims data to determine what diagnoses or procedures were also
reported. We refer the reader to Table 6P.2d associated with the
proposed rule for the findings from our detailed analysis of these 10
cases.
As shown in Table 6P.2d associated with the proposed rule, the data
demonstrate that a number of MCC and/or CC secondary diagnoses were
reported for each of the 10 cases and that the surgical procedures that
were reported in addition to the LITT procedure seem to have
contributed to the longer average length of stay and higher average
costs for those cases when compared to the average length of stay and
average costs for all the cases in their respective MS-DRG. For
example, in case number 1 there are 2 diagnoses that are designated as
MCC conditions and 5 diagnoses that that are designated as CC
conditions with procedure codes describing a kidney transplant,
hemodialysis, and insertion of a ureteral stent that were reported
along with LITT of prostate. For case number 3 there are 4 diagnoses
that are designated as MCC conditions and 6 diagnoses that are
designated as CC conditions with procedure codes describing
bronchoscopic treatment of a bronchial tumor with and without stents,
as well as the use of mechanical ventilation. Overall, the data appear
to indicate that the performance of the LITT procedure was not the
underlying reason for, or main driver of, the increase in resource
utilization for those cases.
As noted in the proposed rule, the requestors indicated that LITT
is primarily being performed on intracranial lesions. However, as
previously summarized, we identified a limited number of cases
reporting LITT procedures for other anatomic sites. We stated in the
proposed rule that we are interested in comments regarding the use of
and experience with LITT for these other anatomic sites.
As discussed in the proposed rule, based on our analysis of the FY
2021 MedPAR claims data for cases reporting LITT of brain or brain stem
(codes D0Y0KZZ and D0Y1KZZ) in MS-DRGs 040, 041, and 042, we agree with
the requestors that the average costs of these cases are higher as
compared to the average costs of all cases assigned to MS-DRGs 040,
041, and 042. For the reasons summarized, in the proposed rule we also
stated we believe that other factors, including the reporting of
secondary MCC and CC diagnoses, may be contributing to the higher
average costs for these cases. As discussed in the FY 2022 IPPS/LTCH
PPS final rule (86 FR 44813), we examined procedure codes D0Y0KZZ and
D0Y1KZZ describing LITT of brain and brain stem, respectively, and
stated that the technique to perform the LITT procedure on these
structures is considered minimally invasive and does not involve a
craniotomy, therefore, continued assignment to the craniotomy MS-DRGs
is not clinically appropriate. As noted in the proposed rule, our
clinical advisors continue to maintain that LITT is a minimally
invasive procedure, requiring only a tiny incision for purposes of a
burr hole and that patients are often only kept overnight (as reflected
in the detailed claims data). However, we stated that we also recognize
that craniotomy and LITT share common procedural characteristics
including use of an operating room, carry risk of immediate
intracranial bleeding or infection, and cause tissue to be immediately
destroyed or excised. We noted that while the data do not demonstrate
that the LITT procedure is the underlying reason for the higher average
costs and consumption of resources for the small number of cases
reporting LITT of brain (54 cases) or brain stem (2 cases) that we
found in MS-DRGs 040, 041, and 042, the data do demonstrate that the
patients receiving this treatment therapy have brain tumors or epilepsy
combined with multiple comorbidities or chronic conditions
necessitating long-term use of medications, or both, and we noted the
indications for LITT (brain tumors and epileptic foci) are better
aligned with MS-DRGs 025, 026, and 027 as compared to MS-DRGs 040, 041,
and 042.
As discussed in the proposed rule, we intend to more fully evaluate
the logic for the procedures specifically involving a craniotomy, as
well as the overall structure of MS-DRGs 023 through 027, and we
believe that reassignment of cases reporting LITT of brain or brain
stem to MS-DRGs 025, 026, and 027 would be an appropriate first step in
connection with these efforts. For example, while we recognize the
distinctions between open craniotomy procedures and minimally invasive
percutaneous intracranial procedures, we also recognize that the
current logic for MS-DRGs 025 through 027 also includes other
endovascular intracranial procedures performed using percutaneous or
percutaneous endoscopic approaches, and we believe that further review
of the clinical coherence of the procedures assigned to these MS-DRGs
may be warranted. Our clinical advisors noted that while the typical
patient treated with LITT usually has a single small scalp incision
through which a hole approximately the diameter of a straw is drilled,
with no extensive surgical exposure, that LITT
[[Page 48819]]
can still be employed for another subset of more complex patients,
including patients with primary brain malignancies and those with
larger metastatic lesions or multiple lesions. For this subset of more
complex patients, a longer post-operative stay with direct medical
supervision may be necessary. As such, we stated in the proposed rule
that we believe reassigning these procedures to MS-DRGs 025 through 027
for FY 2023 would be appropriate as we consider restructuring MS-DRGs
023 through 027, including how to better align the clinical indications
with the performance of specific intracranial procedures. Accordingly,
for these reasons, we stated in the proposed rule that in the event
there is not support for the proposed reclassification of LITT
procedures and the corresponding new procedure codes as presented at
the March 8-9, 2022 ICD-10 Coordination and Maintenance Committee
meeting, we were proposing to reassign the existing procedure codes
describing LITT of the brain or brain stem from MS-DRGs 040, 041, and
042 to MS-DRGs 025, 026, and 027 for FY 2023. We also proposed to
maintain the MS-DRG assignments for the existing procedure codes
describing LITT of other anatomic sites as finalized and displayed in
Table 6P.2b in association with the FY 2022 IPPS/LTCH PPS final rule,
for FY 2023. Lastly, we noted in the proposed rule that we did not
receive any comments or requests to reconsider those finalized MS-DRG
assignments for FY 2023.
As noted, we stated in the proposed rule that we were proposing to
reassign the existing procedure codes describing LITT of the brain or
brain stem from MS-DRGs 040, 041, and 042 to MS-DRGs 025, 026, and 027
for FY 2023, in the event there was not support for the proposed
reclassification of LITT procedures and the corresponding new procedure
codes as presented at the March 8-9, 2022 ICD-10 Coordination and
Maintenance Committee meeting. As the proposed reclassification of the
LITT procedures and the corresponding new procedure codes were approved
following the March meeting, and the existing procedure codes D0Y0KZZ
(Laser interstitial thermal therapy of brain) and D0Y1KZZ (Laser
interstitial thermal therapy of brain stem) will be deleted effective
October 1, 2022, we are not finalizing the proposed reassignment of
these existing codes for FY 2023. As previously noted, and as reflected
in Table 6B.--New Procedure Codes associated with this final rule, the
new procedure codes describing LITT of brain (root operation
Destruction) are assigned to MS-DRGs 025, 026 and 027 for FY 2023. We
did not receive any public comments on our proposal to maintain the MS-
DRG assignments for the existing procedure codes describing LITT of
other anatomic sites as finalized and displayed in Table 6P.2b in
association with the FY 2022 IPPS/LTCH PPS final rule, for FY 2023. As
previously noted, the existing procedure codes describing LITT of other
anatomic sites will also be deleted effective October 1, 2023;
therefore, we are not finalizing the proposed reassignment of these
existing codes for FY 2023. The MS-DRG assignments for the newly
approved procedure codes describing LITT of other anatomic sites for FY
2023 are displayed in Table 6B in association with this final rule.
As noted in the proposed rule, in connection with our analysis of
cases reporting LITT procedures performed on the brain or brain stem in
MDC 01, we have started to examine the logic for case assignment to MS-
DRGs 023 through 027 to determine where further refinements could
potentially be made to better account for differences in the technical
complexity and resource utilization among the procedures that are
currently assigned to those MS-DRGs. Specifically, we are in the
process of evaluating procedures that are performed using an open
craniotomy (where it is necessary to surgically remove a portion of the
skull) versus a percutaneous burr hole (where a hole approximately the
size of a pencil is drilled) to obtain access to the brain in the
performance of a procedure. We are also reviewing the indications for
these procedures, for example, malignant neoplasms versus epilepsy to
consider if there may be merit in considering restructuring the current
MS-DRGs to better recognize the clinical distinctions of these patient
populations in the MS-DRGs. We believe it is worthwhile to also compare
the claims data for epilepsy patients who are treated with a
neurostimulator implant versus a LITT procedure, as well as the claims
data for patients with a diagnosis of epilepsy or malignant neoplasms
who undergo a LITT procedure. Our analysis also includes reviewing the
claims data with regard to the cases that reflect a procedure that is
generally performed with another O.R. procedure versus a standalone
procedure.
As we continue this analysis of the claims data with respect to MS-
DRGs 023 through 027, we stated that we are also seeking public
comments and feedback on other factors that should be considered in the
potential restructuring of these MS-DRGs.
Comment: In response to CMS's request for public comment and
feedback on the potential restructuring of the craniotomy MS-DRGs for
future consideration, some commenters disagreed and stated that such a
restructuring is not necessary. These commenters stated that should CMS
consider future modifications to the logic for case assignment to MS-
DRGs 023 through 027, the agency provide adequate notice for interested
parties to assess the impact of any proposed changes.
Another commenter expressed appreciation that CMS indicated it is
continuing to analyze if additional restructuring for MS-DRGs 023
through 027 may be warranted and agreed that the logic for these MS-
DRGs has become more complex. The commenter stated they will be
performing analyses and plan to submit their findings by the October
20, 2022 deadline. Another commenter urged CMS to also consider the
costs of procedures with respect to whether a device is inserted or
implanted in combination with the approach and clinical indications
because of the various diagnoses and procedures that may group to MS-
DRGs 023 through 027. This commenter expressed support for further
collaboration to better align resources and clinical characteristics
among within these MS-DRGs.
Another commenter who also expressed appreciation that CMS has
signaled its intent on analyzing MS-DRGs 023 through 027 recommended
that CMS also expand its analysis to include MS-DRGs 020 through 022
(Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage
with MCC, with CC, and without CC/MCC, respectively). According to the
commenter, the payment rates for a subset of the procedures that group
to these MS-DRGs appear to no longer adequately reflect the utilization
of resources. The commenter encouraged CMS to analyze these MS-DRGs and
determine if additional modifications may be warranted.
Response: We thank the commenters for their feedback and will take
these recommendations into consideration as we further examine the
logic for case assignment. We note that we would address any proposed
modifications to the existing logic in future rulemaking.
As previously described in the proposed rule and this final rule,
we are examining procedures by their approach (open versus
percutaneous), clinical indications, and procedures that involve the
insertion or implantation of a device. We recognize the logic for MS-
DRGs 023 through 027 has grown more
[[Page 48820]]
complex over the years and believe there is opportunity for further
refinement. We refer the reader to the ICD-10 MS-DRG Definitions
Manual, version 40, which is available via the internet on the CMS
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for
complete documentation of the GROUPER logic for MS-DRGs 023 through
027. Feedback and other suggestions may be submitted by October 20,
2022 and directed to the new electronic intake system, Medicare
Electronic Application Request Information SystemTM
(MEARISTM), discussed in section II.D.1.b of the preamble of
this final rule at: https://mearis.cms.gov/public/home.
b. Vagus Nerve Stimulation
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28141 through
28151), we discussed a request we received to review the MS-DRG
assignment for cases that identify patients who receive an implantable
vagus nerve stimulation system for heart failure. The vagus nerve, also
called the X cranial nerve or the 10th cranial nerve, is the longest
and most complex of the cranial nerves. There is one vagus nerve on
each side of the body that runs from the brain through the face and
thorax to the abdomen. According to the requestor, cranial nerve
stimulation (CNS), which includes vagus nerve stimulation, is a well-
established therapy for various indications including epilepsy,
treatment resistant depression (TRD) and obstructive sleep apnea (OSA),
and is now being investigated and studied for use in patients with
heart failure.
According to the requestor, heart failure, or the heart's inability
to pump an adequate supply of blood and oxygen to support the other
organs of the body, is an autonomic nervous system dysfunction. The
brain controls the function of the heart through the sympathetic branch
and the parasympathetic branches of the autonomic nervous system. In
heart failure, there is an imbalance in the autonomic nervous system.
The vagus nerve stimulation system for heart failure is comprised of an
implantable pulse generator, an electrical lead, and a programming
computer system. The pulse generator, which is usually implanted just
under the skin of the pectoral region, sends the energy to the vagus
nerve through the lead. The lead is a flexible insulated wire that is
guided under the skin from the chest up to the neck and is implanted
onto the vagus nerve and transmits tiny electrical impulses from the
generator to the nerve. These electrical impulses to the vagus nerve
are intended to activate the parasympathetic branch of the autonomic
nervous system to restore balance.
The requestor stated that cases reporting a procedure code
describing the insertion of a neurostimulator lead onto the vagus nerve
and a procedure code describing the insertion of a stimulator generator
with a principal diagnosis code describing epilepsy, TRD or OSA are
assigned to surgical MS-DRGs 040, 041 and 042 (Peripheral Cranial Nerve
and Other Nervous System Procedures with MCC, with CC or Peripheral
Neurostimulator, and without CC/MCC, respectively) in MDC 01 (Diseases
and Disorders of the Nervous System). However, when the same codes
describing the insertion of a neurostimulator lead onto the vagus nerve
and the insertion of a stimulator generator are reported with a
principal diagnosis of heart failure, the cases instead are assigned to
surgical MS-DRGs 252, 253 and 254 (Other Vascular Procedures with MCC,
with CC, without MCC respectively) in MDC 05 (Diseases and Disorders of
the Circulatory System).
The requestor stated that the treatment of autonomic nervous system
dysfunction is the underlying therapeutic objective of cranial nerve
stimulation for heart failure, and therefore the diagnosis of heart
failure is more clinically coherent with other diagnoses in MDC 01. As
a result, the requestor, who is developing the VITARIA[supreg] System,
an active implantable neuromodulation system that uses vagus nerve
stimulation to deliver autonomic regulation therapy (ART) for an
indicated use that includes patients who have moderate to severe heart
failure, submitted a request to reassign cases reporting a procedure
code describing the insertion of a neurostimulator lead onto the vagus
nerve and a procedure code describing the insertion of a stimulator
generator with a principal diagnosis code describing heart failure,
from MS-DRGs 252, 253 and 254 in MDC 05 to MS-DRGs 040, 041 and 042 in
MDC 01. This requestor also submitted an application for new technology
add-on payment for FY 2023. As discussed in section II.F.7. of the
preamble of this final rule, the new technology add-on payment
application for the VITARIA[supreg] System for FY 2023 was withdrawn
prior to the issuance of this final rule.
According to the requestor, the following ICD-10-PCS procedure code
pair identifies the insertion of a vagus nerve stimulation system for
heart failure:
[GRAPHIC] [TIFF OMITTED] TR10AU22.016
We stated in the FY 2023 IPPS/LTCH PPS proposed rule that the
requestor performed its own analysis of Medicare claims from 2020 and
stated that it found that patients enrolled in their pivotal clinical
trials had an average length of stay of 6.38 days. According to the
requestor this finding indicated a resource coherence more similar to
cases assigned to MS-DRGs 040, 041 and 042, whose average lengths of
stay ranges from 2 to 8 days, when compared to the average lengths of
stay of 1 to 3 days for cases assigned to MS-DRGs 252 and 253. The
requestor stated their own analysis of 2019 and 2020 Medicare claims
data also showed that fewer than 11 cases with procedure codes
describing the implantation of a vagus nerve stimulation system map to
MS-DRGs 252, 253 and 254 annually but it is expected that Medicare
patients will receive vagus nerve stimulation system for heart failure
on an inpatient basis. Because of the shared clinical and resource
similarity of the procedure to implant the VITARIA[supreg] system to
other CNS procedures, regardless of indication, the requestor stated
that CNS procedures for the treatment of heart failure should also be
assigned to MS-DRGs 040, 041 and 042. The requestor also noted that the
title of MS-DRGs
[[Page 48821]]
252, 253 and 254 is ``Other Vascular Procedures with MCC, with CC,
without MCC respectively''. Since no vascular access is involved in the
procedure to implant vagus nerve stimulation systems, the requestor
stated MS-DRGs 252, 253 and 254 were not appropriate mappings for these
procedures.
We stated in the proposed rule that the ICD-10-CM diagnosis codes
that describe heart failure are found in the following table. These
diagnosis codes are all currently assigned to MDC 05.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR10AU22.017
The ICD-10-PCS codes that identify the insertion of a
neurostimulator lead onto the vagus nerve are listed in the following
table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.018
[[Page 48822]]
The ICD-10-PCS codes that identify the insertion of a stimulator
generator are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.019
[[Page 48823]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.020
[[Page 48824]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.021
We stated our analysis of this grouping issue confirmed that, when
a procedure code describing the insertion of a neurostimulator lead
onto the vagus nerve and a procedure code describing the insertion of a
stimulator generator are reported with a principal diagnosis code
describing heart failure, these cases group to surgical MS-DRGs 252,
253 and 254 (Other Vascular Procedures with MCC, with CC, without MCC
respectively).
We noted that cases involving the use of a peripheral
neurostimulator and a diagnosis from MDC 01 are assigned to MS-DRG 041
only. The GROUPER logic for MS-DRGs 040, 041, and 042 is reflected in
the logic table:
[[Page 48825]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.022
We refer the reader to the ICD-10 MS-DRG Version 39.1 Definitions
Manual (which is available via the internet on the CMS website at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software) for complete
documentation of the GROUPER logic for the listed MS-DRGs.
In the proposed rule, we stated that we examined claims data from
the September 2021 update of the FY 2021 MedPAR file for MS-DRGs 252,
253 and 254 to identify the subset of cases within MS-DRGs 252, 253 and
254 reporting a procedure code describing the insertion of a
neurostimulator lead onto the vagus nerve and a procedure code
describing the insertion of a stimulator generator with a principal
diagnosis of heart failure. We stated we found zero cases in MS-DRGs
252, 253 and 254 reporting a procedure code describing the insertion of
a neurostimulator lead onto the vagus nerve and a procedure code
describing the insertion of a stimulator generator with a principal
diagnosis of heart failure. In an attempt to further examine this
issue, we then examined claims data from the September 2021 update of
the FY 2021 MedPAR file for MS-DRGs 252, 253 and 254 to identify the
subset of cases within MS-DRGs 252, 253 and 254 reporting a procedure
code describing the insertion of a neurostimulator lead onto the vagus
nerve and a procedure code describing the insertion of a stimulator
generator with a secondary diagnosis of heart failure and similarly
found zero cases.
We indicated in the proposed rule that the results of the claims
analysis demonstrated that there was not sufficient claims data in the
MedPAR file on which to assess the resource use of cases reporting a
procedure code describing the insertion of a neurostimulator lead onto
the vagus nerve and a procedure code describing the insertion of a
stimulator generator with a principal or secondary diagnosis of heart
failure as compared to other cases assigned to MS-DRGs 252, 253, and
254.
As discussed in the proposed rule, in reviewing the requestor's
concerns regarding clinical coherence, our clinical advisors
acknowledged that heart failure is a complex syndrome involving
autonomic nervous system dysfunction, however our clinical advisors
disagreed with assigning the diagnosis codes describing heart failure
to MDC 01 (Diseases and Disorders of the Nervous System). Our clinical
advisors noted the concept of clinical coherence requires that the
patient characteristics included in the definition of each MS-DRG
relate to a common organ system or etiology. As the listed diagnosis
codes describe heart failure, we stated these diagnosis codes are
appropriately assigned to MDC 05 (Diseases and Disorders of the
Circulatory System). Our clinical advisors also stated it would not be
appropriate to move these diagnoses into MDC 01 because it could
inadvertently cause cases reporting these same MDC 05 diagnoses with a
circulatory system procedure to be assigned to an unrelated MS-DRG
because whenever there is a surgical procedure reported on the claim
that is unrelated to the MDC to which the case was assigned based on
the principal diagnosis, it results in a MS-DRG assignment to a
surgical class referred to as ``unrelated operating room procedures''.
To further examine the impact of moving the diagnoses describing
heart failure into MDC 01, we stated we analyzed claims data for cases
reporting a circulatory system O.R. procedure and a principal diagnosis
of heart failure. Our findings are reflected in the following table.
[[Page 48826]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.023
[[Page 48827]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.024
[[Page 48828]]
As shown in the table, if we were to move diagnosis codes
describing heart failure to MDC 01, 20,199 cases would be assigned to
the surgical class referred to as ``unrelated operating room
procedures'' as an unintended consequence because the surgical
procedure reported on the claim would be considered unrelated to the
MDC to which the case was assigned based on the principal diagnosis.
In response to the requestor's concerns regarding the title of MS-
DRGs 252, 253 and 254, we noted that, as stated in the ICD-10 MS-DRG
Definitions Manual, ``In each MDC there is usually a medical and a
surgical class referred to as ``other medical diseases'' and ``other
surgical procedures,'' respectively. The ``other'' medical and surgical
classes are not as precisely defined from a clinical perspective. The
other classes would include diagnoses or procedures which were
infrequently encountered or not well defined clinically. For example,
the ``other'' medical class for the Respiratory System MDC would
contain the diagnoses ``other somatoform disorders'' and ``congenital
malformation of the respiratory system,'' while the ``other'' surgical
class for the female reproductive MDC would contain the surgical
procedures ``excision of liver'' (liver biopsy in ICD-9-CM) and
``inspection of peritoneal cavity'' (exploratory laparotomy in ICD-9-
CM). The ``other'' surgical category contains surgical procedures
which, while infrequent, could still reasonably be expected to be
performed for a patient in the particular MDC. There are, however, also
patients who receive surgical procedures which are completely unrelated
to the MDC to which the patient was assigned. An example of such a
patient would be a patient with a principal diagnosis of pneumonia
whose only surgical procedure is a destruction of prostate
(transurethral prostatectomy in ICD-9-CM). Such patients are assigned
to a surgical class referred to as ``unrelated operating room
procedures.'' '' We further noted that MS-DRGs 252, 253, and 254 (Other
Vascular Procedures with MCC, with CC, and without CC/MCC,
respectively) are examples of the ``other'' surgical class, therefore
it is expected that there will be procedures not as precisely
clinically aligned within the definition (logic) of these MS-DRGs.
We stated in the proposed rule that considering that there was no
data in the FY 2021 MedPAR file to support a reassignment of these
cases based on resource consumption, the analysis of clinical coherence
as discussed previously, and the impact that moving the diagnoses
describing heart failure into MDC 01 from MDC 05 would have on heart
failure cases, we did not believe a reassignment of these cases was
appropriate at this time. We stated we could continue to evaluate the
clinical coherence and resource consumption costs that impact this
subset of cases and their current MS-DRG assignment as data become
available for future rulemaking.
In summary for the reasons stated previously, we did not propose to
reassign cases reporting a procedure code describing the insertion of a
neurostimulator lead onto the vagus nerve and a procedure code
describing the insertion of a stimulator generator with a principal
diagnosis of heart failure from MS-DRGs 252, 253 and 254 to MS-DRGs
040, 041 and 042.
Comment: Commenters expressed support for CMS' decision to not
propose to reassign cases reporting a procedure code describing the
insertion of a neurostimulator lead onto the vagus nerve and a
procedure code describing the insertion of a stimulator generator with
a principal diagnosis of heart failure from MS-DRGs 252, 253 and 254 to
MS-DRGs 040, 041 and 042.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the current assignment of cases
reporting a procedure code describing the insertion of a
neurostimulator lead onto the vagus nerve and a procedure code
describing the insertion of a stimulator generator with a principal
diagnosis of heart failure to MS-DRGs 252, 253 and 254, without
modification, for FY 2023.
We further stated in the proposed rule that as we examined the
GROUPER logic that would determine an assignment of a case to MS-DRGs
252, 253 and 254, we noted the logic for MS-DRGs 252, 253 and 254
includes ICD-10-PCS procedure codes that describe the insertion of the
stimulator generator. We refer the reader to the ICD-10 MS-DRG Version
39.1 Definitions Manual (which is available via the internet on the CMS
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software) for
complete documentation of the GROUPER logic for the listed MS-DRGs. We
stated that during our review of the stimulator generator insertion
procedures assigned to these MS-DRGs, we identified the following 24
procedure codes that describe the insertion of a stimulator generator,
differentiated by device type (for example single array or multiple
array), that did not exist in the logic for MS-DRGs 252, 253 and 254.
[[Page 48829]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.025
For clinical consistency with the other procedure codes describing
the insertion of the stimulator generator currently assigned to these
MS-DRGs, we proposed to add the 24 ICD-10-PCS codes listed previously
to MS-DRGs 252, 253 and 254, (Other Vascular Procedures with MCC, with
CC, and without CC/MCC, respectively) in MDC 05 (Diseases and Disorders
of the Circulatory System) effective October 1, 2022 for FY 2023.
Comment: Commenters supported the proposal to add the 24 ICD-10-PCS
codes to MS-DRGs 252, 253 and 254, (Other Vascular Procedures with MCC,
with CC, and without CC/MCC, respectively) in MDC 05 (Diseases and
Disorders of the Circulatory System).
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add the 24 ICD-10-PCS codes listed
previously to MS-DRGs 252, 253 and 254, (Other Vascular Procedures with
MCC, with CC, and without CC/MCC, respectively) in MDC 05 (Diseases and
Disorders of the Circulatory System) without modification, effective
October 1, 2022 for FY 2023.
Also, in the proposed rule we stated that as we examined the
GROUPER logic that would determine an assignment of a case to MS-DRG
041,
[[Page 48830]]
we noted that the logic for case assignment to MS-DRG 041 as displayed
in the ICD-10 MS-DRG Version 39.1 Definitions Manual, available via the
internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html contains code combinations or ``clusters'' representing
the insertion of a neurostimulator lead and the insertion of a
stimulator generator that are captured under a list referred to as
``Peripheral Neurostimulators.'' During our review of the procedure
code clusters in this list, we noted that ICD-10-PCS procedure code
clusters describing the insertion of a neurostimulator lead and the
insertion of the stimulator generator differentiated by device type
(for example single array or multiple array), approach and anatomical
site placement are captured. However, procedure code clusters
describing the insertion of stimulator generator, that is not
differentiated by device type, and a neurostimulator lead were
inadvertently excluded. We refer the reader to Table 6P.3a associated
with the proposed rule (which is available via the internet on the CMS
website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for the list of the 108 ICD-10-
PCS code clusters that were inadvertently excluded and do not exist in
the logic for MS-DRG 041.
For clinical consistency, our clinical advisors supported the
addition of the 108 procedure code clusters to the GROUPER logic list
referred to as ``Peripheral Neurostimulators'' for MS-DRG 041 that
describe the insertion of stimulator generator, not differentiated by
device type, and a neurostimulator lead. Therefore, we proposed to add
the 108 ICD-10-PCS code clusters listed in Table 6P.3a in association
with the proposed rule that describe the insertion of a stimulator
generator, that is not differentiated by device type, and a
neurostimulator lead to MS-DRG 041, effective October 1, 2022 for FY
2023.
Comment: Commenters expressed support for CMS' proposal to add the
108 ICD-10-PCS code clusters listed in Table 6P.3a in association with
the proposed rule that describe the insertion of a stimulator
generator, that is not differentiated by device type, and a
neurostimulator lead to MS-DRG 041. A commenter stated that this
proposal will clinically align these procedures with other procedures
in their respective MS-DRGs.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add the 108 procedure code clusters listed
in Table 6P.3a in association with the proposed rule that describe the
insertion of stimulator generator, not differentiated by device type,
and a neurostimulator lead to the GROUPER logic list referred to as
``Peripheral Neurostimulators'' for MS-DRG 041 (Peripheral, Cranial
Nerve and Other Nervous System Procedures with CC or Peripheral
Neurostimulator) without modification, effective October 1, 2022 for FY
2023.
4. MDC 02 (Diseases and Disorders of the Eye): Retinal Artery Occlusion
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28151 through
28155), we discussed a request we received to reassign cases reporting
diagnosis codes describing central retinal artery occlusion, and the
closely allied condition branch retinal artery occlusion, from MS-DRG
123 (Neurological Eye Disorders) in MDC 02 (Diseases and Disorders of
the Eye) to MS-DRGs 061, 062, and 063 (Ischemic Stroke Precerebral
Occlusion or Transient Ischemia with Thrombolytic Agent with MCC, with
CC, and without CC/MCC, respectively) in MDC 01 (Diseases and Disorders
of the Nervous System).
Retinal artery occlusion refers to blockage of the retinal artery
that carries oxygen to the nerve cells in the retina at the back of the
eye, often by an embolus or thrombus. A blockage in the main artery in
the retina is called central retinal artery occlusion (CRAO). A
blockage in a smaller artery is called branch retinal artery occlusion
(BRAO). According to the requestor, in the current mapping to MS-DRG
123, diagnoses of CRAO and BRAO are being captured inappropriately as
eye disorders in MDC 02. Instead, the requestor stated that CRAO and
BRAO are forms of acute ischemic stroke which occur when a vessel
supplying blood to the brain is obstructed.
The requestor stated the retina is a core component of the central
nervous system and there is growing recognition that damage to it is a
vascular neurological problem and not an ophthalmological one. Patients
with CRAO or BRAO are typically very sick, have an underlying
condition, and are at imminent risk for further events including heart
attack or brain stroke. A diagnosis of CRAO or BRAO requires an urgent,
structured and multidisciplinary team-based examination to evaluate and
treat other diagnoses that may be present such as high blood pressure,
dyslipidemia, diabetes mellitus, obesity, obstructive sleep apnea and
smoking to ameliorate the risks of a subsequent, potentially lethal,
cardiovascular event.
The requestor further stated new evidence outlines treatment of
patients with CRAO with acute stroke protocols, specifically with
intravenous thrombolysis (IV tPA) or hyperbaric oxygen therapy (HBOT),
to improve outcomes. According to the requestor, BRAO is less commonly
treated with IV tPA than CRAO but also requires an urgent and thorough
diagnostic workup as with any other form of stroke. The requestor
stated the current assignment of these conditions to MS-DRG 123 does
not properly recognize disease complexity and allocation of resources
for care for these cases. The requestor stated that patients with CRAO
or BRAO more closely resemble patients currently mapped to MS-DRGs 061,
062, and 063 in terms of in resource intensity and criticality and that
in instances where HBOT is the chosen treatment modality, any revised
MS-DRG mapping should include the ICD-10-PCS codes for HBOT.
As noted in the proposed rule, the ICD-10-CM codes that describe
CRAO and BRAO are found in the following table.
[[Page 48831]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.026
Thrombolytic therapy is identified with the following ICD-10-PCS
procedure codes.
[GRAPHIC] [TIFF OMITTED] TR10AU22.027
The requestor identified three ICD-10-PCS codes that they stated
describe HBOT.
[GRAPHIC] [TIFF OMITTED] TR10AU22.028
We stated in the proposed rule that during our review of this
issue, we included the three procedure codes as identified by the
requestor as describing HBOT, as well as the similar procedure code
5A05221 (Extracorporeal hyperbaric oxygenation, continuous) that also
describes HBOT, differing only in duration.
We stated that our analysis of this grouping issue confirmed that,
when a procedure code describing the administration of a thrombolytic
agent or a procedure code describing HBOT is reported with principal
diagnosis code describing CRAO or BRAO, these cases group to medical
MS-DRG 123. We began our analysis by examining claims data from the
September 2021 update of the FY 2021 MedPAR file for MS-DRG 123 to (1)
identify cases reporting a principal diagnosis code describing CRAO or
BRAO without a procedure code describing the administration of a
thrombolytic agent or a procedure code describing HBOT; (2) identify
cases reporting diagnosis codes describing CRAO or BRAO with a
procedure code describing HBOT; and (3) identify cases reporting
diagnosis codes describing CRAO or BRAO with a procedure code
describing the administration of a thrombolytic agent. Our findings are
shown in the following table:
[[Page 48832]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.029
As shown in the table, we identified a total of 2,642 cases within
MS-DRG 123 with an average length of stay of 2.5 days and average costs
of $6,457. Of these 2,642 cases, there are 774 cases that reported a
principal diagnosis code describing CRAO or BRAO without a procedure
code describing the administration of a thrombolytic agent or a
procedure code describing HBOT with an average length of stay of 2.2
days and average costs of $5,482. There are nine cases that reported a
principal diagnosis code describing CRAO or BRAO with a procedure code
describing HBOT with an average length of stay of 2 days and average
costs of $6,491. There are 47 cases that reported a principal diagnosis
code describing CRAO or BRAO with a procedure code describing the
administration of a thrombolytic agent with an average length of stay
of 2.3 days and average costs of $14,335.
The data analysis shows that the 774 cases in MS-DRG 123 reporting
a principal diagnosis code describing CRAO or BRAO without a procedure
code describing the administration of a thrombolytic agent or a
procedure code describing HBOT have average costs lower than the
average costs in the FY 2021 MedPAR file for MS-DRG 123 ($5,482
compared to $6,457), and the average length of stay is shorter (2.2
days compared to 2.5 days). For the nine cases in MS-DRG 123 reporting
a principal diagnosis code describing CRAO or BRAO with a procedure
code describing HBOT, the average length of stay is shorter (2 days
compared to 2.5 days) and the average costs ($6,491 compared to $6,457)
are slightly higher than the average length of stay and average costs
compared to all cases in that MS-DRG. For the 47 cases in MS-DRG 123
reporting a principal diagnosis code describing CRAO or BRAO with a
procedure code describing the administration of a thrombolytic agent,
the average length of stay is slightly shorter (2.3 days compared to
2.5 days) and the average costs are higher ($14,335 compared to $6,457)
than the average length of stay and average costs compared to all cases
in that MS-DRG.
We also examined claims data from the September 2021 update of the
FY 2021 MedPAR file for MS-DRGs 061, 062, and 063. Our findings are
shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.030
BILLING CODE 4120-01-C
We stated in the proposed rule that because MS-DRG 123 is a base
DRG and there is a three-way split within MS-DRGs 061, 062, and 063, we
also analyzed the 47 cases reporting a principal diagnosis code
describing CRAO or BRAO with a procedure code describing the
administration of a thrombolytic agent and the nine cases reporting a
principal diagnosis code describing CRAO or BRAO with a procedure code
describing HBOT for the presence or absence of a secondary diagnosis
designated as a complication or comorbidity (CC) or a major
complication or comorbidity (MCC).
[[Page 48833]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.031
We stated that this data analysis showed that the cases in MS-DRG
123 reporting a principal diagnosis code describing CRAO or BRAO with a
procedure code describing the administration of a thrombolytic agent or
with a procedure code describing HBOT when distributed based on the
presence or absence of a secondary diagnosis designated as a CC or an
MCC have average costs lower than the average costs in the FY 2021
MedPAR file for MS-DRGs 061, 062, and 063 respectively, and the average
lengths of stay are shorter. Accordingly, we stated that we did not
believe the data adequately supported a potential reassignment of these
cases to MS-DRGs 061, 062, and 063 respectively.
Our clinical advisors reviewed this issue and the related data
analysis and did not believe that the small subset of patients with a
diagnosis of CRAO or BRAO receiving a thrombolytic agent or hyperbaric
oxygen therapy warranted a separate MS-DRG or reassignment at this
time. We stated our clinical advisors noted the average costs for cases
of patients with a diagnosis of CRAO or BRAO receiving HBOT are only
slightly higher than the average costs for all cases in MS-DRG 123
($6,491 compared to $6,457). The average costs for cases of patients
with a diagnosis of CRAO or BRAO receiving a thrombolytic agent are
higher than the average costs for all cases in MS-DRG 123 however when
distributed based on the presence or absence of a secondary diagnosis
designated as a complication or comorbidity (CC) or a major
complication or comorbidity (MCC), we stated that it was unclear to
what degree the higher average costs for these cases are attributable
to the severity of illness of the patient and other circumstances of
the admission as opposed to the administration of a thrombolytic agent,
as the claims data reflects a wide variance with regard to average
costs for these cases.
Our clinical advisors further noted that ischemia is defined as a
condition in which the blood vessels become blocked, and blood flow is
stopped or reduced. The condition has many potential causes, including
a blockage caused by a blood clot, or due to buildup of deposits, such
as cholesterol. Ischemia can occur anywhere in the body, and the
different names for the condition depend on the organ or body part
affected such as the brain (cerebral ischemia), heart (ischemic heart
disease, myocardial ischemia, or cardiac ischemia), and intestines
(mesenteric ischemia or bowel ischemia), legs (critical limb ischemia--
a form of peripheral artery disease), and skin (cutaneous ischemia),
while they are similar in that they all involve a blocked blood vessel.
In ICD-10 the body or organ system is the axis of the
classification and diagnosis codes describing ischemia affecting other
body parts are classified by the body or organ system affected. For
example, codes describing myocardial ischemia are assigned to MDC 05
(Diseases and Disorders of the Circulatory System) and codes describing
mesenteric ischemia are assigned to MDC 06 (Diseases and Disorders of
the Digestive System). Our clinical advisors disagreed with assigning
the diagnosis codes describing CRAO and BRAO to MDC 01. Our clinical
advisors noted the concept of clinical coherence generally requires
that the patient characteristics included in the definition of each MS-
DRG relate to a common organ system or etiology and that a specific
medical specialty should typically provide care to the patients in the
DRG. While closely related, the eyes and the brain are different
organs. Our clinical advisors stated that because the diagnosis codes
used to report CRAO and BRAO describe ischemia affecting the retina,
these diagnosis codes are appropriately assigned to MDC 02 (Diseases
and Disorders of the Eye). The retina is a collection of cells at the
back of the eye where the processing of visual information begins. Due
to the retina's vital role in vision, damage to it can cause permanent
blindness. The presence of CRAO or BRAO requires input from an
ophthalmologist and treatment for these diagnoses would be expected to
utilize different resources than a diagnosis of cerebral ischemia which
may or may not involve visual impairment. Other possible interventions
for CRAO or BRAO include attempting to lower the intraocular pressure
with medication or by using a small-gauge needle to remove fluid to try
to dislodge the embolus or ocular massage to dislodge the clot, which
are not interventions generally performed for a diagnosis of acute
ischemic stroke.
We stated in the FY 2023 IPPS/LTCH PPS proposed rule that to
explore other mechanisms to address this request, we also reviewed
claims data to consider the option of adding another severity level to
the current structure of MS-DRG 123 (Neurological Eye Disorders) and
assigning the cases with a principal diagnosis of CRAO or BRAO with a
procedure code describing the administration of a thrombolytic agent to
the highest level. This option would have involved modifying the
current base MS-DRG to a two-way severity level split or to a three-way
severity level split of ``with MCC or thrombolytic agent, with CC, and
without CC/MCC.'' Therefore, it would have included proposing new MS-
DRGs if the data and our clinical advisors supported creation of new
MS-DRGs. However, as displayed in the data findings in the table that
follows, we found that the
[[Page 48834]]
data did not support this option. We applied the five criteria as
described in section II.D.1.b. of the preamble of the proposed rule and
this final rule to determine if it would be appropriate to subdivide
cases currently assigned to MS-DRG 123 into severity levels. This
analysis generally includes two years of MedPAR claims data to compare
the data results from one year to the next to avoid making
determinations about whether additional severity levels are warranted
based on an isolated year's data fluctuation and also, to validate that
the established severity levels within a base MS-DRG are supported.
However, as discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR
25092), our MS-DRG analysis last year was based on ICD-10 claims data
from the March 2020 update of the FY 2019 MedPAR file, which contains
hospital claims received from October 1, 2018 through March 31, 2020,
for discharges occurring through September 30, 2019 and the ICD-10
claims data from the September 2020 update of the FY 2020 MedPAR file,
which contains hospital claims received from October 1, 2019 through
September 30, 2020, for discharges occurring through September 30, 2020
given the potential impact of the PHE for COVID-19. Therefore, for the
FY 2023 IPPS/LTCH PPS proposed rule, we reviewed the claims data for
base MS-DRG 123 using the March 2020 update of the FY 2019 MedPAR file
and the September 2020 update of the FY 2020 MedPAR file, which were
used in our analysis of claims data for MS-DRG reclassification
requests for FY 2022. We also reviewed the claims data for base MS-DRG
123 using the September 2021 update of the FY 2021 MedPAR file, which
were used in our analysis of claims data for MS-DRG reclassification
requests for FY 2023. Our findings are shown in the table:
[GRAPHIC] [TIFF OMITTED] TR10AU22.032
We stated that we applied the criteria to create subgroups for the
three-way severity level split. We referred the reader to section
II.D.1.b. of the preamble of the FY 2023 IPPS/LTCH PPS proposed rule,
for related discussion regarding our finalization of the expansion of
the criteria to include the NonCC subgroup and our proposal to continue
to delay application of the NonCC subgroup criteria to existing MS-DRGs
with a three-way severity level split to maintain more stability in the
current MS-DRG structure. We found that the criterion that there be at
least 500 cases for each subgroup was not met, as shown in the table
based on the data in the FY 2019, FY 2020, and FY 2021 MedPAR files.
Specifically, for the ``with MCC'', ``with CC'', and ``without CC/MCC''
split, there were only 376 cases in the ``with MCC'' subgroup based on
the data in the FY 2019 MedPAR file, only 345 cases in the ``with MCC''
subgroup based on the data in the FY 2020 MedPAR file and only 374
cases in the ``with MCC'' subgroup based on the data in the FY 2021
MedPAR file.
We then applied the criteria to create subgroups for the two-way
severity level splits. For the ``with MCC'' and ``without MCC''
(CC+NonCC) split, the criterion that there be at least 500 cases for
each subgroup failed due to low volume each year, specifically, for the
``with MCC'' subgroup as previously described. For the ``with CC/MCC''
and ``without CC/MCC'' (NonCC) split, we found that the criterion that
there be at least a $2,000 difference in average costs between the
``with CC/MCC'' and ``without CC/MCC'' subgroups also failed. In the FY
2019 MedPAR file, our data analysis shows average costs in the
hypothetical ``with CC/MCC'' subgroup of $6,282 and average costs in
the hypothetical ``without CC/MCC'' subgroup of $4,832, for a
difference of only $1,450 ($6,282 minus $4,832 = $1,450). In the FY
2020 MedPAR file, our data analysis shows average costs in the
hypothetical ``with CC/MCC'' subgroup of $6,573 and average costs in
the hypothetical ``without CC/MCC'' subgroup of $5,122, for a
difference of only $1,451 ($6,573 minus $5,122 = $1,451). In the FY
2021 MedPAR file, our data analysis shows average costs in the
hypothetical ``with CC/MCC'' subgroup of $7,176 and average costs in
the hypothetical ``without CC/MCC'' subgroup of $5,364, for a
difference of only $1,812 ($7,176 minus $5,364 = $1,812). We stated
that our data analysis indicated that the current base MS-DRG 123
maintains the overall accuracy of the IPPS, and that the claims data
did not support a three-way or a two-way severity level split for MS-
DRG 123.
Lastly, we stated we explored reassigning cases with a principal
diagnosis of CRAO or BRAO that receive the administration of a
thrombolytic agent to other MS-DRGs within MDC 02. However, our review
did not support reassignment of these cases to any other medical MS-
DRGs as these cases would not be clinically coherent with the cases
assigned to those other MS-DRGs.
Therefore, based on the various data analyses we performed to
explore the possible reassignment of cases with a principal diagnosis
of CRAO or BRAO with a procedure code describing the administration of
a thrombolytic agent or a procedure code describing hyperbaric oxygen
therapy, and the clinical analysis as previously discussed, for FY 2023
we did not propose any MS-DRG changes for cases with a principal
diagnosis of CRAO or BRAO with a procedure code describing the
administration of a thrombolytic agent or a procedure code describing
hyperbaric oxygen therapy.
Comment: Some commenters expressed support for CMS' decision to not
propose any MS-DRG changes for cases with a principal diagnosis of CRAO
or BRAO with a procedure code describing the administration of a
thrombolytic agent or a procedure code describing hyperbaric oxygen
therapy.
Response: We appreciate the commenters' support.
Comment: Other commenters opposed or expressed concerns with CMS'
decision to not propose any MS-DRG changes for cases with a principal
diagnosis of CRAO or BRAO with a procedure code describing the
administration of a thrombolytic agent or a procedure code describing
hyperbaric oxygen therapy. These commenters stated from a
pathophysiologic perspective, CRAO is the same process as a stroke of
the brain and that the retina, although located within the eye, is a
core component of the central nervous system and consists of brain
cells (neurons) that also extend
[[Page 48835]]
through the entire course of the brain. These commenters also stated
that the relationship of any particular tissue to its organ is related
to its structure and function, and not its location. According to the
commenters, acute CRAO is a medical emergency, equivalent to acute
cerebral ischemic stroke, that needs to be treated in the same way with
urgent inpatient evaluation, cerebrovascular and cardiac workup, and
intervention. The commenters urged CMS to assign cases reporting
diagnosis codes describing central retinal artery occlusion with a
procedure code describing the administration of a thrombolytic agent or
a procedure code describing hyperbaric oxygen therapy to MS-DRGs 061,
062, and 063 to ensure appropriate payment for these cases.
Response: We thank the commenters for their feedback. Our clinical
advisors reviewed the commenters' concerns and note that although
commenters' state the relationship of any particular tissue to its
organ is related to its structure and function, and not its location,
in ICD-10, however, the body or organ system is the axis of the
classification. By design, the patient characteristics included in the
definition of each MS-DRG relate to a common organ system or etiology.
Our clinical advisors agree with commenters that the retina is similar
to the brain in terms of cellular and functional elements, but they
note the retina is a part of the eye. Our clinical advisors state that
the presence of CRAO or BRAO, which typically presents sudden, painless
monocular loss of visual acuity and peripheral vision, requires input
from an ophthalmologist which would not always be expected in a
diagnosis of cerebral ischemia, which may or may not involve visual
impairment. Our clinical advisors continue to believe CRAO and BRAO are
appropriately classified with other eye conditions currently assigned
to MDC 02.
Therefore, after consideration of the public comments we received,
and for the reasons discussed, we are finalizing our proposal, without
modification, to maintain the current assignment of cases with a
principal diagnosis of CRAO or BRAO with a procedure code describing
the administration of a thrombolytic agent or a procedure code
describing hyperbaric oxygen therapy.
5. MDC 04 (Diseases and Disorders of the Respiratory System): Acute
Respiratory Distress Syndrome (ARDS)
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28155 through
28156), we discussed a request we received to reassign cases reporting
diagnosis code J80 (Acute respiratory distress syndrome) as the
principal diagnosis from MS-DRG 204 (Respiratory Signs and Symptoms) to
MS-DRG 189 (Pulmonary Edema and Respiratory Failure).
According to the requestor, when a patient presents with the
condition of acute respiratory failure that progresses to acute
respiratory distress syndrome (ARDS) during the hospital stay, official
coding guidance instructs to only report the diagnosis code for ARDS
(code J80). The requestor stated that in the American Hospital
Association's (AHA) Coding Clinic for ICD-10-CM and ICD-10-PCS, Fourth
Quarter 2020 publication, for a patient who is admitted in acute
hypoxic respiratory failure that progresses to ARDS, the advice is to
assign code J80, Acute respiratory distress syndrome. Additionally, in
the ICD-10-CM Tabular List of Diseases, per the Excludes 1 note under
category J96 (Respiratory failure, not elsewhere classified) only code
J80 should be assigned when respiratory failure and ARDS are both
documented. The same publication also maintained that ARDS is a life-
threatening form of respiratory failure and is not an unrelated
condition. Therefore, when acute respiratory failure is documented
along with ARDS, only one code is reported to capture the highest level
of severity.
The requestor also conveyed the Fourth Quarter 2020 publication's
reference to previously published advice from the Fourth Quarter 2017
publication that stated, ``Acute respiratory distress syndrome (ARDS)
is a life-threatening condition. ARDS is a rapidly progressive disorder
that has symptoms of dyspnea, tachypnea, and hypoxemia. Fluid builds up
in the alveoli and lowers the amount of oxygen that is circulated
through the bloodstream. Low levels of oxygen in the blood threatens
organ function. ARDS is often associated with sepsis, pneumonia, trauma
and aspiration. The majority of people who develop ARDS are already in
the hospital in critical condition from some other health complication.
The focus of treatment is getting oxygen to the organs.''
We examined claims data from the September 2021 update of the FY
2021 MedPAR file for all cases in MS-DRG 204 and the cases reporting
ARDS (code J80) as a principal diagnosis. Our findings are shown in the
following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.033
As shown in the table, the data demonstrate a longer average length
of stay (7.6 days versus 2.8 days) and higher average costs ($15,077
versus $6,780) for the 96 cases reporting ARDS (code J80) as a
principal diagnosis when compared to all 5,241 cases in MS-DRG 204.
We also examined claims data from the September 2021 update of the
FY 2021 MedPAR file for all cases in MS-DRG 189. Our findings are shown
in the following table.
[[Page 48836]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.034
We stated in the proposed rule that the data analysis supports that
cases reporting ARDS (code J80) are more appropriately aligned with the
average length of stay and average costs of the cases in MS-DRG 189 in
comparison to MS-DRG 204 when ARDS is reported as a principal
diagnosis. We also stated in the proposed rule that we agree,
consistent with the coding clinic advice, ARDS is a life-threatening
form of respiratory failure and the conventions of the ICD-10-CM
classification as displayed in the Tabular List of Diseases Excludes
note, support the concept that cases reporting ARDS as a principal
diagnosis are more clinically coherent with the other conditions
currently assigned to MS-DRG 189.
For these reasons, we proposed to reassign cases reporting ARDS
(code J80) as a principal diagnosis from MS-DRG 204 to MS-DRG 189
effective FY 2023.
Comment: Commenters supported the proposal to reassign cases
reporting diagnosis code J80 as a principal diagnosis from MS-DRG 204
to MS-DRG 189.
Response: We thank the commenters for their support.
After consideration of the public comments we received, we are
finalizing our proposal to reassign cases reporting ARDS (code J80) as
a principal diagnosis from MS-DRG 204 to MS-DRG 189 effective FY 2023.
6. MDC 05 (Diseases and Disorders of the Circulatory System)
a. Percutaneous Transluminal Coronary Angioplasty (PTCA) Logic
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28156 through
28157), we stated that we identified a replication issue from the ICD-9
based MS-DRGs to the ICD-10 based MS-DRGs for procedure code 02UG3JE
(Supplement mitral valve created from left atrioventricular valve with
synthetic substitute, percutaneous approach) that was created effective
October 1, 2016 (FY 2017), to identify and describe further
interventions that may occur for a patient who had previously undergone
cardiac valve surgery to correct a congenital anomaly, such as repair
of a complete common atrioventricular canal defect.
As stated in the proposed rule, we used our established process in
the assignment of new procedure code 02UG3JE to the most appropriate
MS-DRG(s) for FY 2017. Procedure code 02UG3JE was proposed for
assignment to the same MS-DRGs as its predecessor code. The predecessor
code for procedure code 02UG3JE as shown in the 2017 ICD-10-PCS
conversion table (available via the internet on the CMS web page at:
https://www.cms.gov/Medicare/Coding/ICD10/2017-ICD-10-PCS-and-GEMs) is
02UG3JZ (Supplement mitral valve with synthetic substitute,
percutaneous approach). The ICD-9-CM comparable translation for this
code (02UG3JZ) is procedure code 35.97 (Percutaneous mitral valve
repair with implant), which identifies the use of the MitraClip[supreg]
technology that has been discussed extensively in prior rulemaking.
In the FY 2017 rulemaking, using our established process, new
procedure code 02UG3JE was proposed and finalized for assignment to the
following MS-DRGs for FY 2017, as also shown in Table 6B.--New
Procedure Codes in association with the FY 2017 IPPS/LTCH PPS proposed
and final rules (available via the internet on the CMS web page at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download). We noted that
the listed MS-DRGs also reflect the MS-DRGs that the predecessor code
(02UG3JZ) was assigned to at the time of the proposed rule.
[GRAPHIC] [TIFF OMITTED] TR10AU22.035
However, as also discussed in the FY 2017 IPPS/LTCH PPS final rule
(81 FR 56809 through 56813), in connection with replication efforts
between the ICD-9 and ICD-10 based MS-DRGs and the surgical hierarchy,
the predecessor procedure code (02UG3JZ) was reassigned from MS-DRGs
273 and 274 to MS-DRG 228 (Other Cardiothoracic Procedures with MCC)
and revised MS-DRG 229 (Other Cardiothoracic Procedures without MCC),
and was removed from the PTCA logic for MS-DRGs 231 and 232. However,
these proposed and finalized MS-DRG changes for procedure code 02UG3JZ
were not considered for purposes of the MS-DRG assignments for new
procedure code 02UG3JE, which were instead finalized as proposed based
on the existing MS-DRG assignments for the predecessor code, and code
02UG3JE continued to remain on the
[[Page 48837]]
PTCA list in the GROUPER logic for MS-DRGs 231 and 232.
As noted in the proposed rule, our clinical advisors stated that
procedure code 02UG3JE does not describe a PTCA procedure. As also
noted in the proposed rule, we analyzed claims data from the September
2021 update of the FY 2021 MedPAR file for cases in MS-DRGs 231 and 232
to determine if there were any cases reported with procedure code
02UG3JE, and there were no such cases found.
Accordingly, because the procedure described by procedure code
02UG3JE is not clinically consistent with a PTCA procedure and it was
initially assigned to the list for PTCA procedures in the GROUPER logic
as a result of replication in the transition from ICD-9 to ICD-10 based
MS-DRGs, we proposed to remove procedure code 02UG3JE from the list for
PTCA procedures in the GROUPER logic for MS-DRGs 231 and 232 effective
FY 2023. We also proposed to maintain the MS-DRG assignment for
procedure code 02UG3JE in MS-DRGs 266 and 267 (Endovascular Cardiac
Valve Replacement and Supplement Procedures with and without MCC,
respectively) for FY 2023.
Comment: Commenters agreed with the proposal to remove procedure
code 02UG3JE from the GROUPER logic for MS-DRGs 231 and 232 and to
maintain the assignment in MS-DRGs 266 and 267.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to remove procedure code 02UG3JE from the list
for PTCA procedures in MS-DRGs 231 and 232 and to maintain the
assignment for code 02UG3JE in MS-DRGs 266 and 267 in the GROUPER logic
for FY 2023.
b. Neuromodulation Device Implant for Heart Failure
(BarostimTM Baroreflex Activation Therapy)
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28157 through 28162), the BAROSTIM NEOTM System is the first
neuromodulation device system designed to trigger the body's main
cardiovascular reflex to target symptoms of heart failure. The system
consists of an implantable pulse generator (IPG) that is implanted
subcutaneously in the upper chest below the clavicle, a stimulation
lead that is sutured to either the right or left carotid sinus to
activate the baroreceptors in the wall of the carotid artery and a
wireless programmer system that is used to non-invasively program and
adjust BAROSTIM NEOTM therapy via telemetry. The BAROSTIM
NEOTM System is indicated for the improvement of symptoms of
heart failure in a subset of patients with symptomatic New York Heart
Association (NYHA) class II and III heart failure with low cardiac
ejection fractions who do not benefit from guideline directed
pharmacologic therapy or qualify for Cardiac Resynchronization Therapy
(CRT).
The BAROSTIM NEOTM System was approved for new
technology add-on payments for FY 2021 (85 FR 58716 through 58717) and
FY 2022 (86 FR 44974). We refer readers to section II.F.5.a of the
preamble of the proposed rule and this final rule for a discussion
regarding the FY 2023 status of technologies approved for FY 2022 new
technology add-on payments, including the BAROSTIM NEOTM
System.
For the FY 2023 IPPS/LTCH PPS proposed rule, we received a request
to (1) reassign the ICD-10-PCS procedure codes that describe the
implantation of the BAROSTIM NEOTM System from MS-DRGs 252,
253 and 254 (Other Vascular Procedures with MCC, with CC, without MCC
respectively) to MS-DRGs 222, 223, 224, 225, 226, and 227 (Cardiac
Defibrillator Implant with and without Cardiac Catheterization with and
without AMI/HF/Shock with and without MCC, respectively) and (2)
reassign the procedure code that describes the placement of a BAROSTIM
NEOTM IPG alone from MS-DRGs 252, 253 and 254 to MS-DRG 245
(AICD Generator Procedures).
We stated in the FY 2023 IPPS/LTCH PPS proposed rule that the
following ICD-10-PCS procedure codes uniquely identify the implantation
of the BAROSTIM NEOTM System: 0JH60MZ (Insertion of
stimulator generator into chest subcutaneous tissue and fascia, open
approach) in combination with 03HK3MZ (Insertion of stimulator lead
into right internal carotid artery, percutaneous approach) or 03HL3MZ
(Insertion of stimulator lead into left internal carotid artery,
percutaneous approach). The requestor noted that ICD-10-PCS codes
0JH60MZ, 03HK3MZ and 03HL3MZ are individually assigned to MDC 05 in MS-
DRGs 252, 253, and 254 but not mapped to the logic of these MS-DRGs in
a code combination or code cluster. According to the requestor this
means that cases with a principal diagnosis from MDC 05 with procedure
codes describing the implantation of a BAROSTIM NEOTM system
(0JH60MZ with 03HL3MZ or 03HK3MZ); with procedure codes describing
placement of the stimulator generator alone (0JH60MZ); or with
procedure codes describing the placement of a carotid sinus lead only
(03HL3MZ or 03HK3MZ) are all assigned to MS-DRGs 252, 253, and 254,
despite the significant differences in the clinical coherence and
resources required to perform these distinct procedures.
The requestor stated that cases reporting procedure codes
describing the implantation of a BAROSTIM NEOTM system are
more clinically similar to, and have costs that are more closely
aligned to, cases within MS-DRGs 222, 223, 224, 225, 226, and 227. The
requestor stated that according to its own analysis, the population of
Medicare patients surgically treated with procedures assigned to MS-
DRGs 222, 223, 224, 225, 226, and 227 is essentially identical to the
population treated with the BAROSTIM NEOTM System. According
to the requestor, this congruent patient population accounts for
essentially all cases assigned to MS-DRGs 222, 223, 224, 225, 226, and
227. The requestor stated their analysis demonstrated that over 80% of
the cases in MS-DRGs 222, 223, 224, 225, 226, and 227 had a diagnosis
of heart failure, compared to only 30% of cases with a diagnosis of
heart failure assigned to MS-DRGs 252, 253, and 254. The requestor
stated that the subset of patients that have an indication for the
implantation of a BAROSTIM NEOTM system also have
indications for the implantation of Implantable Cardioverter
Defibrillators (ICD), Cardiac Resynchronization Therapy Defibrillators
(CRT-D) and/or Cardiac Contractility Modulation (CCM) devices, all of
which also require the permanent implantation of a programmable,
electrical pulse generator and at least one electrical lead. The
requestor specifically highlighted that the procedure code combinations
describing the implantation of a cardiac contractility modulation (CCM)
device system, which consists of a programmable implantable pulse
generator (IPG) and three leads, one of which is implanted into the
right atrium and the other two leads which are inserted into the right
ventricle is assigned to MS-DRGs 222, 223, 224, 225, 226, and 227, and
the codes describing the insertion of contractility modulation device
generator alone are assigned to MS-DRG 245. The requestor stated that
the average resource utilization required to implant the BAROSTIM
NEOTM System demonstrates a significant disparity compared
to all procedures within MS-DRGs 252, 253, and 254 and noted that the
cost of the BAROSTIM NEOTM implantable device is $35,000,
which is in range with the cost of the other
[[Page 48838]]
cardiac implantable devices (for example ICD, CRT-D, and CCM) assigned
to MS-DRGs 222, 223, 224, 225, 226, and 227.
The requestor stated that the majority of the procedures assigned
to MS-DRGs 252, 253, and 254 are primarily designed to identify,
diagnose, clear and restructure veins and arteries, excluding those
that require implantable devices. Furthermore, the requestor stated the
surgical procedures within MS-DRGs 252, 253, and 254 are not intended
to treat or improve the function of the heart, nor treat the symptoms
of heart failure.
The requestor acknowledged that there are very few cases within the
publicly available Medicare inpatient claims data that potentially
includes procedure codes describing the implantation of a BAROSTIM
NEOTM system. The requestors' own analysis revealed fewer
than 11 cases with procedure codes describing the implantation of a
BAROSTIM NEOTM system in the combined FY 2019 and FY 2020
MedPAR data and noted that during much of this time period, the
BAROSTIM NEOTM System was only implanted as part of a
controlled clinical trial. The requestor stated that this incomplete
data should not be used to determine initial MS-DRG assignments,
especially for new FDA designated `breakthrough' medical technologies
like the BAROSTIM NEOTM system. Rather, the requestor stated
that CMS should use available information and expert knowledge to make
initial MS-DRG assignments, while waiting for a substantial number of
Medicare covered, post-approved claims from a disperse set of hospitals
to reconsider MS-DRG assignments as necessary. The requestor cautioned
that upon new technology add-on payments expiration, and if the
inadequate MS-DRG assignment for these procedures continues, inpatient
admissions to implant the BAROSTIM NEOTM system will be paid
less than outpatient admissions to perform the same procedures.
The ICD-10-CM diagnosis codes that describe heart failure are found
in the following table. These diagnosis codes are all currently
assigned to MDC 05.
[[Page 48839]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.036
We stated in the proposed rule that first, we examined claims data
from the September 2021 update of the FY 2021 MedPAR file for MS-DRGs
252, 253 and 254 to identify cases reporting a diagnosis of heart
failure and procedure codes describing the implantation of the BAROSTIM
NEOTM system with or without a procedure code describing the
performance of a cardiac catheterization as MS-DRGs 222, 223, 224, 225,
226, and 227 are defined by the performance of cardiac catheterization.
Our findings are shown in the following table.
[[Page 48840]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.037
As shown in the table, the data analysis performed indicates that
the two cases in MS-DRG 252 reporting procedure codes describing the
implantation of a BAROSTIM NEOTM system have an average
length of stay that is shorter than the average length of stay for all
the cases in MS-DRG 252 (4.5 days versus 7.6 days) and higher average
costs when compared to all the cases in MS-DRG 252 ($67,588 versus
$27,488). These two cases did not also report a procedure code
describing the performance of a cardiac catherization. The one case in
MS-DRG 253 reporting procedure codes describing the implantation of a
BAROSTIM NEOTM system had a length of stay that is shorter
than the average length of stay for all the cases in MS-DRG 253 (1 day
versus 5.2 days) and lower costs when compared to all the cases in MS-
DRG 253 ($19,237 versus $21,978). This case did not also report a
procedure code describing the performance of a cardiac catherization.
We found zero cases in MS-DRG 254 reporting procedure codes describing
the implantation of a BAROSTIM NEOTM system.
We stated that our clinical advisors reviewed this data and noted
that was it is difficult to detect patterns of complexity and resource
intensity based on the three cases that reported procedure codes
describing the implantation of a BAROSTIM NEOTM system. The
claims data also reflect a wide variance with regard to the length of
stay and average costs for the three cases that did report the
implantation of a BAROSTIM NEOTM system. We stated that the
results of the claims analysis demonstrated we did not have sufficient
claims data on which to base and evaluate any proposed changes to the
current MS-DRG assignment. We also stated that our clinical advisors
also expressed concern in equating the implantation of a BAROSTIM
NEOTM system to the placement of ICD, CRT-D, and CCM devices
as these devices all differ in terms of technical complexity and
anatomical placement of the electrical lead(s). Our clinical advisors
noted there is no intravascular component or vascular puncture involved
when implanting a BAROSTIM NEOTM system. Our clinical
advisors also noted the placement of ICD, CRT-D, and CCM devices
generally involve a lead being affixed to the myocardium, being
threaded through the coronary sinus or crossing a heart valve and are
procedures that involve a greater level of complexity than affixing the
stimulator lead to either the right or left carotid sinus when
implanting a BAROSTIM NEOTM system.
Next, to evaluate the request to reassign the procedure code that
describes the placement of a BAROSTIM NEOTM IPG alone from
MS-DRGs 252, 253 and 254 to MS-DRG 245 (AICD Generator Procedures), we
stated in the proposed rule that we examined claims data from the
September 2021 update of the FY 2021 MedPAR file for all cases in MS-
DRGs 252, 253 and 254 and compared the results to cases with a
procedure code describing placement of the stimulator generator alone.
Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.038
[[Page 48841]]
As shown in the table, the data analysis performed indicates that
the 12 cases in MS-DRG 252 reporting a procedure code describing
placement of the stimulator generator alone have an average length of
stay that is longer than the average length of stay for all the cases
in MS-DRG 252 (8.8 days versus 7.6 days) and higher average costs when
compared to all the cases in MS-DRG 252 ($56,622 versus $27,488). The
four cases in MS-DRG 253 reporting a procedure code describing
placement of the stimulator generator alone have an average length of
stay that is shorter than the average length of stay for all the cases
in MS-DRG 253 (2.5 days versus 5.2 days) and higher average costs when
compared to all the cases in MS-DRG 253 ($30,451 versus $21,978). We
found zero cases in MS-DRG 254 reporting a procedure code describing
placement of the stimulator generator alone.
We stated that our clinical advisors reviewed this data, and found,
similar to the analysis of the data from the three cases that reported
procedure codes describing the implantation of a BAROSTIM
NEOTM system, that it was difficult to detect patterns of
complexity and resource intensity based on the few cases that reported
procedure codes describing placement of the stimulator generator alone.
The claims data similarly reflects a wide variance with regard to the
length of stay and average costs for these cases that did report the
placement of the stimulator generator alone, indicating there may have
been other factors contributing to the higher costs. When reviewing the
consumption of hospital resources for this small subset of cases, the
claims data also suggest that the increased costs may be attributable
to the severity of illness of the patient and other circumstances of
the admission as the patients tended to have a major complication or
co-morbid (MCC) condition reported based on the MS-DRG assigned.
We stated in the proposed rule that we recognized the average costs
of the small numbers of cases reporting a procedure code describing
placement of the stimulator generator alone are greater when compared
to the average costs of all cases in their respective MS-DRG. We noted
that the MS-DRG system is a system of averages and it is expected that
within the diagnostic related groups, some cases may demonstrate higher
than average costs, while other cases may demonstrate lower than
average costs. We further noted that section 1886(d)(5)(A) of the Act
provides for Medicare payments to Medicare-participating hospitals in
addition to the basic prospective payments for cases incurring
extraordinarily high costs.
In response to the requestor's concerns regarding procedures
currently assigned to MS-DRGs 252, 253 and 254, as discussed in section
II.D.3.b. of the preamble of the proposed rule and this final rule, we
note that MS-DRGs 252, 253, and 254 (Other Vascular Procedures with
MCC, with CC, and without CC/MCC, respectively) are examples of the
``other'' surgical class, and therefore it is expected that there will
be procedures not as precisely clinically aligned within the definition
(logic) of these MS-DRGs. In regard to the concern about the
implications for reimbursement when these procedures are performed in
the outpatient setting as opposed to the inpatient setting, we noted
that the goals of reviewing the MS-DRG assignments of particular
procedures are to better clinically represent the resources involved in
caring for these patients and to enhance the overall accuracy of the
system.
In the proposed rule, in response to the requestor's statement that
CMS should use available information and expert knowledge to make
initial MS-DRG assignments, while waiting for a substantial number of
Medicare covered, post-approved claims from a disperse set of hospitals
to reconsider MS-DRG assignments as necessary, we noted that we use our
established process for GROUPER assignments for new diagnosis and
procedure codes. Specifically, consistent with our established process
for assigning new diagnosis and procedure codes, we stated that we
review the predecessor code and MS-DRG assignment most closely
associated with the new diagnosis or procedure code, and in the absence
of claims data, we consider other factors that may be relevant to the
MS-DRG assignment, including the severity of illness, treatment
difficulty, complexity of service and the resources utilized in the
diagnosis or treatment of the condition. We noted that this process
will not automatically result in the new diagnosis or procedure code
being assigned to the same MS-DRG or having the same designation as the
predecessor code. Members of the public have the opportunity to provide
feedback on the assignment and designation of the codes if they
disagree. We referred the reader to section II.D.17 of the proposed
rule for a more detailed discussion of this process. We noted that when
BAROSTIM NEOTM applied for new technology add-on payment, it
was noted that the technology could be uniquely identified using a
combination of existing ICD-10-PCS codes that were already assigned to
MS-DRGs, and this circumstance generally would not provide a basis for
MS-DRG reassignment.
Lastly, as discussed in the proposed rule, our clinical advisors
expressed concern regarding making proposed MS-DRG changes based on a
specific, single technology (BAROSTIM NEOTM system),
identified by only one unique procedure code combination versus
considering proposed changes based on a group of related procedure
codes that can be reported to describe that same type or class of
technology, which is more consistent with the intent of the MS-DRGs.
We stated that we believed that as the number of cases reporting
procedure codes describing the implantation of neuromodulation devices
for heart failure increases, a better view of the associated costs and
lengths of stay on average will be reflected in the data for purposes
of assessing any reassignment of these cases. We indicated that our
clinical advisors stated that it would not be appropriate to reassign
cases for patients from MS-DRGs 252, 253 and 254 to MS-DRGs 222, 223,
224, 225, 226, and 227 in the absence of additional data to better
determine the resource utilization for this subset of patients to help
inform whether a reassignment would be clinically warranted. Therefore,
for the reasons stated previously, we proposed to maintain the
assignment of cases reporting procedure codes that describe the
implantation of a neuromodulation device in MS-DRGs 252, 253 and 254
for FY 2023. We also proposed to maintain the assignment of cases
reporting a procedure code describing placement of a stimulator
generator alone in MS-DRGs 252, 253 and 254 for FY 2023.
Comment: Commenters expressed support for CMS' proposal to maintain
the assignment of cases reporting procedure codes that describe the
implantation of a neuromodulation device for heart failure in MS-DRGs
252, 253 and 254 and to maintain the assignment of cases reporting a
procedure code describing placement of a stimulator generator alone in
MS-DRGs 252, 253 and 254 for FY 2023.
Response: We appreciate the commenters' support.
Comment: A commenter opposed CMS' proposal. The commenter stated
that in their own analysis of the MedPAR data, and from their real-
world experience, patients with an indication for implantation of a
neuromodulation device were not always admitted with a heart failure
diagnosis. Many patients presented with multiple comorbidities, and
various cardiovascular diagnosis
[[Page 48842]]
(for example, syncope, tachycardia, atrial fibrillation etc.) which
lead to heart failure or are concomitant with heart failure.
This commenter further stated that in their review of the data that
CMS presented, the cost of cases with a diagnosis of heart failure with
procedure codes describing the implantation of a neuromodulation device
without cardiac catheterization and the cost of cases with a procedure
code describing placement of the stimulator generator alone are both
more than twice that of all cases in MS-DRG 252. The commenter stated
even given these disparities, they did not believe that the full costs
of the implantation of a neuromodulation device system have been
appreciated in the MedPAR data files. According to the commenter, the
manufacturer did not charge a cost for the device during clinical
trials for the BAROSTIM NEOTM so such claims do not reflect
the full device cost. The commenter also stated that the COVID-19
pandemic has had a negative impact on inpatient hospital uptake of this
new technology, which in turn has also limited the data available to
support an accurate and appropriate MS-DRG assignment. The commenter
stated they believe the fact that there are few cases in the MedPAR
data files to date is not a reason to allow an overly mispriced MS-DRG
assignment. The commenter stated that while BAROSTIM NEOTM
procedures are typically performed in the outpatient setting, it is
important to preserve inpatient access for those patients with
comorbidities or other risk factors that necessitate an inpatient level
of care. According to this commenter, the current MS-DRG assignments
for procedure codes that describe the implantation of a neuromodulation
device for heart failure would result in a lower payment than
procedures performed in the outpatient setting and could result in
barriers to treatment for patients who are not suitable candidates for
the outpatient setting.
This commenter urged CMS to reassign the ICD-10-PCS procedure codes
that describe the implantation of a neuromodulation device for heart
failure from MS-DRGs 252, 253 and 254 to MS-DRGs 222, 223, 224, 225,
226 and 227 as requested. As alternatives, the commenter recommended to
CMS, to instead, consider reassigning the ICD-10-PCS procedure codes
that describe the implantation of the BAROSTIM NEOTM System
from MS-DRGs 252, 253 and 254 to MS-DRGs 270, 271 and 272 (Other Major
Cardiovascular Procedures with MCC, with CC, and without CC/MCC,
respectively) or even create a new MS-DRG that appropriately describes
these procedures.
Response: We appreciate the commenter's feedback and concern. With
regard to the commenter's concern that patients with an indication for
the implantation of neuromodulation devices are not always admitted
with heart failure diagnoses, we wish to confirm that the examination
of claims data from the September 2021 update of the FY 2021 MedPAR
file for MS-DRGs 252, 253 and 254 to identify cases reporting a
diagnosis of heart failure and procedure codes describing the
implantation of neuromodulation devices for heart failure with or
without a procedure code describing the performance of a cardiac
catheterization, as discussed in the proposed rule, included cases
reporting a diagnosis of heart failure as either a principal or
secondary diagnosis.
Our clinical advisors reviewed commenter's concerns and continue to
note we do not have sufficient claims data on which to base and
evaluate any proposed changes to the current MS-DRG assignment, given
the difficulties of assessing patterns of complexity and resource
intensity based on the limited number of cases identified. Our clinical
advisors also continue to express concern in equating the implantation
of neuromodulation devices for heart failure to the placement of ICD,
CRT-D, and CCM devices as these devices all differ in terms of
technical complexity and anatomical placement of the electrical
lead(s), as discussed in the proposed rule. In regard to the concern
about the implications for payment when these procedures are performed
in the outpatient setting as opposed to the inpatient setting, as noted
in the proposed rule, and in prior rulemaking, the goals of reviewing
the MS-DRG assignments of particular procedures are to better
clinically represent the resources involved in caring for these
patients and to enhance the overall accuracy of the system.
With regard to the commenter's concern that there may have been
other contributing factors that limited the data available to support
an accurate and appropriate MS-DRG assignment of these cases, our
clinical advisors believe that as the number of cases reporting
procedure codes describing the implantation of neuromodulation devices
for heart failure increases, the associated resource utilization can be
better assessed for purposes of evaluating any reassignment of these
cases. As additional claims data becomes available, we will continue to
analyze the clinical nature of procedure codes describing the
implantation of neuromodulation devices for heart failure and their MS-
DRG assignments, including potential alternative MS-DRG assignments, to
further improve the overall accuracy of the IPPS payments in future
rulemaking.
Therefore, after consideration of the public comments we received,
and for the reasons stated earlier, we are finalizing our proposal to
maintain the assignment of cases reporting procedure codes that
describe the implantation of a neuromodulation device in MS-DRGs 252,
253 and 254, without modification, for FY 2023. We are also finalizing
our proposal to maintain the assignment of cases reporting a procedure
code describing placement of a stimulator generator alone in MS-DRGs
252, 253 and 254, without modification, effective October 1, 2022 for
FY 2023.
In the proposed rule, we also noted that during our review of this
issue, as we examined the GROUPER logic that would determine an
assignment of a case to MS-DRGs 222, 223, 224, 225, 226, and 227, we
found two diagnosis codes describing heart failure that are not
currently in the listed principal diagnoses in the GROUPER logic for
MS-DRGs 222 and 223 (Cardiac Defibrillator Implant with Cardiac
Catheterization with AMI, HF or Shock with and without MCC,
respectively). These diagnosis codes are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.039
[[Page 48843]]
We stated that as a result, when either of these codes are coded as
a principal diagnosis, MS-DRGs 224 and 225 (Cardiac Defibrillator
Implant with Cardiac Catheterization without AMI, HF, or Shock with and
without MCC, respectively) are instead assigned when reported with a
procedure code combination describing the implantation of a cardiac
defibrillator and a procedure describing the performance of a cardiac
catherization procedure. We referred the reader to the ICD-10 MS-DRG
Definitions Manual Version 39.1, which is available via the internet on
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software
for complete documentation of the GROUPER logic for MS-DRGs 222, 223,
224, and 225.
In the proposed rule, we stated that our clinical advisors reviewed
this issue and believed that cases reporting diagnosis code I97.130 or
I97.131 as a principal diagnosis are associated with a severity of
illness on par with cases reporting a principal diagnosis of a type of
heart failure. We noted that in order to code postprocedural heart
failure in ICD-10-CM, instructional notes at category I50 direct to
``code first heart failure following surgery'' (that is, I97.130 and
I97.131) with a second code from subcategory of I50 listed after the
postprocedural heart failure code to specify the type of heart failure.
We stated that our clinical advisors recommended adding diagnosis codes
I97.130 and I97.131 to the logic list of principal diagnoses that
describe heart failure for clinical consistency, recognizing that
coding guidelines instruct to code I97.130 and I97.131 before the codes
from subcategory of I50 that specify the type of heart failure, as the
codes from subcategory of I50 are currently in the listed principal
diagnoses in the GROUPER logic for MS-DRGs 222 and 223. Therefore, we
proposed to modify the GROUPER logic to allow cases reporting diagnosis
code I97.130 or I97.131 as a principal diagnosis to group to MS-DRGs
222 and 223 when reported with qualifying procedures.
Comment: Commenters expressed support for CMS' proposal to modify
the GROUPER logic to allow cases reporting diagnosis code I97.130 or
I97.131 as a principal diagnosis to group to MS-DRGs 222 and 223 when
reported with qualifying procedures.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to modify the GROUPER logic to allow cases
reporting diagnosis code I97.130 or I97.131 as a principal diagnosis to
group to MS-DRGs 222 and 223 when reported with qualifying procedures,
without modification, effective October 1, 2022 for FY 2023.
c. Cardiac Mapping
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28162 through 28163), we identified a replication issue from the ICD-9
based MS-DRGs to the ICD-10 based MS-DRGs for procedure code 02K80ZZ
(Map conduction mechanism, open approach). Cardiac mapping describes
the creation of detailed maps to detect how the electrical signals that
control the timing of the heart rhythm move between each heartbeat to
identify the location of rhythm disorders. Cardiac mapping is generally
performed during open-heart surgery or performed via cardiac
catherization.
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49363 through
49369), we discussed a request to remove the cardiac ablation and other
specified cardiovascular procedures from the following MS-DRGs, and to
create new MS-DRGs to classify these procedures:
MS-DRG 246 (Percutaneous Cardiovascular Procedure with
Drug- Eluting Stent with MCC or 4+ Vessels/Stents);
MS-DRG 247 (Percutaneous Cardiovascular Procedure with
Drug-Eluting Stent without MCC);
MS-DRG 248 (Percutaneous Cardiovascular Procedure with
Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents);
MS-DRG 249 (Percutaneous Cardiovascular Procedure with
Non- Drug-Eluting Stent without MCC);
MS-DRG 250 (Percutaneous Cardiovascular Procedure without
Coronary Artery Stent with MCC); and
MS-DRG 251 (Percutaneous Cardiovascular Procedure without
Coronary Artery Stent without MCC).
The requestor recommended that CMS assign the following ICD-9-CM
procedure codes that identify and describe cardiac ablation procedures
and the other percutaneous intracardiac procedures to the newly created
MS-DRGs:
35.52 (Repair of atrial septal defect with prosthesis,
closed technique);
35.96 (Percutaneous balloon valvuloplasty);
35.97 (Percutaneous mitral valve repair with implant);
37.26 (Catheter based invasive electrophysiologic
testing);
37.27 (Cardiac mapping);
37.34 (Excision or destruction of other lesion or tissue
of heart, endovascular approach);
37.36 (Excision, destruction, or exclusion of left atrial
appendage (LAA)); and
37.90 (Insertion of left atrial appendage device).
We stated we agreed that creating these new MS-DRGs would better
reflect utilization of resources and clinical cohesiveness for
intracardiac procedures in comparison to intracoronary procedures.
Therefore, after consideration of the public comments we received, we
finalized our proposal to create MS-DRGs 273 (Percutaneous Intracardiac
Procedures with MCC) and MS-DRG 274 (Percutaneous Intracardiac
Procedures without MCC) for the FY 2016 ICD-10 MS-DRGs Version 33 and
finalized the assignment of the procedures performed within the heart
chambers using intracardiac techniques to the two new MS-DRGs.
In the FY 2016 rulemaking, we stated that the comparable ICD-10-PCS
code translations for ICD-9-CM procedure code 37.27 (Cardiac mapping)
were ICD-10-PCS codes 02K83ZZ (Map conduction mechanism, percutaneous
approach) and 02K84ZZ (Map conduction mechanism, percutaneous
endoscopic approach). However, code 02K80ZZ (Map Conduction Mechanism,
Open Approach), which is also a comparable ICD-10-PCS code translation
for ICD-9-CM procedure code 37.27, was inadvertently excluded.
Consequently, procedure code 02K80ZZ continued to remain in the GROUPER
logic for MS-DRGs 246, 247, 248, 249, 250 and 251.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58477), we finalized
a revision to the titles for MS-DRGs 273 and 274 to ``Percutaneous and
Other Intracardiac Procedures with and without MCC, respectively'' to
better reflect the procedures assigned to them.
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule, in the
ICD-10 MS-DRGs Definitions Manual Version 39.1, procedure code 02K80ZZ
is currently recognized as a non-O.R. procedure that affects the MS-DRG
to which it is assigned. We stated that our clinical advisors reviewed
this grouping issue and stated that procedure code 02K80ZZ does not
describe a percutaneous cardiovascular procedure. We stated that our
clinical advisors supported the reassignment of code 02K80ZZ for
clinical coherence, noting the procedure should be appropriately
grouped along with other procedure codes that describe cardiac mapping
currently assigned to MS-DRGs 273 and
[[Page 48844]]
274. Accordingly, because the procedure described by procedure code
02K80ZZ is not clinically consistent with percutaneous cardiovascular
procedures and it was initially assigned MS-DRGs 246, 247, 248, 249,
250 and 251 as a result of replication in the transition from ICD-9 to
ICD-10 based MS-DRGs, we proposed the reassignment of procedure code
02K80ZZ from MS-DRGs 246, 247, 248, 249, 250 and 251 to MS-DRGs 273 and
274 (Percutaneous and Other Intracardiac Procedures with and without
MCC, respectively) in MDC 05 effective FY 2023.
As discussed in section II.D.1.b of the preamble of the proposed
rule, we noted that we were providing a test version of the ICD-10 MS-
DRG GROUPER Software, Version 40, so that the public could better
analyze and understand the impact of the proposals included in the
proposed rule. We noted that at the time of the development of the test
software this issue was unable to be addressed and therefore, it did
not reflect the proposed reassignment of procedure code 02K80ZZ from
MS-DRGs 246, 247, 248, 249, 250 and 251 to MS-DRGs 273 and 274
(Percutaneous and Other Intracardiac Procedures with and without MCC,
respectively) in MDC 05 for Version 40.
Comment: Commenters agreed with our proposal to reassign procedure
code 02K80ZZ from MS-DRGs 246, 247, 248, 249, 250 and 251 to MS-DRGs
273 and 274 (Percutaneous and Other Intracardiac Procedures with and
without MCC, respectively). A few commenters stated that they
appreciate CMS identifying a replication issue from the ICD-9 based MS-
DRGs to the ICD-10 based MS-DRGs and supported the reassignment of
procedure code 02K80ZZ. A commenter agreed that cardiac mapping is
generally performed during open-heart surgery or performed via cardiac
catheterization to create detailed maps of electrical signals to
identify the location of rhythm disorders.
Response: We thank the commenters for their support.
Comment: Other commenters opposed the proposal. Several commenters
noted that CMS stated that code 02K80ZZ affects the MS-DRG to which it
is assigned, however, based on their review of the MS-DRG logic, code
02K80ZZ is designated as a non-O.R procedure and does not affect MS-DRG
assignment. Other commenters expressed concern that data was not
analyzed to see if code 02K80ZZ had been found in MS-DRGs 246, 247,
248, 249, 250 and 251. A commenter stated that should it be determined
that code 02K80ZZ had not been found in MS-DRGs 246, 247, 248, 249, 250
and 251, then they agreed with removal of code 02K80ZZ from these MS-
DRGs and reassignment to MS-DRGs 273-274. However, should the analysis
show code 02K80ZZ assigned to MS-DRGs 246, 247, 248, 249, 250 and 251,
this commenter suggested CMS consider if the assignment of code 02K80ZZ
to these MS-DRGs should be maintained, and if not, what ramifications
the reassignment would have.
A few commenters recommended that CMS consider assigning code
02K80ZZ to MS-DRGs 228 and 229 (Other Cardiothoracic Procedures with
and without MCC, respectively) instead. Some commenters stated that
they believe that procedures to map conduction mechanism share similar
clinical and resource consumption as the surgical ablation procedures
performed via an open approach that are currently assigned to MS-DRGs
228 and 229. These commenters further stated that given that 02K80ZZ
(Map conduction mechanism, open approach) does not describe a
percutaneous cardiovascular procedure, they did not recommend the
assignment of the code to MS-DRGs 273 and 274. A commenter stated that
based on their own analysis, 02K80ZZ is more often assigned to MS-DRGs
228 and 229 than to MS-DRGs 273 and 274, and furthermore, the ICD-10-
PCS codes included in MS-DRGs 273 and 274 are ablation procedures via
percutaneous approach. Another commenter asserted that the procedures
in MS-DRGs 273 and 274 are all percutaneous approach procedures.
Response: We thank the commenters for their feedback.
We note that in the ICD-10 MS-DRGs Definitions Manual Version 39.1,
procedure code 02K80ZZ is in fact recognized as a non-O.R. procedure
affecting MS-DRGs 246, 247, 248, 249, 250 and 251, specifically. Under
the IPPS MS-DRGs, each ICD-10-PCS procedure code has designations that
determine whether and in what way the presence of that procedure on a
claim impacts the MS-DRG assignment. First, each ICD-10-PCS procedure
code is either designated as an O.R. procedure for purposes of MS-DRG
assignment (``O.R. procedures'') or is not designated as an O.R.
procedure for purposes of MS-DRG assignment (``non-O.R. procedures'').
For each procedure that is designated as a non-O.R. procedure, that
non-O.R. procedure is further classified as either affecting the MS-DRG
assignment or not affecting the MS-DRG assignment. We refer to these
designations that do affect MS-DRG assignment as ``non O.R. affecting
the MS-DRG'' because these procedure codes describe procedures that
would generally require a greater intensity of resources for facilities
to manage the cases included in the definition (logic) of these MS-
DRGs. We refer readers to the ICD-10 MS-DRG Version 39.1 Definitions
Manual at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for
detailed information regarding the designation of procedures as O.R. or
non-O.R. (affecting the MS-DRG) in Appendix E--Operating Room
Procedures and Procedure Code/MS-DRG Index. Procedures designated as
``non O.R. affecting the MS-DRG'' are listed in Appendix E with an
asterisk.
In response to the comments expressing concern that data was not
analyzed to determine if there were any cases reported with procedure
code 02K80ZZ in MS-DRGs 246, 247, 248, 249, 250 and 251, we refer the
reader to Table 6P.1e associated with this final rule and available via
the internet at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. This table displays the findings from our
analysis of the claims data from the September 2021 update of the FY
2021 MedPAR file to determine if there were any cases reported with
procedure code 02K80ZZ assigned to MS-DRGs 246, 247, 248, 249, 250 and
251 and reflects that there were no such cases found.
With regard to the commenters' concerns that procedures to map
conduction mechanism share similar clinical and resource consumption as
surgical ablation procedures performed via an open approach, our
clinical advisors note that while cardiac mapping can be used to
identify and localize areas responsible for rhythm disturbances to
serve as a target for surgical ablation, each of these procedures are
defined by clinically distinct definitions and objectives, which is why
there are separate and unique ICD-10-PCS procedure codes within the
classification for reporting purposes. Our clinical advisors note that
cardiac mapping describes the creation of detailed maps, generally
involving the use of electrodes and a mapping system (consisting of
amplifiers and a recording and analysis system), to detect how the
electrical signals that control the timing of the heart rhythm move
between each heartbeat to identify the location of rhythm disorders.
Surgical ablation, however, describes the burning or freezing of tissue
on the inside of the heart to disrupt faulty electrical signals causing
the arrhythmia.
[[Page 48845]]
We also note in response to the comments received that percutaneous
ablation procedures are not the only procedures assigned to MS-DRGs 273
and 274. Of note, left atrial appendage closure (LAAC) procedures, with
and without an implant, are also assigned to MS-DRGs 273 and 274. In
response to the commenters who did not agree with the proposal to
reassign procedure code 02K80ZZ from MS-DRGs 246, 247, 248, 249, 250
and 251 to MS-DRGs 273 and 274 based on the open approach of the
procedure, as noted in the proposed rule, in the FY 2021 IPPS/LTCH PPS
final rule (85 FR 58477), we finalized a revision to the titles for MS-
DRGs 273 and 274 to ``Percutaneous and Other Intracardiac Procedures
with and without MCC, respectively'' to better reflect the procedures
assigned, as not only percutaneous procedures are assigned to these MS-
DRGs. We refer the reader to the ICD-10 MS-DRG Definitions Manual,
version 39.1, which is available via the internet on the CMS website
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete
documentation of the GROUPER logic for MS-DRGs 273 and 274.
Our clinical advisors continue to note that code 02K80ZZ (Map
Conduction Mechanism, Open Approach), which is a comparable ICD-10-PCS
code translation for ICD-9-CM procedure code 37.27 (Cardiac mapping),
was inadvertently excluded in FY 2016 rulemaking when we finalized our
proposal to create MS-DRGs 273 and MS-DRG 274 to better reflect
utilization of resources and clinical cohesiveness for intracardiac
procedures in comparison to intracoronary procedures. Our clinical
advisors continue to support the reassignment of code 02K80ZZ for
clinical coherence, noting the procedure should be appropriately
grouped along with other procedure codes that describe cardiac mapping
that are currently assigned to MS-DRGs 273 and 274.
Therefore, after consideration of the public comments we received,
and for the reasons discussed, we are finalizing our proposal to
reassign procedure code 02K80ZZ from MS-DRGs 246, 247, 248, 249, 250
and 251 to MS-DRGs 273 and 274 (Percutaneous and Other Intracardiac
Procedures with and without MCC, respectively) in MDC 05 for Version
40, without modification.
d. Surgical Ablation
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44836 through
44848), we discussed a two-part request we received to review the MS-
DRG assignments for cases involving the surgical ablation procedure for
atrial fibrillation. The first part of the request was to create a new
classification of surgical ablation MS-DRGs to better accommodate the
costs of open concomitant surgical ablations. The requestor identified
the following potential procedure combinations that would comprise an
``open concomitant surgical ablation'' procedure.
Open CABG + open surgical ablation
Open MVR + open surgical ablation
Open AVR + open surgical ablation
Open MVR + open AVR + open surgical ablation
Open MVR + open CABG + open surgical ablation
Open MVR + open AVR + open CABG + open surgical ablation
Open AVR + open CABG + open surgical ablation
As discussed in the FY 2022 IPPS/LTCH PPS final rule, we examined
claims data from the March 2020 update of the FY 2019 MedPAR file and
the September 2020 update of the FY 2020 MedPAR file for cases
reporting procedure code combinations describing open concomitant
surgical ablations. We refer the reader to Table 6P.1o associated with
the FY 2022 final rule (which is available via the internet on the CMS
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS) for data analysis findings of cases
reporting procedure code combinations describing open concomitant
surgical ablations. We stated our analysis showed while the average
lengths of stay and average costs of cases reporting procedure code
combinations describing open concomitant surgical ablations are higher
than all cases in their respective MS-DRG, we found variation in the
volume, length of stay, and average costs of the cases. We also stated
findings from our analysis indicated that MS-DRGs 216, 217, and 218
(Cardiac Valve and Other Major Cardiothoracic Procedures with Cardiac
Catheterization with MCC, with CC, and without CC/MCC, respectively) as
well as approximately 31 other MS-DRGs would be subject to change based
on the three-way severity level split criterion finalized in FY 2021.
We refer the reader to section II.D.1.b. of the FY 2022 IPPS/LTCH PPS
final rule (86 FR 44796 through 44798), for related discussion
regarding our finalization of the proposal to delay application of the
NonCC subgroup criteria to existing MS-DRGs with three-way severity
level split to maintain more stability in the current MS-DRG structure.
In the FY 2022 final rule, we finalized our proposal to revise the
surgical hierarchy for the MS-DRGs in MDC 05 (Diseases and Disorders of
the Circulatory System) to sequence MS-DRGs 231-236 (Coronary Bypass)
above MS-DRGs 228 and 229 (Other Cardiothoracic Procedures with and
without MCC, respectively), effective October 1, 2021. In addition, we
also finalized the assignment of cases with a procedure code describing
coronary bypass and a procedure code describing open ablation to MS-
DRGs 233 and 234 and changed the titles of these MS-DRGs to ``Coronary
Bypass with Cardiac Catheterization or Open Ablation with and without
MCC, respectively'' to reflect this reassignment for FY 2022.
In response to this final policy, as discussed in the FY 2023 IPPS/
LTCH PPS proposed rule (87 FR 28163), we received a request to again
review the MS-DRG assignment of cases involving open concomitant
surgical ablation procedures. The requestor stated they continue to
believe that the average hospital costs for surgical ablation for
atrial fibrillation demonstrates a cost disparity compared to all
procedures within their respective MS-DRGs. The requestor suggested
that when open surgical ablation is performed with MVR, or AVR or MVR/
AVR + CABG that these procedures are either (1) assigned to a different
family of MS-DRGs or (2) assigned to MS-DRGs 216 and 217 (Cardiac Valve
and Other Major Cardiothoracic Procedures with Cardiac Catheterization
with MCC and with CC, respectively) similar to what CMS did with CABG
and open ablation procedures in the FY 2022 rulemaking to better
accommodate the added cost of open concomitant surgical ablation.
In the proposed rule we stated the change to the surgical hierarchy
in MDC 05 and the assignment of cases with a procedure code describing
coronary bypass and a procedure code describing open ablation to MS-
DRGs 233 and 234 is recent, only becoming effective October 1, 2021. We
stated that we believed more time was needed before considering to
again review the MS-DRG assignment of cases reporting procedure code
combinations describing open concomitant surgical ablations as the data
from the September 2021 update of the FY 2021 MedPAR file does not
reflect our FY 2022 finalization. In addition, our clinical advisors
continued to state that in open concomitant surgical ablation
procedures, the CABG, MVR, and AVR components of the procedure are more
technically complex than the open surgical ablation procedure. They
also stated that the finalized revision to the
[[Page 48846]]
surgical hierarchy leads to a grouping that is more coherent and better
accounts for the resources expended to address the more complex
procedures from other cases redistributed during the hierarchy change.
As noted, we stated that we believed that additional time was needed to
allow for further analysis of the claims data to reflect our FY 2022
finalization, and also to determine to what extent the patient's co-
morbid conditions are also contributing to costs and to identify other
contributing factors that might exist with respect to the increased
length of stay and costs of this subset of cases in these MS-DRGs, as
discussed in the FY 2022 IPPS/LTCH PPS final rule.
Comment: Commenters expressed support of CMS' decision to allow
additional time for the claims data to reflect our FY 2022 finalization
before further analysis. Commenters stated that the finalized changes
to surgical hierarchy for cardiac procedures were positive and will
improve patient access. Other commenters stated that the finalized
changes to the MS-DRG assignment of cases with a procedure code
describing coronary bypass and a procedure code describing open
ablation were timely.
Response: We thank the commenters for their support.
Comment: Some commenters opposed CMS' decision and suggested that
Medicare cover both aortic valve replacement surgery and surgical
treatment for atrial fibrillation.
Response: We note that the Definitions Manual display of the
GROUPER logic assignment for each procedure code is not an indication
of whether or not a particular procedure is covered for payment
purposes. The MS-DRG logic must specifically require a condition to
group based on whether it is reported as a principal diagnosis or a
secondary diagnosis, and consider any procedures that are reported, in
addition to consideration of the patient's age, sex and discharge
status in order to affect the MS-DRG assignment. In other words, cases
will group according to the GROUPER logic, regardless of any coding
guidelines or coverage policies. It is the Medicare Code Editor (MCE)
and other payer-specific edits that identify inconsistencies in the
coding guidelines or coverage policies. These data integrity edits
address issues such as data validity, coding rules, and coverage
policies. Since the inception of the IPPS, the data editing function
has been a separate and independent step in the process of determining
a DRG assignment. The separation of the MS-DRG grouping and data
editing functions allows the MS-DRG GROUPER to remain stable even
though coding rules and coverage policies may change during the fiscal
year.
Comment: Other commenters opposed CMS' decision and stated CMS
needs to finish the work that was started and improve hospital payment
for valvular procedures with surgical ablation for atrial fibrillation.
These commenters stated that the finalization of the revision to the
surgical hierarchy for the MS-DRGs in MDC 05 and the finalization of
the assignment of cases with a procedure code describing coronary
bypass and a procedure code describing open ablation to MS-DRGs 233 and
234 in FY 2022 rulemaking does not address the increased costs of cases
describing open concomitant surgical ablation performed with open valve
procedures that are assigned to MS-DRGs 216 through 221. A few
commenters asserted that hospitals are forced to lose money on these
lifesaving treatments because CMS has not addressed this underpayment.
Other commenters stated that CMS did not provide transparent data
analysis of cases describing open surgical ablation for atrial
fibrillation performed during open valve procedures so the provider
community could appropriately evaluate.
Commenters stated that treating atrial fibrillation during the same
surgical session as an open valve procedure requires significant device
costs, additional operating room time, and specialized staff. A
commenter stated that even if the surgical ablation procedure is less
technically complex than CABG, MVR, and/or AVR, hospitals still bear
significant costs for furnishing the ablation procedure when the
additional costs of the innovative device technologies (such as
radiofrequency ablation clamps, cryoablation probes, and left atrial
appendage management devices) that are used during the procedure are
considered. Commenters expressed concern that given the added costs of
performing as many as three procedures at the same time, hospitals may
more likely schedule the patient for separate procedures even though
guidelines of the Society for Thoracic Surgeons and the Heart Rhythm
Society recommend performing surgical ablation for atrial fibrillation
at the time of open-heart procedures when indicated. These commenters
further stated they believed it did not seem financially prudent to
compel patients to undergo multiple procedures, potentially costing
more in the long run, when their atrial fibrillation could be treated
during the same open-heart operation. Many commenters urged CMS to
either (1) assign the cases to a different family of MS-DRGs or (2)
assign these cases to MS-DRGs 216 and 217 (Cardiac Valve and Other
Major Cardiothoracic Procedures with Cardiac Catheterization with MCC
and with CC, respectively) as originally requested.
Another commenter stated they respected the position of CMS'
clinical advisors given the complexity of the involved procedures and
noted that the issue of multiple procedures or interventions performed
during a single hospital stay is also a problem in other areas of
cardiology and warrants a meaningful solution. This commenter stated
they believed that since performing procedures concomitantly is more
efficient, more convenient, provides a better prognosis for the patient
and could be more cost effective than the procedures being performed in
different hospital stays, there should be a mechanism for
differentiated payment when procedures are performed concomitantly,
when it is best for the patient. This commenter recommended that CMS
create a supplemental payment mechanism that could be modeled based on
the respective costs of the individual procedures determined by claims
data and then adjusted for efficiencies of a single operative session
to facilitate incremental payment when two major procedures are
performed during the same hospital admission and urged CMS to solicit
further comment on possible methodological solutions to accommodate
costs when two procedures are performed concomitantly.
Response: We appreciate the commenters' feedback.
We refer readers to Tables 6P.1c and 6P1.d associated with this
final rule (which are available via the internet on the CMS website at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS) for the data analysis of cases reporting procedure
code combinations describing open concomitant surgical ablations in the
September 2021 update of the FY 2021 MedPAR file. Table 6P.1c
associated with this final rule sets forth the list of ICD-10-PCS
procedure codes reflecting mitral valve repair or replacement (MVR),
aortic valve repair or replacement (AVR), and coronary artery bypass
grafting (CABG) procedures that we examined in this analysis. Table
6P.1d associated with this final rule shows the data analysis findings
of cases reporting procedure code combinations describing open
concomitant surgical ablations assigned to MS-DRGs 216, 217, 218, 219,
220 and
[[Page 48847]]
221 from the September 2021 update of the FY 2021 MedPAR file.
As shown in Table 6P.1d associated with this final rule, while the
average lengths of stay and average costs of cases reporting procedure
code combinations describing open concomitant surgical ablations are
higher than all cases in their respective MS-DRG, we found there is
variation in the volume, length of stay, and average costs of the
cases. For MS-DRG 216, we found 870 cases reporting procedure code
combinations describing open concomitant surgical ablations with the
average length of stay ranging from 16.8 days to 20.5 days and average
costs ranging from $90,122 to $156,617 for these cases. For MS-DRG 217,
we found 168 cases reporting procedure code combinations describing
open concomitant surgical ablations with the average length of stay
ranging from 7.5 days to 12 days and average costs ranging from $48,644
to $74,594 for these cases. For MS-DRG 218, we found zero cases
reporting procedure code combinations describing open concomitant
surgical ablations. For MS-DRG 219, we found 1,940 cases reporting
procedure code combinations describing open concomitant surgical
ablations with the average length of stay ranging from 11.2 days to
13.4 days and average costs ranging from $70,816 to $86,805 for these
cases. For MS-DRG 220, we found 1,338 cases reporting procedure code
combinations describing open concomitant surgical ablations with the
average length of stay ranging from 7.1 days to 8.8 days and average
costs ranging from $49,326 to $65,611 for these cases. For MS-DRG 221,
we found 60 cases reporting procedure code combinations describing open
concomitant surgical ablations with the average length of stay ranging
from 5.6 days to 6.3 days and average costs ranging from $44,247 to
$47,418 for these cases.
As noted, and similar to our analysis of the data for the FY 2022
IPPS/LTCH PPS rulemaking, the data analysis shows that while the
average lengths of stay and average costs of cases reporting procedure
code combinations describing open concomitant surgical ablations are
higher than all cases in their respective MS-DRG, there is variation in
the volume, length of stay, and average costs of the cases. As we
discuss later in this section, the analysis also shows that the cases
reporting an open concomitant surgical ablation code combination are
predominately found in the higher (CC or MCC) severity level MS-DRGs of
their current base MS-DRG assignment. Moreover, as also previously
noted, the data from the September 2021 update of the FY 2021 MedPAR
file does not reflect our FY 2022 finalization. We continue to believe
that additional time is needed to allow for further analysis of the
claims data to reflect our FY 2022 finalization, and also to determine
to what extent the patient's co-morbid conditions or other factors may
be contributing to the increased length of stay and costs of this
subset of cases, as discussed previously.
In response to comments that urged CMS to assign cases reporting
procedure code combinations describing open concomitant surgical
ablations currently assigned to MS-DRGs 216, 217, 218, 219, 220 and 221
to MS-DRGs 216 and 217 only, MS-DRGs 216, 217 and 218 are defined by
the performance of cardiac catheterization. The performance of a
cardiac catherization procedure could be also contributing to the
increased average costs of cases reporting procedure code combinations
describing open concomitant surgical ablations currently assigned to
MS-DRGs 216, 217 and 218. Our clinical advisors have expressed concern
about the effect on clinical coherence of assigning cases reporting
procedure code combinations describing open concomitant surgical
ablations that do not also have a cardiac catherization procedure
reported to MS-DRGs that are defined by the performance of that
procedure.
We also note, as discussed in Section D.1.b of the proposed rule
and this final rule, using the September 2021 update of the FY 2021
MedPAR file, we analyzed how applying the NonCC subgroup criteria to
all MS-DRGs currently split into three severity levels would affect the
MS-DRG structure beginning in FY 2022. Similar to our findings
discussed in the FY 2022 IPPS/LTCH final rule, findings from our
analysis using the September 2021 update of the FY 2021 MedPAR file
indicated that MS-DRGs 216, 217, 218 as well as approximately 40 other
MS-DRGs would be subject to change based on the three-way severity
level split criterion finalized in FY 2021. While we are finalizing the
delay of the application of the NonCC subgroup criteria to existing MS-
DRGs with a three-way severity level split until FY 2024 or later, and
to maintain the current structure of the 41 MS-DRGs that currently have
a three-way severity level split (total of 123 MS-DRGs) that would
otherwise be subject to these criteria, we note that the total number
of cases in MS-DRG 218 is again below 500, and that we may consider
consolidating these MS-DRGs into two severity levels based on the
application of the NonCC subgroup criteria in future rule-making. We
refer the reader to Table 6P.1b associated with the proposed rule and
this final rule (which is available via the internet on the CMS website
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS) for the list of the 123 MS-DRGs that would be
subject to deletion and the list of the 75 new MS-DRGs that would have
been proposed for creation under this policy if the NonCC subgroup
criteria were applied.
In response to comments that the finalized revision to the surgical
hierarchy did not adequately address the increased costs of cases
associated with open concomitant surgical ablation and that urged CMS
to create new MS-DRGs for these open concomitant procedures as
originally requested, our clinical advisors continue to believe
additional time is needed to review the clinical nature of cases
reporting an open concomitant surgical ablation code combination before
exploring a proposal to create new MS-DRGs for this subset of cases
currently assigned to MS-DRGs 216 through 221 given the complexity of
these code combinations and the corresponding data. Our analysis using
the September 2021 update of the FY 2021 MedPAR file reflects that the
cases reporting an open concomitant surgical ablation code combination
are predominately found in the higher (CC or MCC) severity level MS-
DRGs of their current base MS-DRG assignment, suggesting that the
patient's co-morbid conditions may also be contributing to higher costs
of these cases. Secondly, for the numerous procedure combinations that
would comprise an ``open concomitant surgical ablation'' procedure, the
increase in average costs appears to directly correlate with the number
of procedures performed. For example, cases that describe ``Open MVR +
open surgical ablation'' generally demonstrate costs that are lower
than cases that describe ``Open MVR + open AVR + open CABG + open
surgical ablation.'' Therefore, our clinical advisors continue to
believe that additional time is needed to allow for further analysis of
the claims data to determine to what extent the patient's co-morbid
conditions are also contributing to higher costs and to identify other
contributing factors that might exist with respect to the increased
length of stay and costs of these cases in these MS-DRGs. Our clinical
advisors continue to believe that future data findings may demonstrate
additional variance in resource utilization for this patient
population.
With respect to commenters' concerns regarding a mechanism for
[[Page 48848]]
differentiated payment when procedures are performed concomitantly, we
agree that the performance of concomitant procedures is an area that
warrants more analysis across the MS-DRG classification, as the
performance of ``concomitant procedures'' may affect the consumption of
resources in other clinical scenarios as well, especially when the use
of devices is involved. As discussed in prior rulemaking, the MS-DRGs
are a classification system intended to group together diagnoses and
procedures with similar clinical characteristics and utilization of
resources. It has been difficult to identify other MS-DRGs that would
be more appropriate MS-DRG assignments for these concomitant procedures
based on the variance in the clinical characteristics and utilization
of resources for concomitant procedures, which can depend on the number
of procedures being performed concomitantly and the nature of these
procedures. We are interested in receiving feedback on possible
mechanisms through which we can address concomitant procedures. We are
also interested in receiving feedback on how CMS can mitigate any
unintended negative payment impacts to providers providing concomitant
procedures. Commenters can continue to submit their recommendations via
the new electronic intake system, Medicare Electronic Application
Request Information SystemTM (MEARISTM) at:
https://mearis.cms.gov/public/home. We will consider these public
comments for possible proposals in future rulemaking as part of our
annual review process.
Comment: Some commenters noted that cases describing standalone
hybrid percutaneous endoscopic surgical ablation are assigned MS-DRGs
228 and 229 (Other Cardiothoracic Procedures with and without MCC,
respectively) and noted that payment for MS-DRGs 228 and 229 has been
trending downward over the last six years. These commenters stated that
the downward payment trend for MS-DRGs 228 and 229 has resulted in
hospitals being undercompensated for the costs of furnishing standalone
hybrid percutaneous endoscopic surgical ablation procedures for atrial
fibrillation. Other commenters stated that CMS did not provide
transparency to the details of its analysis to support why standalone
hybrid surgical ablation procedures should not be moved from MS-DRGs
228 and 229.
Some commenters stated that the decline in payment for standalone
hybrid percutaneous endoscopic surgical ablation procedures makes it
impossible for their facilities to continue to provide these needed
procedures to patients suffering from atrial fibrillation. A commenter
stated the proposed relative weight does not accurately reflect the
costs of these device intensive procedures and that there has been no
transparency into the cause for these significant declines. Another
commenter stated that their facility has been especially impacted by
COVID-19 and stated that for CMS to expect facilities to be able to
continue to provide patients with needed medical services such as
hybrid percutaneous endoscopic surgical ablation at such a steep
decrease in payment is intolerable for hospitals. Other commenters
asserted that hospitals will be forced to postpone or ``trim back'' on
providing patients access to more complex, resource intensive
procedures such as these, to better align their costs with what they
asserted were Medicare's inadequate payment levels. These commenters
proposed two possible remedies to this underpayment, that CMS either
(1) use its statutory authority to not reduce the relative weight and
payment for MS-DRGs 228 and 229, or (2) assign cases reporting
procedure codes describing standalone percutaneous endoscopic surgical
ablation from MS-DRGs 228 and 229 to the higher (MCC) severity level
MS-DRG of its current base MS-DRG assignment, which is MS-DRG 228
(Other Cardiothoracic Procedures with MCC), to prevent underpayment for
these procedures and avoid disruptions in beneficiary access.
Response: We appreciate the commenters' feedback. We note that we
did not receive a specific request to change the MS-DRG assignment for
standalone percutaneous endoscopic surgical ablation procedures for
consideration for the FY 2023 IPPS/LTCH PPS proposed rule. We note a
request to reassign cases describing standalone percutaneous endoscopic
surgical ablation from MS-DRGs 228 and 229 (Other Cardiothoracic
Procedures with and without MCC, respectively) to higher weighted MS-
DRGs 219 and 220 (Cardiac Valve and Other Major Cardiothoracic
Procedures without Cardiac Catheterization with MCC and with CC,
respectively) was discussed in the FY 2022 IPPS/LTCH PPS proposed rule.
In the FY 2022 IPPS/LTCH final rule, in response to comments received
on the proposed rule, we also discussed the assignment of cases
reporting procedure codes describing standalone percutaneous endoscopic
surgical ablation from MS-DRGs 228 and 229 to the higher (MCC) severity
level MS-DRG of its current base MS-DRG assignment in the FY 2022 IPPS/
LTCH PPS final rule. We refer readers to the FY 2022 IPPS/LTCH PPS
final rule (86 FR 44844 through 44848) for a complete discussion.
In the request to again review the MS-DRG assignment of surgical
ablation procedures in FY 2023 rulemaking, however, the requestor
stated in their submission that while surgical ablation represents
losses across all procedure types, they recommended focusing on
addressing open concomitant surgical ablation in FY 2023 rulemaking and
did not request a change to the MS-DRG assignment for standalone
percutaneous endoscopic surgical ablation. Therefore, cases describing
standalone percutaneous endoscopic surgical ablation were not
considered in the FY 2023 IPPS/LTCH PPS proposed rule.
In response to the comment that hospitals may postpone or ``trim
back'' on providing patients access to these procedures in order to
better align their costs with Medicare payment levels, as we have
stated in prior rulemaking, it is not appropriate for facilities to
deny treatment to beneficiaries needing a specific type of therapy or
treatment that potentially involves increased costs.
We acknowledge the reduction in the proposed FY 2023 relative
weights for MS-DRGs 228 and 229 (approximately 7% and 4%, respectively
from the FY 2022 relative weight), however, we note we did not propose
a change to the GROUPER logic of MS-DRGs 228 and 229 for FY 2023.
However, there have been previous changes to the structure of MS-DRGs
228 and 229 over the past six years. It is to be expected that when MS-
DRGs are restructured, such as when procedure codes are reassigned or
the hierarchy within an MDC is revised, resulting in a different case-
mix within the MS-DRGs, the relative weights of the MS-DRGs will change
as a result. We believe the trending reduction in relative weights for
MS-DRGs 228 and 229 over time to be appropriately driven by the
underlying data in the six years since CMS began using the ICD-10 data
in calculating the relative weights and is reflective of the change in
case-mix within these MS-DRGs. Specifically, in the FY 2017 IPPS/LTCH
PPS final rule (81 FR 56809 through 56813), we finalized our proposal
to collapse MS-DRGs 228, 229, and 230 from three severity levels to two
severity levels by deleting MS-DRG 230 and revised the structure of MS-
DRG 229. We also finalized our proposal to reassign ICD-9-CM procedure
code 35.97 and the cases reporting ICD-10-PCS procedure
[[Page 48849]]
code 02UG3JZ (Supplement mitral valve with synthetic substitute,
percutaneous approach) from MS-DRGs 273 and 274 to MS-DRG 228 and
revised the titles of MS-DRG 228 and 229. In the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42080 through 56813) we finalized our proposal to
modify the structure of MS-DRGs 266 and 267 by reassigning ICD-10-PCS
procedure code 02UG3JZ describing a transcatheter mitral valve repair
with implant procedure from MS-DRGs 228 and 229 to MS-DRGs 266 and 267
and revised the titles of MS-DRGs 266 and 267. Finally, as discussed in
the FY 2022 IPPS/LTCH PPS final rule, and earlier in this section, we
finalized a revision to the surgical hierarchy for the MS-DRGs in MDC
05 to sequence MS-DRGs 231-236 (Coronary Bypass) above MS-DRGs 228 and
229 for FY 2022. Therefore, the data appear to reflect that the
difference in the relative weights shown in Table 5-List of Medicare
Severity Diagnosis Related Groups (MS-DRGs), Relative Weighting
Factors, and Geometric and Arithmetic Mean Length of Stay associated
with final rule for the applicable fiscal year can be attributed to the
fact that these previously finalized policies resulted in a different
case-mix within the MS-DRGs, which is then being reflected in the
relative weights. We refer the reader to section II.E. of the preamble
of this FY 2023 IPPS/LTCH PPS final rule for a complete discussion of
the relative weight calculations for FY 2023, including our finalized
policies to use 50 percent of the relative weights calculated using all
cases in the FY 2021 MedPAR data and 50 percent of the relative weights
calculated without COVID-19 cases in the FY 2021 MedPAR data to
calculate the relative weights for FY 2023, and to apply a permanent
10-percent cap on the reduction in a MS-DRG's relative weight in a
given fiscal year, beginning in FY 2023.
We appreciate the commenters' support and feedback, and intend to
continue to consider these issues. For the reasons summarized earlier,
and after consideration of the public comments we received, we are not
making any MS-DRG changes for cases involving the open concomitant
surgical ablation procedures or for cases describing standalone
percutaneous endoscopic surgical ablation for FY 2023.
7. MDC 06 (Diseases and Disorders of the Digestive System):
Appendicitis
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28163 through
28165), we discussed a request we received to reconsider the MS-DRG
assignment for diagnosis code K35.20 (Acute appendicitis with
generalized peritonitis, without abscess). According to the requestor,
when this code is reported in combination with any one of the
corresponding procedure codes that describe an appendectomy, the case
is grouping to MS-DRGs 341, 342, and 343 (Appendectomy without
Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively). Alternatively, the requestor stated that when diagnosis
code K35.32 (Acute appendicitis with perforation and localized
peritonitis, without abscess) is reported in combination with any one
of the corresponding procedure codes that describe an appendectomy, the
case is grouping to MS-DRGs 338, 339, and 340 (Appendectomy with
Complicated Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively).
The requestor asserted that the difference in MS-DRG assignment
suggests that localized peritonitis is more severe or requires an
additional level of care over and above that for generalized
peritonitis. The requestor stated that clinically, both localized and
generalized peritonitis, when treated with an appendectomy require the
same level of patient care, including extensive intraoperative
irrigation at the surgical site, direct inspection or imaging of the
abdomen to look for possible abscess, use of intravenous antibiotics,
and prolonged inpatient monitoring. The requestor added that
generalized peritonitis can be thought of as a progression of the
localized peritonitis condition and that patients progress from
localized to generalized peritonitis and not vice versa.
In the proposed rule we noted that this topic has been discussed
previously in our FY 2019 (83 FR 41230) and FY 2021 rulemakings (85 FR
32500 through 32503) and (85 FR 58484 through 58488). Effective FY 2019
(October 1, 2018) diagnosis code K35.2 (Acute appendicitis with
generalized peritonitis) was expanded to K35.20 (Acute appendicitis
with generalized peritonitis, without abscess); and K35.21 (Acute
appendicitis with generalized peritonitis, with abscess). In addition,
code K35.3 (Acute appendicitis with localized peritonitis) was expanded
to K35.30 (Acute appendicitis with localized peritonitis, without
perforation or gangrene); K35.31 (Acute appendicitis with localized
peritonitis and gangrene, without perforation); K35.32 (Acute
appendicitis with perforation and localized peritonitis, without
abscess); and K35.33 (Acute appendicitis with perforation and localized
peritonitis, with abscess).
We finalized the severity level designations for these new
diagnosis codes in the FY 2019 IPPS/LTCH PPS final rule and stated our
clinical advisors believed that the new diagnosis codes for acute
appendicitis described as ``with abscess'' or ``with perforation'' were
clinically qualified for the MCC severity level designation, while
acute appendicitis ``without abscess'' or ``without perforation'' were
clinically qualified for the CC severity level designation because
cases with abscess or perforation would be expected to require more
clinical resources and time to treat while those cases ``without
abscess'' or ``without perforation'' are not as severe clinical
conditions.
As discussed in our FY 2021 rulemaking, we received the request to
add K35.20 (Acute appendicitis with generalized peritonitis, without
abscess) to the list of complicated principal diagnoses so that all
ruptured/perforated appendicitis codes in MDC 06 group to MS-DRGs 338,
339, and 340 (Appendectomy with Complicated Principal Diagnosis with
MCC, with CC, and without CC/MCC, respectively) as K35.20 is the only
ruptured appendicitis code not included in the list of complicated
principal diagnosis codes. At that time, we noted that the inclusion
term at subcategory K35.2 (Acute appendicitis with generalized
peritonitis) is: ``Appendicitis (acute) with generalized (diffuse)
peritonitis following rupture or perforation of the appendix''. The
requestor stated that code K35.20 (Acute appendicitis with generalized
peritonitis, without abscess) describes a generalized, more extensive
form of peritonitis than code K35.32 (Acute appendicitis with
perforation and localized peritonitis, without abscess). We noted that
our clinical advisors agreed that the presence of an abscess would
clinically determine whether a diagnosis of acute appendicitis would be
considered a complicated principal diagnosis. As diagnosis code K35.20
is described as ``without'' an abscess, our clinical advisors
recommended that K35.20 not be added to the list of complicated
principal diagnoses for MS-DRGS 338, 339, and 340. We also proposed to
remove diagnosis code K35.32 (Acute appendicitis with perforation and
localized peritonitis, without abscess) from the complicated principal
diagnosis list.
In response to that proposal, some commenters disagreed. A
commenter stated that when ruptured appendicitis results in generalized
peritonitis, resources are greater because the
[[Page 48850]]
infection is not walled off, not localized, and has spread to two or
more compartments within the abdominal cavity. According to the
commenter, clinical literature supports the statement that generalized
peritonitis is a more morbid (severe) presentation than just
perforation or localized abscess. After consideration of the comments
received and for the reasons discussed in the FY 2021 final rule, we
did not finalize our proposals in that final rule. We concurred that
the expansion of diagnosis codes K35.2 and K35.3 to introduce
additional clinical concepts effective October 1, 2018 significantly
changed the scope and complexity of the diagnosis codes for this subset
of patients. We also stated NCHS' staff acknowledged the clinical
concerns based on the manner in which diagnosis codes K35.2 and K35.3
were expanded and confirmed that they would consider further review of
these newly expanded codes with respect to the clinical concepts.
We communicated with the CDC/NCHS staff regarding this repeat
request submitted for FY 2023 consideration. The CDC/NCHS staff
included these codes describing appendicitis on the agenda and a
proposal for further revisions was presented for discussion at the
March 8-9, 2022 ICD-10 Coordination and Maintenance Committee meeting.
Specifically, the CDC/NCHS staff proposed to expand current diagnosis
codes K35.20 and K35.21, making them sub-subcategories and creating new
diagnosis codes to identify and describe acute appendicitis with
generalized peritonitis, with perforation and without perforation, and
unspecified as to perforation, as shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.040
We refer the reader to the CDC website at: https://www.cdc.gov/nchs/icd/icd10cm_maintenance.htm for additional detailed information
regarding the proposal, including a recording of the discussion and the
related meeting materials.
We noted in the proposed rule that the deadline for submitting
public comments on the diagnosis code proposals discussed at the March
8-9, 2022 ICD-10 Coordination and Maintenance Committee meeting was May
9, 2022 and according to the CDC/NCHS staff, the diagnosis code
proposals are being considered for an October 1, 2023 implementation
(FY 2024). We stated that any future proposed changes to the MS-DRGs
for Appendectomy would be dependent on the diagnosis code revisions
that are finalized by the CDC/NCHS. Since it is not clear what code
changes may be finalized, including whether public comments expressed
support for the proposed changes or provided alternative options for
consideration, we stated in the proposed rule that we believe it is
appropriate to delay any possible MS-DRG modifications for future
rulemaking. Therefore, we did not propose a change to the MS-DRG
assignment or the current structure for MS-DRGs 338, 339, 340, 341,
342, and 343. Although we did not propose a change to the MS-DRG
assignments for FY 2023, we made the findings from our data analysis
available for the listed MS-DRGs and the associated diagnosis codes to
help inform future comments. We referred the reader to Table 6P.4a
associated with the proposed rule (which is available via the internet
on the CMS website at: https://www.cms.gov/medicare/medicare-fee-for-
service-payment/acuteinpatientpps).
Comment: Commenters agreed with our proposal to maintain the
structure of MS-DRGs 338, 339, 340, 341, 342, and 343 including the MS-
DRG assignment for diagnosis code K35.20 to MS-DRGs 341, 342, and 343.
However, a commenter opposed CMS's proposal and stated they agreed with
the requestor that all diagnosis codes describing a ruptured or
perforated appendix should group to MS-DRGs 338, 339, and 340. The
commenter stated that the condition described by code K35.20 can be
associated with the risk of postoperative abscess formation and
extended length of hospital stay, thereby warranting classification as
a complicated diagnosis. This commenter urged CMS to reassign code
K35.20 from MS-DRGs 341, 342, and 343 to MS-DRGs 338, 339, and 340 for
FY 2023.
Response: We thank the commenters for their support and feedback.
In response to the commenter who urged CMS to reassign diagnosis code
K35.20 from MS-DRGs 341, 342, and 343 to MS-DRGs 338, 339, and 340 for
FY 2023, we note that the CDC/NCHS staff are in the process of
reviewing public comments related to the proposed revision to certain
diagnosis codes describing acute appendicitis that was presented at the
March 8-9, 2022 ICD-10 Coordination and Maintenance Committee meeting,
as discussed in the proposed rule. Accordingly, we continue to believe
it is appropriate to delay any potential MS-DRG modifications as we do
not yet know what the finalized code updates, including any
corresponding changes to the Index to Diseases and Injuries and Tabular
List of Diseases, might be. We will continue to collaborate with the
CDC/NCHS regarding this issue.
After consideration of the public comments we received, we are
maintaining the current structure of MS-DRGs 338, 339, 340, 341, 342,
and 343 and the MS-DRG assignment of diagnosis code K35.20 for FY 2023.
8. MDC 07 (Diseases and Disorders of the Hepatobiliary System and
Pancreas): Laparoscopic Cholecystectomy With Common Bile Duct
Exploration
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28165), we stated
that we received a request to review the MS-DRG assignment when
procedure code 0FC94ZZ (Extirpation of matter from common bile duct,
percutaneous endoscopic approach) that describes a common bile duct
exploration with gallstone removal procedure using a laparoscopic
approach, is reported with a laparoscopic cholecystectomy. The
procedure codes describing a laparoscopic cholecystectomy are
[[Page 48851]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.041
According to the requestor, when a laparoscopic cholecystectomy is
reported with any one of the listed procedure codes with a common bile
duct exploration and gallstone removal procedure that is performed
laparoscopically and reported with procedure code 0FC94ZZ, the
resulting assignment is MS-DRGs 417, 418 and 419 (Laparoscopic
Cholecystectomy without C.D.E. with MCC, with CC, and without CC/MCC,
respectively). This MS-DRG assignment does not recognize that a common
bile duct exploration (C.D.E.) was performed. However, the requestor
stated that when procedure code 0FC90ZZ (Extirpation of matter from
common bile duct, open approach) that describes a common bile duct
exploration with gallstone removal procedure using an open approach is
reported with any one of the listed procedure codes describing a
laparoscopic cholecystectomy, the resulting assignment is MS-DRGs 411,
412, and 413 (Cholecystectomy with C.D.E. with MCC, with CC, and
without CC/MCC, respectively). The requestor stated that this MS-DRG
assignment appropriately recognizes that a common bile duct exploration
was performed. The requestor questioned why only the common bile duct
exploration with gallstone removal procedure performed using an open
approach (code 0FC90ZZ) grouped appropriately when reported with the
laparoscopic cholecystectomy.
We stated in the proposed rule that we reviewed procedure code
0FC94ZZ and found that it is currently designated as a non-O.R.
procedure, therefore, the GROUPER logic does not recognize this
procedure for purposes of MS-DRG assignment. We also noted that MS-DRGs
411, 412, and 413 include cholecystectomy procedures performed by
either an open or a percutaneous endoscopic (laparoscopic) approach. We
referred the reader to the V39.1 ICD-10 MS-DRG Definitions Manual,
which is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete
documentation of the GROUPER logic for MS-DRGs 411, 412, 413, 417, 418
and 419.
As stated in the proposed rule, we analyzed claims data from the
September 2021 update of the FY 2021 MedPAR file for all cases in MS-
DRGs 411, 412, 413, 417, 418, and 419. Because the logic for MS-DRGs
411, 412, and 413 includes cholecystectomy procedures performed by
either an open or percutaneous endoscopic (laparoscopic) approach, we
also analyzed the cases reported with each approach separately. The
findings from our analysis are shown in the following tables.
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[GRAPHIC] [TIFF OMITTED] TR10AU22.043
[[Page 48852]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.044
In MS-DRG 411, we found a total of 116 cases with an average length
of stay of 8.5 days and average costs of $29,332. Of those 116 cases,
there were 56 cases reporting an open cholecystectomy, with an average
length of stay of 10.7 days and average costs of $36,135 and 60 cases
reporting a laparoscopic cholecystectomy, with an average length of
stay of 6.5 days and average costs of $22,982. The data show that the
cases reporting an open cholecystectomy have a longer average length of
stay (10.7 days versus 6.5 days) and higher average costs ($36,135
versus $22,982) compared to the cases reporting a laparoscopic
cholecystectomy. The data also show that the cases reporting an open
cholecystectomy have a longer average length of stay (10.7 days versus
8.5 days) and higher average costs ($36,135 versus $29,332) compared to
all the cases in MS-DRG 411. Similar findings are demonstrated for MS-
DRGs 412 and 413, where the data show that the cases reporting an open
cholecystectomy have a longer average length of stay and higher average
costs compared to the cases reporting a laparoscopic cholecystectomy,
and also, when compared to all the cases in their respective MS-DRGs.
We then analyzed claims data from the September 2021 update of the
FY 2021 MedPAR file for cases reporting procedure code 0FC94ZZ in MS-
DRGs 417, 418, and 419 to assess how often it was reported. The
findings from our analysis are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.045
We found a total of 231 cases across MS-DRGs 417, 418, and 419 with
an average length of stay of 4.6 days and average costs of $15,348
reporting procedure code 0FC94ZZ. In our review of the cases reporting
a laparoscopic cholecystectomy across MS-DRGs 411, 412, and 413, we
found a total of 178 cases with an average length of stay of 5.3 days
and average costs of $18,206.
We also examined claims data from the September 2021 update of the
FY 2021 MedPAR file for cases reporting procedure code 0FC94ZZ across
all the MS-DRGs without another O.R. procedure reported, to assess the
number of cases and in which MS-DRGs procedure code 0FC94ZZ was found.
The findings from our analysis are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.046
[[Page 48853]]
The data analysis shows procedure code 0FC94ZZ was reported in a
total of 32 cases across 7 MS-DRGs with an average length of stay of
5.9 days and average costs of $16,087. While procedure code 0FC94ZZ is
designated as non-O.R., we also analyzed the average length of stay and
average costs of the cases found within each of the 7 MS-DRGs reporting
procedure code 0FC94ZZ against all the cases in their respective MS-
DRGs, to determine if there was any indication that the performance of
the procedure described by procedure code 0FC94ZZ may have had any
impact. For instance, as shown in the table, for MS-DRG 438 we found 2
cases reporting procedure code 0FC94ZZ with an average length of stay
of 14 days and average costs of $26,092. In the September 2021 update
of the FY 2021 MedPAR file, the total number of cases for MS-DRG 438 is
10,240 with an average length of stay of 6.4 days and average costs of
$13,341. The 2 cases reporting procedure code 0FC94ZZ have
approximately twice the average length of stay (14 days versus 6.4
days) and approximately twice the average costs ($26,092 versus
$13,341) compared to all the cases for MS-DRG 438. In the absence of
additional analysis, it is unknown if these differences can be
attributed to other factors, such as the MCCs that were reported in
these cases. Similar findings were found for MS-DRGs 441, 445, 446, and
871. We noted in the proposed rule that we will consider if further
detailed analysis may be warranted for these cases.
As stated in the proposed rule, our clinical advisors agreed that
procedure code 0FC94ZZ describes a common bile duct exploration
procedure with removal of a gallstone and should be added to the logic
for case assignment to MS-DRGs 411, 412, and 413 for clinical coherence
with the other procedures that describe a common bile duct exploration.
Therefore, for FY 2023, we proposed to redesignate procedure code
0FC94ZZ from a non-O.R. procedure to an O.R. procedure and add it to
the logic list for common bile duct exploration (CDE) in MS-DRGs 411,
412, and 413 (Cholecystectomy with C.D.E. with MCC, with CC, and
without CC/MCC, respectively) in MDC 07 to appropriately reflect when
this procedure is performed and improve the clinical coherence of the
patients assigned to these MS-DRGs.
Comment: Commenters agreed with our proposal to redesignate
procedure code 0FC94ZZ from a non-O.R. procedure to an O.R. procedure
and to add it to the logic list for common bile duct exploration (CDE)
procedures in MS-DRGs 411, 412, and 413.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to redesignate procedure code 0FC94ZZ from a
non-O.R. procedure to an O.R. procedure and to add it to the logic list
for common bile duct exploration (CDE) procedures in MS-DRGs 411, 412,
and 413 for FY 2023.
In addition, we noted in the proposed rule that MS-DRGs 414, 415,
and 416 (Cholecystectomy Except by Laparoscope without C.D.E. with MCC,
with CC and without CC/MCC, respectively) also reflect cholecystectomy
procedures, however, the logic is specifically defined for open
cholecystectomy procedures without a common bile duct exploration
procedure performed. Since MS-DRGs 411, 412, and 413 reflect cases
where an open or laparoscopic cholecystectomy is performed with a
common bile duct exploration procedure, MS-DRGs 414, 415, and 416
reflect cases where only an open cholecystectomy is performed without a
common bile duct exploration procedure, and MS-DRGs 417, 418, and 419
reflect cases where only a laparoscopic cholecystectomy is performed
without a common bile duct exploration procedure, we stated we believe
there may be an opportunity to further refine these MS-DRGs once
additional analysis is performed for consideration in future
rulemaking. For example, we indicated we could consider proposing to
restructure these cholecystectomy MS-DRGs to reflect the following two
concepts, if supported by the data, and relatedly, to determine if
severity levels are also supported according to the existing criteria.
Open Cholecystectomy with or without C.D.E.; and
Laparoscopic Cholecystectomy with or without C.D.E.
Comment: Commenters agreed that there may be an opportunity to
further refine the MS-DRGs for cholecystectomy procedures and
encouraged CMS to conduct further review and analysis of the procedure
codes describing cholecystectomy with common bile duct exploration for
consideration in future rulemaking.
Response: We thank the commenters for their support and continue to
solicit any additional feedback from the public on this and any
alternative recommendations or options to further refine these MS-DRGs
for future consideration. As discussed in section II.D.1.b. of the
preamble of the proposed rule and this final rule, feedback and other
suggestions should be directed to the new electronic intake system,
Medicare Electronic Application Request Information SystemTM
(MEARISTM) at: https://mearis.cms.gov/public/home, with any
comments and suggestions for consideration for FY 2024 to be submitted
by October 20, 2022.
9. MDC 10 (Diseases and Disorders of the Endocrine System): Eladocagene
Exuparvovec Gene Therapy
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44895), we finalized
the redesignation of code XW0Q316 (Introduction of eladocagene
exuparvovec into cranial cavity and brain, percutaneous approach, new
technology group 6) from a Non-O.R. procedure to an O.R. procedure,
assigned to MS-DRGs 628, 629, and 630 (Other Endocrine, Nutritional and
Metabolic O.R. Procedures with MCC, with CC, and without CC/MCC,
respectively) in MDC 10 (Endocrine, Nutritional and Metabolic Diseases
and Disorders) and to MS-DRGs 987, 988, and 989 (Non-Extensive O.R.
Procedure Unrelated to Principal Diagnosis with MCC, with CC and
without MCC/CC, respectively). In the FY 2023 IPPS/LTCH PPS proposed
rule (87 FR 28167 through 28168) we discussed a request we received to
reconsider this assignment for FY 2023. According to the requestor, the
clinical characteristics and costs of cases assigned to MS-DRGs 628
through 630 are significantly different from those associated with the
administration of eladocagene exuparvovec. The requestor performed its
own analysis, using deep brain stimulation for epilepsy and selective
dorsal rhizotomy for cerebral palsy as proxies, and stated that based
on its findings for the initial cost analysis and clinical comparison,
that MS-DRG 23 (Craniotomy with Major Device Implant or Acute Complex
CNS Principal Diagnosis with MCC or Chemotherapy Implant or Epilepsy
with Neurostimulator), MS-DRG 24 (Craniotomy with Major Device Implant
or Acute Complex CNS Principal Diagnosis without MCC) and MS-DRGs 25,
26, and 27 (Craniotomy and Endovascular Intracranial Procedures with
MCC, with CC, and without CC/MCC, respectively) may be more
appropriate. However, the requestor also stated that while the clinical
aspects of eladocagene exuparvovec cases are similar to those of MS-
DRGs 23 through 27, the costs are much higher and neither MS-DRGs 628,
629, 630 or MS-DRGs 23 through 27 are appropriate. Therefore, the
requestor stated its belief
[[Page 48854]]
that assigning eladocagene exuparvovec cases to new MS-DRGs is
warranted.
Eladocagene exuparvovec is a gene therapy for the treatment of
patients with aromatic L-amino acid decarboxylase (AADC) deficiency, a
rare genetic and fatal condition identified with ICD-10-CM diagnosis
code E70.81. Patients with AADC deficiency are generally observed to
have onset of symptoms in the first year of life, most notably
hypotonia (muscle weakness), followed by movement disorders,
developmental delay and autonomic signs, such as hyperhidrosis (profuse
sweating unrelated to heat or exercise). It is understood that the
long-term implications of this disease are severe, resulting in severe
deficits and limitations in life expectancy. Because the condition is
primarily diagnosed in the pediatric population, we would not expect to
find any meaningful volume of cases in the MedPAR data.
As discussed in the proposed rule, we analyzed claims data from the
September 2021 update of the FY 2021 MedPAR file for MS-DRGs 628, 629,
and 630 for cases reporting procedure code XW0Q316 and did not find any
cases. We then extended our analysis to all MS-DRGs and found 1 case
reporting the administration of this therapy in MS-DRG 829
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with
Other Procedures with CC/MCC) with an average length of stay of 2 days
and average costs of $1,544. As we have discussed elsewhere we
generally prefer not to create a new MS-DRG unless it would include a
substantial number of cases. However, as discussed in section
II.D.19.b. of the preamble of the proposed rule and this final rule, we
are seeking public comment on possible mechanisms through which we can
address rare diseases and conditions that are represented by low
volumes in our claims data. We believe this topic, relating to the
administration of treatment to address the rare genetic and fatal
condition of AADC deficiency, is appropriately aligned with and should
be considered as part of that effort. Therefore, we stated in the
proposed rule that we are maintaining the current structure for MS-DRGs
628, 629, and 630 for FY 2023, but would continue to consider this
request in connection with our evaluation of possible mechanisms to
address rare diseases and conditions in the MS-DRG structure, as
discussed later in this rule.
Comment: Commenters agreed with our decision to maintain the
current MS-DRG assignment for cases reporting the administration of
eladocagene exuparvovec. Other commenters urged CMS to consider
appropriate MS-DRG assignment and payment for gene therapy
intracerebral infusion therapies. The commenters stated there is
anticipated rapid development and potential for these therapies to help
patients. The commenters also expressed appreciation for CMS' request
for feedback on MS-DRG assignment for rare diseases and stated that
gene therapy represents an area of significant innovation in treating
these conditions. The commenters suggested that CMS carefully consider
the MS-DRG assignment for procedures that involve an intracerebral
infusion of gene therapy or stem cell products that are currently under
development for several neurologic disorders including Parkinson's,
which is very common, and aromatic L-amino acid decarboxylase
deficiency, which is very rare. The commenters stated that
intracerebral infusion therapies are unique procedures requiring vastly
different hospital resources compared to more traditional neurosurgical
procedures. According to the commenters, appropriate MS-DRG assignment
or consideration for creating new MS-DRG categories will be essential
to assuring access to these therapies.
Response: We appreciate the commenters' support and feedback.
Comment: A couple commenters disagreed with CMS's decision to
maintain the current MS-DRG assignment for cases reporting the
administration of eladocagene exuparvovec. The commenters requested
that CMS consider creating a new MS-DRG for neurosurgical gene therapy.
A commenter indicated that because eladocagene exuparvovec has not yet
been approved by the FDA they are unable to appropriately identify
cases in the claims data. This commenter stated that there are
currently approximately 68 gene therapy trials for central nervous
system disorders, therefore, the decision to create or not create a new
MS-DRG may have broader implications.
Response: We appreciate the commenters' feedback. As discussed in
the proposed rule, our analysis of claims data, which identified only
one case reporting the administration of this therapy, did not support
a proposal to create a new MS-DRG. The MS-DRGs are a classification
system intended to group together those diagnoses and procedures with
similar clinical characteristics and utilization of resources. As
discussed previously and in prior rulemaking, we generally prefer not
to create a new MS-DRG unless it would include a substantial number of
cases, as having large clinical cohesive groups within an MS-DRG
provides greater stability for annual updates to the relative payment
weights. We acknowledge the complexities related to classifying cases
that are represented by low volumes in our claims data and believe that
further review of this issue also aligns with our intent to consider
how rare diseases or conditions may be classified under the IPPS.
After consideration of the public comments we received, we are
maintaining the current MS-DRG assignment for cases reporting the
administration of eladocagene exuparvovec for FY 2023. We will continue
to explore appropriate mechanisms to address therapies indicated for
rare diseases. We also refer the reader to section II.D.19.a of the
preamble of this final rule for a discussion of the feedback received
in response to the comment solicitation on possible mechanisms to
address rare diseases and conditions in the MS-DRG structure.
10. MDC 15 Newborns and Other Neonates With Conditions Originating in
Perinatal Period: MS-DRG 795 Normal Newborn
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28168 through
28170), we discussed a request we received to review the MS-DRG
assignment of newborn encounters with diagnosis codes describing
contact with and (suspected) exposure to COVID-19 when the condition is
ruled out after clinical evaluation and negative workup. The requestor
expressed concern that a newborn encounter coded with a principal
diagnosis code from category Z38 (Liveborn infants according to place
of birth and type of delivery), followed by codes Z05.1 (Observation
and evaluation of newborn for suspected infectious condition ruled out)
and Z20.822 (Contact with and (suspected) exposure to COVID-19) is
assigned to MS-DRG 794 (Neonate with Other Significant Problems). The
requestor stated that this assignment appears to be in error and that
the assignment should instead be to MS-DRG 795 (Normal Newborn).
In the proposed rule we stated that our analysis of this grouping
issue confirmed that, when a principal diagnosis code from category Z38
(Liveborn infants according to place of birth and type of delivery),
followed by codes Z05.1 (Observation and evaluation of newborn for
suspected infectious condition ruled out) and Z20.822 (Contact with and
(suspected) exposure to COVID-19), the case is assigned to MS-DRG 794.
[[Page 48855]]
We stated that as we examined the GROUPER logic that would
determine an assignment of cases to MS-DRG 795, we noted the ``only
secondary diagnosis'' list under MS-DRG 795 includes the following five
ICD-10-CM diagnosis codes from ICD-10-CM category Z20. We refer the
reader to the ICD-10 MS-DRG Version 39.1 Definitions Manual (which is
available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete documentation of the GROUPER
logic for the MS-DRG 795.
[GRAPHIC] [TIFF OMITTED] TR10AU22.047
As discussed in the proposed rule, in reviewing the ICD-10-CM
diagnosis code classification and the GROUPER logic list, we noted that
the 13 ICD-10-CM diagnosis codes, also from category Z20, listed in the
following table were inadvertently omitted from the ``only secondary
diagnosis'' list under MS-DRG 795.
[GRAPHIC] [TIFF OMITTED] TR10AU22.048
We reviewed section I.C.21.c.1 of the 2022 ICD-10-CM Official
Guidelines for Coding and Reporting which state ``category Z20
indicates contact with, and suspected exposure to, communicable
diseases. These codes are for patients who are suspected to have been
exposed to a disease by close personal contact with an infected
individual or are in an area where a disease is epidemic . . . Contact/
exposure codes may be used as a first-listed code to explain an
encounter for testing, or, more commonly, as a secondary code to
identify a potential risk.'' Per the Excludes1 note at category Z20,
when applicable, diagnoses of current infectious or parasitic disease
are coded instead of codes from category Z20.
We stated in the proposed rule that our clinical advisors reviewed
this issue and agreed that patients exposed to communicable diseases
that are worked up or treated prophylactically or both, and for whom
those conditions are later determined after study to not be present,
are distinct from patients with identified signs or symptoms of a
suspected problem or diagnosed with having that communicable disease.
Our clinical advisors supported adding the 13 diagnosis codes listed
previously to the logic of MS-DRG 795 for clinical consistency with the
five other diagnosis codes describing contact with, and suspected
exposure to, communicable diseases currently assigned to the ``only
secondary diagnosis'' list under MS-DRG 795.
After review of the coding guidelines and conventions, and
discussion with our clinical advisors, we stated that we agreed with
the requestor that in these circumstances, these encounters should not
map to MS-DRG 794 (Neonate with Other Significant Problems) and should
instead be assigned to MS-DRG 795 (Normal Newborn). Therefore, we
proposed to add the 13 diagnosis codes listed previously that describe
contact with and (suspected) exposure to communicable diseases to the
``only secondary diagnosis'' list under MS-DRG 795 (Normal Newborn).
Under this proposal, cases with a principal diagnosis described by an
ICD-10-CM code from category Z38 (Liveborn infants according to place
of birth and type of delivery), following by codes Z05.1 (Observation
and evaluation of newborn for suspected infectious condition ruled out)
and Z20.822 (Contact with and (suspected) exposure to COVID-19) will be
assigned to MS-DRG 795.
Comment: Commenters expressed support for CMS' proposal to add the
13 diagnosis codes listed previously that describe contact with and
(suspected) exposure to communicable diseases to the ``only secondary
diagnosis'' list under MS-DRG 795 (Normal Newborn).
Response: We appreciate the commenters' support.
[[Page 48856]]
Comment: A few commenters opposed CMS's proposal and stated that
newborns exposed to communicable diseases often require care and
treatment well above that of a normal newborn in terms of requiring
increased evaluation, monitoring, testing, and prophylactic treatment.
Some commenters stated that these newborns are not ``normal newborns''
due to the specific exposures they have had. These commenters listed a
number of communicable diseases as examples and indicated the specific
interventions such as evaluations, screenings, assessments, extra
monitoring, laboratory studies, prophylactic treatments and sometimes
isolation that can be required to prevent disease or complications when
contact or (suspected) exposure occurs. Another commenter noted that
there is a substantial difference in the FY 2023 proposed relative
weights between MS-DRG 795 and MSDRG 794 and stated that ``exposure
only'' cases fall in between the two MS-DRGs in terms of resource
utilization. This commenter stated that a review of the cases at their
facility shows that cases assigned to MS-DRG 794 with only a diagnosis
code describing contact with and (suspected) exposure to communicable
diseases driving the MS-DRG assignment had longer lengths of stay and
higher charges than cases assigned to MS-DRG 795, while having shorter
lengths of stay and lower charges than other cases assigned to MS-DRG
794 with diagnoses describing conditions other than contact with and
(suspected) exposure driving the MS-DRG assignment. This commenter also
stated that they believed that the five ICD-10-CM diagnosis codes from
ICD-10-CM category Z20 currently listed in the ``only secondary
diagnosis'' list under MS-DRG 795 are currently inappropriately
included and requested that either the 13 codes for contact with and
(suspected) exposure remain assigned to MS-DRG 794 and the five codes
currently in MS-DRG 795 be reassigned to MS-DRG 794 or a new MS-DRG be
created that would include newborns that fall into the ``exposure
only'' category, with a relative weight that falls somewhere between
the relative weights of MS-DRG 794 and 795 to accurately capture
resource utilization.
Response: We thank the commenters for their feedback. Our clinical
advisors reviewed the commenters' concerns. While our clinical advisors
agree that patients exposed to communicable diseases can require workup
or prophylactic treatment, they continue to state these patients are
distinct from patients with identified signs or symptoms of a suspected
problem or diagnosed with having that communicable disease. Our
clinical advisors noted that the subset of newborns with a principal or
secondary diagnosis listed in the logic list for MS-DRG 794 (Neonate
with Other Significant Problems) are clinically distinct and often
represent a more severe set of patients. Accordingly, our clinical
advisors continue to believe that the five other diagnosis codes
describing contact with, and suspected exposure to, communicable
diseases are appropriately assigned to the ``only secondary diagnosis''
list under MS-DRG 795, and also continue to support adding the 13
diagnosis codes listed previously to the logic of MS-DRG 795 for
clinical consistency. We appreciate the commenters' feedback suggesting
further review of the newborn MS-DRGs and agree that these groupings
warrant special consideration. As discussed in prior rulemaking, we
generally do not adopt the same approach to refine the maternity and
newborn MS-DRGs because of the extremely low volume of Medicare
patients there are in these DRGs.
After consideration of the public comments we received, and for the
reasons discussed, we are finalizing our proposal to add the 13
diagnosis codes listed previously that describe contact with and
(suspected) exposure to communicable diseases to the ``only secondary
diagnosis'' list under MS-DRG 795 (Normal Newborn), without
modification, for FY 2023.
In addition, as discussed in the proposed rule, as we examined the
GROUPER logic that would determine an assignment of cases to MS-DRGs in
MDC 15, we noted the logic for MS-DRG 790 (Extreme Immaturity or
Respiratory Distress Syndrome Neonate) includes ICD-10-CM diagnosis
codes that describe extremely low birth weight newborn, extreme
immaturity of newborn and respiratory distress syndrome of newborn. We
referred the reader to the ICD-10 MS-DRG Version 39.1 Definitions
Manual (which is available via the internet on the CMS website at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software) for complete
documentation of the GROUPER logic for MS-DRG 790. We stated that
during our review of the diagnosis codes assigned to these MS-DRGs, we
identified three diagnosis codes that do not exist in the logic for MS-
DRG 790. The three diagnosis codes and their current MS-DRG assignments
are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.049
We stated our clinical advisors reviewed this grouping issue and
noted that while virtually every neonate under 1000 grams, which is the
definition of extremely low birth weight (ELBW), will have a weight
documented somewhere in the medical record, in the rare instance that
it is not, if the diagnosis documented by the provider is ``ELBW'' the
neonate would be in a higher risk category. Our clinical advisors also
noted that whereas weight is measured with high precision, gestational
age is more complicated. With the exception of in vitro fertilization,
gestational age is an estimate. Our clinical advisors stated similar to
documentation of ``ELBW'', if the diagnosis documented by the provider
is ``extreme immaturity of newborn'' the neonate would be in a higher
risk category. These diagnoses
[[Page 48857]]
describe conditions that require advanced care and resources similar to
other conditions already assigned to the logic of MS-DRG 790 even in
cases where the birth weight, or weeks of gestation, are unspecified.
For clinical consistency, our clinical advisors supported the
addition of these three diagnosis codes to the GROUPER logic list for
MS-DRG 790. Therefore, we proposed to reassign ICD-10-CM diagnosis
codes P07.00, P07.20 and P07.26 to MS-DRG 790, effective October 1,
2022 for FY 2023.
Comment: Commenters expressed support for CMS' proposal to reassign
ICD-10-CM diagnosis codes P07.00, P07.20 and P07.26 to MS-DRG 790.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to reassign ICD-10-CM diagnosis codes P07.00,
P07.20 and P07.26 to MS-DRG 790, without modification, effective
October 1, 2022 for FY 2023.
11. Review of Procedure Codes in MS-DRGs 981 Through 983 and 987
Through 989
We annually conduct a review of procedures producing assignment to
MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to
Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively) or MS-DRGs 987 through 989 (Non-Extensive O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively) on the basis of volume, by procedure, to see if it would
be appropriate to move cases reporting these procedure codes out of
these MS-DRGs into one of the surgical MS-DRGs for the MDC into which
the principal diagnosis falls. The data are arrayed in two ways for
comparison purposes. We look at a frequency count of each major
operative procedure code. We also compare procedures across MDCs by
volume of procedure codes within each MDC. We use this information to
determine which procedure codes and diagnosis codes to examine. We
identify those procedures occurring in conjunction with certain
principal diagnoses with sufficient frequency to justify adding them to
one of the surgical MS-DRGs for the MDC in which the diagnosis falls.
We also consider whether it would be more appropriate to move the
principal diagnosis codes into the MDC to which the procedure is
currently assigned.
In addition to this internal review, we also consider requests that
we receive to examine cases found to group to MS-DRGs 981 through 983
or MS-DRGs 987 through 989 to determine if it would be appropriate to
add procedure codes to one of the surgical MS-DRGs for the MDC into
which the principal diagnosis falls or to move the principal diagnosis
to the surgical MS-DRGs to which the procedure codes are assigned.
Based on the results of our review of the claims data from the
September 2021 update of the FY 2021 MedPAR file, as well as our review
of the requests that we received to examine cases found to group to MS-
DRGs 981 through 983 or MS-DRGs 987 through 989, we proposed to move
the cases reporting the procedures and/or principal diagnosis codes
described in this section of this rule from MS-DRGs 981 through 983 or
MS-DRGs 987 through 989 into one of the surgical MS-DRGs for the MDC
into which the principal diagnosis or procedure is assigned.
a. Embolization of Portal and Hepatic Veins
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28170), we received a request to reassign cases with a principal
diagnosis from MDC 07 (Diseases and Disorders of the Hepatobiliary
System and Pancreas) when reported with procedures involving the
embolization of a hepatic or portal vein from MS-DRGs 981, 982 and 983
(Extensive O.R. Procedures Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively) to MS-DRGs 423, 424, and 425
(Other Hepatobiliary or Pancreas Procedures with MCC, with CC, and
without CC/MCC, respectively) in MDC 07.
We noted that in ICD-10-PCS, the root operation selected to code
embolization procedures is dependent on the objective of the procedure.
If the objective of an embolization procedure is to completely close a
vessel, the root operation Occlusion is coded. ICD-10-PCS procedure
codes 06L43DZ (Occlusion of hepatic vein with intraluminal device,
percutaneous approach) or 06L83DZ (Occlusion of portal vein with
intraluminal device, percutaneous approach) may be reported to describe
embolization procedures to completely close off a hepatic or portal
vein with an intraluminal device. If the objective of an embolization
procedure is to narrow the lumen of a vessel, the root operation
Restriction is coded. ICD-10-PCS procedure codes 06V43DZ (Restriction
of hepatic vein with intraluminal device, percutaneous approach) or
06V83DZ (Restriction of portal vein with intraluminal device,
percutaneous approach) may be reported to describe embolization
procedures to narrow or partially occlude a hepatic or portal vein with
an intraluminal device.
These four ICD-10-PCS procedure codes, as well as their MDC
assignments, are listed in the table:
[GRAPHIC] [TIFF OMITTED] TR10AU22.050
We stated in the proposed rule that our analysis of this grouping
issue confirmed that when a procedure code describing the percutaneous
occlusion or restriction of the hepatic or portal vein with
intraluminal device is reported with a principal diagnosis from MDC 07,
these cases group to MS-DRGs 981, 982, and 983 (Extensive O.R.
Procedure Unrelated to Principal Diagnosis with MCC, with CC, and
without CC/MCC, respectively). Whenever there is a surgical procedure
reported on the claim that is unrelated to the MDC to which the case
was assigned based on the principal diagnosis, it results in an MS-DRG
assignment to a surgical class referred to as ``unrelated operating
room procedures''.
As noted in the proposed rule, to understand the resource use for
the subset of cases reporting procedure codes 06L43DZ, 06L83DZ, 06V43DZ
or 06V83DZ with a principal diagnosis from MDC 07 that are currently
grouping to MS-DRGs 981, 982, and
[[Page 48858]]
983, we examined claims data from the September 2021 update of the FY
2021 MedPAR file for the average length of stay and average costs for
these cases. Our findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TR10AU22.051
We also examined the data for cases in MS-DRGs 423, 424, and 425,
and our findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TR10AU22.052
As noted in the proposed rule, while the claims analysis based on
the September 2021 update of the FY 2021 MedPAR file identified only 34
cases for which these procedures were reported with a principal
diagnosis from MDC 07 resulting in assignment to MS-DRGs 981 through
983, and the average length of stay and average costs for these cases
vary in comparison to the average length of stay and average costs of
all cases in MS-DRGs 423, 424, and 425, given the clinical indications
for hepatic or portal vein embolization procedures, such as to induce
regrowth on one side of the liver in advance of a planned hepatic
resection on the other side, we stated we believed it was clinically
appropriate to add these procedure codes describing the percutaneous
occlusion or restriction of the hepatic or portal vein with
intraluminal device to MS-DRGs 423, 424, and 425 in MDC 07. Our
clinical advisors stated that these procedures are clearly related to
the principal diagnoses as they are procedures performed for
hepatobiliary diagnoses, namely hepatocellular carcinoma and liver
metastases, so it is clinically appropriate for the procedures to group
to the same MDC as the principal diagnoses. Our clinical advisors also
stated the procedures describing the percutaneous occlusion or
restriction of the hepatic or portal vein with intraluminal device are
consistent with the existing procedure codes included in the logic for
case assignment to MS-DRGs 423, 424, and 425.
Therefore, we proposed to add ICD-10-PCS procedure codes 06L43DZ,
06L83DZ, 06V43DZ and 06V83DZ to MDC 07 in MS-DRGs 423, 424 and 425.
Under this proposal, cases reporting procedure codes 06L43DZ, 06L83DZ,
06V43DZ or 06V83DZ in conjunction with a principal diagnosis code from
MDC 07 would group to MS-DRGs 423, 424 and 425.
Comment: Commenters expressed support for CMS' proposal to add ICD-
10-PCS procedure codes 06L43DZ, 06L83DZ, 06V43DZ and 06V83DZ to MDC 07
in MS-DRGs 423, 424 and 425. A commenter stated that this proposal is
in line with resources utilized in performing the procedures and also
helps organizations better manage their Program for Evaluating Payment
Patterns Electronic Report (PEPPER) data related to DRG 981 and 982.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add ICD-10-PCS procedure codes 06L43DZ,
06L83DZ, 06V43DZ and 06V83DZ to MDC 07 in MS-DRGs 423, 424 and 425,
without modification, effective October 1, 2022 for FY 2023.
b. Percutaneous Excision of Hip Muscle
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28171), we received a request to examine cases reporting a procedure
describing
[[Page 48859]]
percutaneous biopsies of muscle. The requestor stated that when
procedures describing the percutaneous excision of the left hip muscle
for diagnostic purposes are reported with a principal diagnosis from
MDC 06 (Diseases and Disorders of the Digestive System) such as K68.12
(Psoas muscle abscess), the cases are assigned to MS-DRGs 981, 982, and
983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis with
MCC, with CC, and without CC/MCC, respectively). However, when
procedures describing the percutaneous excision of the retroperitoneum
for diagnostic purposes are reported with the same principal diagnosis
of psoas muscle abscess, the cases are assigned to medical MS-DRGs 371,
372, and 373 (Major Gastrointestinal Disorders and Peritoneal
Infections with MCC, with CC, and without CC/MCC, respectively). The
requestor stated the cases at their facility with a principal diagnosis
of psoas muscle abscess when reported with a procedure describing a
biopsy of the left muscle had an average length of stay comparable to
other cases assigned to MS-DRGs 371, 372, and 373. The requestor
provided ICD-10-PCS procedure code 0KBP3ZX (Excision of left hip
muscle, percutaneous approach, diagnostic) in its request and
recommended that CMS evaluate the assignment of procedure code 0KBP3ZX
because procedures describing the percutaneous excision of the left hip
muscle for diagnostic purposes appear to be related to a diagnosis of
psoas muscle abscess.
We stated in the proposed rule that in order to analyze this
request, we first identified the similar ICD-10-PCS procedure codes
that also describe the excision of hip muscle. We noted that under the
ICD-10-PCS procedure classification, biopsy procedures are identified
by the 7th digit qualifier value ``diagnostic'' in the code
description. The four ICD-10-PCS procedure codes that describe the
excision of hip muscle, as well as their MDC assignments, are listed in
the table:
[GRAPHIC] [TIFF OMITTED] TR10AU22.053
We stated in the proposed rule that our analysis of this grouping
issue confirmed that when procedure codes 0KBN3ZX, 0KBN3ZZ, 0KBP3ZX or
0KBP3ZZ are reported with a principal diagnosis from MDC 06, such as
K68.12, these cases group to MS-DRGs 981, 982, and 983. As noted in the
previous discussion, whenever there is a surgical procedure reported on
the claim that is unrelated to the MDC to which the case was assigned
based on the principal diagnosis, it results in a MS-DRG assignment to
a surgical class referred to as ``unrelated operating room
procedures''.
As noted in the proposed rule, we examined the claims data from the
September 2021 update of the FY 2021 MedPAR file to identify cases
reporting procedure codes 0KBN3ZX, 0KBN3ZZ, 0KBP3ZX, or 0KBP3ZZ with a
principal diagnosis of K68.12 (Psoas muscle abscess) that are currently
grouping to MS-DRGs 981, 982, and 983. Our findings are shown in this
table:
[GRAPHIC] [TIFF OMITTED] TR10AU22.054
As shown, in our analyses of the claims data for MS-DRGs 981
through 983, we found a total of seven cases reporting procedures
describing excision of hip muscle with a principal diagnosis of K68.12
in the September 2021 update of the FY 2021 MedPAR file.
We stated in the proposed rule that to further evaluate this issue,
we examined claims data from the September 2021 update of the FY 2021
MedPAR file for cases reporting any one of the four procedure codes
(0KBN3ZX, 0KBN3ZZ, 0KBP3ZX, or 0KBP3ZZ) in MS-DRGs
[[Page 48860]]
981 through 983 with a principal diagnosis from MDC 06. Our findings
are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.055
As shown, in our analyses of the claims data for MS-DRGs 981
through 983, we found a total of 14 cases reporting procedures
describing excision of hip muscle with a principal diagnosis from MDC
06 in the September 2021 update of the FY 2021 MedPAR file.
We also stated in the proposed rule that we examined the data for
cases in MS-DRGs 371, 372, and 373, and our findings are shown in the
following table:
[GRAPHIC] [TIFF OMITTED] TR10AU22.056
As discussed in the proposed rule, we reviewed these procedures and
our clinical advisors stated that procedures that describe the
percutaneous excision of hip muscle are not surgical in nature and
would not be the main reason for inpatient hospitalization or be
considered the principal driver of resource expenditure. Our clinical
advisors stated although a correlation cannot usually be made between
procedures performed in general anatomic regions, such as the
retroperitoneum, and procedures performed in specific body parts, such
as muscle, because procedures coded with general anatomic region body
parts represent a broader range of procedures that cannot be coded to a
specific body part, they agreed that in this instance procedures that
describe the percutaneous excision of hip muscle should have the same
designation as the ICD-10-PCS procedure codes that describe the
percutaneous excision of the retroperitoneum that are currently
designated as non-O.R. procedures.
We stated that our clinical advisors reviewed this analysis and
believed that, for clinical coherence and consistency, it would be
appropriate to designate ICD-10-PCS codes 0KBN3ZX, 0KBN3ZZ, 0KBP3ZX,
and 0KBP3ZZ as non-O.R. procedures.
Therefore, we proposed to remove codes 0KBN3ZX, 0KBN3ZZ, 0KBP3ZX,
and 0KBP3ZZ from the FY 2023 ICD-10 MS-DRGs Version 40 Definitions
Manual in Appendix E--Operating Room Procedures and Procedure Code/MS-
DRG Index as O.R. procedures. Under this proposal, these procedures
would no longer impact MS-DRG assignment. Cases reporting procedure
codes 0KBN3ZX, 0KBN3ZZ, 0KBP3ZX, and 0KBP3ZZ in conjunction with a
principal diagnosis code from MDC 06 would group to MS-DRGs 371, 372,
and 373.
Comment: Some commenters expressed support for CMS' proposal to
remove codes 0KBN3ZX, 0KBN3ZZ, 0KBP3ZX, and 0KBP3ZZ from the FY 2023
ICD-10 MS-DRGs Version 40 Definitions Manual in Appendix E--Operating
Room Procedures and Procedure Code/MS-DRG Index as O.R. procedures.
Response: We appreciate the commenters' support.
Comment: A commenter opposed CMS' proposal to designate ICD-10-PCS
codes 0KBN3ZX, 0KBN3ZZ, 0KBP3ZX, and 0KBP3ZZ as non-O.R. procedures and
stated that they did not believe this proposal was warranted based on
the work involved in performing the procedures.
Response: We thank the commenter for their feedback. Our clinical
advisors reviewed the commenter's concerns and continue to support a
non-O.R. designation for procedure codes 0KBN3ZX, 0KBN3ZZ, 0KBP3ZX, and
[[Page 48861]]
0KBP3ZZ that describe the percutaneous excision of hip muscle. Our
clinical advisors continue to state that procedure codes that describe
the percutaneous excision of hip muscle are not surgical in nature and
these procedures should have the same designation as the ICD-10-PCS
procedure codes that describe the percutaneous excision of the
retroperitoneum that are currently designated as non-O.R. procedures.
After consideration of the public comments we received, for the
reasons stated, we are finalizing our proposal to remove codes 0KBN3ZX,
0KBN3ZZ, 0KBP3ZX, and 0KBP3ZZ from the FY 2023 ICD-10 MS-DRGs Version
40 Definitions Manual in Appendix E--Operating Room Procedures and
Procedure Code/MS-DRG Index as O.R. procedures, without modification,
effective October 1, 2022 for FY 2023. Under this final policy, these
procedures will no longer impact MS-DRG assignment.
In addition, as discussed in the proposed rule, we also conduct an
internal review and consider requests that we receive to examine cases
found to group to MS-DRGs 981 through 983 or MS-DRGs 987 through 989 to
determine if it would be appropriate for the cases to be reassigned
from one of the MS-DRG groups to the other. In the proposed rule, we
stated that based on the results of our review of the claims data from
the September 2021 update of the FY 2021 MedPAR file we did not
identify any cases for reassignment. We also stated we did not receive
any requests suggesting reassignment. Therefore, for FY 2023 we did not
propose to move any cases reporting procedure codes from MS-DRGs 981
through 983 to MS-DRGs 987 through 989 or vice versa.
Comment: Commenters expressed support for CMS' decision to not
propose to move any cases reporting procedure codes from MS-DRGs 981
through 983 to MS-DRGs 987 through 989 or vice versa.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing the structure of MS-DRGs 981 through 983 and MS-DRGs 987
through 989 for FY 2023 without modification.
12. Operating Room (O.R.) and Non-O.R. Issues
a. Background
Under the IPPS MS-DRGs (and former CMS MS-DRGs), we have a list of
procedure codes that are considered operating room (O.R.) procedures.
Historically, we developed this list using physician panels that
classified each procedure code based on the procedure and its effect on
consumption of hospital resources. For example, generally the presence
of a surgical procedure which required the use of the operating room
would be expected to have a significant effect on the type of hospital
resources (for example, operating room, recovery room, and anesthesia)
used by a patient, and therefore, these patients were considered
surgical. Because the claims data generally available do not precisely
indicate whether a patient was taken to the operating room, surgical
patients were identified based on the procedures that were performed.
Generally, if the procedure was not expected to require the use of the
operating room, the patient would be considered medical (non-O.R.).
Currently, each ICD-10-PCS procedure code has designations that
determine whether and in what way the presence of that procedure on a
claim impacts the MS-DRG assignment. First, each ICD-10-PCS procedure
code is either designated as an O.R. procedure for purposes of MS- DRG
assignment (``O.R. procedures'') or is not designated as an O.R.
procedure for purposes of MS-DRG assignment (``non-O.R. procedures'').
Second, for each procedure that is designated as an O.R. procedure,
that O.R. procedure is further classified as either extensive or non-
extensive. Third, for each procedure that is designated as a non-O.R.
procedure, that non-O.R. procedure is further classified as either
affecting the MS-DRG assignment or not affecting the MS-DRG assignment.
We refer to these designations that do affect MS-DRG assignment as
``non O.R. affecting the MS-DRG.'' For new procedure codes that have
been finalized through the ICD-10 Coordination and Maintenance
Committee meeting process and are proposed to be classified as O.R.
procedures or non-O.R. procedures affecting the MS-DRG, our clinical
advisors recommend the MS-DRG assignment which is then made available
in association with the proposed rule (Table 6B.--New Procedure Codes)
and subject to public comment. These proposed assignments are generally
based on the assignment of predecessor codes or the assignment of
similar codes. For example, we generally examine the MS-DRG assignment
for similar procedures, such as the other approaches for that
procedure, to determine the most appropriate MS-DRG assignment for
procedures proposed to be newly designated as O.R. procedures. As
discussed in section II.D.14 of the preamble of this final rule, we are
making Table 6B.--New Procedure Codes--FY 2023 available on the CMS
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. We also refer readers to the ICD-
10 MS-DRG Version 39.1 Definitions Manual at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for detailed information regarding
the designation of procedures as O.R. or non-O.R. (affecting the MS-
DRG) in Appendix E--Operating Room Procedures and Procedure Code/MS-DRG
Index.
In the FY 2020 IPPS/LTCH PPS proposed rule, we stated that, given
the long period of time that has elapsed since the original O.R.
(extensive and non-extensive) and non-O.R. designations were
established, the incremental changes that have occurred to these O.R.
and non-O.R. procedure code lists, and changes in the way inpatient
care is delivered, we plan to conduct a comprehensive, systematic
review of the ICD-10-PCS procedure codes. This will be a multi year
project during which we will also review the process for determining
when a procedure is considered an operating room procedure. For
example, we may restructure the current O.R. and non O.R.-designations
for procedures by leveraging the detail that is now available in the
ICD-10 claims data. We refer readers to the discussion regarding the
designation of procedure codes in the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38066) where we stated that the determination of when a
procedure code should be designated as an O.R. procedure has become a
much more complex task. This is, in part, due to the number of various
approaches available in the ICD-10-PCS classification, as well as
changes in medical practice. While we have typically evaluated
procedures on the basis of whether or not they would be performed in an
operating room, we believe that there may be other factors to consider
with regard to resource utilization, particularly with the
implementation of ICD-10.
We discussed in the FY 2020 IPPS/LTCH PPS proposed rule that as a
result of this planned review and potential restructuring, procedures
that are currently designated as O.R. procedures may no longer warrant
that designation, and conversely, procedures that are currently
designated as non-O.R.
[[Page 48862]]
procedures may warrant an O.R. type of designation. We intend to
consider the resources used and how a procedure should affect the MS-
DRG assignment. We may also consider the effect of specific surgical
approaches to evaluate whether to subdivide specific MS DRGs based on a
specific surgical approach. We plan to utilize our available MedPAR
claims data as a basis for this review and the input of our clinical
advisors. As part of this comprehensive review of the procedure codes,
we also intend to evaluate the MS-DRG assignment of the procedures and
the current surgical hierarchy because both of these factor into the
process of refining the ICD-10 MS-DRGs to better recognize complexity
of service and resource utilization.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58540 through
58541), we provided a summary of the comments we had received in
response to our request for feedback on what factors or criteria to
consider in determining whether a procedure is designated as an O.R.
procedure in the ICD-10-PCS classification system for future
consideration.
We stated in the proposed rule that in consideration of the ongoing
PHE, we continue to believe it may be appropriate to allow additional
time for the claims data to stabilize prior to selecting the timeframe
to analyze for this review. Additional time is also necessary as we
continue to develop our process and methodology. Therefore, we stated
that we will provide more detail on this analysis and the methodology
for conducting this review in future rulemaking.
Comment: Commenters supported CMS' plan to continue to conduct the
comprehensive, systematic review of the ICD-10-PCS codes that includes
a process for determining when a procedure is designated as O.R. or
non-O.R. These commenters expressed support of CMS' decision to allow
additional time for the claims data to stabilize prior to selecting the
timeframe to analyze for this review in consideration of the ongoing
PHE. A commenter stated they appreciate that CMS is taking the
appropriate time before deciding whether and how to restructure the
current O.R. and non-O.R. designations. Another commenter acknowledged
that O.R. and non-O.R. designation determinations are a substantial
undertaking that may significantly restructure many MS-DRGs.
Response: We thank the commenters for their support and appreciate
their acknowledgement of the magnitude of this effort.
Comment: Other commenters stated that designation of O.R. versus
non-O.R. may no longer be the most critical differentiator between
resource-intensive procedures for MS-DRG purposes. These commenters
noted that medical practice is changing and presently, there are
increasingly complex and resource-intensive procedures performed by
hospitals that do not involve the use of an operating room. A commenter
stated that because of technological advances, sophisticated resource-
intensive procedures are no longer confined to the operating room
setting.
Other commenters highlighted stem cell transplants (SCT), Chimeric
Antigen Receptor (CAR) T-cell therapy, and other novel cell and gene
therapies as examples of therapeutic interventions that have similar or
greater resource utilization and complexity than some O.R. designated
procedures, while not being currently designated as O.R. procedures
themselves. Another commenter noted that some procedures performed in
interventional radiology suites and cardiac catheterization labs can
utilize more advanced equipment and supplies than procedures performed
in a traditional operating room with minimally installed equipment. As
part of the broader and continuing conversation about future MS-DRG
assignments and designations for these procedures and therapies, these
commenters encouraged CMS to consider how other factors influence
resource utilization, and recommended CMS consider questions such as
whether:
certain types of interventions, such as the administration
of certain complex drugs/biologics or therapies (for example, radiation
therapy), that demonstrate higher costs and resource utilization,
warrant consideration of a designation as an O.R. procedure or another
equivalent designation?
certain types of procedures and therapies make up a
substantial percentage of the costs within a particular MS-DRG?
there is an average amount of cost within the relative
weight of a MS-DRG that represents significant resource utilization and
complexity?
complex infusion-type administration of novel and
potentially curative cell and gene therapies should be considered for
new category of MS-DRGs, to be added to the current categories of Pre-
MDC MS-DRGs, Surgical MS-DRGs and Medical MS-DRGs?
Response: CMS appreciates the commenters' feedback and
recommendations as to factors to consider in evaluating O.R.
designations. As stated previously, we have typically evaluated
procedures on the basis of whether or not they would be performed in an
operating room. We agree with commenters and believe that there may be
other factors to consider with regard to resource utilization,
particularly with the implementation of ICD-10. As discussed in the
proposed rule, we are exploring alternatives on how we may restructure
the current O.R. and non-O.R. designations for procedures by leveraging
the detail that is available in the ICD-10 claims data. We continue to
develop our process and methodology, and will provide more detail in
future rulemaking.
Comment: Several commenters suggested that CMS work closely with
physician specialty societies and interested parties to identify the
most important drivers of complexity and resource use in the hospital
setting. Other commenters suggested CMS engage the broader community by
convening town halls or listening sessions. A few commenters suggested
that CMS allow sufficient time for provider review and stated that
thorough data analysis with provider input is critical to allow for
appropriate insight in provider comments. A commenter recommended that
CMS be transparent in its methodology, identify criteria or metrics
used to determine what does and does not constitute significant
resource utilization and complexity across MS-DRGs, and be receptive to
public opinion. Another commenter stated that they look forward to CMS
providing more detail on this analysis and expressed that they would
appreciate advanced notice for comment in future rulemaking regarding
the proposed methodology for conducting this review.
Response: CMS appreciates this feedback. We note that CMS has
already convened an internal workgroup comprised of clinicians, coding
specialists and other policy analysts, and we look forward to further
feedback from the public. Recognizing sufficient time is needed to
provide feedback on what factors or criteria to consider in determining
whether a procedure should be designated as an O.R. procedure in the
ICD-10-PCS classification system, we have provided opportunity for the
public to provide feedback beginning with the FY 2018 final rule and we
continue to solicit input. We encourage the public to submit comments
on other factors to consider in our refinement efforts to recognize and
differentiate consumption of resources for the ICD-10 MS-DRGs timely
for consideration. We will also
[[Page 48863]]
explore additional means of eliciting feedback, and will notify the
public of any such other opportunities for communication and comment in
the future. Once we are in a position to provide more detail on this
analysis and the methodology for conducting this comprehensive review,
we will do so in future rulemaking.
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28174 through 28175), we received the following requests regarding
changing the designation of specific ICD-10-PCS procedure codes from
non-O.R. to O.R. procedures. In this section of this rule, as we did in
the proposed rule, we summarize these requests and address why we are
not considering a change to the designation of these codes at this time
and, further, respond to the public comments we received regarding
these requests.
We received a request to change the designation of all ICD-10-PCS
procedure codes that describe diagnostic and therapeutic percutaneous
endoscopic procedures performed on thoracic and abdominal organs, from
non-O.R. to O.R. According to the requestor, thoracoscopic and
laparoscopic procedures are always performed in the operating room
under general anesthesia. In the proposed rule, we stated we believed
additional time was needed to fully examine the numerous ICD-10-PCS
codes in the classification that describe diagnostic and therapeutic
percutaneous endoscopic procedures performed on thoracic and abdominal
organs as there are over 19,000 ICD-10-PCS codes in the classification
that describe procedures performed using a percutaneous endoscopic
approach. As we have signaled in prior rulemaking, the designation of
an O.R. procedure encompasses more than the physical location of the
hospital in which the procedure may be performed. We also examine if,
and in what way, the performance of the procedure affects the resource
expenditure in those admissions in the inpatient setting, in addition
to examining other clinical factors such as procedure complexity, and
need for anesthesia administration as well as other types of sedation.
We stated we will continue to evaluate the ICD-10-PCS procedure codes
that describe diagnostic and therapeutic percutaneous endoscopic
procedures performed on thoracic and abdominal organs as we conduct a
comprehensive, systematic review of the ICD-10-PCS procedure codes.
Comment: A commenter stated that they agreed with the request to
change the designation of all lCD-10-PCS procedure codes that describe
diagnostic and therapeutic percutaneous endoscopic procedures performed
on thoracic and abdominal organs from non-O.R. to O.R. and stated that
these procedures would likely occur in an operating room under general
anesthesia. Another commenter stated that while they did not dispute
that there may be over 19,000 ICD-10-PCS codes that describe procedures
performed using a percutaneous endoscopic approach, they believed that
this list could be whittled down substantially by considering only
codes describing procedures performed on thoracic and abdominal organs.
This commenter stated that even with a smaller list utilizing the
criteria they suggested, they could not think of a thoracoscopic or
laparoscopic procedure that would not require general anesthesia and be
performed in an operating room and urged CMS to designate all ICD-10-
PCS procedure codes that describe diagnostic and therapeutic
percutaneous endoscopic procedures performed on thoracic and abdominal
organs as operating room procedures.
Response: We appreciate the commenters' feedback. We also
appreciate the commenter's suggestion, however, as stated in the
proposed rule, and in prior rulemaking, we plan to conduct a
comprehensive, systematic review of the ICD-10-PCS procedure codes. Our
clinical advisors recommended that rather than evaluating the procedure
codes describing diagnostic and therapeutic percutaneous endoscopic
procedures performed on thoracic and abdominal organs in isolation,
analysis should be performed for this subset of procedure codes across
the MS-DRGs, as part of the comprehensive procedure code review. As a
component of our broader comprehensive procedure code review, we are
also reviewing the process for determining when a procedure is
considered an operating room procedure. For example, we may restructure
the current O.R. and non-O.R. designations for procedures by leveraging
the detail that is available in the ICD-10 claims data. Therefore,
after consideration of the public comments we received, and for the
reasons discussed, we are not making changes in this final rule to the
designation of all ICD-10-PCS procedure codes that describe diagnostic
and therapeutic percutaneous endoscopic procedures performed on
thoracic and abdominal organs, from non-O.R. to O.R. We will provide
more detail on the comprehensive procedure code review and the
methodology for conducting this review in future rulemaking.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44892 through 44895)
CMS finalized the proposal to remove the 22 codes that describe the
open drainage of subcutaneous tissue and fascia listed in the following
table from the ICD-10 MS-DRGs Version 39.1 Definitions Manual in
Appendix E--Operating Room Procedures and Procedure Code/MS-DRG Index
as O.R. procedures. Under this finalization, these procedures no longer
impact MS-DRG assignment.
[[Page 48864]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.057
In the FY 2022 final rule we noted that the designation of the 22
procedure codes that describe the open drainage of subcutaneous tissue
and fascia as O.R. procedures was a result of a replication error in
transitioning to ICD-10. This replication error led to ICD-10-PCS
procedure codes that describe the open drainage of subcutaneous tissue
and fascia being listed as comparable translations for ICD-9-CM code
83.09 (Other incision of soft tissue), which was designated as a non-
extensive O.R. procedure under the ICD-9-CM MS-DRGs Version 32, as
opposed to being listed as comparable translations for ICD-9-CM code
86.04 (Other incision with drainage of skin and subcutaneous tissue)
which was designated as a non-O.R. procedure under the ICD-9-CM MS-DRGs
Version 32. We stated in the FY 2022 final rule that designating the 22
procedure codes that describe the open drainage of subcutaneous tissue
and fascia as non-O.R. procedures would result in a more accurate
replication of the comparable procedure, under the ICD-9-CM MS-DRGs
Version 32 which was 86.04, not 83.09 and is more aligned with current
shifts in treatment practices.
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule, we
received a request to re-examine this change in designation. According
to the requestor, open procedures for the drainage of subcutaneous
tissue and fascia are indeed typically performed in the operating room
under general anesthesia and involve making incisions through the
subcutaneous tissue into fascia for therapeutic drainage, breaking up
of loculations, and irrigation. We stated that while our clinical
advisors did not disagree with the requestor that these procedures can
involve making incisions through the subcutaneous tissue into fascia,
they continued to state procedures describing the open drainage of
subcutaneous tissue and fascia can now be safely performed in the
outpatient setting and when performed during a hospitalization, they
are typically performed in conjunction with another O.R. procedure. For
the reasons discussed in the FY 2022 final rule, our clinical advisors
stated that the non-O.R. designation of the 22 procedure codes that
describe the open drainage of subcutaneous tissue and fascia as
finalized in the FY 2022 final rule better reflects the associated
technical complexity and hospital resource use of these procedures.
Comment: Some commenters opposed the non-O.R. designation of the 22
procedure codes that describe the open drainage of subcutaneous tissue
and fascia as finalized in the FY 2022 final rule and urged that these
codes be designated as O.R. procedures for FY 2023. These commenters
stated that procedure codes that describe the open drainage of
subcutaneous tissue and fascia are indeed performed in the operating
room under general anesthesia, are surgical in nature, and an O.R.
designation would more accurately capture the utilization of resources.
A commenter stated that a review of the cases at their facility shows
that approximately 80% of the procedures describing open drainage of
subcutaneous tissue and fascia are performed in an O.R. setting
requiring anesthesia, with a much lesser percentage performed at the
bedside. Another commenter noted in the FY 2018 IPPS proposed rule,
these same 22 ICD-10-PCS codes were identified and a commenter opposed
the proposal to re-designate these codes at that time. In response to
the issues raised by this commenter, CMS agreed in the FY 2018
[[Page 48865]]
IPPS final rule to maintain the designation of the 22 procedure codes.
This commenter stated the rationale to maintain these 22 codes as O.R.
procedures has not changed and that there is no safe way to effectively
drain an infection involving the subfascial plane without the resources
of an operating room.
Response: Our clinical advisors reviewed the commenters' concerns
and continue to state that treatment practices have continued to shift
since FY 2018 rulemaking. As stated in the FY 2022 final rule in
response to similar comments, procedures describing the open drainage
of subcutaneous tissue and fascia can now be safely performed in the
outpatient setting and when performed during a hospitalization, it is
typically in conjunction with another O.R. procedure. In cases where
procedures describing open drainage of subcutaneous tissue and fascia
are the only procedures performed in an admission, the admission is
quite likely due to need for IV antibiotics as opposed to the need for
operating room resources in an inpatient setting.
We refer the reader to Table 6P.1f associated with this final rule
(which is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS) for the data analysis of cases reporting the 22
procedure codes that describe the open drainage of subcutaneous tissue
and fascia in the September 2021 update of the FY 2021 MedPAR file. We
note that within each MDC, the MS-DRGs are divided into medical and
surgical categories. In general, surgical MS-DRGs are further defined
based on the precise surgical procedure performed while the medical MS-
DRGs are further defined based on the precise principal diagnosis for
which a patient was admitted to the hospital. In Table 6P.1f associated
with this final rule, column B displays the category of each MS-DRG in
MS-DRG GROUPER Version 39.1. The letter M is used to designate a
medical MS-DRG and the letter P is used to designate a surgical MS-DRG.
As shown in the table, when the procedure codes that describe the open
drainage of the subcutaneous tissue and fascia are reported,
approximately 70% of the MS-DRGs assigned are classified as surgical
MS-DRGs which indicates at least one procedure code designated as an
O.R. procedure was also reported in these cases. We refer the reader to
the ICD-10 MS-DRG Version 39.1 Definitions Manual (which is available
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/AcuteInpatientPPS/MS-DRGClassifications-and-Software) for complete documentation of the
GROUPER logic for the listed MS-DRGs.
Our clinical advisors continue to state that procedure codes that
describe the open drainage of subcutaneous tissue and fascia do not
reflect the technical complexity or resource intensity in comparison to
other procedures that are designated as O.R. procedures. They also
continue to state that the non-O.R. designation of the 22 procedure
codes that describe the open drainage of subcutaneous tissue and fascia
as finalized in the FY 2022 final rule better reflects the associated
technical complexity and hospital resource use of these procedures.
Therefore, after consideration of the public comments we received,
and for the reasons discussed, we are not making changes in this final
rule to the designation of the 22 codes that describe the open drainage
of subcutaneous tissue and fascia listed in the previous table.
13. Changes to the MS-DRG Diagnosis Codes for FY 2023
a. Background of the CC List and the CC Exclusions List
Under the IPPS MS-DRG classification system, we have developed a
standard list of diagnoses that are considered CCs. Historically, we
developed this list using physician panels that classified each
diagnosis code based on whether the diagnosis, when present as a
secondary condition, would be considered a substantial complication or
comorbidity. A substantial complication or comorbidity was defined as a
condition that, because of its presence with a specific principal
diagnosis, would cause an increase in the length-of-stay by at least 1
day in at least 75 percent of the patients. However, depending on the
principal diagnosis of the patient, some diagnoses on the basic list of
complications and comorbidities may be excluded if they are closely
related to the principal diagnosis. In FY 2008, we evaluated each
diagnosis code to determine its impact on resource use and to determine
the most appropriate CC subclassification (NonCC, CC, or MCC)
assignment. We refer readers to sections II.D.2. and 3. of the preamble
of the FY 2008 IPPS final rule with comment period for a discussion of
the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008
(72 FR 47152 through 47171).
b. Overview of Comprehensive CC/MCC Analysis
In the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159), we described
our process for establishing three different levels of CC severity into
which we would subdivide the diagnosis codes. The categorization of
diagnoses as a MCC, a CC, or a NonCC was accomplished using an
iterative approach in which each diagnosis was evaluated to determine
the extent to which its presence as a secondary diagnosis resulted in
increased hospital resource use. We refer readers to the FY 2008 IPPS/
LTCH PPS final rule (72 FR 47159) for a complete discussion of our
approach. Since the comprehensive analysis was completed for FY 2008,
we have evaluated diagnosis codes individually when assigning severity
levels to new codes and when receiving requests to change the severity
level of specific diagnosis codes.
We noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235
through 19246) that with the transition to ICD-10-CM and the
significant changes that have occurred to diagnosis codes since the FY
2008 review, we believed it was necessary to conduct a comprehensive
analysis once again. Based on this analysis, we proposed changes to the
severity level designations for 1,492 ICD-10-CM diagnosis codes and
invited public comments on those proposals. As summarized in the FY
2020 IPPS/LTCH PPS final rule, many commenters expressed concern with
the proposed severity level designation changes overall and recommended
that CMS conduct further analysis prior to finalizing any proposals.
After careful consideration of the public comments we received, as
discussed further in the FY 2020 final rule, we generally did not
finalize our proposed changes to the severity designations for the ICD-
10-CM diagnosis codes, other than the changes to the severity level
designations for the diagnosis codes in category Z16- (Resistance to
antimicrobial drugs) from a NonCC to a CC. We stated that postponing
adoption of the proposed comprehensive changes in the severity level
designations would allow further opportunity to provide additional
background to the public on the methodology utilized and clinical
rationale applied across diagnostic categories to assist the public in
its review. We refer readers to the FY 2020 IPPS/LTCH PPS final rule
(84 FR 42150 through 42152) for a complete discussion of our response
to public comments regarding the proposed
[[Page 48866]]
severity level designation changes for FY 2020.
As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR
32550), to provide the public with more information on the CC/MCC
comprehensive analysis discussed in the FY 2020 IPPS/LTCH PPS proposed
and final rules, CMS hosted a listening session on October 8, 2019. The
listening session included a review of this methodology utilized to
mathematically measure the impact on resource use. We refer readers to
https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/Downloads/10082019ListingSessionTrasncriptandQandAsandAudioFile.zip for
the transcript and audio file of the listening session. We also refer
readers to https://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for
the supplementary file containing the mathematical data generated using
claims from the FY 2018 MedPAR file describing the impact on resource
use of specific ICD-10-CM diagnosis codes when reported as a secondary
diagnosis that was made available for the listening session.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58550 through
58554), we discussed our plan to continue a comprehensive CC/MCC
analysis, using a combination of mathematical analysis of claims data
as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235)
and the application of nine guiding principles and plan to present the
findings and proposals in future rulemaking. The nine guiding
principles are as follows:
Represents end of life/near death or has reached an
advanced stage associated with systemic physiologic decompensation and
debility.
Denotes organ system instability or failure.
Involves a chronic illness with susceptibility to
exacerbations or abrupt decline.
Serves as a marker for advanced disease states across
multiple different comorbid conditions.
Reflects systemic impact.
Post-operative/post-procedure condition/complication
impacting recovery.
Typically requires higher level of care (that is,
intensive monitoring, greater number of caregivers, additional testing,
intensive care unit care, extended length of stay).
Impedes patient cooperation or management of care or both.
Recent (last 10 years) change in best practice, or in
practice guidelines and review of the extent to which these changes
have led to concomitant changes in expected resource use.
We refer readers to the FY 2021 IPPS/LTCH PPS final rule for a
complete discussion of our response to public comments regarding the
nine guiding principles.
In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25175 through
25180), as another interval step in our comprehensive review of the
severity designations of ICD-10-CM diagnosis codes, we requested public
comments on a potential change to the severity level designations for
``unspecified'' ICD-10-CM diagnosis codes that we were considering
adopting for FY 2022. Specifically, we noted we were considering
changing the severity level designation of ``unspecified'' diagnosis
codes to a NonCC where there are other codes available in that code
subcategory that further specify the anatomic site. As summarized in
the FY 2022 IPPS/LTCH PPS final rule, many commenters expressed concern
with the potential severity level designation changes overall and
recommended that CMS delay any possible change to the designation of
these codes to give hospitals and their physicians time to prepare.
After careful consideration of the public comments we received, we
maintained the severity level designation of the ``unspecified''
diagnosis codes currently designated as a CC or MCC where there are
other codes available in that code subcategory that further specify the
anatomic site for FY 2022. We refer readers to the FY 2022 IPPS/LTCH
PPS final rule (86 FR 44916 through 44926) for a complete discussion of
our response to public comments regarding the potential severity level
designation changes. Instead, for FY 2022, we finalized a new Medicare
Code Editor (MCE) code edit for ``unspecified'' codes, effective with
discharges on and after April 1, 2022. We stated we believe finalizing
this new edit would provide additional time for providers to be
educated while not affecting the payment the provider is eligible to
receive. We refer the reader to section II.D.14.e. of the FY 2022 IPPS/
LTCH PPS final rule (86 FR 44940 through 44943) for the complete
discussion.
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule, as this
new edit became effective beginning with discharges on and after April
1, 2022, we stated our clinical advisors believed it was appropriate to
not propose to change the designation of any ICD-10-CM diagnosis codes,
including the unspecified codes that are subject to the ``Unspecified
Code'' edit, as we continue our comprehensive CC/MCC analysis to allow
interested parties the time needed to become acclimated to the new
edit.
Comment: Commenters stated that they appreciate and agree with CMS'
decision not to propose any further changes to the designation of any
ICD-10-CM diagnosis codes, including the unspecified codes, at this
time. These commenters recommended that CMS allow one to two full years
of data availability before proposing any additional changes to the
designation of any ICD-10-CM diagnosis code, given that the new MCE
edit was recently implemented on April 1, 2022 and stated that having
one to two full years of data will afford more meaningful analysis in
future rulemaking considerations as part of the comprehensive CC/MCC
analysis.
Response: We appreciate the commenters' support. With respect to
the commenters who suggested allowing one to two full years of data
availability before proposing any additional changes, we appreciate the
feedback and will take these suggestions under consideration.
We continue to solicit feedback regarding the guiding principles,
as well as other possible ways we can incorporate meaningful indicators
of clinical severity. We have made available on the CMS website updated
impact on resource use files so that the public can review the
mathematical data for the impact on resource use generated using claims
from the FY 2019 MedPAR file, the FY 2020 MedPAR file and the FY 2021
MedPAR files. The link to these files is posted on the CMS website at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software. When providing
additional feedback or comments, we encourage the public to provide a
detailed explanation of how applying a suggested concept or principle
would ensure that the severity designation appropriately reflects
resource use for any diagnosis code. We also continue to be interested
in receiving feedback on how we might otherwise foster the
documentation and reporting of the most specific diagnosis codes
supported by the available medical record documentation and clinical
knowledge of the patient's health condition to more accurately reflect
each health care encounter and improve the reliability and validity of
the coded data. Interested parties can submit any comments and
recommendations for FY 2024 by
[[Page 48867]]
October 20, 2022 via the new electronic intake system, Medicare
Electronic Application Request Information SystemTM
(MEARISTM) at: https://mearis.cms.gov/public/home.
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28177), for new diagnosis codes approved for FY 2023, consistent with
our annual process for designating a severity level (MCC, CC or NonCC)
for new diagnosis codes, we first review the predecessor code
designation, followed by review and consideration of other factors that
may be relevant to the severity level designation, including the
severity of illness, treatment difficulty, complexity of service and
the resources utilized in the diagnosis or treatment of the condition.
We noted that this process does not automatically result in the new
diagnosis code having the same designation as the predecessor code. We
refer the reader to section II.D.14 of this final rule for the
discussion of the proposed changes to the ICD-10-CM and ICD-10-PCS
coding systems for FY 2023.
c. Requested Changes to Severity Levels
In the FY 2023 IPPS/LTCH PPS proposed rule, we noted that we
received several requests to change the severity level designations of
specific ICD-10-CM diagnosis codes, including a request to analyze a
subset of the social determinants of health (SDOH) diagnosis codes. We
stated our clinical advisors believed it was appropriate to consider
these requests in connection with our continued comprehensive CC/MCC
analysis in future rulemaking, rather than proposing to change the
designation of individual ICD-10-CM diagnosis codes at this time.
However, we refer the reader to section II.D.13.d for further
discussion related to the diagnosis codes describing social
determinants of health. As discussed in the proposed rule and noted
earlier in this section, we plan to continue a comprehensive CC/MCC
analysis, using a combination of mathematical analysis of claims data
and the application of nine guiding principles. We will consider these
individual requests received for changes to severity level designations
as we continue our comprehensive CC/MCC analysis and will provide more
detail in future rulemaking.
d. Request for Information on Social Determinants of Health Diagnosis
Codes
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28177 through 28181), we solicited public comments on how the reporting
of diagnosis codes in categories Z55-Z65 may improve our ability to
recognize severity of illness, complexity of service, and/or
utilization of resources under the MS-DRGs as described further in this
section. Consistent with the Administration's goal of advancing health
equity for all, including members of historically underserved and
under-resourced communities, as described in the President's January
20, 2021 Executive Order 13985 on ``Advancing Racial Equity and Support
for Underserved Communities Through the Federal Government,'' \13\ we
stated we were also interested in receiving feedback on how we might
otherwise foster the documentation and reporting of the diagnosis codes
describing social and economic circumstances to more accurately reflect
each health care encounter and improve the reliability and validity of
the coded data including in support of efforts to advance health
equity.
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\13\ Available at: https://www.federalregister.gov/documents/2021/01/25/2021-01753/advancing-racial-equity-and-support-for-underserved-communities-through-the-federal-government.
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Social determinants of health (SDOH) are the conditions in the
environments where people are born, live, learn, work, play, worship,
and age that affect a wide range of health, functioning, and quality-
of-life outcomes and risks.\14\ These circumstances or determinants
influence an individual's health status and can contribute to wide
health disparities and inequities. While SDOH do not describe current
illnesses or injuries at the individual level, they are widely
recognized as important potential predictors of risk for developing
medical conditions like heart disease, diabetes, and obesity. In ICD-
10-CM, the Z codes found in Chapter 21 represent reasons for
encounters, and are provided for occasions when circumstances other
than a disease, injury or external cause classifiable to categories
A00-Y89 are recorded as `diagnoses' or `problems'. The subset of Z
codes that describe the social determinants of health are found in
categories Z55-Z65 (Persons with potential health hazards related to
socioeconomic and psychosocial circumstances). These codes describe a
range of issues related--but not limited--to education and literacy,
employment, housing, ability to obtain adequate amounts of food or safe
drinking water, and occupational exposure to toxic agents, dust, or
radiation. We noted that effective October 1, 2021, the Centers for
Disease Control and Prevention (CDC) National Center for Health
Statistics (NCHS) added 11 new diagnosis codes describing SDOH to
provide additional information regarding determinants such as housing,
food insecurity, and transportation. In addition, section I.B.14 of the
FY 2022 ICD-10-CM Official Guidelines for Coding and Reporting was
updated to provide clarification of the term ``clinician'' in reporting
codes related to social determinants of health and clarified the
documentation that can be utilized to assign SDOH codes when included
in the official medical record. In this context, ``clinicians'' other
than the patient's provider refer to ``healthcare professionals
permitted, based on regulatory or accreditation requirements or
internal hospital policies, to document in a patient's official medical
record.'' \15\
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\14\ Available at: https://health.gov/healthypeople/objectives-and-data/social-determinants-health.
\15\ Available at: https://ftp.cdc.gov/pub/Health_Statistics/NCHS/Publications/ICD10CM/2022/10cmguidelines-FY2022-April%201%20update%202-3-22.pdf.
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As stated in the proposed rule, reporting SDOH Z codes in inpatient
claims data could enhance quality improvement activities, track factors
that influence people's health, and provide further insight into
existing health inequities.16 17 18 More routine collection
of SDOH Z codes could also likely improve coordination within hospitals
to utilize the data across their clinical care and discharge planning
teams, including with post-acute partners. CMS has heard from
interested parties about a number of reasons for why there may be less
routine documentation and reporting of SDOH in the inpatient setting.
First, Z codes are not required to be reported by inpatient hospitals
and generally do not affect MS-DRG assignment. Rather, these codes are
currently reported voluntarily by providers when and if supported in
the medical record
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\16\ Maksut JL, Hodge C, Van CD, Razmi, A, & Khau MT.
Utilization of Z Codes for Social Determinants of Health among
Medicare Fee-For-Service Beneficiaries, 2019. Office of Minority
Health (OMH) Data Highlight No. 24. Centers for Medicare & Medicaid
Services (CMS), Baltimore, MD, 2021.
\17\ Truong HP, Luke AA, Hammond G, Wadhera RK, Reidhead M,
Joynt Maddox KE. Utilization of Social Determinants of Health ICD-10
Z-Codes Among Hospitalized Patients in the United States, 2016-2017.
Med Care. 2020;58(12):1037-1043. doi:10.1097/MLR.0000000000001418.
\18\ Wark K, Cheung K, Wolter E, Avey JP. Engaging stakeholders
in integrating social determinants of health into electronic health
records: A scoping review. International Journal of Circumpolar
Health. 2021 Jan 1;80(1):1943983.
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[[Page 48868]]
documentation. As such, consistent protocols may not be in place for
documenting and reporting. Second, many of the circumstances captured
through SDOH Z codes are dependent on the willingness of patients to
discuss personal social, economic, or environmental conditions.
Providers may or may not be able to reliably document certain
circumstances,\19\ as a result, in the medical records. There are also
questions of how bias can play into screening for SDOH and how systemic
bias within the health care system can play a role in this process.\20\
CMS has also heard of the significant pressures on provider time, and
whether providers have access to comprehensive care and coordination
teams, including social workers, who may be more appropriately skilled
to assess certain SDOH.
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\19\ Garg A, Boynton-Jarrett R, Dworkin PH. Avoiding the
Unintended Consequences of Screening for Social Determinants of
Health. JAMA. 2016;316(8):813-814. doi:10.1001/jama.2016.9282.
\20\ Egede LE, Walker RJ, Williams JS. Intersection of
Structural Racism, Social Determinants of Health, and Implicit Bias
With Emergency Physician Admission Tendencies. JAMA Netw Open.
2021;4(9):e2126375. doi:10.1001/jamanetworkopen.2021.26375.
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Given that SDOH diagnosis codes describe economic and environmental
circumstances faced by patients and often correlate with substantial
variance in health outcomes,\21\ more widely adopted consistent
documentation and reporting in the inpatient setting could better
identify non-medical factors affecting health and track progress toward
addressing them. Doing so could also aid in work toward formulating
more comprehensive and actionable policies to address health equity and
promote the highest quality, best-value care for all beneficiaries.
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\21\ Commission on Social Determinants of Health. Closing the
gap in a generation: health equity through action on the social
determinants of health: final report of the commission on social
determinants of health. World Health Organization, 2008.
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As we discuss more fully later in this section of this final rule,
as we did in the proposed rule, we believe reporting of SDOH Z codes
may also better determine the resource utilization for treating
patients experiencing these circumstances to help inform whether a
change to the severity designation of these codes would be clinically
warranted as we continue a comprehensive CC/MCC analysis, using a
combination of mathematical analysis of claims data as discussed in the
FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) and the application
of nine guiding principles.
There are 96 diagnosis codes that describe the social determinants
of health found in categories Z55-Z65. These 96 diagnosis codes for
which we solicited comments as described in the proposed rule are shown
in Table 6P.5a associated with the proposed rule (which is available
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS). We note we also
made available the data describing the impact on resource use when
reported as a secondary diagnosis for all 96 ICD-10-CM Z codes that
describe the social determinants of health from categories Z55-Z65.
These data are consistent with data historically used to mathematically
measure impact on resource use for secondary diagnoses, and the data
which we plan to use in combination with application of the nine
guiding principles as we continue the comprehensive CC/MCC analysis.
In Table 6P.5a associated with the proposed rule, column C displays
the FY 2021 severity level designation for these diagnosis codes in MS-
DRG GROUPER Version 38.1. Column D displays CMS's current FY 2022
severity level designation in MS-DRG GROUPER Version 39.1. Columns E-N
show data on the impact on resource use generated using discharge
claims from the September 2021 update of the FY 2021 MedPAR file and
MS-DRG GROUPER Version 39.1. For further information on the data on the
impact on resource use as displayed in Columns E-N, we refer readers to
the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159) for a complete
discussion of the methodology utilized to mathematically measure the
impact on resource use. Also, as discussed in the FY 2021 IPPS/LTCH PPS
proposed rule (85 FR 32550), to provide the public with more
information on the CC/MCC comprehensive analysis discussed in the FY
2020 IPPS/LTCH PPS proposed and final rules, CMS hosted a listening
session on October 8, 2019. The listening session included a review of
this methodology utilized to mathematically measure the impact on
resource use. We refer readers to https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/Downloads/10082019ListingSessionTrasncriptandQandAsandAudioFile.zip for the
transcript and audio file of the listening session. We also refer
readers to https://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for
the supplementary file containing the data describing the impact on
resource use of specific ICD-10-CM diagnosis codes when reported as a
secondary diagnosis that was made available for the listening session.
We note that the supplementary file that was made available for the
listening session contains the mathematical data for the impact on
resource use generated using claims from the FY 2018 MedPAR file. We
have also made available on the CMS website updated impact on resource
use files so that the public can review the mathematical data for the
impact on resource use generated using claims from the FY 2019 MedPAR
file, FY 2020 MedPAR file and the FY 2021 MedPAR files.
In the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159), we described
the categorization of diagnoses as an MCC, a CC, or a NonCC,
accomplished using an iterative approach in which each diagnosis was
evaluated to determine the extent to which its presence as a secondary
diagnosis resulted in increased hospital resource use. As such, the
designation of CC or MCC is intended to account for the increased
resources required to address a condition as a secondary diagnosis. In
Version 39.1, the 96 diagnosis codes that describe the social
determinants of health from categories Z55-Z65 have a severity
designation of NonCC.
In the proposed rule, we noted that if SDOH Z codes are not
consistently reported in inpatient claims data, our methodology
utilized to mathematically measure the impact on resource use, as
described previously, may not adequately reflect what additional
resources were expended by the hospital to address these SDOH
circumstances in terms of requiring clinical evaluation, extended
length of hospital stay, increased nursing care or monitoring or both,
and comprehensive discharge planning. In the proposed rule, we sought
public comment on whether CMS should consider requiring more robust
documentation and claims data reporting to inform the impact on
resource use these determinants have on caring for patients affected by
these circumstances in an inpatient setting and inform our decision-
making in a future year in determining the most appropriate CC subclass
(NonCC, CC, or MCC) assignment for each SDOH Z code as a secondary
diagnosis. We also sought public comment on developing protocols to
standardize the screening for SDOH for all patients, and then
consistently document and report such codes and on whether such
protocols should vary based on certain factors, such as hospital size
and type. For instance, we noted in the proposed rule that we
recognized that hospitals have different mixes of patients and volume
of patients, and as such, may have
[[Page 48869]]
different staffing resources to devote to proper documentation and
coding of SDOH. In particular, we stated we were interested in hearing
the perspectives of different sized hospitals in both urban and rural
settings, and hospitals disproportionately serving members of
historically underserved and under-resourced communities in regard to
their experience with reporting of SDOH. We also stated we were
additionally interested in learning how reporting SDOH Z codes may be
used to inform community health need assessment activities required by
non-profit hospitals.
In the proposed rule, we also recognized that there is a potential
for different uses and complexity in appropriately determining and
reporting the full range of Z codes. For instance, certain code
categories like Z62 (Problems related to upbringing) and Z63 (Other
problems related to principal support group, including family
circumstances) may require specialized clinical training to diagnose
and document, which may not be the primary purpose of the inpatient
admission. Category Z57 describes occupational exposure to risk
factors, which also may not be apparent in most inpatient admissions
and would rely upon the patient providing this information voluntarily.
Category Z60 (Problems related to social environment) also describes
problems of adjustment to life-cycle transitions, which also may or may
not be readily apparent or discussed by the patient in relation to the
inpatient admission.
Thus, we sought comment on which specific SDOH Z codes were most
likely to influence (that is, increase) hospital resource utilization
related to inpatient care, including any supporting information that
correlates inpatient hospital resource use to specific SDOH Z codes. In
the proposed rule, we stated CMS believed a potential starting point
for discussion was consideration of the SDOH Z diagnosis codes
describing homelessness. Homelessness can be reasonably expected to
have an impact on hospital utilization.\22\ Healthcare needs for
patients experiencing homelessness may be associated with increased
resource utilization compared to other patients due to difficulty
finding discharge destinations to meet the patient's multifaceted needs
which can result in longer inpatient stays and can have financial
impacts for hospitals.\23\ Longer hospital stays for these patients
\24\ can also be associated with increased costs because patients
experiencing homelessness are less able to access care at early stages
of illness, and also may be exposed to communicable disease and harsh
climate conditions, resulting in more severe and complex symptoms by
the time they are admitted to hospitals, potentially leading to worse
health outcomes. We stated in the proposed rule that patients
experiencing homelessness can also be disproportionately affected by
mental health diagnoses and issues with substance use disorders. In
addition, patients experiencing homelessness may have limited or no
access to prescription medicines or over-the-counter medicines,
including adequate locations to store medications away from the heat or
cold,\25\ and studies have shown difficulties adhering to medication
regimens among persons experiencing homeless.\26\ Patients experiencing
homelessness may also face challenges in accessing transplants and
clinicians may defer care because of the uncertain post-acute
discharge.
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\22\ Koh HK, O'Connell JJ. Improving Health Care for Homeless
People. JAMA. 2016;316(24):2586-2587. doi:10.1001/jama.2016.18760.
\23\ Canham SL, Custodio K, Mauboules C, Good C, Bosma H. Health
and Psychosocial Needs of Older Adults Who Are Experiencing
Homelessness Following Hospital Discharge. Gerontologist. 2020 May
15;60(4):715-724. doi: 10.1093/geront/gnz078. PMID: 31228238.
https://pubmed.ncbi.nlm.nih.gov/31228238/.
\24\ Hwang SW, Weaver J, Aubry T. Hospital costs and length of
stay among homeless patients admitted to medical, surgical, and
psychiatric services. Med Care. 2011;49:350-354. https://journals.lww.com/lww-medicalcare/Fulltext/2019/01000/Trends,_Causes,_and_Outcomes_of_Hospitalizations.4.aspx.
\25\ Sun R (AHRQ), Karaca Z (AHRQ), Wong HS (AHRQ).
Characteristics of Homeless Individuals Using Emergency Department
Services in 2014. HCUP Statistical Brief #229. October 2017. Agency
for Healthcare Research and Quality, Rockville, MD. www.hcup-us.ahrq.gov/reports/statbriefs/sb229-Homeless-ED-Visits-2014.pdf.
\26\ Coe, Antoinette B. Coe et al. ``Medication Adherence
Challenges Among Patients Experiencing Homelessness in a Behavioral
Health Clinic. https://journals.lww.com/lww-medicalcare/Fulltext/2019/01000/Trends,_Causes,_and_Outcomes_of_Hospitalizations.4.aspx.
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To further examine the diagnosis codes that describe SDOH, in the
proposed rule we reviewed the data on the impact on resource use for
diagnosis code Z59.0 (Homelessness) when reported as a secondary
diagnosis to facilitate discussion for the purposes of the comment
solicitation. We noted that prior to FY 2022, homelessness was one of
the more frequently reported codes that describe social determinants of
health. We also noted that effective FY 2022, the subcategory was
expanded and now includes codes Z59.00 (Homelessness, unspecified),
Z59.01 (Sheltered homelessness), and code Z59.02 (Unsheltered
homelessness).
In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19243 through
19244), as part of our proposal to change the severity level
designations for 1,492 ICD-10-CM diagnosis codes, we proposed to change
the severity level designation of code Z59.0 (Homelessness) from NonCC
to CC. We stated that because the C1 value (C1 = 1.5964) in the table
was generally close to 2, the data suggested that when reported as a
secondary diagnosis, the resources involved in caring for a patient
experiencing homelessness supported increasing the severity level from
a NonCC to a CC. In the FY 2020 IPPS/LTCH PPS proposed rule, we also
stated our clinical advisors reviewed these data and believed the
resources involved in caring for these patients are more aligned with a
CC. As noted in section II.D.13.b of the proposed rule and this final
rule, many commenters expressed concern with the proposed severity
level designation changes overall and consequently we generally did not
finalize our proposed changes to the severity designations for the
1,492 ICD-10-CM diagnosis codes, at that time. However, the proposal to
change the severity designation of code Z59.0 specifically did receive
mostly supportive comments. We stated in the proposed rule that many
commenters stated that a patient experiencing homelessness requires
significant coordination of social services along with their health
care. Another commenter also recommended that CMS expand the change in
designation to all the codes in category Z59, not just code Z59.0.
Another commenter, while indicating their support of the proposal,
noted that it is unclear that the status/condition would result in
increased hospital resource use.
As discussed in the proposed rule, our proposal in FY 2020 was
based on the data for the impact on resource use generated using claims
from the FY 2018 MedPAR file. The following table reflects the impact
on resource use data generated using claims from the FY 2019 MedPAR
file, FY 2020 MedPAR file and the FY 2021 MedPAR file, respectively,
for the diagnosis code that describes homelessness as a NonCC. We noted
there is currently no data for codes Z59.01 (Sheltered homelessness)
and code Z59.02 (Unsheltered homelessness) as these codes became
effective on October 1, 2021. Again, we refer readers to the FY 2008
IPPS/LTCH PPS final rule (72 FR 47159) for a complete discussion of our
historical approach to mathematically evaluate the extent to which the
presence of an ICD-
[[Page 48870]]
10-CM code as a secondary diagnosis resulted in increased hospital
resource use, and the explanation of the columns in the table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.058
As shown in the table, we examined data for the diagnosis code(s)
that describe homelessness as a NonCC in FY 2019 through FY 2021. When
examining diagnosis code Z59.0 (Homelessness), the value in column C1
is closer to 2.0 than to 1.0 in FY 2019 and FY 2020, though we noted
that we did not use FY 2020 data for rate setting purposes in light of
impacts related to the PHE for COVID-19 as described in the FY 2022
IPPS/LTCH PPS final rule (86 FR 44778). The data suggests that when
homelessness is reported as a secondary diagnosis, the resources
involved in caring for these patients are more aligned with a CC than a
NonCC or an MCC, as explained in the FY 2008 IPPS/LTCH PPS final rule
(72 FR 47159). However, in FY 2021, the C1 value is generally closer to
1, which suggest the resources involved in caring for patients
experiencing homelessness are more aligned with a NonCC severity level
than a CC or an MCC severity level. We also noted fluctuations in the
C1 values year to year. We stated we were uncertain if the data from FY
2021, in particular, reflect fluctuations that may be a result of the
public health emergency or even reduced hospitalizations of certain
conditions. We also stated we were uncertain if homelessness may be
underreported when there is not an available field on the claim when
other diagnoses are reported instead. We sought public comment on these
possibilities, particularly to inform our understanding of the trend of
the C1 value.
As we have stated in prior rulemaking, these mathematical
constructs are used in conjunction with the judgment of our clinical
advisors to classify each secondary diagnosis reviewed. We presented
these data to highlight that the resources expended in caring for
patients reported to be affected by a SDOH such as homelessness during
an inpatient hospitalization may not be consistently expressed in the
inpatient claims data and to demonstrate how reporting the SDOH Z codes
could more accurately reflect the health care encounter and improve the
reliability and validity of the coded data.
In summary, we stated we would appreciate public comment on these
issues, including on the following questions:
How the reporting of certain Z codes--and if so, which Z
codes \27\--may improve our ability to recognize severity of illness,
complexity of service, and utilization of resources under the MS-DRGs?
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\27\ https://www.cms.gov/files/document/zcodes-infographic.pdf.
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Whether CMS should require the reporting of certain Z
codes--and if so, which ones--to be reported on hospital inpatient
claims to strengthen data analysis?
The additional provider burden and potential benefits of
documenting and reporting of certain Z codes, including potential
benefits to beneficiaries.
Whether codes in category Z59 (Homelessness) have been
underreported and if so, why? In particular, we stated we were
interested in hearing the perspectives of large urban hospitals, rural
hospitals, and other hospital types in regard to their experience. We
also sought comments on how factors such as hospital size and type
might impact a hospital's ability to develop standardized consistent
protocols to better screen, document and report homelessness.
As discussed in the proposed rule, we stated that the comments we
receive on these issues may also be informative as we evaluate whether
to develop a proposal in future rulemaking to change the severity level
designation of the diagnosis codes describing homelessness from NonCC
to CC and whether other SDOH, as described by Z codes, are also
appropriate candidates to be proposed for designation as CCs.
We noted that examining the severity level designation of diagnosis
codes is just one area to possibly support documentation and reporting
of SDOH in the inpatient setting. We stated we were also interested in
ideas from the public on how the MS-DRG classification can be utilized
in agency wide efforts to advance health equity, expand access, drive
high-quality, person-centered care, and promote affordability and
sustainability in the Medicare program. Specifically, we invited public
comment on ways the MS-DRG classification can be useful in addressing
the challenges of defining and collecting accurate and standardized
self-identified socioeconomic information for the purposes of
reporting, measure stratification, and other data collection efforts.
We stated we were interested in learning more about the potential
benefits and challenges associated with the collection of SDOH data in
the inpatient setting. Feedback on the limitations and barriers
providers could experience as they consider more robust documentation
and reporting would also help inform our development of appropriately
tailored efforts that address and mitigate barriers for all hospital
types across communities and patient mixes. We stated we would take
commenters' feedback into consideration in future policy development.
In this FY 2023 IPPS/LTCH PPS final rule, we present a summation of
the comments we received in response to our request for information on
SDOH diagnosis codes, including how the reporting of SDOH diagnosis
codes may improve our ability to recognize severity of illness,
complexity of service, and/or utilization of resources under the MS-
DRGs, as well as how we might otherwise foster the documentation and
reporting of the diagnosis codes describing social and economic
circumstances to more accurately reflect each health care encounter and
improve the reliability and validity of the coded data, including in
support of efforts to advance health equity. We thank commenters for
sharing their views and their willingness to support CMS in these
efforts.
Comment: Many commenters applauded CMS' efforts to encourage
documentation and reporting of SDOH diagnosis codes given the impact
that social risks can have on health outcomes. These commenters stated
that it is critical that physicians, other health care professionals,
and facilities
[[Page 48871]]
recognize the impact SDOH have on the health of their patients.
Commenters stated that they agree that better reporting of these SDOH Z
codes through inpatient claims could enhance coordination within
hospitals across clinical care teams and discharge planning, and with
post-acute care providers. A commenter stated that SDOH data can be
extremely valuable and powerful tools to improve healthcare, and stated
that they were confident that CMS' encouragement of the use of this
data would lead to better healthcare for our country.
Some commenters stated that while the documentation and reporting
of SDOH diagnosis codes is important to address healthcare inequities,
the collection of this data may place significant burden on facilities
and providers and have tremendous operational and technology impacts.
Commenters stated that hospitals have demonstrated significant
variability in screening capabilities and referral practices, and
inpatient settings require additional time to develop screening
protocols and ensure that screening results are documented in a place
where they can be captured for claims. Other commenters stated
assigning codes for SDOH can be a time-consuming and labor-intensive
process, as many electronic health records (EHRs) do not have easy
pathways to add a Z code to the problem or diagnosis list. Other
commenters stated that one of the major challenges to providers is
ensuring that SDOH information documented in the EHR and reported on
the claim is accurate as patients' circumstances are ever changing. A
commenter stated that it is not feasible for hospitals to screen for
every SDOH due to the time and resources involved for both patients and
providers and suggested that rather than require this process be
repeated with each encounter, CMS should permit SDOH information to
carry forward across encounters until new documentation supports
removal or revision to the initial SDOH diagnosis codes to minimize the
administrative burden. Commenters also stated that the challenge of
increased documentation reviews by coding staff would be further
exacerbated by staffing shortages within the industry, as well as
coding productivity standards. A few commenters stated for rural
hospitals, bandwidth is already low due to workforce shortages and
heavy caseloads. These commenters stated that adding any screening and
documentation processes for SDOH, on top of existing workloads, may
require more than a physician or nurse and instead may require engaging
a staff such as social workers or psychologists who may not be standard
members of care teams at all rural hospitals.
Many commenters stated there was a lack of standard, nationally
accepted definitions of the SDOH Z codes and that there are potential
gaps that may come with the use of, and reporting related to SDOH Z
codes. Other commenters stated that SDOH Z codes are informative but
some descriptions lack specificity and may be too broad to distinctly
capture enough detail around the type of care that the patient needs
relative to their diagnosis and their SDOH challenges. Commenters also
identified the lack of national data and exchange standards for capture
of the SDOH Z codes as an additional barrier. Commenters stated that
while fully supporting efforts to improve and increase the collection
of SDOH data, they believed that other options exist that would make it
feasible for hospitals of all sizes and types to consistently collect
data in a standardized manner without creating undue burden and
suggested that CMS consider developing a broader strategy for
collecting SDOH data. A commenter specifically suggested that CMS
coordinate with states, which are often requiring their own assessments
to identify social risk and needs, to reduce burden. Another commenter
stated that they believed that the creation of a new Hierarchical
Condition Category for SDOH Z codes could help improve documentation
efforts since, according to this commenter, organizations that treat
these high-risk patients are reimbursed at higher rates than those
patients who are not grouped into these HCCs.
Commenters recommended that CMS consider reimbursement incentives
for documenting and reporting of SDOH Z codes to help health care
providers build and sustain systemic screening and documentation, which
will ultimately lead to better health for patients. Many commenters
stated that they agree that codes in category Z59 (Homelessness) have
been underreported and that increasing the severity level of the codes
that describe homelessness from a NonCC to a CC could prompt more
rigorous documentation and reporting. Commenters stated that they
believe that homelessness involves a level of care in line with
diagnoses currently designated as CCs. Some commenters stated that
patients experiencing homelessness can often increase inpatient costs
by creating discharge disposition challenges that lead to an extended
length of stay. A few commenters noted that in their experience,
extended lengths of stay were particularly high for patients
experiencing homelessness who underwent surgery. Another commenter
stated that based on their own analysis, homelessness has an effect on
resource utilization on par with other diagnoses currently designated
as MCCs but stated elevation to a CC is the most reasonable first step
to help drive the reporting of these SDOH Z codes, and help drive
subsequent, meaningful evaluation of outcomes.
Commenters encouraged CMS to examine other SDOH Z codes that
describe circumstances such as food insecurity, lack of adequate food
and drinking water, extreme poverty, lack of transportation and
unemployment, to determine the hospital resource utilization related to
addressing these factors and to analyze whether these SDOH Z codes
should be considered for designation as CCs as well. Some commenters
also pointed to conditions outside of the SDOH Z codes such as: medical
debt, malnutrition, elder abuse and neglect, underdosing of medication,
personal history of falling and awaiting organ transplant status as
examples of other areas where fostering better documentation and
reporting could improve health outcomes.
Other commenters expressed concern and stated that they believed
that while some SDOH diagnoses could have some impact for MS-DRG
assignment due to additional efforts needed around discharge planning,
generally SDOH diagnoses should have limited impact on severity of
illness. Rather, according to these commenters, the impact is more
important for risk adjustment for population-based initiatives, such as
a readmissions program. A commenter stated that simply elevating SDOH
Z-codes to CCs and marginally increasing reimbursement will be
inadequate to meaningfully drive CMS' stated equity mission. Another
commenter noted that in some cases, patients experiencing circumstances
described by SDOH Z codes may require social services support to
address a need post-discharge, but the complexity of the inpatient
clinical services is not affected. A commenter, while supportive of the
consideration of the change in designation, expressed concern that
increasing the severity level of the codes that describe homelessness
from a NonCC to a CC could potentially lead to fraudulent or abusive
coding practices in order to raise the payment rate for an encounter.
Another commenter recommended that safeguards be put in place to
disallow oversight agencies (such as Recovery Audit Contractors (RAC)
and third-party
[[Page 48872]]
payer validations) from challenging MS-DRG assignment, and instead
honor the reporting of the code when supported by documentation,
especially in instances where homelessness might be the only
complication or comorbidity coded.
While commending CMS' efforts, many commenters cautioned that
mandating the reporting of SDOH Z codes could necessitate making
changes to the institutional claim form. Currently, only 25 diagnoses
are captured on the electronic claim form. Commenters noted that
documenting and reporting the social and economic circumstances
patients may be experiencing may require a substantial number of SDOH Z
codes, and stated that this could lead to the crowding out of other
diagnosis codes that also need to be captured on the claim form such as
codes for medical diagnoses, comorbidities, Hierarchical Condition
Category (HCC) coding, Hospital Acquired Conditions (HAC), and patient
safety indicators (PSI) due to limited space.
Several commenters expressed concern and stated that they did not
believe that CMS proposed a clear, compelling, or significant benefit
to patients as a result of collecting this data. These commenters
cautioned against requiring hospitals to implement the collection of
sensitive information for the purposes of analysis, and asserted that
CMS will be placing hospitals in the precarious position of asking
sensitive and intimate social questions, while often not having
solutions to mitigate or eliminate these risks, as they stated the
documentation of social risks does not in and of itself improve health
outcomes. A commenter stated that studies have shown that many
providers are wary of screening for social needs, if they believe they
do not also have the ability to make referrals or to connect patients
to resources to address their needs. Other commenters expressed concern
and stated it is counterproductive for hospitals to collect SDOH data
without having resources and pathways in place to offer help. A few
commenters stated that by requiring medical facilities to report this
data, CMS is diverting resources and time from patient care and stated
that CMS should not be pursing an initiative that is meant to collect
data on non-medical information. A commenter stated that although the
collection of SDOH information can occur during inpatient visits,
documentation and reporting of this data may be actually best suited to
outpatient office visits, where providers may have a greater
opportunity to interact with their patients and the ability to consider
more proactive approaches to help address their social needs.
Many other commenters also expressed concern and stated that while
SDOH information can be useful for administrative use and payment
adjustment, information about an individual's social risk and needs has
been shown to be sensitive, and individuals are often hesitant to
disclose this information for fear of bias, misuse, or discrimination.
Commenters stated patients may not see the relevance of providing
information to their providers related to SDOH that may not be directly
applicable to why they are seeking care. These commenters stated that
there are significant concerns from physicians, other providers, and
patients about ``medicalizing'' SDOH in the electronic health record
and stated mechanisms must be established to shield this sensitive
information on certain forms, charts, health records, and discharge
papers. Commenters noted that when SDOH Z codes are entered via an EHR
or other form of collection, those results show up on the patient's
after-visit summary, which may be concerning for patients. Commenters
also expressed concern that SDOH Z codes may ``follow'' a patient for
too many years and cause potential discrimination, bias, or other
misunderstandings in the future. Commenters stated that hospitals must
be equipped with tools to communicate the context of SDOH Z codes with
patients at the point of screening or self-reporting so that patients
understand the rationale for data collection and how it can help
address their needs. Several commenters stated that CMS should also put
in place Conditions of Participation requiring hospitals to train their
staff on how this information can and cannot be used to prevent
information being used in discriminatory pricing, care, or other
purposes.
Many commenters stated that the most immediate and important action
CMS could take to increase the use of SDOH Z codes is to finalize the
evidence-based ``Screening for Social Drivers of Health'' and ``Screen
Positive Rate for Social Drivers of Health'' measures proposed to be
adopted in the Hospital Inpatient Quality Reporting (IQR) Program.
These commenters stated that these measures create an opportunity to
collect inpatient SDOH data at a scale that could significantly improve
MS-DRGs' precision and ability to recognize severity and complexity of
service and utilization of resources. Many commenters stated that
absent these measures and associated data, SDOH Z codes will continue
to be underreported and unreliable. We refer the reader to section
IX.E.5.b of the preamble of the proposed rule and this final rule for
further discussion regarding new measures for the Hospital IQR Program
measure set. These commenters urged CMS to start with an incremental
approach in requiring the reporting of SDOH Z codes and suggested that
reporting should be optional or voluntary for at least two-three years
to allow providers and CMS to gain experience in reporting and
collecting this data. If the reporting of the SDOH Z codes becomes
mandatory, these commenters recommended that the requirement start with
the subset of SDOH Z codes that directly align with the social needs
identified in the five core domains of the proposed measures.
Response: We again thank commenters for sharing their views and
their willingness to support CMS in these efforts. We will take the
commenters' feedback into consideration in future policy development.
e. Additions and Deletions to the Diagnosis Code Severity Levels for FY
2023
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28181) we noted
the following tables identify the proposed additions and deletions to
the diagnosis code MCC severity levels list and the proposed additions
and deletions to the diagnosis code CC severity levels list for FY 2023
and are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html
Table 6I.1--Proposed Additions to the MCC List--FY 2023;
Table 6I.2--Proposed Deletions to the MCC List--FY 2023;
Table 6J.1--Proposed Additions to the CC List--FY 2023; and
Table 6J.2--Proposed Deletions to the CC List--FY 2023.
Comment: Commenters agreed with the proposed additions and
deletions to the MCC and CC lists as shown in tables 6I.1, 6I.2, 6J.1,
and 6J.2 associated with the proposed rule.
Response: We appreciate the commenters' support.
The following tables associated with this final rule reflect the
finalized severity levels under Version 40 of the ICD-10 MS-DRGs for FY
2023 and are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS; Table 6I. --Complete MCC List--FY 2023; Table
[[Page 48873]]
6I.1--Additions to the MCC List--FY 2023; Table 6I.2--Deletions to the
MCC List--FY 2022; Table 6J.--Complete CC List--FY 2023; Table 6J.1--
Additions to the CC List--FY 2023; and Table 6J.2--Deletions to the CC
List--FY 2023.
f. CC Exclusions List for FY 2023
In the September 1, 1987 final notice (52 FR 33143) concerning
changes to the DRG classification system, we modified the GROUPER logic
so that certain diagnoses included on the standard list of CCs would
not be considered valid CCs in combination with a particular principal
diagnosis. We created the CC Exclusions List for the following reasons:
(1) to preclude coding of CCs for closely related conditions; (2) to
preclude duplicative or inconsistent coding from being treated as CCs;
and (3) to ensure that cases are appropriately classified between the
complicated and uncomplicated DRGs in a pair.
In the May 19, 1987 proposed notice (52 FR 18877) and the September
1, 1987 final notice (52 FR 33154), we explained that the excluded
secondary diagnoses were established using the following five
principles:
Chronic and acute manifestations of the same condition
should not be considered CCs for one another.
Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for the same condition should not be considered
CCs for one another.
Codes for the same condition that cannot coexist, such as
partial/total, unilateral/bilateral, obstructed/unobstructed, and
benign/malignant, should not be considered CCs for one another.
Codes for the same condition in anatomically proximal
sites should not be considered CCs for one another.
Closely related conditions should not be considered CCs
for one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. We have continued to review the remaining
CCs to identify additional exclusions and to remove diagnoses from the
master list that have been shown not to meet the definition of a CC. We
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541
through 50544) for detailed information regarding revisions that were
made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
The ICD-10 MS-DRGs Version 39.1 CC Exclusion List is included as
Appendix C in the ICD-10 MS-DRG Definitions Manual, which is available
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html, and
includes two lists identified as Part 1 and Part 2. Part 1 is the list
of all diagnosis codes that are defined as a CC or MCC when reported as
a secondary diagnosis. For all diagnosis codes on the list, a link is
provided to a collection of diagnosis codes which, when reported as the
principal diagnosis, would cause the CC or MCC diagnosis to be
considered as a NonCC. Part 2 is the list of diagnosis codes designated
as a MCC only for patients discharged alive; otherwise, they are
assigned as a NonCC.
In the FY 2023 IPPS/LTCH PPS proposed rule, we proposed additional
changes to the ICD-10 MS-DRGs Version 40 CC Exclusion List based on the
diagnosis and procedure code updates as discussed in section II.D.14.
of the proposed rule and set forth in Tables 6G.1, 6G.2, 6H.1, and 6H.2
associated with the proposed rule and available via the internet on the
CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
As discussed in section II.D.14 of the preamble of this final rule,
we are finalizing, without modification, the proposed assignments and
designations for the diagnosis codes after consideration of the public
comments received. Therefore, the finalized CC Exclusions List as
displayed in Tables 6G.1, 6G.2, 6H.1, 6H.2, and 6K, associated with
this final rule reflect the severity levels under V40 of the ICD-10 MS-
DRGs. We have developed Table 6G.1.--Secondary Diagnosis Order
Additions to the CC Exclusions List--FY 2023; Table 6G.2.--Principal
Diagnosis Order Additions to the CC Exclusions List--FY 2023; Table
6H.1.--Secondary Diagnosis Order Deletions to the CC Exclusions List--
FY 2023; and Table 6H.2.--Principal Diagnosis Order Deletions to the CC
Exclusions List--FY 2023; and Table 6K. Complete List of CC
Exclusions--FY 2023.
For Table 6G.1, each secondary diagnosis code finalized for
addition to the CC Exclusion List is shown with an asterisk and the
principal diagnoses finalized to exclude the secondary diagnosis code
are provided in the indented column immediately following it. For Table
6G.2, each of the principal diagnosis codes for which there is a CC
exclusion is shown with an asterisk and the conditions finalized for
addition to the CC Exclusion List that will not count as a CC are
provided in an indented column immediately following the affected
principal diagnosis. For Table 6H.1, each secondary diagnosis code
finalized for deletion from the CC Exclusion List is shown with an
asterisk followed by the principal diagnosis codes that currently
exclude it. For Table 6H.2, each of the principal diagnosis codes is
shown with an asterisk and the finalized deletions to the CC Exclusions
List are provided in an indented column immediately following the
affected principal diagnosis. Tables 6G.1, 6G.2, 6H.1, and 6H.2
associated with this final rule are available via the internet on the
CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
The ICD-10 MS-DRGs Version 40 CC Exclusion List is included as
Appendix C of the Definitions Manual (available in two formats; text
and HTML). The manuals are available via the internet on the CMS
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software and each
format includes two lists identified as Part 1 and Part 2. Part 1 is
the list of all diagnosis codes that are defined as a CC or MCC when
reported as a secondary diagnosis. For all diagnosis codes on the list,
a link (HTML version) is provided to a collection of diagnosis codes
which, when used as the principal diagnosis, would cause the CC or MCC
diagnosis to be considered as a NonCC. Part 2 is the list of diagnosis
codes designated as a MCC only for patients discharged alive;
otherwise, they are assigned as a NonCC.
14. Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
To identify new, revised and deleted diagnosis and procedure codes,
for FY 2023, we have developed Table 6A.--New Diagnosis Codes, Table
6B.--New Procedure Codes, Table 6C.--Invalid Diagnosis Codes, Table
6D.--Invalid Procedure Codes, and Table 6E.--Revised Diagnosis Code
Titles for this final rule.
These tables are not published in the Addendum to the proposed rule
or final rule, but are available via the internet on the CMS website
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the
Addendum to this final rule. As discussed in section II.D.17. of the
preamble of the proposed rule and this final rule, the code titles are
adopted as part of the ICD-10 Coordination and Maintenance Committee
meeting process. Therefore, although we publish the code titles in the
IPPS proposed and final rules, they are not subject to comment in the
proposed or final rules.
[[Page 48874]]
We are finalizing the MDC and MS-DRG assignments for the new
diagnosis codes and procedure codes as set forth in Table 6A.--New
Diagnosis Codes and Table 6B.--New Procedure Codes. In addition, the
finalized severity level designations for the new diagnosis codes are
set forth in Table 6A. and the finalized O.R. status for the new
procedure codes are set forth in Table 6B. Consistent with our
established process, we examined the MS-DRG assignment and the
attributes (severity level and O.R. status) of the predecessor
diagnosis or procedure code, as applicable, to inform our finalized
assignments and designations.
Specifically, we review the predecessor code and MS-DRG assignment
most closely associated with the new diagnosis or procedure code, and
in the absence of claims data, we consider other factors that may be
relevant to the MS-DRG assignment, including the severity of illness,
treatment difficulty, complexity of service and the resources utilized
in the diagnosis or treatment of the condition. We note that this
process does not automatically result in the new diagnosis or procedure
code being proposed for assignment to the same MS-DRG or to have the
same designation as the predecessor code.
We are making available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html
the following tables associated with this final rule:
Table 6A.--New Diagnosis Codes--FY 2023
Table 6B.--New Procedure Codes--FY 2023
Table 6C.--Invalid Diagnosis Codes--FY 2023
Table 6D.--Invalid Procedure Codes--FY 2023
Table 6E.--Revised Diagnosis Code Titles--FY 2023
Table 6G.1.--Secondary Diagnosis Order Additions to the CC
Exclusions List--FY 2023
Table 6G.2.--Principal Diagnosis Order Additions to the CC
Exclusions List--FY 2023
Table 6H.1.--Secondary Diagnosis Order Deletions to the CC
Exclusions List--FY 2023
Table 6H.2.--Principal Diagnosis Order Deletions to the CC
Exclusions List--FY 2023
Table 6I.--Complete MCC List--FY 2023
Table 6I.1.--Additions to the MCC List--FY 2023
Table 6I.2.--Deletions to the MCC List--FY 2023
Table 6J.--Complete CC List--FY 2023
Table 6J.1.--Additions to the CC List--FY 2023
Table 6J.2.--Deletions to the CC List--FY 2023
Table 6K.--Complete List of CC Exclusions--FY 2023.
15. Changes to the Medicare Code Editor (MCE)
The Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare claims data. Patient
diagnoses, procedure(s), and demographic information are entered into
the Medicare claims processing systems and are subjected to a series of
automated screens. The MCE screens are designed to identify cases that
require further review before classification into an MS-DRG.
As discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44936),
we made available the FY 2022 ICD-10 MCE Version 39 manual file. The
manual contains the definitions of the Medicare code edits, including a
description of each coding edit with the corresponding diagnosis and
procedure code edit lists. The link to this MCE manual file, along with
the link to the mainframe and computer software for the MCE Version 39
(and ICD-10 MS-DRGs) are posted on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
In the FY 2023 IPPS/LTCH PPS proposed rule, we discussed the
proposals we were making based on our internal review and analysis. We
noted that we did not receive any specific MCE requests by the November
1, 2021 deadline. In this FY 2023 IPPS/LTCH PPS final rule, we present
a summation of the comments we received in response to the MCE
proposals presented based on internal review and analyses in the
proposed rule, our responses to those comments, and our finalized
policies.
In addition, as a result of new and modified code updates approved
after the annual spring ICD-10 Coordination and Maintenance Committee
meeting, we routinely make changes to the MCE. In the past, in both the
IPPS proposed and final rules, we have only provided the list of
changes to the MCE that were brought to our attention after the prior
year's final rule. We historically have not listed the changes we have
made to the MCE as a result of the new and modified codes approved
after the annual spring ICD-10 Coordination and Maintenance Committee
meeting. These changes are approved too late in the rulemaking schedule
for inclusion in the proposed rule. Furthermore, although our MCE
policies have been described in our proposed and final rules, we have
not provided the detail of each new or modified diagnosis and procedure
code edit in the final rule. However, we make available the finalized
Definitions of Medicare Code Edits (MCE) file. Therefore, we are making
available the FY 2023 ICD-10 MCE Version 40 Manual file, along with the
link to the mainframe and computer software for the MCE Version 40 (and
ICD-10 MS-DRGs), on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
a. External Causes of Morbidity Codes as Principal Diagnosis
In the MCE, the external cause codes (V, W, X, or Y codes) describe
the circumstance causing an injury, not the nature of the injury, and
therefore should not be used as a principal diagnosis.
As discussed in section II.D.14. of the preamble of the proposed
rule and this final rule, Table 6C.--Invalid Diagnosis Codes, lists the
diagnosis codes that are no longer effective as of October 1, 2022.
Included in this table are codes currently subject to the External
causes of morbidity codes as principal diagnosis edit. We proposed to
delete the ICD-10-CM diagnosis codes shown in Table 6P.6a associated
with the proposed rule and available via the internet on the CMS
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS that are currently subject to the External
causes of morbidity codes as principal diagnosis edit since they will
no longer be valid for reporting purposes.
Comment: Commenters agreed with CMS's proposal to remove the
diagnosis codes listed in Table 6P.6a from the External Causes of
Morbidity edit code list since they are no longer valid.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to delete the diagnosis codes listed in Table
6P.6a associated with the proposed rule from the External Causes of
Morbidity edit code list under the ICD-10 MCE Version 40, effective
October 1, 2022.
b. Age Conflict Edit
In the MCE, the Age conflict edit exists to detect inconsistencies
between a patient's age and any diagnosis on the patient's record; for
example, a 5-year-
[[Page 48875]]
old patient with benign prostatic hypertrophy or a 78-year-old patient
coded with a delivery. In these cases, the diagnosis is clinically and
virtually impossible for a patient of the stated age. Therefore, either
the diagnosis or the age is presumed to be incorrect. Currently, in the
MCE, the following four age diagnosis categories appear under the Age
conflict edit and are listed in the manual and written in the software
program:
Perinatal/Newborn--Age 0 years only; a subset of diagnoses
which will only occur during the perinatal or newborn period of age 0
(for example, tetanus neonatorum, health examination for newborn under
8 days old).
Pediatric--Age is 0-17 years inclusive (for example,
Reye's syndrome, routine child health exam).
Maternity--Age range is 9-64 years inclusive (for example,
diabetes in pregnancy, antepartum pulmonary complication).
Adult--Age range is 15-124 years inclusive (for example,
senile delirium, mature cataract).
(1) Maternity Diagnoses
Under the ICD-10 MCE, the Maternity diagnoses category for the Age
conflict edit considers the age range of 9 to 64 years inclusive. For
that reason, the diagnosis codes on this Age conflict edit list would
be expected to apply to conditions or disorders specific to that age
group only.
As discussed in section II.D.14. of the preamble of the proposed
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the
diagnosis codes that have been approved to date which will be effective
with discharges on and after October 1, 2022. We proposed to add new
ICD-10-CM diagnosis codes to the edit code list for the Maternity
diagnoses category as shown in Table 6P.6b associated with the proposed
rule and available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS
under the Age conflict edit.
Comment: Commenters agreed with CMS's proposal to add the diagnosis
codes listed in Table 6P.6b to the Maternity diagnoses edit code list.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add the diagnosis codes as shown in Table
6P.6b associated with the proposed rule to the Maternity diagnoses edit
code list.
In addition, as discussed in section II.D.14. of the preamble of
the proposed rule and this final rule, Table 6C.--Invalid Diagnosis
Codes, lists the diagnosis codes that are no longer effective as of
October 1, 2022. We proposed to delete the following diagnosis codes
from the Maternity diagnoses edit code list.
[GRAPHIC] [TIFF OMITTED] TR10AU22.059
Comment: Commenters agreed with CMS's proposal to remove the
diagnosis codes listed in the previous table from the Maternity
diagnoses edit code list since they are no longer valid.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to remove the diagnosis codes listed in the
previous table from the Maternity diagnoses edit code list under the
ICD-10 MCE Version 40, effective October 1, 2022.
(2) Adult Diagnoses
Under the ICD-10 MCE, the Adult diagnoses category for the Age
conflict edit considers the age range of 15 to 124 years inclusive. For
that reason, the diagnosis codes on this Age conflict edit list would
be expected to apply to conditions or disorders specific to that age
group only.
As discussed in section II.D.14. of the preamble of the proposed
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the
diagnosis codes that have been approved which will be effective with
discharges on and after October 1, 2022. We proposed to add the
following new ICD-10-CM diagnosis codes to the edit code list for the
Adult diagnoses category under the Age conflict edit.
[[Page 48876]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.060
Comment: Commenters agreed with CMS's proposal to add the diagnosis
codes listed in the previous table to the Adult diagnoses edit code
list.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add the diagnosis codes listed in the
previous table to the Adult diagnoses edit code list under the ICD-10
MCE Version 40, effective October 1, 2022.
In addition, as discussed in section II.D.14. of the preamble of
the proposed rule and this final rule, Table 6C.--Invalid Diagnosis
Codes, lists the diagnosis codes that are no longer effective as of
October 1, 2022. We proposed to delete the following codes from the
Adult diagnoses edit code list.
[[Page 48877]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.061
Comment: Commenters agreed with CMS's proposal to remove the
diagnosis codes listed in the previous table from the Adult diagnoses
edit code list since they are no longer valid.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to remove the diagnosis codes listed in the
previous table from the Adult diagnoses edit code list under the ICD-10
MCE Version 40, effective October 1, 2022.
c. Sex Conflict Edit
In the MCE, the Sex conflict edit detects inconsistencies between a
patient's sex and any diagnosis or procedure on the patient's record;
for example, a male patient with cervical cancer (diagnosis) or a
female patient with a prostatectomy (procedure). In both instances, the
indicated diagnosis or the procedure conflicts with the stated sex of
the patient. Therefore, the patient's diagnosis, procedure, or sex is
presumed to be incorrect.
Comment: A commenter requested clarification on how the sex
conflict edits consider patients who identify as transgender.
Response: The sex conflict edit under the MCE is consistent with 45
CFR 170.207(n) which states that birth sex must be coded as Male,
Female or Unknown. Gender identity is a separate data element under 45
CFR 170.207(o). We note that any proposed changes to account for gender
identity on the CMS-1450 form would need to be submitted to the
National Uniform Billing Committee (NUBC) for consideration.
Comment: Another commenter expressed concerns about the existing
ICD-10 codes and edits that appear to be sex specific (that is, male
only or female only). According to the commenter, reporting of these
codes for patients who identify as transgender may result in treatment
being delayed or denied. The commenter acknowledged the necessity in
aligning a patient's historical health data with that of their gender
identity and personal anatomy, however, according to the commenter,
removal of sex specific codes from the MCE would be beneficial for
nonbinary people as well.
Another commenter stated that transgender individuals may be
alienated and deterred from seeking medical care in the future as a
result of inappropriate claims denial due to the Sex conflict edit. The
commenter stated that obstetricians-gynecologists specifically have
conveyed the need to document and report a patient's gender identity in
combination with their sex to provide quality, patient-centered care.
The commenter also stated they have made recommendations to the Office
of the National Coordinator for Health Information Technology (ONC) to
include the data element ``gender'' in its minimum certification
criteria for electronic health records. The commenter recommended that
CMS work with ONC to ensure that automated claim editors, like the MCE,
do not require obstetrician-gynecologists and other health care
professionals to misrepresent their patients' genders to provide the
appropriate clinical care. Lastly, the commenter encouraged CMS to
continue its efforts to reduce the administrative burden by adapting
the MCE and other systems to fit the needs of all physicians and their
patients.
Response: We appreciate the commenters' feedback. We intend to
explore alternative options that may help to address the challenges
described by the commenters with claims processing for individuals who
identify as transgender or nonbinary.. We are interested in feedback
and comments on other ways for which these issues could be considered
from a process, systems and operational perspective. Comments should be
directed to the new electronic intake system, Medicare Electronic
Application Request Information SystemTM
(MEARISTM), discussed in section II.D.1.b of the preamble of
the proposed rule and this final rule at: https://mearis.cms.gov/public/home by October 20, 2022
(1) Diagnoses for Females Only Edit
As discussed in section II.D.14. of the preamble of the proposed
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the new
diagnosis codes that have been approved to date which will be effective
with discharges on and after October 1, 2022. We proposed to add new
ICD-10-CM diagnosis codes to the edit code list for the Diagnoses for
females only category as shown in Table 6P.6c associated with the
proposed rule and available via the internet on the CMS website at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS under the Sex conflict edit.
Comment: Commenters agreed with CMS's proposal to add the diagnosis
codes listed in Table 6P.6c to the Diagnoses for females only edit code
list.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add the diagnosis codes as shown in Table
6P.6c associated with the proposed rule to the Diagnoses for females
only edit code list.
In addition, as discussed in section II.D.14. of the preamble of
the proposed rule and this final rule, Table 6C.--Invalid Diagnosis
Codes, lists the diagnosis codes that are no longer effective as of
October 1, 2022. We proposed to delete the following codes from the
Diagnoses for females only edit code list.
[[Page 48878]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.062
Comment: Commenters agreed with CMS's proposal to remove the
diagnosis codes listed in the previous table from the Diagnoses for
females only edit code list since they are no longer valid.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to remove the diagnosis codes listed in the
previous table from the Diagnoses for female only edit code list under
the ICD-10 MCE Version 40, effective October 1, 2022.
(2) Procedures for Males Only
As discussed in section II.D.14. of the preamble of the proposed
rule and this final rule, Table 6B.--New Procedure Codes, lists the new
procedure codes that have been approved to date which will be effective
with discharges on and after October 1, 2022. Included in this table
are the following procedure codes we proposed to add to the edit code
list for the Procedures for males only category under the Sex conflict
edit.
[GRAPHIC] [TIFF OMITTED] TR10AU22.063
Comment: Commenters agreed with CMS's proposal to add the diagnosis
codes listed in the previous table to the Procedures for males only
edit code list.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add the diagnosis codes listed in the
previous table to the Procedures for males only
[[Page 48879]]
edit code list under the ICD-10 MCE Version 40, effective October 1,
2022.
d. Manifestation Code as Principal Diagnosis Edit
In the ICD-10-CM classification system, manifestation codes
describe the manifestation of an underlying disease, not the disease
itself, and therefore should not be used as a principal diagnosis.
As discussed in section II.D.14. of the preamble of the proposed
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the new
diagnosis codes that have been approved which will be effective with
discharges on and after October 1, 2022. Included in this table are the
following new ICD-10-CM diagnosis codes that we proposed to add to the
edit code list for the Manifestation code as principal diagnosis edit,
because the disease itself would be required to be reported first.
[GRAPHIC] [TIFF OMITTED] TR10AU22.064
Comment: Commenters agreed with CMS's proposal to add the diagnosis
codes listed in the previous table to the Manifestation code as
principal diagnosis edit code list.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add the diagnosis codes listed in the
previous table to the Manifestation code as principal diagnosis edit
code list under the ICD-10 MCE Version 40, effective October 1, 2022.
In addition, as discussed in section II.D.14. of the preamble of
the proposed rule and this final rule, Table 6C.--Invalid Diagnosis
Codes, lists the diagnosis codes that are no longer effective as of
October 1, 2022. Included in this table is ICD-10-CM diagnosis code
F02.81 (Dementia in other diseases classified elsewhere with behavioral
disturbance), that is currently listed on the edit code list for the
Manifestation code as principal diagnosis edit. We proposed to delete
this code from the Manifestation code as principal diagnosis edit code
list.
Comment: Commenters agreed with CMS's proposal to remove diagnosis
code F02.81 from the Manifestation code as principal diagnosis edit
code list since it is no longer valid.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to remove diagnosis code F02.81 from the
Manifestation code as principal diagnosis edit code list under the ICD-
10 MCE Version 40, effective October 1, 2022.
e. Unacceptable Principal Diagnosis Edit
In the MCE, there are select codes that describe a circumstance
which influences an individual's health status but does not actually
describe a current illness or injury. There also are codes that are not
specific manifestations but may be due to an underlying cause. These
codes are considered unacceptable as a principal diagnosis. In limited
situations, there are a few codes on the MCE Unacceptable Principal
Diagnosis edit code list that are considered ``acceptable'' when a
specified secondary diagnosis is also coded and reported on the claim.
As discussed in section II.D.14. of the preamble of the proposed
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the new
diagnosis codes that have been approved which will be effective with
discharges on and after October 1, 2022. Additionally, as discussed in
section II.D.1.b of the preamble of the proposed rule and this final
rule, we provided a test version of the ICD-10 MS-DRG GROUPER Software,
Version 40, so that the public could better analyze and understand the
[[Page 48880]]
impact of the proposals included in the proposed rule. We noted that at
the time of the development of the test software, a subset of the
listed codes (F01.511 through F01.C4) that were proposed for this edit
were unable to be included and therefore, the test software does not
reflect these codes. We proposed to add the following new ICD-10-CM
diagnosis codes to the Unacceptable Principal Diagnosis edit code list.
[GRAPHIC] [TIFF OMITTED] TR10AU22.065
[[Page 48881]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.066
Comment: Commenters agreed with our proposal to add the diagnosis
codes listed in the previous table to the Unacceptable Principal
Diagnosis edit code list.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add the diagnosis codes listed in the
previous table to the Unacceptable Principal Diagnosis edit code list
under the ICD-10 MCE Version 40, effective October 1, 2022.
In addition, as discussed in section II.D.14. of the preamble of
the proposed rule and this final rule, Table 6C.--Invalid Diagnosis
Codes, lists the diagnosis codes that are no longer effective as of
October 1, 2022. We proposed to delete the following codes from the
Unacceptable Principal Diagnosis edit code list.
[GRAPHIC] [TIFF OMITTED] TR10AU22.067
Comment: Commenters agreed with CMS's proposal to remove diagnosis
codes Z87.76, Z91.11, and Z91.19 from the Unacceptable principal
diagnosis edit code list since they are no longer valid.
Response: We appreciate the commenters' support. After
consideration of the public comments we received, we are finalizing our
proposal to remove the diagnosis codes listed in the previous table
from the Unacceptable Principal Diagnosis edit code list under the ICD-
10 MCE Version 40, effective October 1, 2022.
[[Page 48882]]
f. Unspecified Code
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44940 through
44943), we finalized the implementation of a new Unspecified code edit,
effective with discharges on and after April 1, 2022. Unspecified codes
exist in the ICD-10-CM classification for circumstances when
documentation in the medical record does not provide the level of
detail needed to support reporting a more specific code. However, in
the inpatient setting, there should generally be very limited and rare
circumstances for which the laterality (right, left, bilateral) of a
condition is unable to be documented and reported.
As discussed in section II.D.14. of the preamble of the proposed
rule and this final rule, Table 6A.--New Diagnosis Codes, lists the new
diagnosis codes that have been approved to date which will be effective
with discharges on and after October 1, 2022. We proposed to add the
following new ICD-10-CM diagnosis codes to the Unspecified code edit
code list.
[GRAPHIC] [TIFF OMITTED] TR10AU22.068
Comment: Commenters agreed with our proposal to add the diagnosis
codes listed in the previous table to the Unspecified code edit code
list.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add the diagnosis codes listed in the
previous table to the Unspecified code edit code list under the ICD-10
MCE Version 40, effective October 1, 2022.
g. Future Enhancement
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38053 through 38054)
we noted the importance of ensuring accuracy of the coded data from the
reporting, collection, processing, coverage, payment and analysis
aspects. Subsequently, in the FY 2019 IPPS/LTCH PPS proposed rule (83
FR 20235) we stated that we engaged a contractor to assist in the
review of the limited coverage and non-covered procedure edits in the
MCE that may also be present in other claims processing systems that
are utilized by our MACs. The MACs must adhere to criteria specified
within the National Coverage Determinations (NCDs) and may implement
their own edits in addition to what is already incorporated into the
MCE, resulting in duplicate edits. The objective of this review is to
identify where duplicate edits may exist and to determine what the
impact might be if these edits were to be removed from the MCE.
We have also noted that the purpose of the MCE is to ensure that
errors and inconsistencies in the coded data are recognized during
Medicare claims processing. As we indicated in the FY 2019 IPPS/LTCH
PPS final rule (83 FR 41228), we are considering whether the inclusion
of coverage edits in the MCE necessarily aligns with that specific goal
because the focus of coverage edits is on whether or not a particular
service is covered for payment purposes and not whether it was coded
correctly.
Comment: A few commenters requested that CMS continue to include
the existing coverage edits in the MCE. According to the commenters,
the MACs software and systems may not be consistently updated and
current, therefore, coding edits may trigger erroneously only to be
dismissed on appeal when it is discovered that the code in question is
covered under an NCD. The commenters stated their belief that the
national MCE provides important safeguards for claims processing and
coverage.
Response: We appreciate the commenters' feedback.
As we continue to evaluate the purpose and function of the MCE with
respect to ICD-10, we encourage public input for future discussion. As
we have discussed in prior rulemaking, we recognize a need to further
examine the current list of edits and the definitions of those edits.
We continue to encourage public comments on whether there are
additional concerns with the current edits, including specific edits or
language that should be removed or revised, edits that should be
combined, or new edits that should be added to assist in detecting
errors or inaccuracies in the coded data. Comments should be directed
to the new electronic intake system, Medicare Electronic Application
Request Information SystemTM (MEARISTM),
discussed in section II.D.1.b of the preamble of the proposed rule and
this final rule at: https://mearis.cms.gov/public/home by October 20,
2022.
16. Changes to Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different MS-DRG within the MDC to which the principal diagnosis
is assigned. Therefore, it is necessary to have a decision rule within
the GROUPER by which these cases are assigned to a single MS-DRG. The
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function.
Application of this hierarchy ensures that cases involving multiple
surgical procedures are assigned to the MS-DRG associated with the most
resource-intensive surgical class.
A surgical class can be composed of one or more MS-DRGs. For
example, in MDC 11, the surgical class ``kidney transplant'' consists
of a single MS-DRG (MS-DRG 652) and the class ``major bladder
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact on
more than one MS-DRG. The methodology for determining the most
resource-intensive surgical class involves weighting the average
resources for each MS-DRG by frequency to determine the weighted
average resources for each surgical class. For example, assume surgical
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To
determine whether surgical class A should be higher or lower than
surgical class B in the surgical hierarchy, we would weigh the
[[Page 48883]]
average costs of each MS-DRG in the class by frequency (that is, by the
number of cases in the MS-DRG) to determine average resource
consumption for the surgical class. The surgical classes would then be
ordered from the class with the highest average resource utilization to
that with the lowest, with the exception of ``other O.R. procedures''
as discussed in this final rule.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted MS-DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, in cases involving multiple
procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average cost is
ordered above a surgical class with a higher average cost. For example,
the ``other O.R. procedures'' surgical class is uniformly ordered last
in the surgical hierarchy of each MDC in which it occurs, regardless of
the fact that the average costs for the MS-DRG or MS-DRGs in that
surgical class may be higher than those for other surgical classes in
the MDC. The ``other O.R. procedures'' class is a group of procedures
that are only infrequently related to the diagnoses in the MDC, but are
still occasionally performed on patients with cases assigned to the MDC
with these diagnoses. Therefore, assignment to these surgical classes
should only occur if no other surgical class more closely related to
the diagnoses in the MDC is appropriate.
A second example occurs when the difference between the average
costs for two surgical classes is very small. We have found that small
differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the hierarchy
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered
below it.
Based on the changes that we proposed to make for FY 2023, as
discussed in section II.D. of the preamble of the proposed rule and
this final rule, we are maintaining the existing surgical hierarchy for
FY 2023.
17. Maintenance of the ICD-10-CM and ICD-10-PCS Coding Systems
In September 1985, the ICD-9-CM Coordination and Maintenance
Committee was formed. This is a Federal interdepartmental committee,
co-chaired by the Centers for Disease Control and Prevention's (CDC)
National Center for Health Statistics (NCHS) and CMS, charged with
maintaining and updating the ICD-9-CM system. The final update to ICD-
9-CM codes was made on October 1, 2013. Thereafter, the name of the
Committee was changed to the ICD-10 Coordination and Maintenance
Committee, effective with the March 19-20, 2014 meeting. The ICD-10
Coordination and Maintenance Committee addresses updates to the ICD-10-
CM and ICD-10-PCS coding systems. The Committee is jointly responsible
for approving coding changes, and developing errata, addenda, and other
modifications to the coding systems to reflect newly developed
procedures and technologies and newly identified diseases. The
Committee is also responsible for promoting the use of Federal and non-
Federal educational programs and other communication techniques with a
view toward standardizing coding applications and upgrading the quality
of the classification system.
The official list of ICD-9-CM diagnosis and procedure codes by
fiscal year can be found on the CMS website at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The official
list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS website
at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM
diagnosis codes included in the Tabular List and Alphabetic Index for
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index
for Procedures.
The ICD-10 Coordination and Maintenance Committee holds its
meetings in the spring and fall to update the codes and the applicable
payment and reporting systems by October 1 or April 1 of each year.
Items are placed on the agenda for the Committee meeting if the request
is received at least 3 months prior to the meeting. This requirement
allows time for staff to review and research the coding issues and
prepare material for discussion at the meeting. It also allows time for
the topic to be publicized in meeting announcements in the Federal
Register as well as on the CMS website.
The Committee encourages participation in the previously mentioned
process by health- related organizations and other interested parties.
In this regard, the Committee holds public meetings for discussion of
educational issues and proposed coding changes. These meetings provide
an opportunity for representatives of recognized organizations in the
coding field, such as the American Health Information Management
Association (AHIMA), the American Hospital Association (AHA), and
various physician specialty groups, as well as individual physicians,
health information management professionals, and other members of the
public, to contribute ideas on coding matters. After considering the
opinions expressed during the public meetings and in writing, the
Committee formulates recommendations, which then must be approved by
the agencies. A complete addendum describing details of all diagnosis
and procedure coding changes, both tabular and index, is published on
the CMS and NCHS websites in June of each year. Publishers of coding
books and software use this information to modify their products that
are used by health care providers.
The Committee presented proposals for coding changes for
implementation in FY 2023 at a public meeting held on September 14-15,
2021 and finalized the coding changes after consideration of comments
received at the meetings and in writing by November 15, 2021.
The Committee held its 2022 meeting on March 8-9, 2022. The
deadline for submitting comments on the procedure code proposals that
are being considered for an October 1, 2022 implementation was April 8,
2022. The deadline for submitting comments on the diagnosis code
proposals that are being considered for an October 1, 2023
implementation was May 9, 2022. It was announced at this meeting that
any new diagnosis and procedure codes for which there was consensus of
public support and for which complete tabular and indexing changes
would be made by June 2022 would be included in the October 1, 2022
update to the ICD-10-CM diagnosis and ICD-10-PCS procedure code sets.
It was also announced at this meeting that we are changing the process
for submitting requested updates to the ICD-10-PCS classification,
beginning with the procedure code requests submitted for consideration
for the September 13-14, 2022 ICD-10 Coordination and Maintenance
Committee Meeting. As stated in section II.D.1.b. of the preamble of
the proposed rule and this final rule, CMS is in the process of
implementing a new electronic application intake system, MEARIS\TM\.
Effective January 5, 2022, MEARIS\TM\ became available as an initial
release for users to begin gaining familiarity with a
[[Page 48884]]
new approach and process to submit ICD-10-PCS procedure code requests.
Information on this new approach for submitting an ICD-10-PCS code
request can be accessed at: https://mearis.cms.gov. Effective March 1,
2022, the full release of MEARIS\TM\ became active for ICD-10-PCS code
request submissions. ICD-10-PCS code request submissions were due no
later than June 10, 2022 to be considered for the September 13-14, 2022
ICD-10 Coordination and Maintenance Committee Meeting. Moving forward,
CMS will only accept ICD-10-PCS code requests submitted via MEARIS\TM\.
Requests submitted through the ICDProcedureCodeRequest mailbox will no
longer be considered. Within MEARIS\TM\, we have built in several
resources to support users, including a ``Resources'' section
(available at https://mearis.cms.gov/public/resources) and technical
support available under ``Useful Links'' at the bottom of the
MEARIS\TM\ site. Questions regarding MEARIS\TM\ can be submitted to CMS
using the form available under ``Contact'' at: https://mearis.cms.gov/public/resources.
As discussed in earlier sections of the preamble of this final
rule, there are new, revised, and deleted ICD-10-CM diagnosis codes and
ICD-10-PCS procedure codes that are captured in Table 6A.--New
Diagnosis Codes, Table 6B.--New Procedure Codes, Table 6C.--Invalid
Diagnosis Codes, Table 6D.--Invalid Procedure Codes, and Table 6E.--
Revised Diagnosis Code Titles for this final rule, which are available
via the internet on the CMS website at: https://www.cms.gov/medicare/
medicare-fee-for-service-payment/acuteinpatientpps. The code titles are
adopted as part of the ICD-10 Coordination and Maintenance Committee
process. Therefore, although we make the code titles available through
tables in association with the IPPS proposed and final rules, they are
not subject to comment in the proposed or final rule. Because of the
length of these tables, they are not published in the Addendum to the
proposed or final rule. Rather, they are available via the internet as
discussed in section VI. of the Addendum to the proposed rule and this
final rule.
Recordings for the virtual meeting discussions of the procedure
codes at the Committee's September 14-15, 2021 meeting and the March 8-
9, 2022 meeting can be obtained from the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials. The
materials for the discussions relating to diagnosis codes at the
September 14-15, 2021 meeting and March 8-9, 2022 meeting can be found
through the CDC website at: http://www.cdc.gov/nchs/icd/icd10cm_maintenance.html. These websites also provide detailed
information about the Committee, including information on requesting a
new code, participating in a Committee meeting, timeline requirements
and meeting dates.
We encourage commenters to submit questions and comments on coding
issues involving diagnosis codes via Email to: [email protected].
Questions and comments concerning the procedure codes should be
submitted via Email to: [email protected].
We stated in the proposed rule that as a result of the ongoing
COVID-19 public health emergency, the CDC implemented three new
diagnosis codes describing immunization status related to COVID-19 into
the ICD-10-CM effective with discharges on and after April 1, 2022.
The diagnosis codes are as follows:
[GRAPHIC] [TIFF OMITTED] TR10AU22.069
We refer the reader to the CDC web page at https://www.cdc.gov/nchs/icd/icd10cm.htm for additional details regarding the
implementation of these new diagnosis codes.
As discussed in the proposed rule, we provided the MS-DRG
assignments for the three diagnosis codes effective with discharges on
and after April 1, 2022, consistent with our established process for
assigning new diagnosis codes. Specifically, we review the predecessor
diagnosis code and MS-DRG assignment most closely associated with the
new diagnosis code, and consider other factors that may be relevant to
the MS-DRG assignment, including the severity of illness, treatment
difficulty, and the resources utilized for the specific condition/
diagnosis. We note that this process does not automatically result in
the new diagnosis code being assigned to the same MS-DRG as the
predecessor code. The assignments for the previously listed diagnosis
codes are reflected in Table 6A.--New Diagnosis Codes associated with
the proposed rule and available via the internet on the CMS website at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. As with the other new diagnosis codes and MS-DRG
assignments included in Table 6A in association with the proposed rule,
we solicited public comments on the most appropriate MDC, MS-DRG, and
severity level assignments for these codes for FY 2023, as well as any
other options for the GROUPER logic.
We did not receive any comments opposing the MDC, MS-DRG, and
severity level assignments for the listed codes and are therefore,
finalizing the assignments as reflected in Table 6A.--New Diagnosis
Codes in association with this final rule.
In addition, we noted in the proposed rule that CMS implemented
nine new procedure codes describing the introduction or infusion of
therapeutics, including vaccines for COVID-19prevention, into the ICD-
10-PCS effective with discharges on and after April 1, 2022. The nine
procedure codes listed in this section of this rule are designated as
non-O.R. and do not affect any MDC or MS-DRG assignment as shown in the
following table.
[[Page 48885]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.070
The ICD-10 MS-DRG assignment for cases reporting any one of the
nine procedure codes is dependent on the reported principal diagnosis,
any secondary diagnoses defined as a CC or MCC, procedures or services
performed, age, sex, and discharge status. The nine procedure codes are
reflected in Table 6B.--New Procedure Codes in association with the
proposed rule and available via the internet on the CMS website at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. As with the other new procedure codes and MS-DRG
assignments included in Table 6B in association with the proposed rule,
we solicited public comments on the most appropriate MDC, MS-DRG, and
operating room status assignments for these codes for FY 2023, as well
as any other options for the GROUPER logic.
We did not receive any comments opposing the MDC, MS-DRG, and
operating room status assignments for the listed codes and are
therefore, finalizing the assignments as reflected in Table 6B.--New
Procedure Codes in association with this final rule.
In the proposed rule we also noted that Change Request (CR) 12578,
Transmittal 11174, titled ``April 2022 Update to the Medicare
Severity--Diagnosis Related Group (MS-DRG) Grouper and Medicare Code
Editor (MCE) Version 39.1 for the International Classification of
Diseases, Tenth Revision (ICD-10) Diagnosis Codes for 2019 Novel
Coronavirus (COVID-19) Vaccination Status and ICD-10 Procedure Coding
System (PCS) Codes for Introduction or Infusion of Therapeutics and
Vaccines for COVID-19 Treatment'', was issued on January 14, 2022
(available via the internet on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r11174cp)
regarding the release of an updated version of the ICD-10 MS-DRG
GROUPER and Medicare Code Editor software, Version 39.1, effective with
discharges on and after April 1, 2022, reflecting the new diagnosis and
procedure codes. The updated software, along with the updated ICD-10
MS-DRG V39.1 Definitions Manual and the Definitions of Medicare Code
Edits V39.1 manual is available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
In the September 7, 2001 final rule implementing the IPPS new
technology add-on payments (66 FR 46906), we indicated we would attempt
to include proposals for procedure codes that would describe new
technology discussed and approved at the Spring meeting as part of the
code revisions effective the following October.
Section 503(a) of Public Law 108-173 included a requirement for
updating diagnosis and procedure codes twice a year instead of a single
update on October 1 of each year. This requirement was included as part
of the amendments to the Act relating to recognition of new technology
under the IPPS. Section 503(a) of Public Law 108-173 amended section
1886(d)(5)(K) of the Act by adding a clause (vii) which states that the
Secretary shall provide for the addition of new diagnosis and procedure
codes on April 1 of each year, but the addition of such codes shall not
require the Secretary to adjust the payment (or diagnosis-related group
[[Page 48886]]
classification) until the fiscal year that begins after such date. This
requirement improves the recognition of new technologies under the IPPS
by providing information on these new technologies at an earlier date.
Data will be available 6 months earlier than would be possible with
updates occurring only once a year on October 1.
In the FY 2005 IPPS final rule, we implemented section
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law
108-173, by developing a mechanism for approving, in time for the April
update, diagnosis and procedure code revisions needed to describe new
technologies and medical services for purposes of the new technology
add-on payment process. We also established the following process for
making those determinations. Topics considered during the Fall ICD-10
(previously ICD-9-CM) Coordination and Maintenance Committee meeting
were considered for an April 1 update if a strong and convincing case
was made by the requestor during the Committee's public meeting. The
request needed to identify the reason why a new code was needed in
April for purposes of the new technology process. Meeting participants
and those reviewing the Committee meeting materials were provided the
opportunity to comment on the expedited request. We refer the reader to
the FY 2022 IPPS/LTCH PPS final rule (86 FR 44950) for further
discussion of the implementation of this prior April 1 update for
purposes of the new technology add-on payment process.
However, as discussed in the FY 2022 IPPS/LTCH PPS final rule (86
FR 44950 through 44956), we adopted an April 1 implementation date, in
addition to the annual October 1 update, beginning with April 1, 2022.
We noted that the intent of this April 1 implementation date is to
allow flexibility in the ICD-10 code update process. With this new
April 1 update, CMS now uses the same process for consideration of all
requests for an April 1 implementation date, including for purposes of
the new technology add-on payment process (that is, the prior process
for consideration of an April 1 implementation date only if a strong
and convincing case was made by the requestor during the meeting no
longer applies). We are continuing to use several aspects of our
existing established process to implement new codes through the April 1
code update, which includes presenting proposals for April 1
consideration at the September ICD-10 Coordination and Maintenance
Committee meeting, requesting public comments, reviewing the public
comments, finalizing codes, and announcing the new codes with their
assignments consistent with the new GROUPER release information. We
note that under our established process, requestors indicate whether
they are submitting their code request for consideration for an April 1
implementation date or an October 1 implementation date. The ICD-10
Coordination and Maintenance Committee makes efforts to accommodate the
requested implementation date for each request submitted. However, the
Committee determines which requests are to be presented for
consideration for an April 1 implementation date or an October 1
implementation date. As discussed earlier in this section of the
preamble of this final rule, there were code proposals presented for an
expedited April 1, 2022 implementation at the September 14-15, 2021
Committee meetings that involved treatments related to the COVID-19
PHE. One of these code proposals was also in connection with a request
for a new technology add-on payment application. Following the receipt
of public comments, the code proposals were approved and finalized,
therefore, there were new codes implemented April 1, 2022.
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule, consistent
with the process we outlined for the April 1 implementation date, we
announced the new codes in November 2021 and provided the updated code
files and ICD-10-CM Official Guidelines for Coding and Reporting in
December 2021. On January 24, 2022 the Federal Register notice for the
March 8-9, 2022 ICD-10 Coordination and Maintenance Committee Meeting
was published that includes the tentative agenda and identifies which
topics are related to a new technology add-on payment application. By
February 1, 2022 we made available the updated V39.1 ICD-10 MS-DRG
Grouper software and related materials via the internet on CMS web page
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
Comment: A few commenters expressed concerns with the meeting
process and timing for the implementation of new ICD-10-CM diagnosis
codes by the CDC/NCHS. The commenters urged CMS to work with the CDC/
NCHS on expediting the finalization of proposed new diagnosis codes in
light of the option to implement codes on April 1. Another commenter
expressed support for the ability of an April implementation and
expedited diagnosis codes to improve reporting and health equity. The
commenter requested that CMS consider utilizing this April 1 pathway to
advance the Agency's and the health care system's equity goals,
specifically for diagnosis codes that describe social and economic
circumstances to more accurately reflect health care encounters and
episodes of care while also contributing to reliability and validity of
coded claims data.
Response: We thank the commenters for the feedback. As we have
noted in prior rulemaking (85 FR 58556) the CDC/NCHS has lead
responsibility for the ICD-10-CM diagnosis classification while CMS has
lead responsibility for the ICD-10-PCS procedure classification. Each
organization has their own established process in responding to
requests for code updates, including when specific topics may appear on
the agenda of an ICD-10 Coordination and Maintenance Committee meeting
and the fiscal year in which code proposals are considered for
implementation.
ICD-9-CM addendum and code title information is published on the
CMS website at: https://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/addendum. ICD-10-CM and ICD-10-PCS addendum
and code title information is published on the CMS website at: https://www.cms.gov/medicare/coding/icd10. CMS also sends electronic files
containing all ICD-10-CM and ICD-10-PCS coding changes to its Medicare
contractors for use in updating their systems and providing education
to providers. Information on ICD-10-CM diagnosis codes, along with the
Official ICD-10-CM Coding Guidelines, can be found on the CDC website
at: https://www.cdc.gov/nchs/icd/icd10cm.htm. Additionally, information
on new, revised, and deleted ICD-10-CM diagnosis and ICD-10-PCS
procedure codes is provided to the AHA for publication in the Coding
Clinic for ICD-10. The AHA also distributes coding update information
to publishers and software vendors.
In the proposed rule we noted that for FY 2022, there are currently
72,750 diagnosis codes and 78,229 procedure codes. We also noted that
as displayed in Table 6A.--New Diagnosis Codes and in Table 6B.--New
Procedure Codes associated with the proposed rule (and available via
the internet on the CMS website at https://www.cms.gov/medicare/
medicare-fee-for-service-payment/acuteinpatientpps), there were 1,176
new diagnosis codes and 45 new
[[Page 48887]]
procedure codes that had been finalized for FY 2023 at the time of the
development of the proposed rule. As discussed in section II.D.14 of
the preamble of this final rule, we are making available Table 6A.--New
Diagnosis Codes, Table 6B.--New Procedure Codes, Table 6C.--Invalid
Diagnosis Codes, Table 6D.--Invalid Procedure Codes and Table 6E.--
Revised Diagnosis Code Titles via the internet on the CMS website at:
https://www.cms.gov/medicare/medicare-fee-for-service-payment/
acuteinpatientpps in association with this final rule. As shown in
Table 6B.--New Procedure Codes, there were procedure codes discussed at
the March 8-9, 2022 ICD-10 Coordination and Maintenance Committee
meeting that were not finalized in time to include in the proposed rule
and are identified with an asterisk. We refer the reader to Table 6B.--
New Procedure Codes associated with this final rule and available via
the internet on the CMS website at: https://www.cms.gov/medicare/
medicare-fee-for-service-payment/acuteinpatientpps for the detailed
list of these additional 286 new procedure codes. The addition of these
286 new procedure codes to the 45 procedure codes that had been
finalized at the time of the development of the proposed rule results
in a total of 331 (45 + 286 = 331) new procedure codes for FY 2023.
We also note, as reflected in Table 6C.--Invalid Diagnosis Codes
and in Table 6D.--Invalid Procedure Codes, there are a total of 287
diagnosis codes and 64 procedure codes that will become invalid
effective October 1, 2022. Based on these code updates, effective
October 1, 2022, there are a total of 73,639 ICD-10-CM diagnosis codes
and 78,496 ICD-10-PCS procedure codes for FY 2023 as shown in the
following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.071
As stated previously, the public is provided the opportunity to
comment on any requests for new diagnosis or procedure codes discussed
at the ICD-10 Coordination and Maintenance Committee meeting. The code
titles are adopted as part of the ICD-10 Coordination and Maintenance
Committee process. Thus, although we publish the code titles in the
IPPS proposed and final rules, they are not subject to comment in the
proposed or final rules.
18. Replaced Devices Offered Without Cost or With a Credit
a. Background
In the FY 2008 IPPS final rule with comment period (72 FR 47246
through 47251), we discussed the topic of Medicare payment for devices
that are replaced without cost or where credit for a replaced device is
furnished to the hospital. We implemented a policy to reduce a
hospital's IPPS payment for certain MS-DRGs where the implantation of a
device that subsequently failed or was recalled determined the base MS-
DRG assignment. At that time, we specified that we will reduce a
hospital's IPPS payment for those MS-DRGs where the hospital received a
credit for a replaced device equal to 50 percent or more of the cost of
the device.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through
51557), we clarified this policy to state that the policy applies if
the hospital received a credit equal to 50 percent or more of the cost
of the replacement device and issued instructions to hospitals
accordingly.
b. Changes for FY 2023
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule, for FY
2023 we proposed not to add any MS-DRGs to the policy for replaced
devices offered without cost or with a credit. We proposed to continue
to include the existing MS-DRGs currently subject to the policy as
displayed in the following table.
[[Page 48888]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.072
[GRAPHIC] [TIFF OMITTED] TR10AU22.073
We did not receive any public comments opposing our proposal to
continue to include the existing MS-DRGs currently subject to the
policy. Therefore, we are finalizing the list of MS-DRGs in the table
included in the proposed rule and in this final rule that will be
subject to the replaced devices offered without cost or with a credit
policy effective October 1, 2022. The final list of MS-DRGs subject to
the IPPS policy for replaced devices offered without cost or with a
credit will be issued to providers in the form of a Change Request
(CR).
19. Other Policy Issues
a. Comment Solicitation on Possible Mechanisms To Address Rare Diseases
and Conditions Represented by Low Volumes Within the MS-DRG Structure
As discussed in section II.D.13.d of the preamble of the proposed
rule and this final rule, we solicited public
[[Page 48889]]
comments involving how the reporting of certain diagnosis codes may
improve our ability to recognize severity of illness, complexity of
service, and utilization of resources under the MS-DRGs, as well as
feedback on mechanisms to improve the reliability and validity of the
coded data as part of an ongoing effort across CMS to evaluate and
develop policies to reduce health disparities. In concert with that
effort, as discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28195 through 28197) we also solicited comments to explore possible
mechanisms through which we could address rare diseases and conditions
that are represented by low volumes in our claims data.
We stated in the FY 2023 proposed rule that one subset of our
beneficiary population for which we sought comment on potential issues
related to patient access in the inpatient setting were patients
diagnosed with rare diseases and conditions that are represented by low
volumes in our claims data. We noted that the Orphan Drug Act (ODA)
added section 526(a)(2)(B) to the Federal Food, Drug, and Cosmetic Act
(21 U.S.C. 360bb(a)(2)(B)), defining a rare disease or condition as
``any disease or condition which (A) affects less than 200,000 persons
in the United States, or (B) affects more than 200,000 in the United
States and for which there is no reasonable expectation that the cost
of developing and making available in the United States a drug for such
disease or condition will be recovered from sales in the United States
of such drug.'' Most rare diseases, however, affect far fewer people.
The Genetic and Rare Diseases Information Center (GARD), which was
created in 2002 by the National Institutes of Health (NIH) Office of
Rare Diseases Research, estimates that there are as many as 7,000
distinct rare diseases. Rare diseases, which can include genetic
diseases, autoimmune conditions, some cancers, and uncommon infections,
are highly diverse, may affect many organ systems and have wide
variations in the rates and patterns of manifestations and progression.
The ODA created a process for the U.S. Food and Drug Administration
(FDA) to identify a drug as a drug developed for the treatment of a
rare disease or condition called ``orphan-drug designation''. The
sponsor of a drug that has orphan drug designation may be eligible for
certain financial incentives, such as tax credits and potentially seven
years of market exclusivity after approval, all of which are intended
to incentivize developing drugs for small numbers of patients. We
stated that we heard from some interested parties, however, that there
may be a number of barriers to providers in treating these patients
with these orphan designated drugs in the Medicare hospital inpatient
setting.
According to these interested parties, one significant barrier that
continues to present challenges to manufacturers is accessing formulary
coverage for potentially high cost therapeutics for rare diseases.
These interested parties stated that hospitals utilize formularies for
inpatient drugs as a cost-management tool that strongly incentivizes
physicians to use on-formulary drugs over off-formulary drugs, whenever
clinically appropriate to do so. A drug formulary is defined as a list
of medications and continually updated related information, that
represents the clinical judgment of pharmacists, physicians, and other
experts in the diagnosis and treatment of disease or promotion of
health. It is often described as a list of medications routinely
stocked by the health care system. These interested parties stated that
although certain therapeutics can be associated with better outcomes
for patients with rare diseases, the lack of access to hospital
formularies represents a hurdle under the IPPS MS-DRGs. According to
these interested parties, when Medicare reimbursement is insufficient
to cover the costs of certain therapeutics that treat patients with
rare diseases, a disincentive can be created in addressing these
conditions.
For the purposes of the comment solicitation in the proposed rule,
we described three selected requests we had received relating to the
MS-DRG classification of rare diseases and conditions that are
represented by low volumes in our claims data.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53311), the FY 2015
IPPS/LTCH PPS final rule (79 FR 49901) and the FY 2019 IPPS/LTCH PPS
final rule (83 FR 41200), we discussed requests we received to revise
the MS-DRG classification for cases of patients diagnosed with
porphyria to recognize the resource requirements in caring for these
patients, to ensure appropriate payment for these cases, and to
preserve patient access to necessary treatments. Porphyria is defined
as a group of rare disorders (``porphyrias'') that interfere with the
production of hemoglobin that is needed for red blood cells. While some
of these disorders are genetic (inborn) and others are acquired, they
all result in the abnormal accumulation of hemoglobin building blocks,
called porphyrins, which can be deposited in the tissues where they
particularly interfere with the functioning of the nervous system and
the skin. Treatment for patients suffering from disorders of porphyrin
metabolism consists of an intravenous injection of Panhematin[supreg]
(hemin for injection).
In the FY 2019 proposed rule, we stated our data analysis showed
that cases reporting diagnosis code E80.21 (Acute intermittent
(hepatic) porphyria) as the principal diagnosis in MS-DRG 642 (Inborn
and Other Disorders of Metabolism) had higher average costs and longer
average lengths of stay compared to the average costs and length of
stay for all other cases in MS-DRG 642. However, after considering
these findings in the context of the current MS-DRG structure, we
stated that we were unable to identify an MS-DRG that would more
closely parallel these cases with respect to average costs and length
of stay that would also be clinically aligned. We further stated that
our clinical advisors believed that, in the current MS-DRG structure,
the clinical characteristics of patients in these cases are most
closely aligned with the clinical characteristics of patients in all
cases in MS-DRG 642. Moreover, given the small number of porphyria
cases, we stated we did not believe there was justification for
creating a new MS-DRG and did not propose to revise the MS-DRG
classification for porphyria cases.
In response, some commenters described significant difficulties
encountered by patients with acute porphyria attacks in obtaining
Panhematin[supreg] when presenting to an inpatient hospital, which they
attributed to the strong financial disincentives faced by facilities to
treat these cases on an inpatient basis. The commenters stated that,
based on the lower than expected average cost per case and longer than
expected length of stay for acute porphyria attacks, it appeared that
facilities were frequently not providing Panhematin[supreg] to patients
in this condition, and instead attempting to provide symptom relief and
transferring patients to an outpatient setting to receive the drug
where they can be adequately paid. The commenters stated that this is
in contrast to the standard of care for acute porphyria attacks and
could result in devastating long-term health consequences.
In the FY 2019 final rule (83 FR 41200), as we have stated in prior
rulemaking, we noted it is not appropriate for facilities to deny
treatment to beneficiaries needing a specific type of therapy or
treatment that involves increased costs. We further noted the MS-DRG
system is a system of averages and it is expected that across
[[Page 48890]]
the diagnostic related groups that within certain groups, some cases
may demonstrate higher than average costs, while other cases may
demonstrate lower than average costs. While we recognized the average
costs of the small number of porphyria cases were greater than the
average costs of the cases in MS-DRG 642 overall, we also noted that an
averaged payment system depends on aggregation of similar cases with a
range of costs, and that we seek to identify sufficiently large sets of
claims data with a resource/cost similarity and clinical similarity in
developing diagnostic-related groups rather than smaller subsets of
diagnoses. We further stated that we were sensitive to the commenters'
concerns about access to treatment for beneficiaries who have been
diagnosed with this condition and we would continue to explore
mechanisms through which to address rare diseases and low volume DRGs.
Similarly, in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44869),
we discussed a request we received to review potential access issues in
the inpatient setting for the administration of ANDEXXA[supreg].
ANDEXXA[supreg] (coagulation factor Xa (recombinant), inactivated-zhzo)
is a recombinant decoy protein that rapidly reverses the anticoagulant
effects of two direct oral anticoagulants, apixaban and rivaroxaban,
when reversal of anticoagulation is needed due to life-threatening or
uncontrolled bleeding in indications such as intracranial hemorrhages
(ICHs) and gastrointestinal bleeds (GIBs). We noted that while our data
findings demonstrated the average costs for the cases reporting the
intravenous administration of ANDEXXA[supreg] were higher when compared
to all cases in their respective MS-DRG, these cases represented a very
small percentage of the total number of cases reported in those MS-
DRGs. We stated we were unable to identify another MS-DRG that would be
a more appropriate MS-DRG assignment for these cases based on the
indication for this therapeutic drug. We also stated that while we were
sensitive to the requestors' concerns about continued access to
treatment for beneficiaries who require the reversal of anticoagulation
due to life-threatening or uncontrolled bleeding, we indicated
additional time was needed to explore options and other mechanisms
through which to address low volume, high-cost drugs outside of the MS-
DRGs.
Lastly, in the proposed rule, we discussed a request we received to
reconsider how cases reporting the administration of Zulresso[supreg]
(brexanolone) are recognized for payment under the ICD-10 MS-DRGs in an
effort to improve access to treatment for maternal mental health. On
March 19, 2019 Zulresso[supreg] (brexanolone) became the first Food and
Drug Administration (FDA) approved drug, specifically for postpartum
depression (PPD) in adults. According to the requestor, PPD is one of
the most common complications during and after pregnancy. The requestor
stated PPD is a serious but manageable disorder and that with early
treatment, the life of the mother, baby, and the entire family could be
positively impacted. The requestor indicated it shares CMS's goals of
addressing disparities in access to care, and urged CMS to take
additional steps to address inequities in women's health by permitting
separate payment for Zulresso[supreg] (brexanolone), in addition to the
MS-DRG payment.
As discussed in the proposed rule, effective with discharges on and
after October 1, 2020, cases reporting the administration of
Zulresso[supreg] in the inpatient setting are identified by ICD-10-PCS
procedure codes XW03306 (Introduction of brexanolone into peripheral
vein, percutaneous approach, new technology group 6) or XW04306
(Introduction of brexanolone into central vein, percutaneous approach,
new technology group 6). These procedure codes are designated as non-O.
R. procedures and do not affect the MS-DRG assignment when reported on
an inpatient claim. We noted that an application for new technology
add-on payment for Zulresso[supreg] (brexanolone) was discussed in the
FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32672 through 32676) and was
not approved, as discussed in the final rule (85 FR 58709 through
58715).
We stated we analyzed claims from the September 2021 update of the
FY 2021 MedPAR file for cases reporting the administration of
Zulresso[supreg] (brexanolone). Our analysis of the claims data
identified only one case reporting the administration of
Zulresso[supreg] (brexanolone) in MS-DRG 870 (Septicemia or Severe
Sepsis with MV >96 Hours) with an average length of stay of 22 days and
average costs of $67,812. For all cases in MS-DRG 870, the average
costs are $55,459 and the average length of stay is 15.9 days. We
stated that while the average length of stay for the case reporting the
administration of Zulresso[supreg] (brexanolone) was greater (22 days
versus 15.9 days) and the average costs were higher ($67,812 versus
$55,459), than all cases in MS-DRG 870 it was unclear if treatment with
Zulresso[supreg] (brexanolone) was the underlying reason for these
factors, given that the MS-DRG assigned is for sepsis and it is not
uncommon for sepsis patients to have multiple co-morbidities and
intensive treatment strategies to address this severe, often life
threatening condition.
We stated we appreciated the requestor's interest in sharing CMS's
goal of advancing women's health, however, we noted that the population
in which Zulresso[supreg] (brexanolone) is indicated generally does not
include our inpatient Medicare population. As we have stated in prior
rulemaking, (83 FR 41210), we have not adopted the same approach to
refine the maternity and newborn MS-DRGs because of the extremely low
volume of Medicare patients there are in these MS-DRGs. When there is
not a high volume of these cases (for example, maternity and newborn)
represented in the Medicare data, we generally advise that other payers
should develop DRGs to address the needs of their patients. We stated
we believed the same would apply with respect to administration of
Zulresso[supreg] (brexanolone) for which, as noted, we identified only
one case in the FY 2021 MedPAR file.
As discussed in prior rulemaking, the MS-DRGs are a classification
system intended to group together diagnoses and procedures with similar
clinical characteristics and utilization of resources. Rare diseases
and conditions that are represented by low volumes in our claims data
however, pose a unique challenge to this methodology as these
conditions by definition affect small subsets of the population. In the
proposed rule, we stated that it has been difficult to identify other
MS-DRGs that would be more appropriate MS-DRG assignments for these
rare conditions based on the wide variance in the clinical
characteristics and utilization of resources for each condition,
depending on the diagnosis. Creating a new MS-DRG for these conditions
as a distinct ``related'' group is also challenging for the same
reasons.
As previously noted, we generally seek to identify sufficiently
large sets of claims data with a resource/cost similarity and clinical
similarity in developing diagnostic-related groups rather than smaller
subsets. In the proposed rule, we stated that we have been concerned
that basing MS-DRG reclassification decisions on small numbers of cases
could lead to complexities in establishing the relative payment weights
for the MS-DRGs because several expensive cases could impact the
overall relative payment weight. Having larger clinical cohesive groups
within an MS-DRG provides greater stability and thus predictability
[[Page 48891]]
for hospitals for annual updates to the relative payment weights.
As also previously noted, the MS-DRG system is a system of averages
and it is expected that within the diagnostic related groups, some
cases may demonstrate higher than average costs, while other cases may
demonstrate lower than average costs. However, as noted, cases
involving treatment of rare diseases may involve more resource use than
other cases in their respective MS-DRG. Section 1886(d)(5)(A) of the
Act provides for Medicare payments to Medicare-participating hospitals
in addition to the basic prospective payments for cases incurring
extraordinarily high costs, however we solicited feedback on other
mechanisms we could explore through which we can address concerns
relating to payment for patients with rare diseases and conditions that
are represented by low volumes in our claims data. We stated we were
also interested in receiving comments on other meaningful ways in which
we might potentially improve access to treatment for postpartum
depression in certain populations, including through activities
pursuant to Vice President Harris's Call to Action to Reduce Maternal
Mortality and Morbidity.\28\
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\28\ Available at: https://www.whitehouse.gov/briefing-room/statements-releases/2021/12/07/fact-sheet-vice-president-kamala-harris-announces-call-to-action-to-reduce-maternal-mortality-and-morbidity/.
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To inform decision making, we stated we were also looking for
feedback on how to mitigate any unintended negative payment impacts to
providers serving patients with rare diseases or conditions that are
represented by low volumes in our claims data. In particular, we stated
we were interested in hearing the perspectives of large urban
hospitals, rural hospitals, and other hospital types in regard to their
experience. We also sought comments on how factors such as hospital
size and type might impact a hospital's ability to develop protocols to
better address these conditions. We stated we would take commenters'
feedback into consideration in future policy development.
Comment: Many commenters stated they appreciated CMS' attention and
the acknowledgment of the challenging nature of rare diseases as part
of a reporting and payment structure. Commenters also expressed that
they fully support the Administration's initiatives that champion
policies to improve maternal health and equity, especially as it
relates to PPD. Most commenters provided recommendations and suggested
CMS explore mechanisms such as--
Creating a ``permanent'' payment methodology approach
which combines the MS-DRG ``fixed price'' with continued partial
payment for the actual cost of treatment per stay;
Creating new MS-DRGs for certain low-volume therapies or
for orphan conditions with more flexible cost outlier funding;
Creating new MS-DRG categories to ensure access to rapidly
expanding transformative therapies like cell and gene therapies;
Creating a new enhanced new technology add-on payment-like
pathway that establishes separate payment for low volume high-cost
drugs;
Reimbursing hospitals for orphan drugs based on the
Average Sales Price (ASP) as published in the HOPD Addendum B file
using the same authority that the Agency relied on to make the recent
COVID-19 payment adjustments;
Carving-out ``clinical trial'' inpatient stays to ensure
that the MS-DRG payment rate is not adversely impacted by facility-
reported costs that do not include acquisition costs;
Exploring databases outside of the MedPAR to obtain claims
data for inclusion analysis;
Creating a rare disease diagnosis code designation,
similar to the complication or comorbidity (CC) and major complication
or comorbidity (MCC) severity designations;
Establishing a central formulary to provide high cost
drugs for rare conditions instead of utilizing individual hospital
pharmacy formularies to ease burdens of carrying high cost drugs on
rural and smaller hospitals, as drug transport can potentially be
cheaper then patient transport;
Waiving the 500 case threshold when deciding whether an
MS-DRG change should be proposed.
Specifically, in discussing how cases reporting the administration
of Zulresso[supreg] (brexanolone) are recognized for payment,
commenters stated that if Medicare commits to creating MS-DRGs around
the Medicare population giving birth, the impacts of this progress
would have far-reaching effects beyond Medicare beneficiaries as it
will serve as the foundation for commercial and Medicaid payments.
Response: We appreciate the input provided by commenters in
response to this request for information and we thank commenters for
the acknowledgment of the challenges rare diseases or conditions that
are represented by low volumes present as part of a reporting and
reimbursement structure. We thank the commenters for their support and
consideration of these issues. We will take the comments received in
response to the solicitation into consideration as we continue to
explore mechanisms to address concerns relating to payment for patients
with rare diseases and conditions that are represented by low volumes
in our claims data.
20. Out of Scope Public Comments Received
We received public comments on MS-DRG related issues that were
outside the scope of the proposals included in the FY 2023 IPPS/LTCH
PPS proposed rule. Because we consider these public comments to be
outside the scope of the proposed rule, we are not addressing them in
this final rule. As stated in section II.D.1.b. of the preamble of this
final rule, we encourage individuals with comments about MS-DRG
classifications to submit these comments no later than October 20, 2022
via the new electronic intake system, Medicare Electronic Application
Request Information SystemTM (MEARISTM) at:
https://mearis.cms.gov/public/home so that they can be considered for
possible inclusion in the annual proposed rule. We will consider these
public comments for possible proposals in future rulemaking as part of
our annual review process.
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
E. Recalibration of the FY 2023 MS-DRG Relative Weights
1. Data Sources for Developing the Relative Weights
Consistent with our established policy, in developing the MS-DRG
relative weights for FY 2023, we proposed to use two data sources:
claims data and cost report data. The claims data source is the MedPAR
file, which includes fully coded diagnostic and procedure data for all
Medicare inpatient hospital bills. The FY 2021 MedPAR data used in this
final rule include discharges occurring on October 1, 2020, through
September 30, 2021, based on bills received by CMS through March 31,
2022, from all hospitals subject to the IPPS and short-term, acute care
hospitals in Maryland (which at that time were under a waiver from the
IPPS).
The FY 2021 MedPAR file used in calculating the relative weights
includes data for approximately 7,444,003
[[Page 48892]]
Medicare discharges from IPPS providers. Discharges for Medicare
beneficiaries enrolled in a Medicare Advantage managed care plan are
excluded from this analysis. These discharges are excluded when the
MedPAR ``GHO Paid'' indicator field on the claim record is equal to
``1'' or when the MedPAR DRG payment field, which represents the total
payment for the claim, is equal to the MedPAR ``Indirect Medical
Education (IME)'' payment field, indicating that the claim was an ``IME
only'' claim submitted by a teaching hospital on behalf of a
beneficiary enrolled in a Medicare Advantage managed care plan. In
addition, the March 2022 update of the FY 2021 MedPAR file complies
with version 5010 of the X12 HIPAA Transaction and Code Set Standards,
and includes a variable called ``claim type.'' Claim type ``60''
indicates that the claim was an inpatient claim paid as fee-for-
service. Claim types ``61,'' ``62,'' ``63,'' and ``64'' relate to
encounter claims, Medicare Advantage IME claims, and HMO no-pay claims.
Therefore, the calculation of the relative weights for FY 2023 also
excludes claims with claim type values not equal to ``60.'' The data
exclude CAHs, including hospitals that subsequently became CAHs after
the period from which the data were taken. We note that the FY 2023
relative weights are based on the ICD-10-CM diagnosis codes and ICD-10-
PCS procedure codes from the FY 2021 MedPAR claims data, grouped
through the ICD-10 version of the FY 2023 GROUPER (Version 40).
The second data source used in the cost-based relative weighting
methodology is the Medicare cost report data files from the HCRIS. In
general, we use the HCRIS dataset that is 3 years prior to the IPPS
fiscal year. Specifically, for this final rule, we used the March 2022
update of the FY 2020 HCRIS for calculating the FY 2023 cost-based
relative weights. Consistent with our historical practice, for this FY
2023 final rule, we are providing the version of the HCRIS from which
we calculated these 19 CCRs on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. Click on
the link on the left side of the screen titled ``FY 2023 IPPS Final
Rule Home Page'' or ``Acute Inpatient Files for Download.''
2. Methodology for Calculation of the Relative Weights
a. General
We calculated the FY 2023 relative weights based on 19 CCRs. The
methodology we proposed to use to calculate the FY 2023 MS-DRG cost-
based relative weights based on claims data in the FY 2021 MedPAR file
and data from the FY 2020 Medicare cost reports is as follows:
To the extent possible, all the claims were regrouped
using the FY 2023 MS-DRG classifications discussed in sections II.B.
and II.D. of the preamble of this final rule.
The transplant cases that were used to establish the
relative weights for heart and heart-lung, liver and/or intestinal, and
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively)
were limited to those Medicare-approved transplant centers that have
cases in the FY 2021 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those
facilities that have received approval from CMS as transplant centers.)
Organ acquisition costs for kidney, heart, heart-lung,
liver, lung, pancreas, and intestinal (or multivisceral organs)
transplants continue to be paid on a reasonable cost basis.
Because these acquisition costs are paid separately from the
prospective payment rate, it is necessary to subtract the acquisition
charges from the total charges on each transplant bill that showed
acquisition charges before computing the average cost for each MS-DRG
and before eliminating statistical outliers.
Section 108 of the Further Consolidated Appropriations Act, 2020
provides that, for cost reporting periods beginning on or after October
1, 2020, costs related to hematopoietic stem cell acquisition for the
purpose of an allogeneic hematopoietic stem cell transplant shall be
paid on a reasonable cost basis. We refer the reader to the FY 2021
IPPS/LTCH PPS final rule for further discussion of the reasonable cost
basis payment for cost reporting periods beginning on or after October
1, 2020 (85 FR 58835 through 58842). For FY 2022 and subsequent years,
we subtract the hematopoietic stem cell acquisition charges from the
total charges on each transplant bill that showed hematopoietic stem
cell acquisition charges before computing the average cost for each MS-
DRG and before eliminating statistical outliers.
Claims with total charges or total lengths of stay less
than or equal to zero were deleted. Claims that had an amount in the
total charge field that differed by more than $30.00 from the sum of
the routine day charges, intensive care charges, pharmacy charges,
implantable devices charges, supplies and equipment charges, therapy
services charges, operating room charges, cardiology charges,
laboratory charges, radiology charges, other service charges, labor and
delivery charges, inhalation therapy charges, emergency room charges,
blood and blood products charges, anesthesia charges, cardiac
catheterization charges, CT scan charges, and MRI charges were also
deleted.
At least 93.0 percent of the providers in the MedPAR file
had charges for 14 of the 19 cost centers. All claims of providers that
did not have charges greater than zero for at least 14 of the 19 cost
centers were deleted. In other words, a provider must have no more than
five blank cost centers. If a provider did not have charges greater
than zero in more than five cost centers, the claims for the provider
were deleted.
Statistical outliers were eliminated by removing all cases
that were beyond 3.0 standard deviations from the geometric mean of the
log distribution of both the total charges per case and the total
charges per day for each MS-DRG.
Effective October 1, 2008, because hospital inpatient
claims include a POA indicator field for each diagnosis present on the
claim, only for purposes of relative weight-setting, the POA indicator
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have
an ``N'' (No) or a ``U'' (documentation insufficient to determine if
the condition was present at the time of inpatient admission) in the
POA field.
Under current payment policy, the presence of specific HAC codes,
as indicated by the POA field values, can generate a lower payment for
the claim. Specifically, if the particular condition is present on
admission (that is, a ``Y'' indicator is associated with the diagnosis
on the claim), it is not a HAC, and the hospital is paid for the higher
severity (and, therefore, the higher weighted MS-DRG). If the
particular condition is not present on admission (that is, an ``N''
indicator is associated with the diagnosis on the claim) and there are
no other complicating conditions, the DRG GROUPER assigns the claim to
a lower severity (and, therefore, the lower weighted MS-DRG) as a
penalty for allowing a Medicare inpatient to contract a HAC. While the
POA reporting meets policy goals of encouraging quality care and
generates program savings, it presents an issue for the relative
weight-setting process. Because cases identified as HACs are likely to
be more complex than similar cases that are not identified as HACs, the
charges associated with HAC cases are likely to be higher as well.
Therefore, if the higher charges of these HAC claims are grouped into
lower
[[Page 48893]]
severity MS-DRGs prior to the relative weight-setting process, the
relative weights of these particular MS-DRGs would become artificially
inflated, potentially skewing the relative weights. In addition, we
want to protect the integrity of the budget neutrality process by
ensuring that, in estimating payments, no increase to the standardized
amount occurs as a result of lower overall payments in a previous year
that stem from using weights and case-mix that are based on lower
severity MS-DRG assignments. If this would occur, the anticipated cost
savings from the HAC policy would be lost.
To avoid these problems, we reset the POA indicator field to ``Y''
only for relative weight-setting purposes for all claims that otherwise
have an ``N'' or a ``U'' in the POA field. This resetting ``forced''
the more costly HAC claims into the higher severity MS-DRGs as
appropriate, and the relative weights calculated for each MS-DRG more
closely reflect the true costs of those cases.
In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013
and subsequent fiscal years, we finalized a policy to treat hospitals
that participate in the Bundled Payments for Care Improvement (BPCI)
initiative the same as prior fiscal years for the IPPS payment modeling
and ratesetting process without regard to hospitals' participation
within these bundled payment models (77 FR 53341 through 53343).
Specifically, because acute care hospitals participating in the BPCI
Initiative still receive IPPS payments under section 1886(d) of the
Act, we include all applicable data from these subsection (d) hospitals
in our IPPS payment modeling and ratesetting calculations as if the
hospitals were not participating in those models under the BPCI
initiative. We refer readers to the FY 2013 IPPS/LTCH PPS final rule
for a complete discussion on our final policy for the treatment of
hospitals participating in the BPCI initiative in our ratesetting
process. For additional information on the BPCI initiative, we refer
readers to the CMS' Center for Medicare and Medicaid Innovation's
website at https://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the preamble of the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53341 through 53343).
The participation of hospitals in the BPCI initiative concluded on
September 30, 2018. The participation of hospitals in the BPCI Advanced
model started on October 1, 2018. The BPCI Advanced model, tested under
the authority of section 1115A of the Act, is comprised of a single
payment and risk track, which bundles payments for multiple services
beneficiaries receive during a Clinical Episode. Acute care hospitals
may participate in BPCI Advanced in one of two capacities: as a model
Participant or as a downstream Episode Initiator. Regardless of the
capacity in which they participate in the BPCI Advanced model,
participating acute care hospitals will continue to receive IPPS
payments under section 1886(d) of the Act. Acute care hospitals that
are Participants also assume financial and quality performance
accountability for Clinical Episodes in the form of a reconciliation
payment. For additional information on the BPCI Advanced model, we
refer readers to the BPCI Advanced web page on the CMS Center for
Medicare and Medicaid Innovation's website at https://innovation.cms.gov/initiatives/bpci-advanced/. Consistent with our
policy for FY 2022, and consistent with how we have treated hospitals
that participated in the BPCI Initiative, for FY 2023, we continue to
believe it is appropriate to include all applicable data from the
subsection (d) hospitals participating in the BPCI Advanced model in
our IPPS payment modeling and ratesetting calculations because, as
noted previously, these hospitals are still receiving IPPS payments
under section 1886(d) of the Act. Consistent with the FY 2022 IPPS/LTCH
PPS final rule, we also proposed to include all applicable data from
subsection (d) hospitals participating in the Comprehensive Care for
Joint Replacement (CJR) Model in our IPPS payment modeling and
ratesetting calculations.
The charges for each of the 19 cost groups for each claim were
standardized to remove the effects of differences in area wage levels,
IME and DSH payments, and for hospitals located in Alaska and Hawaii,
the applicable cost-of-living adjustment. Because hospital charges
include charges for both operating and capital costs, we standardized
total charges to remove the effects of differences in geographic
adjustment factors, cost-of-living adjustments, and DSH payments under
the capital IPPS as well. Charges were then summed by MS-DRG for each
of the 19 cost groups so that each MS-DRG had 19 standardized charge
totals. Statistical outliers were then removed. These charges were then
adjusted to cost by applying the national average CCRs developed from
the FY 2020 cost report data.
The 19 cost centers that we used in the relative weight calculation
are shown in a supplemental data file, Cost Center HCRIS Lines
Supplemental Data File, posted via the internet on the CMS website for
this final rule and available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. The supplemental data file
shows the lines on the cost report and the corresponding revenue codes
that we used to create the 19 national cost center CCRs. In the FY 2023
IPPS/LTCH PPS proposed rule, we stated that if we receive comments
about the groupings in this supplemental data file, we may consider
these comments as we finalize our policy.
Comment: A commenter requested that CMS create a dedicated cost
center line for cell and gene therapy product cost information, which
would enable the agency to create a 20th cost center that is separate
from the drugs/pharmacy cost center.
Response: We appreciate the commenter's request regarding the
creation of new cost centers for cell and gene therapy product cost
information and may consider this request in connection with future
rulemaking.
After consideration of the comment received, we are finalizing our
proposal to use the 19 national cost center CCRs to calculate the
relative weights for FY 2023.
Consistent with historical practice, we account for rare situations
of non-monotonicity in a base MS-DRG and its severity levels, where the
mean cost in the higher severity level is less than the mean cost in
the lower severity level, in determining the relative weights for the
different severity levels. If there are initially non-monotonic
relative weights in the same base DRG and its severity levels, then we
combine the cases that group to the specific non-monotonic MS-DRGs for
purposes of relative weight calculations. For example, if there are two
non-monotonic MS-DRGs, combining the cases across those two MS-DRGs
results in the same relative weight for both MS-DRGs. The relative
weight calculated using the combined cases for those severity levels is
monotonic, effectively removing any non-monotonicity with the base DRG
and its severity levels. For this FY 2023 final rule, this calculation
was applied to address non-monotonicity for cases that grouped to MS-
DRG 793 and MS-DRG 794. In the supplemental file titled AOR/BOR File,
we include statistics for the affected MS-DRGs both separately and with
cases combined.
We invited public comments on our proposals related to
recalibration of the proposed FY 2023 relative weights and the changes
in the relative weights from FY 2022.
[[Page 48894]]
Comment: A commenter requested that CMS study whether it might be
appropriate to define the labor portion individually for each of the 19
cost centers and only standardize that portion, particularly if doing
so improves the explanatory power of all MS-DRGs. This commenter
requested that CMS conduct this study in collaboration with
stakeholders and release this analysis in future rulemaking.
Response: We appreciate the commenter's request that CMS study the
appropriateness of defining the labor portion individually for each of
the 19 cost centers and standardizing only that portion, and we may
consider this request in connection with future rulemaking.
After consideration of the comment received, we are finalizing our
proposals related to the recalibration of the FY 2023 relative weights.
We summarize and respond to comments relating to the methodology for
calculating the relative weight for MS-DRG 018 in the next section of
this final rule.
b. Relative Weight Calculation for MS-DRG 018
As discussed in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58599
through 58600), we created MS-DRG 018 for cases that include procedures
describing CAR T-cell therapies, which were reported using ICD-10-PCS
procedure codes XW033C3 or XW043C3. Effective for FY 2022, we revised
MS-DRG 018 to include cases that report the procedure codes for CAR T-
cell and non-CAR T-cell therapies and other immunotherapies (86 FR
44798 through 448106). We refer the reader to section II.D.2. of this
final rule for discussion of the agenda items for the March 8-9, 2022
ICD-10 Coordination and Maintenance Committee meeting relating to new
procedure codes to describe the administration of a CAR T-cell or
another type of gene or cellular therapy product, as well as our
established process for determining the MS-DRG assignment for codes
approved at the March meeting.
For MS-DRG 018, we include a modification to our existing relative
weight methodology to ensure that the relative weight for MS-DRG 018
appropriately reflects the relative resources required for providing
CAR T-cell and non-CAR T-cell therapies and other immunotherapies
outside of a clinical trial, while still accounting for the clinical
trial cases in the overall average cost for all MS-DRGs. For cases that
group to MS-DRG 018, we do not include claims determined to be clinical
trial claims that group to MS-DRG 018 when calculating the average cost
for MS-DRG 018 that is used to calculate the relative weight for this
MS-DRG, with the additional refinements that: (a) when the CAR T-cell,
non-CAR T-cell or other immunotherapy product is purchased in the usual
manner, but the case involves a clinical trial of a different product,
we include the claim when calculating the average cost for MS-DRG 018
to the extent such claims can be identified in the historical data; and
(b) when there is expanded access use of the CAR T-cell, non-CAR T-cell
or other immunotherapy product, these cases will not be included when
calculating the average cost for new MS DRG 018 to the extent such
claims can be identified in the historical data (85 FR 58600). We also
calculate an adjustment to account for the CAR T-cell, non-CAR T-cell
and other immunotherapy cases determined to be clinical trial cases, as
described later in this final rule and include revenue center 891 in
our calculation of standardized drug charges for MS-DRG 018. We refer
the reader to the FY 2021 IPPS/LTCH PPS final rule for further
discussion of our modifications to the relative weight calculation for
MS-DRG 018.
We proposed to continue to use the same process to identify
clinical trial claims in the FY 2021 MedPAR for purposes of calculating
the FY 2023 relative weights. We continue to use the proxy of
standardized drug charges of less than $373,000, which was the average
sales price of KYMRIAH and YESCARTA, which are the two CAR T-cell
biological products in the FY 2021 MedPAR data used for this final
rule. (As previously noted, effective beginning FY 2022, we revised MS-
DRG 018 to include cases that report the procedure codes for CAR T-cell
and non-CAR T-cell therapies and other immunotherapies (86 FR 44798
through 448106).) Using the same methodology from the FY 2021 IPPS/LTCH
PPS final rule, we proposed to apply an adjustment to account for the
CAR T cell therapy cases identified as clinical trial cases in
calculating the national average standardized cost per case that is
used to calculate the relative weights for all MS-DRGs:
Calculate the average cost for cases to be assigned to MS-
DRG 018 that contain ICD-10-CM diagnosis code Z00.6 or contain
standardized drug charges of less than $373,000.
Calculate the average cost for all other cases to be
assigned to MS-DRG 018.
Calculate an adjustor by dividing the average cost
calculated in step 1 by the average cost calculated in step 2.
Apply the adjustor calculated in step 3 to the cases
identified in step 1 as clinical trial cases, then add this adjusted
case count to the non-clinical trial case count prior to calculating
the average cost across all MS-DRGs.
Additionally, we are continuing our finalized methodology for
calculating this payment adjustment, such that: (a) when the CAR T-
cell, non-CAR T-cell or other immunotherapy product is purchased in the
usual manner, but the case involves a clinical trial of a different
product, the claim will be included when calculating the average cost
for cases not determined to be clinical trial cases; and (b) when there
is expanded access use of immunotherapy, these cases will be included
when calculating the average cost for cases determined to be clinical
trial cases. However, we continue to believe to the best of our
knowledge there are no claims in the historical data (FY 2021 MedPAR)
used in the calculation of the adjustment for cases involving a
clinical trial of a different product, and to the extent the historical
data contain claims for cases involving expanded access use of
immunotherapy we believe those claims would have drug charges less than
$373,000.
Applying this previously finalized methodology, based on the
December 2021 update of the FY 2021 MedPAR file used for the proposed
rule, we estimated that the average costs of cases assigned to MS-DRG
018 that are identified as clinical trial cases ($61,356) were 20
percent of the average costs of the cases assigned to MS-DRG 018 that
are identified as non-clinical trial cases ($299,460). Accordingly, as
we did for FY 2022, we proposed to adjust the transfer-adjusted case
count for MS-DRG 018 by applying the proposed adjustor of 0.20 to the
applicable clinical trial and expanded access use immunotherapy cases,
and to use this adjusted case count for MS-DRG 018 in calculating the
national average cost per case, which is used in the calculation of the
relative weights. Therefore, in calculating the national average cost
per case for purposes of the proposed rule, each case identified as an
applicable clinical trial or expanded access use immunotherapy case was
adjusted by 0.20. As we did for FY 2022, we applied this same adjustor
for the applicable cases that group to MS-DRG 018 for purposes of
budget neutrality and outlier simulations. We also proposed to update
the value of the adjustor based on more recent data for the final rule.
Comment: Several commenters were supportive of CMS' continued use
of MS-DRG 018 as it is currently
[[Page 48895]]
structured, including the identification and exclusion of CAR T-cell
clinical trial and expanded access use cases assigned to MS-DRG 018.
Commenters stated that the stability of MS-DRG 018 will help ensure
beneficiary access to CAR T-cell therapy services. One commenter stated
that analysis of CAR T-cell claims data from FY 2021 through the first
quarter of FY 2022 shows significant improvement in patient access to
CAR T. Another commenter requested that CMS reevaluate the clinical
trial threshold annually as acquisition costs increase and additional
therapies are introduced to MS-DRG 018.
Other commenters stated that they were concerned with what they
stated were Medicare under-reimbursements for CAR T-cell technology,
especially given the array of resources used to treat patients
undergoing these complex, novel cell therapies and the adverse impact
inadequate reimbursement has on beneficiary access. A commenter stated
that payment for MS-DRG 018 is almost 30 percent below the cost of CAR
T-cell cases and does not cover the cost of the therapy itself. A
commenter recommended that CMS cover the full cost of the CAR T-cell
therapy, while another commenter requested that CMS implement a policy
solution that will ensure providers recoup at least the invoice cost of
the CAR T-cell product. The commenter referenced prior comments about
options for such policy solutions. Some commenters stated that the
increase in the fixed-loss threshold makes it even more difficult to
obtain adequate reimbursement. A commenter requested that CMS closely
monitor reimbursement rates for CAR T-cell therapies to ensure that
hospital facilities can continue to provide access to these treatments.
Response: We appreciate the support and feedback on our proposal to
use the same ratesetting methodology for MS-DRG 018 in FY 2023 as we
have in prior years. With regard to the commenter who requested that
CMS reevaluate the clinical trial threshold annually, we note that we
continue to monitor the data and may engage further with the public and
consider this comment in connection with future rulemaking. With regard
to the comments that the MS-DRG relative weight for MS-DRG 018 is
inadequate and does not result in payment that fully covers the
hospital resource costs, we refer readers to the FY 2022 IPPS/LTCH
final rule (86 FR 44965) where we responded to similar comments.
Comment: A commenter stated that they understand that outliers are
removed in the development of MS-DRGs so that they do not skew the
results. The commenter found that in the calculation of the relative
weights, MS-DRG 018 has the highest percent of cases removed as
statistical outliers. The commenter stated the removal of these cases
resulted in a lower standardized cost per inpatient stay. Another
commenter requested that CMS monitor the impact that the removal of
these statistical outliers has on MS-DRG 018 and other low volume
services.
Response: We examined the cases referenced by the commenter that
were removed as statistical outliers in the FY 2021 MedPAR claims data.
We found that these cases had very high charges and very short lengths
of stay, with daily charges in excess of $1.2 million relative to the
average daily charge of $114,000 for MS-DRG 018. As described earlier
in this section, our standard method to identify and remove statistical
outliers excludes cases with total charges and total daily charges that
are beyond 3 standard deviations from the geometric mean of the log
distribution of both average total charges and average total daily
charges of the respective MS-DRG. As described in section III.B.4.b. of
the preamble of this final rule with respect to the MS-LTC-DRGs,
statistical outliers are removed because we believe that they may
represent aberrations in the data that distort the measure of average
resource use. For this reason, we believe that the cases identified by
the commenters are appropriately excluded as outliers, as their
inclusion could distort the measure of average resource use for MS-DRG
018. We will continue to monitor the removal of statistical outliers in
calculating the relative weights for MS-DRG 018.
Comment: A commenter recommended that CMS establish a new,
alternative payment model under CMMI for gene and cell therapies,
outside of the constraints of the IPPS. The commenter stated that this
would provide a clearer path to coverage and payment policy that can
improve patient access. Another commenter stated that some exceptions
to the standard IPPS process are and will continue to be needed to
allow hospitals to make lifesaving therapies available at launch to
Medicare beneficiaries as soon as possible.
Response: We believe that is premature to make structural changes
to the IPPS at this time to pay for gene and cell therapies. We may
consider these comments for future rulemaking as we gain more
experience in paying for these therapies under the IPPS.
Comment: Some commenters expressed concern that CMS mapped revenue
codes 087X for cell and gene therapy services furnished by hospital
staff to the drug cost group. One commenter stated that the NUBC
definition states this revenue code series is for ``[c]harges for
procedures performed by staff for the acquisition and infusion/
injection of genetically modified cells''. The commenter stated that
there is no standard cost center to report staff expense associated
with the 087X series, but that it is inappropriate to assign the
revenue for cell collection and processing services employed by
hospital nursing and laboratory staff to the drug/pharmacy cost center.
The commenter stated that if CMS finalizes this proposed mapping, it
will be inconsistent with the mapping of revenues and expenses that
hospitals are required to adhere to in their cost reports. A commenter
suggested that CMS should revise the mapping of the 087X revenue codes
to more closely reflect the departments where the staff expenses are
recorded on the cost report. Commenters suggested that CMS map revenue
codes 0871 and 0874 to the ``other'' cost center and 0872 and 0873 to
the laboratory cost center. A commenter requested that CMS allow
providers to bill for cell collection and cell processing services on
the day that the services are rendered rather than adding them to the
inpatient claim. The commenter stated that these are separate from the
manufacturing process and are not included in the acquisition cost of
the product.
Response: We disagree with the commenters that revenue center codes
087X are inappropriately mapped to the drug cost center. Cell
collection and processing activities are part of the steps required to
manufacture the drug, and thus assignment to the drug cost center
accurately allocates these costs. Given this, we believe it is
appropriate to apply the drug CCR to these charges for purposes of
calculating the relative weights. With respect to the commenter who
indicated that finalizing the proposed assignment of the 087X codes
would be inconsistent with the mapping of revenues and expenses
hospitals are required to adhere to in their cost reports, it is
unclear to us what requirements are being referred to. With respect to
the commenter who requested that CMS allow separate billing for the
cell collection and processing services, as we discussed in the CY 2022
OPPS final rule (86 FR 63550), CMS does not believe that separate
payment is necessary for the various steps required to collect and
prepare the genetically modified T-cells, and Medicare does not
generally pay separately for each step
[[Page 48896]]
used to manufacture a drug or biological product.
Comment: A commenter requested that CMS consider allowing hospitals
to use expanded access condition code 90 instead of the remarks field,
which would remove a layer of manual work required by the MACs, which
would decrease the opportunity for errors.
Response: We agree with the commenter that the availability of
condition code 90 obviates the need for the use of the remarks field to
identify expanded access claims that group to MS-DRG 018 for the
purposes of applying the clinical trial adjustment. Effective October
1, 2022, providers should submit condition code 90 to identify expanded
access claims that group to MS-DRG 018, rather than the remarks field.
The MACs will no longer flag cases as expanded access claims based on
information submitted in the remarks field for claims submitted on or
after October 1, 2022.
Comment: A commenter requested that CMS provide additional
clarification on the agency's methodology to develop the relative
weight for both MS-DRG 018 and its overall ratesetting methodology.
This commenter requested that CMS describe the order of operations,
including step-by-step instructions of when to exclude certain types of
claims. This commenter also requested that CMS clarify whether the
agency trims claims first, and then sets aside clinical trial cases, or
sets aside clinical trial claims and claims with less than $373,000 and
then performs trimming.
Response: In response to the commenter's specific question
regarding when CMS removes clinical trial cases from MS-DRG 018, the
trims to remove clinical trial cases from MS-DRG 018 are done prior to
the elimination of statistical outliers. In response to the commenter's
request that we clarify our relative weight methodology more generally,
we note that in each year's IPPS/LTCH PPS proposed and final rules, we
include a section describing the recalibration of the MS-DRG relative
weights and methodology for calculating the relative weights. We refer
readers to sections II.E.1. and E.2.a. of the preamble of this final
rule, in which we describe the trims we apply to the MedPAR claims to
exclude non-IPPS claims, and provide a detailed description of the
methodology we use to calculate the relative weights. The order that
the trims are applied is consistent with the narrative description of
our methodology. In addition, since the creation of MS-DRG 018, we have
provided a description of the calculation of the relative weight for
MS-DRG 018, including a step-by-step calculation of the CAR T-cell
clinical trial adjustment factor, as set forth earlier in this section.
We also note that some commenters requested additional
clarifications regarding billing instructions for CAR T-cell therapies,
such as appropriate CAR T-cell billing and charges. We do not believe
changes to billing guidance are needed at this time but will take these
comments into consideration when developing policies and program
requirements for future years for CAR T-cell therapy policy.
After consideration of the public comments we received, we are
finalizing our proposals regarding the calculation of the relative
weight for MS-DRG 018. Applying this finalized methodology, based on
the March 2022 update of the FY 2021 MedPAR file used for this final
rule, we estimated that the average costs of cases assigned to MS-DRG
018 that are identified as clinical trial cases ($61,540) were 21
percent of the average costs of the cases assigned to MS-DRG 018 that
are identified as non-clinical trial cases ($293,546). Accordingly, as
we did for FY 2022, we are finalizing our proposal to adjust the
transfer-adjusted case count for MS-DRG 018 by applying the adjustor of
0.21 to the applicable clinical trial and expanded access use
immunotherapy cases, and to use this adjusted case count for MS-DRG 018
in calculating the national average cost per case, which is used in the
calculation of the relative weights. Therefore, in calculating the
national average cost per case for purposes of this final rule, each
case identified as an applicable clinical trial or expanded access use
immunotherapy case was adjusted by 0.21. As we did for FY 2022, we are
applying this same adjustor for the applicable cases that group to MS
DRG 018 for purposes of budget neutrality and outlier simulations.
c. Averaging of Relative Weights for FY 2023
In section I.F. of the proposed rule and this final rule, we
discuss our proposal to use the FY 2021 MedPAR data for purposes of FY
2023 IPPS ratesetting, with certain proposed modifications to our usual
methodologies, including an averaging approach for calculating the FY
2023 relative weights. As discussed in the proposed rule, we observed
that COVID-19 cases were impacting the relative weights as calculated
using the FY 2021 claims data for a few COVID-19-related MS-DRGs. For
example, for MS-DRG 870 (Septicemia or Severe Sepsis with MV >96
hours), the relative weight calculated using the FY 2021 MedPAR data
was approximately 9 percent higher than the relative weight calculated
excluding the COVID-19 cases in the FY 2021 data. As also discussed in
that section, we believe it is reasonable to assume that there will be
fewer COVID-19 hospitalizations among Medicare beneficiaries in FY 2023
than there were in FY 2021. However, we cannot know the precise number
of COVID-19 hospitalizations among Medicare beneficiaries in FY 2023.
To account for the anticipated decline in COVID-19 hospitalizations of
Medicare beneficiaries as compared to FY 2021, we proposed to determine
the MS-DRG relative weights for FY 2023 by averaging the relative
weights as calculated with and without COVID-19 cases in the FY 2021
data, as described in greater detail in this section. Given the
uncertainty in the number of COVID-19 hospitalizations in FY 2023, we
proposed to use 50 percent of the relative weights calculated using all
applicable cases in the FY 2021 claims data and 50 percent of the
relative weights calculated without the COVID-19 cases in the FY 2021
claims data. We stated that we believe this proposed approach would
appropriately reduce, but not remove entirely, the effect of COVID-19
cases on the relative weight calculations, consistent with our
expectation that Medicare inpatient hospitalizations for COVID-19 will
continue in FY 2023 at a lower level as compared to FY 2021. By
averaging the relative weights in this manner, we stated that we
believe the result would reflect a reasonable estimation of the case
mix for FY 2023 based on the information available at the time, as
discussed in section I.F. of the preamble to the proposed rule and this
final rule, and more accurately estimate the relative resource use for
the cases treated in FY 2023 than if we were to calculate the proposed
relative weights based on 100 percent of the relative weights as
calculated for all applicable cases in the FY 2021 data. For the
proposed rule, our proposed calculation was as follows:
Step 1: Calculate a set of relative weights using all
applicable cases in the December 2021 update of the FY 2021 MedPAR
data, using the methodology as described earlier in this section, and
then applying a normalization adjustment factor as described later in
this section.
Step 2: Calculate a set of relative weights using the
December 2021 update of the FY 2021 MedPAR data excluding cases with a
principal or secondary diagnosis of COVID-19 (ICD-10-CM diagnosis code
U07.1), and
[[Page 48897]]
otherwise using the methodology as described earlier in this section,
and then applying a normalization adjustment factor as described later
in this section.
Step 3: Average the results of step 1 and step 2 to
calculate a set of averaged relative weights, geometric mean length of
stays, and arithmetic mean length of stays.
Step 4: Calculate the proposed FY 2023 relative weights by
applying an additional normalization factor to these averaged relative
weights. This additional normalization factor is necessary to ensure
that the average case weight as calculated in step 3 of this proposed
averaging methodology for recalibration of the FY 2023 relative weights
is equal to the average case weight before recalibration. We note that
this factor is very close to 1 and is described later in this section.
We noted that in Step 5 of this proposed calculation, we applied
the proposed 10 percent cap to the relative weights for those MS-DRGs
for which the relative weight as calculated in Step 4 would otherwise
have declined by more than 10 percent from the FY 2022 relative weight,
as discussed more fully later in this section. We also noted that we
intended to update this calculation for the final rule using the March
2022 update of the FY 2021 MedPAR file.
We set forth the proposed relative weights, geometric mean length
of stay, and average length of stay as calculated using this proposed
methodology in Table 5 associated with the proposed rule, which is
available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. We also made available the
relative weights, geometric mean length of stay, and average length of
stay as calculated in steps 1 and 2 of this proposed methodology on our
website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
Comment: Several commenters supported our proposal to average the
relative weights calculated with and without COVID-19 cases, stating
that this would more accurately account for the anticipated change in
case mix as COVID-19 cases decline.
Another commenter supported an alternative MS-DRG relative weight
methodology, but stated that the proposed methodology does not do
enough to control for variability. This commenter requested that CMS
use FY 2019 claims or some other alternate blend using the FY 2021
claims to establish the FY 2023 relative weights.
Some commenters expressed concern about policies that may limit the
reimbursement for COVID-19 cases. A commenter suggested increasing the
relative weights for the MS-DRGs that have documented COVID-19 cases,
but recommended that CMS consider a process to differentiate patients
who test asymptomatically for COVID-19 from those whose COVID-19
infection is causing clinical symptoms to worsen. The commenter stated
that this approach would better target the more resource intensive
beneficiaries without artificially constraining reimbursement for their
care.
Response: We appreciate commenters' support for and feedback on our
proposal. However, we disagree that we should blend other data sources
or take additional steps to control for variability in the FY 2023
relative weights. As we stated in the FY 2023 IPPS/LTCH PPS proposed
rule, we cannot know the precise number of COVID-19 hospitalizations
among Medicare beneficiaries as compared to FY 2021. Our proposal to
average the relative weights is intended to reflect a reasonable
estimation of the case mix for FY 2023 based on the information
available at this time, not to completely remove all variability in the
FY 2023 relative weights. Our proposed methodology uses the FY 2021
MedPAR claims file to determine the FY 2023 relative weights, as the
most recent available data during the period of the COVID-19 PHE, with
modifications to account for the anticipated decline in COVID-19
hospitalizations of Medicare beneficiaries at IPPS hospitals as
compared to FY 2021. As discussed in section I.F. of this final rule,
after reviewing the latest CDC hospitalization data available at this
time, we continue to believe that it is reasonable to assume that some
Medicare beneficiaries will be hospitalized with COVID-19 at IPPS
hospitals in FY 2023, but that there will be fewer COVID 19
hospitalizations as compared to FY 2021. With respect to the
commenters' concerns about policies that may limit reimbursement for
COVID-19 cases, we note that the majority of cases that include a
diagnosis of COVID-19 (ICD-10-CM diagnosis code U07.1) group to MS-DRGs
177 and 871, and that the relative weights calculated using the
proposed averaging methodology for FY 2023 are higher than the FY 2022
relative weights for these MS-DRGs. For MS-DRG 177, the relative weight
calculated using the proposed averaging approach is also higher than
the relative weight calculated using all applicable cases in the FY
2021 MedPAR file. For MS-DRG 871, while the relative weight calculated
using the proposed averaging approach is lower than the relative weight
calculated using all applicable cases in the FY 2021 MedPAR file, it is
still an increase as compared to the relative weight for FY 2022.
Moreover, as previously discussed, we believe that use of the proposed
averaging methodology would provide a more accurate estimate of
relative resource use for FY 2023 than if we were to calculate the
proposed relative weights using all applicable cases in the FY 2021
data, and is consistent with our expectation, based on the information
available at this time, that Medicare inpatient hospitalizations for
COVID-19 will continue in FY 2023 at a lower level as compared to FY
2021. With regard to the suggestion about differentiating between
symptomatic and asymptomatic COVID-19 cases, at this time we do not
believe it is operationally feasible to make such a distinction given
that separate coding does not exist to differentiate these cases. We
may consider this suggestion in connection with future rulemaking.
After consideration of comments received, we are finalizing our
proposal to determine the FY 2023 MS-DRG relative weights by averaging
the relative weights as calculated with and without COVID-19 cases in
the FY 2021 data, as previously described. As previously discussed, for
this final rule, we are using the March 2022 update of the FY 2021
MedPAR file to determine the final relative weights for FY 2023. The
relative weights, geometric mean length of stay, and average length of
stay as calculated using this methodology are set forth in Table 5
associated with this final rule, which is available on the CMS website
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. We are also making available the relative weights,
geometric mean length of stay, and average length of stay as calculated
in steps 1 and 2 of this methodology on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
d. Cap for Relative Weight Reductions
In the FY 2018 IPPS/LTCH PPS final rule, we summarized comments we
had received requesting a transition period for substantial reductions
in relative weights in order to facilitate payment stability.
Specifically, some commenters requested that CMS establish a cap on the
decline in a relative weight from FY 2017 to FY 2018, or a phase-in or
multi-year transition period in cases of substantial fluctuation of
payment rates (82 FR 38103).
[[Page 48898]]
After consideration of these comments, and for the reasons
discussed in the FY 2018 final rule, we adopted a temporary one-time
measure for FY 2018 for MS-DRGs where the relative weight would have
declined by more than 20 percent from the FY 2017 relative weight,
consistent with our general authority to assign and update appropriate
weighting factors under sections 1886(d)(4)(B) and (C) of the Act (82
FR 38103). Specifically, for these MS-DRGs, the relative weight for FY
2018 was set at 80 percent of the FY 2017 relative weight. In the FY
2019 IPPS/LTCH PPS final rule, in response to similar comments, we
adopted a temporary one-time measure for FY 2019 for an MS-DRG where
the FY 2018 relative weight declined by 20 percent from the FY 2017
relative weight and the FY 2019 relative weight would have declined by
20 percent or more from the FY 2018 relative weight (83 FR 41273).
Specifically, for an MS-DRG meeting this criterion, we set the FY 2019
relative weight equal to the FY 2018 relative weight. In the FY 2020
IPPS/LTCH PPS final rule, in response to similar comments, we adopted a
temporary one-time measure for FY 2020 for an MS-DRG where the FY 2018
relative weight declined by 20 percent from the FY 2017 relative weight
and the FY 2020 relative weight would have declined by 20 percent or
more from the FY 2019 relative weight, which was maintained at the FY
2018 relative weight (84 FR 42167). Specifically, for an MS-DRG meeting
this criterion, we set the FY 2020 relative weight equal to the FY 2019
relative weight, which was in turn set equal to the FY 2018 relative
weight.
In the FY 2021 IPPS/LTCH PPS proposed rule, we noted the one-time
measure adopted for FY 2020 and sought comment on whether we should
consider a similar policy for FY 2021, or an alternative approach such
as averaging the FY 2020 relative weight and the otherwise applicable
FY 2021 relative weight for MS-DRG 215, which was the only MS-DRG
impacted by the FY 2020 policy setting the FY 2020 relative weight
equal to the FY 2019 relative weight. Commenters generally supported
either setting the FY 2021 weight for MS-DRG 215 equal to the FY 2020
relative weight or an averaging approach. Some commenters requested
that CMS consider such an approach when the relative weight for an MS-
DRG is drastically reduced in a given year, particularly when it
follows a significant decline in prior years. After consideration of
comments received, and for the reasons discussed in the FY 2021 final
rule, we set the FY 2021 relative weight for MS-DRG 215 equal to the
average of the FY 2020 relative weight and the otherwise applicable FY
2021 weight. With regard to the concerns raised about other MS-DRGs
with significant reductions relative to FY 2020, we noted that these
other MS-DRGs were low volume in our claims data, and therefore
typically experience a greater degree of year-to-year variation. We
acknowledged the longstanding concerns related to low volume MS-DRGs
and stated that we would take into consideration the unique issues
relating to such MS-DRGs and the stability of their weights for future
rulemaking.
As we stated in the FY 2023 IPPS/LTCH PPS proposed rule, we have
continued to consider the comments we received in response to prior
rulemaking recommending that CMS limit significant declines in the
relative weights for the MS-DRGs more broadly, including by
establishing a cap on the degree to which the relative weight for an
MS-DRG may decline from one fiscal year to the next. For prior fiscal
years, as previously discussed, we have adopted limited, temporary
measures to address potentially substantial declines in the relative
weights in certain outlier circumstances to mitigate the impacts of
such declines. However, we have also acknowledged commenters' concerns
related to significant reductions in the weights for other MS-DRGs, in
particular low volume MS-DRGs. For these low volume MS-DRGs,
fluctuations in the volume or mix of cases and/or the presence of a few
high cost or low cost cases can have a disproportionate impact on the
calculated relative weight, thus resulting in greater year-to-year
variation in the relative weights for these MS-DRGs. This variation may
reduce the predictability and stability of an individual hospital's
Medicare payments from year-to-year. We also recognize that significant
declines in the relative weights may occur for higher-volume MS-DRGs,
with such fluctuations likewise affecting the predictability and
stability of hospital payments.
In light of these concerns, we have further considered requests
made by commenters that we address year-to-year fluctuations in
relative weights, particularly for low volume MS-DRGs, and to mitigate
the financial impacts of significant fluctuations. In consideration of
the concerns that commenters have raised about year-to-year
fluctuations in relative weights and the financial impacts of
significant fluctuations, we stated in the proposed rule that we
believe it would be appropriate to limit such fluctuations by applying
a cap on reductions in the relative weight for an MS-DRG for a given
fiscal year. Therefore, consistent with our statutory authority under
section 1886(d)(4)(B) and (C) of the Act to assign and update
appropriate weighting factors, we proposed a permanent 10-percent cap
on the reduction in an MS-DRG's relative weight in a given fiscal year,
beginning in FY 2023. This proposal is consistent with our general
authority to assign and update appropriate weighting factors as part of
our annual reclassification of the MS-DRGs and recalibration of the
relative weights under sections 1886(d)(4)(B) and (C)(i) of the Act, as
well as the requirements of section 1886(d)(4)(C)(iii) of the Act,
which specifies that the annual DRG reclassification and recalibration
of the relative weights be made in a manner that ensures that aggregate
payments to hospitals are not affected. In addition, we have authority
to implement this proposed cap and the associated budget neutrality
adjustment under our special exceptions and adjustments authority at
section 1886(d)(5)(I)(i) of the Act, which similarly gives the
Secretary broad authority to provide by regulation for such other
exceptions and adjustments to the payment amounts under section 1886(d)
of the Act as the Secretary deems appropriate. As discussed, we believe
this cap on declines in the relative weights would be appropriate in
order to promote predictability and stability in hospital payments and
to mitigate the financial impacts of significant fluctuations in the
weights. That is, by smoothing year-to-year changes in the MS-DRG
relative weights, we stated that this proposal would provide greater
predictability to hospitals, allowing time to adjust to significant
changes to relative weights. Moreover, consistent with the budget
neutrality requirement for annual updates to the relative weights,
including our implementation of similar caps on significant declines in
the relative weight for prior fiscal years, we believe that application
of this proposed 10-percent cap on relative weight reductions should
not increase estimated aggregate Medicare payments beyond the payments
that would be made had we never applied this cap. Accordingly, we
proposed to apply a budget neutrality adjustment to the standardized
amount for all hospitals to ensure that application of the proposed 10-
percent cap does not result in an increase or decrease of estimated
aggregate payments. For a further discussion of the budget neutrality
[[Page 48899]]
adjustment, we refer readers to the Addendum of the proposed rule and
this final rule.
Under this proposal, in cases where the relative weight for a MS-
DRG would decrease by more than 10 percent in a given fiscal year, we
proposed to limit the reduction to 10 percent for that fiscal year. For
example, if the relative weight for an MS-DRG in FY 2022 is 1.100 and
the relative weight for FY 2023 would otherwise be 0.9350, which would
represent a decrease of 15 percent from FY 2022, the reduction would be
limited to 10 percent, such that the proposed relative weight for FY
2023 for MS-DRG XYZ would be 0.9900 (that is, 0.90 x FY 2022 weight of
1.100). The proposed relative weights for FY 2023 as set forth in Table
5 associated with the proposed rule and available on the CMS website at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS reflect the application of this proposed cap.
As previously summarized, in the past, we have adopted a temporary
cap of 20 percent on the decline in an MS-DRG's relative weight to
address certain outlier circumstances. However, as also previously
discussed, we recognize that hospitals may benefit from the phase-in of
smaller declines in the relative weight that may nonetheless contribute
to less stability and predictability in hospital payment rates.
Accordingly, for purposes of this proposed permanent cap, we considered
that a higher cap, such as the 20-percent cap that we have applied
previously (see, for example, 82 FR 38103), would limit declines in the
relative weights for fewer MS-DRGs (5 MS-DRGs in our analysis of the
March 2022 update of the FY 2021 MedPAR claims), while a lower cap,
such as a 5-percent cap, would limit declines in the relative weights
for more MS-DRGs (92 MS-DRGs in our analysis of the March 2022 update
of the FY 2021 MedPAR claims), but with a larger associated budget
neutrality adjustment to the standardized amount. On balance, we stated
that we believe that a 10-percent cap would mitigate financial impacts
resulting from significant fluctuations in the relative weights,
particularly for low volume MS-DRGs, without the larger budget
neutrality adjustment associated with a smaller cap. We noted that this
proposed policy would limit declines in the relative weight for 27 MS-
DRGs, based on the FY 2021 claims data used for the proposed rule;
based on the March 2022 update of the FY 2021 claims data used for this
final rule, we note that it would limit declines in the relative
weights for 31 MS-DRGs.
We noted that this proposed 10-percent cap on reductions to an MS-
DRG's relative weight would apply only to a given MS-DRG with its
current MS-DRG number. In cases where CMS creates new MS-DRGs or
modifies the MS-DRGs as part of its annual reclassifications resulting
in renumbering of one or more MS-DRGs, we proposed that this limit on
the reduction in the relative weight would not apply to any MS-DRGs
affected by the renumbering (that is, the proposed 10-percent cap would
not apply to the relative weight for any new or renumbered MS-DRGs for
the fiscal year). We proposed to modify the regulations at Sec.
412.60(b) to reflect this proposed permanent cap on relative weight
reductions. We sought comments on our proposal to apply a 10-percent
cap on decreases in an MS-DRG relative weight from one fiscal year to
the next.
Comment: Many commenters supported our proposal to cap yearly
reductions in an MS-DRG's relative weight to 10%. Commenters stated
that significant year-over-year reductions can disrupt patient access
to medically necessary treatment, that large swings are inconsistent
with the principle of payment stability, and that a permanent 10
percent cap would provide more time for providers to adjust to
significant changes in relative weights. A commenter stated that a cap
on relative weight decreases could incentivize greater innovation, as
hospitals may avoid MS-DRGs with significant declines, even if they
offer more innovative, cost-saving treatment approaches. This commenter
stated that mitigating large year-to-year payment changes would
encourage providers to use the most clinically appropriate care.
Commenters also stated that the cap is particularly helpful for low
volume services, as they stated that shifts in these MS-DRGs are not
reflective of true changes in the cost of care.
Some commenters requested that CMS apply the cap in a non-budget
neutral manner. A commenter requested that CMS monitor for any
unintended consequences of the cap, given that it is budget neutral.
Many commenters requested that CMS finalize a permanent lower cap,
with some commenters expressing concern that with a 10% cap, there are
still sizable reductions for high-cost MS-DRGs. Other commenters
requested that CMS finalize a one-year cap of 5%, followed by a
permanent cap of 10%. Several commenters recommended a permanent 5%
cap, while others requested CMS set the floor as low as possible. Some
commenters noted that a broad range of MS-DRGs have weight fluctuations
in FY 2023 due to unique circumstances, such as the first use of
hospital data impacted by the COVID-19 PHE for IPPS ratesetting. A
commenter stated that the 10% cap benefits mostly medical MS-DRGs,
while many surgical MS-DRGs would experience reductions greater than 5
percent but less than 10 percent. This commenter stated that capping
reductions at 5% is consistent with the rationale to blend hospital
claims with and without COVID-19, due to the uncertainty around the
degree to which FY 2021 will reflect hospitals' costs and case mix in
FY 2023. One commenter noted that their analysis of the MS-DRG relative
weights showed that the average yearly variation in relative weights
was 5%, so a permanent 5% cap is more in line with historical MS-DRG
variation. A commenter stated that there is precedent of a 5% cap in
other parts of the IPPS, such as the wage index.
One commenter requested that if CMS finalizes a 10% cap, that the
agency continue to monitor whether a 10% cap is appropriate. A
commenter requested that CMS update this policy clearly and
transparently, and with additional stakeholder input, on an annual
basis to maintain stability and predictability.
Some commenters acknowledged that setting a lower threshold for the
cap would necessitate a larger budget neutrality adjustment, but that
the redistributive impact would be minimal overall. These commenters
stated that on balance it is still preferable to smooth the impact of
steep payment declines for a larger number of services.
One commenter stated that it is premature for CMS to adopt a
permanent cap, and recommended that CMS implement the 10% cap for FY
2023 only without a budget neutrality offset. This commenter stated
that as COVID-19 becomes more endemic in the population, and less
severe and costly in hospitals, Medicare utilization would be expected
to return to its former level of annual stability, negating the need
for a permanent cap on reductions to relative weights.
A commenter requested that any caps on the maximum annual change to
the MS-DRG relative weights should not apply to just decreases but to
increases as well.
A commenter stated that any new MS-DRG or modified version of an
existing MS-DRG would benefit from the 10% cap in subsequent years
following its introduction or modification. This commenter requested
that CMS apply the 10% cap to all MS-DRGs once the MS-DRG has been
established and gone through at least one year of the relative weight
setting
[[Page 48900]]
process. This commenter also requested that CMS consider how this type
of policy could support long term payment stability for relative
weights and hospital payments.
One commenter suggested that similar caps on payment reductions
would be beneficial under the OPPS and PFS for revised or bundled
coding updates.
Response: We appreciate commenters' support for and feedback on our
proposal. However, we disagree with the suggestion that the proposed
cap be applied in a non-budget neutral manner. As we stated in the
IPPS/LTCH PPS proposed rule, our proposal is consistent with the
requirements of section 1886(d)(4)(C)(iii) of the Act, which specifies
that the annual DRG reclassification and recalibration of the relative
weights be made in a manner that ensures that aggregate payments to
hospitals are not affected. Consistent with this budget neutrality
requirement for annual updates to the relative weights, we believe that
application of this proposed 10-percent cap on relative weight
reductions should not increase estimated aggregate Medicare payments
beyond the payments that would be made had we never applied this cap.
This is also consistent with our implementation of similar caps on
significant declines in the relative weight for prior fiscal years, as
previously summarized.
We appreciate commenters' feedback on the size of the cap on year-
to-year declines in an MS-DRG's relative weight, however we disagree
that we should finalize a lower cap, whether for one year or on a
permanent basis. As discussed in the proposed rule, after considering
larger and smaller caps, we determined that on balance, a 10-percent
cap would promote predictability and mitigate financial impacts
resulting from significant fluctuations in the relative weights,
particularly for low volume MS-DRGs, without the larger budget
neutrality adjustment associated with a smaller cap. With respect to
commenters who stated that we should finalize a five percent cap
because there were greater fluctuations due to the first use of the PHE
data for ratesetting and that many surgical MS-DRGs would experience
declines of between 5 and 10 percent, we note that declines in relative
weights between 5 and 10 percent are not uncommon. For example, we note
that prior to the PHE, and relative to the 25 medical MS-DRGs and 36
surgical MS-DRGs for which the FY 2023 relative weight is declining
between 5 and 10 percent as compared to FY 2022 (based on the March
2022 update of the FY 2021 claims data used for this final rule), for
the FY 2020 IPPS/LTCH PPS final rule, 27 surgical MS-DRGs and 21
medical MS-DRGs declined between 5 and 10 percent, and for the FY 2019
IPPS/LTCH PPS final rule, 32 surgical MS-DRGs and 25 medical MS-DRGs
declined between 5 and 10 percent. Therefore, we do not believe that
the number of MS-DRGs for which the FY 2023 relative weight is
declining between 5 and 10 percent is unusual or necessarily related to
the first use of the PHE data. We therefore continue to believe that a
10-percent cap strikes the appropriate balance between considerations
of promoting predictability and mitigating financial impacts resulting
from significant fluctuations in the relative weights, without the
larger budget neutrality adjustment associated with a smaller cap. We
acknowledge commenters' observation that most MS-DRGs impacted by the
cap for FY 2023 are medical MS-DRGs; we note that the particular MS-
DRGs impacted in a given year would be expected to fluctuate based on
changes in the underlying data or as result of reclassifications.
With respect to the commenters who requested that CMS implement a
10-percent cap for one year only or update the policy on an annual
basis, we believe that in order to better promote predictability and
stability in hospital payments, it is appropriate to finalize a
permanent 10-percent cap on year-to-year declines in the relative
weight, beginning with the FY 2023 relative weights. We expect to
continue to monitor the effects of this cap, including the number of
MS-DRGs subject to the cap for any given fiscal year, and to present in
the Addendum to the annual proposed and final rules the budget
neutrality adjustment for reclassification and recalibration of the MS-
DRG relative weights with application of this cap. We also anticipate
continuing to make available on the CMS website a supplemental file
demonstrating the application of the permanent 10 percent cap for
future years.
With regard to the comment requesting that caps on maximum changes
to an MS-DRG's relative weight apply to increases as well, as discussed
in the IPPS/LTCH PPS proposed rule, our goal in smoothing year-to-year
changes in the relative weights is to mitigate financial impacts
associated with significant declines in an MS-DRG's relative weight and
allow hospitals more time to adjust to such changes by phasing-in these
declines. In cases where the underlying data or MS-DRG
reclassifications result in an increase to an MS-DRG's relative weight,
we do not believe a such a phase-in is appropriate.
With regard to new or modified MS-DRGs, we are clarifying that
after the first fiscal year that these new or modified MS-DRGs take
effect, any changes to the relative weights for those MS-DRGs would
also be subject to the 10-percent cap.
With regard to the commenter's suggestion about long-term payment
stability, we note that the goal of this policy is to smooth year-to-
year changes.
With regard to similar caps on payment under other payment systems,
we note that this comment is outside the scope of the proposals
included in the FY 2023 IPPS/LTCH PPS proposed rule, and we are
therefore not addressing this comment in this final rule. We may
consider this comment in connection with future rulemaking.
After consideration of comments received, we are finalizing the
proposed permanent 10-percent cap on the reduction in an MS-DRG's
relative weight in a given fiscal year and the associated budget
neutrality adjustment to the standardized amount, as previously
described in this section, beginning in FY 2023. We are also finalizing
our proposed modifications to the regulations at Sec. 412.60(b) to
reflect this permanent cap on relative weight reductions. The final
relative weights for FY 2023 as set forth in Table 5 associated with
this final rule and available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS
reflect the application of this finalized cap. For a further discussion
of the budget neutrality adjustment for FY 2023, we refer readers to
the Addendum of this final rule.
3. Development of National Average CCRs
We developed the national average CCRs as follows:
Using the FY 2020 cost report data, we removed CAHs, Indian Health
Service hospitals, all-inclusive rate hospitals, and cost reports that
represented time periods of less than 1 year (365 days). We included
hospitals located in Maryland because we include their charges in our
claims database. Then we created CCRs for each provider for each cost
center (see the supplemental data file for line items used in the
calculations) and removed any CCRs that were greater than 10 or less
than 0.01. We normalized the departmental CCRs by dividing the CCR for
each department by the total CCR for the hospital for the purpose of
trimming the data. Then we took the logs of the
[[Page 48901]]
normalized cost center CCRs and removed any cost center CCRs where the
log of the cost center CCR was greater or less than the mean log plus/
minus 3 times the standard deviation for the log of that cost center
CCR. Once the cost report data were trimmed, we calculated a Medicare-
specific CCR. The Medicare-specific CCR was determined by taking the
Medicare charges for each line item from Worksheet D-3 and deriving the
Medicare-specific costs by applying the hospital-specific departmental
CCRs to the Medicare-specific charges for each line item from Worksheet
D-3. Once each hospital's Medicare-specific costs were established, we
summed the total Medicare-specific costs and divided by the sum of the
total Medicare-specific charges to produce national average, charge-
weighted CCRs.
After we multiplied the total charges for each MS-DRG in each of
the 19 cost centers by the corresponding national average CCR, we
summed the 19 ``costs'' across each MS-DRG to produce a total
standardized cost for the MS-DRG. The average standardized cost for
each MS-DRG was then computed as the total standardized cost for the
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The
average cost for each MS-DRG was then divided by the national average
standardized cost per case to determine the proposed relative weight.
As discussed earlier in this section, we are finalizing our
proposal to (a) use 50 percent of the relative weights calculated using
all cases in the FY 2021 MedPAR data and 50 percent of the relative
weights calculated without COVID-19 cases in the FY 2021 MedPAR data to
calculate the relative weights for FY 2023; and (b) apply a permanent
10-percent cap on the reduction in a MS-DRG's relative weight in a
given fiscal year, beginning in FY 2023.
In developing the relative weights consistent with these finalized
policies, we first created a set of relative weights using all
applicable cases in the March 2022 update of the FY 2021 MedPAR data,
using the methodology as described earlier in this section (Step 1).
These relative weights were then normalized by an adjustment factor of
1.948410 so that the average case weight after recalibration was equal
to the average case weight before recalibration. The normalization
adjustment is intended to ensure that recalibration by itself neither
increases nor decreases total payments under the IPPS, as required by
section 1886(d)(4)(C)(iii) of the Act.
Next, we created a set of relative weights using the March 2022
update of the FY 2021 MedPAR data excluding cases with a principal or
secondary diagnosis of COVID-19 (ICD-10-CM diagnosis code U07.1), and
otherwise using the methodology as described earlier in this section
(Step 2). These relative weights were then normalized by an adjustment
factor of 1.916445.
We then averaged the results of Step 1 and Step 2 (Step 3), and
normalized these relative weights by applying an adjustment factor of
1.000212 (Step 4). This normalization adjustment is intended to ensure
that this averaging methodology for recalibration of the FY 2023
relative weights neither increases nor decreases total payments under
the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
Finally, we applied the 10 percent cap to the relative weights for
those MS-DRGs for which the relative weight as calculated in Step 4
would otherwise have declined by more than 10 percent from the FY 2022
relative weight (Step 5). Specifically, for those MS-DRGs for which the
relative weight as calculated in Step 4 declined by more than 10
percent from the FY 2022 relative weight, we set the FY 2023 relative
weight equal to 90 percent of the FY 2022 relative weight. The relative
weights for FY 2023 as set forth in Table 5 associated with this final
rule and available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS reflect the
application of this cap. We are also making available a supplemental
file setting forth the relative weights as calculated with all cases
(Step 1), excluding cases with a principal or secondary diagnosis of
COVID-19 (Step 2), following application of the normalization factor
and prior to the application of this cap (Step 4), and with the
application of this cap (Step 5) along with the other supplemental
files for this final rule, on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS.
The 19 national average CCRs for FY 2023 are as follows:
BILLING CODE 4120-01-P
[[Page 48902]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.074
Since FY 2009, the relative weights have been based on 100 percent
cost weights based on our MS-DRG grouping system.
When we recalibrated the DRG weights for previous years, we set a
threshold of 10 cases as the minimum number of cases required to
compute a reasonable weight. We are proposed to use that same case
threshold in recalibrating the proposed MS-DRG relative weights for FY
2023. Using data from the FY 2021 MedPAR file, there were 7 MS-DRGs
that contain fewer than 10 cases. For FY 2023, because we do not have
sufficient MedPAR data to set accurate and stable cost relative weights
for these low-volume MS-DRGs, we proposed to compute relative weights
for the low-volume MS-DRGs by adjusting their final FY 2022 relative
weights by the percentage change in the average weight of the cases in
other MS-DRGs from FY 2022 to FY 2023. The crosswalk table is as
follows.
[[Page 48903]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.075
BILLING CODE 4120-01-C
We did not receive any public comments on our proposals and we are
finalizing our proposals without modification.
F. Add-On Payments for New Services and Technologies for FY 2023
1. Background
Sections 1886(d)(5)(K) and (L) of the Act establish a process of
identifying and ensuring adequate payment for new medical services and
technologies (sometimes collectively referred to in this section as
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the
Act specifies that a medical service or technology will be considered
new if it meets criteria established by the Secretary after notice and
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act
specifies that a new medical service or technology may be considered
for new technology add-on payment if, based on the estimated costs
incurred with respect to discharges involving such service or
technology, the DRG prospective payment rate otherwise applicable to
such discharges under this subsection is inadequate. The regulations at
42 CFR 412.87 implement these provisions and Sec. 412.87(b) specifies
three criteria for a new medical service or technology to receive the
additional payment: (1) the medical service or technology must be new;
(2) the medical service or technology must be costly such that the DRG
rate otherwise applicable to discharges involving the medical service
or technology is determined to be inadequate; and (3) the service or
technology must demonstrate a substantial clinical improvement over
existing services or technologies. In addition, certain transformative
new devices and antimicrobial products may qualify under an alternative
inpatient new technology add-on payment pathway, as set forth in the
regulations at Sec. 412.87(c) and (d). We note that section
1886(d)(5)(K)(i) of the Act requires that the Secretary establish a
mechanism to recognize the costs of new medical services and
technologies under the payment system established under that
subsection, which establishes the system for paying for the operating
costs of inpatient hospital services. The system of payment for capital
costs is established under section 1886(g) of the Act. Therefore, as
discussed in prior rulemaking (72 FR 47307 through 47308), we do not
include capital costs in the add-on payments for a new medical service
or technology or make new technology add-on payments under the IPPS for
capital-related costs.
In this rule, we highlight some of the major statutory and
regulatory provisions relevant to the new technology add-on payment
criteria, as well as other information. For further discussion on the
new technology add-on payment criteria, we refer readers to the FY 2012
IPPS/LTCH PPS final rule (76 FR 51572 through 51574), the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42288 through 42300), and the FY 2021 IPPS/
LTCH PPS final rule (85 FR 58736 through 58742).
a. New Technology Add-On Payment Criteria
(1) Newness Criterion
Under the first criterion, as reflected in Sec. 412.87(b)(2), a
specific medical service or technology will no longer be considered
``new'' for purposes of new medical service or technology add-on
payments after CMS has recalibrated the MS-DRGs, based on available
data, to reflect the cost of the technology. We note that we do not
consider a service or technology to be new if it is substantially
similar to one or more existing technologies. That is, even if a
medical product receives a new FDA approval or clearance, it may not
necessarily be considered ``new'' for purposes of new technology add-on
payments if it is ``substantially similar'' to another medical product
that was approved or cleared by FDA and has been on the market for more
than 2 to 3 years. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74
FR 43813 through 43814), we established criteria for evaluating whether
a new technology is substantially similar to an existing technology,
specifically whether: (1) a product uses the same or a similar
mechanism of action to achieve a therapeutic outcome; (2) a product is
assigned to the same or a different MS-DRG; and (3) the new use
[[Page 48904]]
of the technology involves the treatment of the same or similar type of
disease and the same or similar patient population. If a technology
meets all three of these criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments. For a detailed
discussion of the criteria for substantial similarity, we refer readers
to the FY 2006 IPPS final rule (70 FR 47351 through 47352) and the FY
2010 IPPS/LTCH PPS final rule (74 FR 43813 through 43814).
(2) Cost Criterion
Under the second criterion, Sec. 412.87(b)(3) further provides
that, to be eligible for the add-on payment for new medical services or
technologies, the MS-DRG prospective payment rate otherwise applicable
to discharges involving the new medical service or technology must be
assessed for adequacy. Under the cost criterion, consistent with the
formula specified in section 1886(d)(5)(K)(ii)(I) of the Act, to assess
the adequacy of payment for a new technology paid under the applicable
MS-DRG prospective payment rate, we evaluate whether the charges of the
cases involving a new medical service or technology will exceed a
threshold amount that is the lesser of 75% of the standardized amount
(increased to reflect the difference between cost and charges) or 75%
of one standard deviation beyond the geometric mean standardized charge
for all cases in the MS-DRG to which the new medical service or
technology is assigned (or the case-weighted average of all relevant
MS-DRGs if the new medical service or technology occurs in many
different MS-DRGs). The MS-DRG threshold amounts generally used in
evaluating new technology add-on payment applications for FY 2023 are
presented in a data file that is available, along with the other data
files associated with the FY 2022 IPPS/LTCH PPS final rule and
correction notice, on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.
We note that, under the policy finalized in the FY 2021 IPPS/LTCH
PPS final rule (85 FR 58603 through 58605), beginning with FY 2022, we
use the proposed threshold values associated with the proposed rule for
that fiscal year to evaluate the cost criterion for all applications
for new technology add-on payments and previously approved technologies
that may continue to receive new technology add-on payments, if those
technologies would be assigned to a proposed new MS-DRG for that same
fiscal year.
As finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41275),
beginning with FY 2020, we include the thresholds applicable to the
next fiscal year (previously included in Table 10 of the annual IPPS/
LTCH PPS proposed and final rules) in the data files associated with
the prior fiscal year. Accordingly, the proposed thresholds for
applications for new technology add-on payments for FY 2024 were
presented in a data file that is available on the CMS website, along
with the other data files associated with the FY 2023 final rule, by
clicking on the FY 2023 IPPS final rule home page at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule, in the FY
2022 IPPS/LTCH PPS final rule, we finalized our proposal to use the FY
2019 MedPAR claims data where we ordinarily would have used the FY 2020
MedPAR claims data for purposes of FY 2022 ratesetting. Consistent with
that final policy, we finalized our proposal to use the FY 2019 claims
data to set the thresholds for applications for new technology add-on
payments for FY 2023. We note that, for the reasons discussed in
section I.F. of the preamble of the proposed rule and this final rule,
we proposed to use the FY 2021 MedPAR claims data for FY 2023
ratesetting, with certain proposed modifications to our relative weight
setting and outlier methodologies. Consistent with this proposal, for
the FY 2024 proposed threshold values, we proposed to use the FY 2021
claims data to set the proposed thresholds for applications for new
technology add-on payments for FY 2024. In addition, as discussed in
section III.E.1.c. of the proposed rule and this final rule, we
proposed to use an averaging approach for calculating the FY 2023
relative weights, to account for the anticipated decline in COVID-19
hospitalizations of Medicare beneficiaries as compared to FY 2021.
Specifically, we proposed to average the relative weights as calculated
with and without COVID-19 cases in the FY 2021 data to determine the
MS-DRG relative weights for FY 2023. Certain steps of calculating the
thresholds for applications for new technology add-on payments use the
same charge data that is used to calculate the MS-DRG weights. As a
result, different average charges per MS-DRG are calculated using the
charge data for the relative weights as calculated with and without
COVID-19 cases. Therefore, for purposes of calculating the FY 2024
thresholds, we also proposed to average the data in the steps of the
calculation that use charge data from the calculation of the MS-DRG
weights. In addition, as discussed in section I.O. of the appendix of
the FY 2023 IPPS/LTCH proposed rule (87 FR 28740 through 28741), we
also considered, as an alternative to our proposal, calculating the FY
2023 MS-DRG relative weights without the proposed averaging approach to
account for COVID-19 cases. In connection with this alternative
approach, we made available the threshold values as calculated without
this averaged data on the ``FY 2023 Final Rule Homepage'' at https://
www.cms.gov/medicare/medicare-fee-for-service-payment/
acuteinpatientpps, as well as other supplemental files as discussed
further in section I.O. of Appendix A of this final rule.
As discussed in section I.F. of the preamble of this final rule, we
are finalizing our proposal to use the FY 2021 MedPAR claims data for
FY 2023 ratesetting. Also, as discussed in section II.E of this final
rule we are finalizing our proposal to average the relative weights as
calculated with and without COVID-19 cases in the FY 2021 data to
determine the MS-DRG relative weights for FY 2023. We did not receive
any public comments on our proposal to average the data in the steps of
the calculation of the FY 2024 thresholds that use charge data from the
calculation of the MS-DRG weights, as discussed in the proposed rule.
Accordingly, in this final rule, we are finalizing to use FY 2021
claims data to set the thresholds for applications for new technology
add-on payments for FY 2024, and we are also finalizing to average the
data in the steps of the calculation of the FY 2024 thresholds that use
charge data from the calculation of the MS-DRG weights, as described
previously. The finalized thresholds for applications for new
technology add-on payments for FY 2024 are presented in a data file
that is available on the CMS website, along with the other data files
associated with this FY 2023 final rule, by clicking on the FY 2023
IPPS Final Rule Home Page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.
In the September 7, 2001, final rule that established the new
technology add-on payment regulations (66 FR 46917), we discussed that
applicants should submit a significant sample of data to demonstrate
that the medical service or technology meets the high-cost threshold.
Specifically, applicants should submit a sample of sufficient size to
enable us to undertake an initial
[[Page 48905]]
validation and analysis of the data. We also discussed in the September
7, 2001, final rule (66 FR 46917) the issue of whether the Health
Insurance Portability and Accountability Act (HIPAA) Privacy Rule at 45
CFR parts 160 and 164 applies to claims information that providers
submit with applications for new medical service or technology add-on
payments. We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51573) for further information on this issue.
(3) Substantial Clinical Improvement Criterion
Under the third criterion at Sec. 412.87(b)(1), a medical service
or technology must represent an advance that substantially improves,
relative to technologies previously available, the diagnosis or
treatment of Medicare beneficiaries. In the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42288 through 42292), we prospectively codified in our
regulations at Sec. 412.87(b) the following aspects of how we evaluate
substantial clinical improvement for purposes of new technology add-on
payments under the IPPS:
The totality of the circumstances is considered when
making a determination that a new medical service or technology
represents an advance that substantially improves, relative to services
or technologies previously available, the diagnosis or treatment of
Medicare beneficiaries.
A determination that a new medical service or technology
represents an advance that substantially improves, relative to services
or technologies previously available, the diagnosis or treatment of
Medicare beneficiaries means--
++ The new medical service or technology offers a treatment option
for a patient population unresponsive to, or ineligible for, currently
available treatments;
++ The new medical service or technology offers the ability to
diagnose a medical condition in a patient population where that medical
condition is currently undetectable, or offers the ability to diagnose
a medical condition earlier in a patient population than allowed by
currently available methods, and there must also be evidence that use
of the new medical service or technology to make a diagnosis affects
the management of the patient;
++ The use of the new medical service or technology significantly
improves clinical outcomes relative to services or technologies
previously available as demonstrated by one or more of the following: a
reduction in at least one clinically significant adverse event,
including a reduction in mortality or a clinically significant
complication; a decreased rate of at least one subsequent diagnostic or
therapeutic intervention; a decreased number of future hospitalizations
or physician visits; a more rapid beneficial resolution of the disease
process treatment including, but not limited to, a reduced length of
stay or recovery time; an improvement in one or more activities of
daily living; an improved quality of life; or, a demonstrated greater
medication adherence or compliance; or
++ The totality of the circumstances otherwise demonstrates that
the new medical service or technology substantially improves, relative
to technologies previously available, the diagnosis or treatment of
Medicare beneficiaries.
Evidence from the following published or unpublished
information sources from within the United States or elsewhere may be
sufficient to establish that a new medical service or technology
represents an advance that substantially improves, relative to services
or technologies previously available, the diagnosis or treatment of
Medicare beneficiaries: clinical trials, peer reviewed journal
articles; study results; meta-analyses; consensus statements; white
papers; patient surveys; case studies; reports; systematic literature
reviews; letters from major healthcare associations; editorials and
letters to the editor; and public comments. Other appropriate
information sources may be considered.
The medical condition diagnosed or treated by the new
medical service or technology may have a low prevalence among Medicare
beneficiaries.
The new medical service or technology may represent an
advance that substantially improves, relative to services or
technologies previously available, the diagnosis or treatment of a
subpopulation of patients with the medical condition diagnosed or
treated by the new medical service or technology.
We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for
additional discussion of the evaluation of substantial clinical
improvement for purposes of new technology add-on payments under the
IPPS.
We note, consistent with the discussion in the FY 2003 IPPS final
rule (67 FR 50015), that while FDA has regulatory responsibility for
decisions related to marketing authorization (for example, approval,
clearance, etc.), we do not rely upon FDA criteria in our evaluation of
substantial clinical improvement for purposes of determining what
drugs, devices, or technologies qualify for new technology add-on
payments under Medicare. This criterion does not depend on the standard
of safety and effectiveness on which FDA relies but on a demonstration
of substantial clinical improvement in the Medicare population.
b. Alternative Inpatient New Technology Add-On Payment Pathway
Beginning with applications for FY 2021 new technology add-on
payments, under the regulations at Sec. 412.87(c), a medical device
that is part of FDA's Breakthrough Devices Program may qualify for the
new technology add-on payment under an alternative pathway.
Additionally, under the regulations at Sec. 412.87(d) for certain
antimicrobial products, beginning with FY 2021, a drug that is
designated by FDA as a Qualified Infectious Disease Product (QIDP),
and, beginning with FY 2022, a drug that is approved by FDA under the
Limited Population Pathway for Antibacterial and Antifungal Drugs
(LPAD), may also qualify for the new technology add-on payment under an
alternative pathway. We refer the reader to the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42292 through 42297) and the FY 2021 IPPS/LTCH PPS
final rule (85 FR 58737 through 58739) for further discussion on this
policy. We note that a technology is not required to have the specified
FDA designation at the time the new technology add-on payment
application is submitted. CMS reviews the application based on the
information provided by the applicant only under the alternative
pathway specified by the applicant at the time of new technology add-on
payment application submission. However, to receive approval for the
new technology add-on payment under that alternative pathway, the
technology must have the applicable FDA designation and meet all other
requirements in the regulations in Sec. 412.87(c) and (d), as
applicable.
(1) Alternative Pathway for Certain Transformative New Devices
For applications received for new technology add-on payments for FY
2021 and subsequent fiscal years, if a medical device is part of FDA's
Breakthrough Devices Program and received FDA marketing authorization,
it will be considered not substantially similar to an existing
technology for purposes of the new technology add-on payment under the
IPPS, and will not need to meet the requirement under Sec.
412.87(b)(1) that it represent an advance that substantially improves,
[[Page 48906]]
relative to technologies previously available, the diagnosis or
treatment of Medicare beneficiaries. Under this alternative pathway, a
medical device that has received FDA marketing authorization (that is,
has been approved or cleared by, or had a De Novo classification
request granted by, FDA) and that is part of FDA's Breakthrough Devices
Program will need to meet the requirements of Sec. 412.87(c). We note
that in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58734 through
58736), we clarified our policy that a new medical device under this
alternative pathway must receive marketing authorization for the
indication covered by the Breakthrough Devices Program designation. We
refer the reader to the FY 2021 IPPS/LTCH PPS final rule (85 FR 58734
through 58736) for further discussion regarding this clarification.
(2) Alternative Pathway for Certain Antimicrobial Products
For applications received for new technology add-on payments for
certain antimicrobial products, beginning with FY 2021, if a technology
is designated by FDA as a QIDP and received FDA marketing
authorization, and, beginning with FY 2022, if a drug is approved under
FDA's LPAD pathway and used for the indication approved under the LPAD
pathway, it will be considered not substantially similar to an existing
technology for purposes of new technology add-on payments and will not
need to meet the requirement that it represent an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries. Under this
alternative pathway for QIDPs and LPADs, a medical product that has
received FDA marketing authorization and is designated by FDA as a QIDP
or approved under the LPAD pathway will need to meet the requirements
of Sec. 412.87(d).
We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR
42292 through 42297) and FY 2021 IPPS/LTCH PPS final rule (85 FR 58737
through 58739) for further discussion on this policy. We note, in the
FY 2021 IPPS/LTCH PPS final rule (85 FR 58737 through 58739), we
clarified that a new medical product seeking approval for the new
technology add-on payment under the alternative pathway for QIDPs must
receive marketing authorization for the indication covered by the QIDP
designation. We also finalized our policy to expand our alternative new
technology add-on payment pathway for certain antimicrobial products to
include products approved under the LPAD pathway and used for the
indication approved under the LPAD pathway.
c. Additional Payment for New Medical Service or Technology
The new medical service or technology add-on payment policy under
the IPPS provides additional payments for cases with relatively high
costs involving eligible new medical services or technologies, while
preserving some of the incentives inherent under an average-based
prospective payment system. The payment mechanism is based on the cost
to hospitals for the new medical service or technology. As noted
previously, we do not include capital costs in the add-on payments for
a new medical service or technology or make new technology add-on
payments under the IPPS for capital-related costs (72 FR 47307 through
47308).
For discharges occurring before October 1, 2019, under Sec.
412.88, if the costs of the discharge (determined by applying operating
cost-to-charge ratios (CCRs) as described in Sec. 412.84(h)) exceed
the full DRG payment (including payments for IME and DSH, but excluding
outlier payments), CMS made an add-on payment equal to the lesser of:
(1) 50% of the costs of the new medical service or technology; or (2)
50% of the amount by which the costs of the case exceed the standard
DRG payment.
Beginning with discharges on or after October 1, 2019, for the
reasons discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297
through 42300), we finalized an increase in the new technology add-on
payment percentage, as reflected at Sec. 412.88(a)(2)(ii).
Specifically, for a new technology other than a medical product
designated by FDA as a QIDP, beginning with discharges on or after
October 1, 2019, if the costs of a discharge involving a new technology
(determined by applying CCRs as described in Sec. 412.84(h)) exceed
the full DRG payment (including payments for IME and DSH, but excluding
outlier payments), Medicare will make an add-on payment equal to the
lesser of: (1) 65% of the costs of the new medical service or
technology; or (2) 65% of the amount by which the costs of the case
exceed the standard DRG payment. For a new technology that is a medical
product designated by FDA as a QIDP, beginning with discharges on or
after October 1, 2019, if the costs of a discharge involving a new
technology (determined by applying CCRs as described in Sec.
412.84(h)) exceed the full DRG payment (including payments for IME and
DSH, but excluding outlier payments), Medicare will make an add-on
payment equal to the lesser of: (1) 75% of the costs of the new medical
service or technology; or (2) 75% of the amount by which the costs of
the case exceed the standard DRG payment. For a new technology that is
a medical product approved under FDA's LPAD pathway, beginning with
discharges on or after October 1, 2020, if the costs of a discharge
involving a new technology (determined by applying CCRs as described in
Sec. 412.84(h)) exceed the full DRG payment (including payments for
IME and DSH, but excluding outlier payments), Medicare will make an
add-on payment equal to the lesser of: (1) 75% of the costs of the new
medical service or technology; or (2) 75% of the amount by which the
costs of the case exceed the standard DRG payment. As set forth in
Sec. 412.88(b)(2), unless the discharge qualifies for an outlier
payment, the additional Medicare payment will be limited to the full
MS-DRG payment plus 65% (or 75% for certain antimicrobial products
(QIDPs and LPADs)) of the estimated costs of the new technology or
medical service. We refer the reader to the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42297 through 42300) for further discussion on the increase
in the new technology add-on payment beginning with discharges on or
after October 1, 2019.
Section 503(d)(2) of Public Law 108-173 provides that there shall
be no reduction or adjustment in aggregate payments under the IPPS due
to add-on payments for new medical services and technologies.
Therefore, in accordance with section 503(d)(2) of Public Law 108-173,
add-on payments for new medical services or technologies for FY 2005
and subsequent years have not been subjected to budget neutrality.
d. Evaluation of Eligibility Criteria for New Medical Service or
Technology Applications
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulation at Sec. 412.87 to codify our longstanding
practice of how CMS evaluates the eligibility criteria for new medical
service or technology add-on payment applications. That is, we first
determine whether a medical service or technology meets the newness
criterion, and only if so, do we then make a determination as to
whether the technology meets the cost threshold and represents a
substantial clinical improvement over existing medical services or
technologies. We specified that all applicants for new technology add-
on payments must have FDA approval or clearance by July 1 of the
[[Page 48907]]
year prior to the beginning of the fiscal year for which the
application is being considered. In the FY 2021 IPPS/LTCH PPS final
rule, to more precisely describe the various types of FDA approvals,
clearances and classifications that we consider under our new
technology add-on payment policy, we finalized a technical
clarification to the regulation to indicate that new technologies must
receive FDA marketing authorization (such as pre-market approval (PMA);
510(k) clearance; the granting of a De Novo classification request, or
approval of a New Drug Application (NDA)) by July 1 of the year prior
to the beginning of the fiscal year for which the application is being
considered. Consistent with our longstanding policy, we consider FDA
marketing authorization as representing that a product has received FDA
approval or clearance when considering eligibility for the new
technology add-on payment under Sec. 412.87(e)(2) (85 FR 58742).
Additionally, in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58739
through 58742), we finalized our proposal to provide conditional
approval for new technology add-on payment for a technology for which
an application is submitted under the alternative pathway for certain
antimicrobial products at Sec. 412.87(d) that does not receive FDA
marketing authorization by the July 1 deadline specified in Sec.
412.87(e)(2), provided that the technology otherwise meets the
applicable add-on payment criteria. Under this policy, cases involving
eligible antimicrobial products would begin receiving the new
technology add-on payment sooner, effective for discharges the quarter
after the date of FDA marketing authorization provided that the
technology receives FDA marketing authorization by July 1 of the
particular fiscal year for which the applicant applied for new
technology add-on payments.
e. New Technology Liaisons
Many interested parties (including device/biologic/drug developers
or manufacturers, industry consultants, others) engage CMS for
coverage, coding, and payment questions or concerns. In order to
streamline engagement by centralizing the different innovation pathways
within CMS including new technology add-on payments, CMS has
established a team of new technology liaisons that can serve as an
initial resource for interested parties. This team is available to
assist with all of the following:
Help to point interested parties to or provide information
and resources where possible regarding process, requirements, and
timelines.
Coordinate and facilitate opportunities for interested
parties to engage with various CMS components.
Serve as a primary point of contact for interested parties
and provide updates on developments where possible or appropriate.
We received many questions from interested parties with respect to
pursuing new technology add-on payments who may not be entirely
familiar with working with CMS. While we encourage interested parties
to first review our resources available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech, we
know that there may be additional questions about the application
process. Interested parties with further questions about Medicare's
coverage, coding, and payment processes, and about how they can
navigate these processes, whether for new technology add-on payments or
otherwise, can contact the new technology liaison team at
[email protected].
f. Application Information for New Medical Services or Technologies
Applicants for add-on payments for new medical services or
technologies for FY 2024 must submit a formal request, including a full
description of the clinical applications of the medical service or
technology and the results of any clinical evaluations demonstrating
that the new medical service or technology represents a substantial
clinical improvement (unless the application is under one of the
alternative pathways as previously described), along with a significant
sample of data to demonstrate that the medical service or technology
meets the high-cost threshold. CMS will review the application based on
the information provided by the applicant under the pathway specified
by the applicant at the time of application submission. Complete
application information, along with final deadlines for submitting a
full application, will be posted as it becomes available on the CMS
website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to
identify the new medical services or technologies under review before
the publication of the final rule for FY 2024, the CMS website also
will post the tracking forms completed by each applicant. We note that
the burden associated with this information collection requirement is
the time and effort required to collect and submit the data in the
formal request for add-on payments for new medical services and
technologies to CMS. The aforementioned burden is subject to the Paper
Reduction Act (PRA) and approved under OMB control number 0938-1347,
and has an expiration date of 11/30/2023.
As discussed previously, in the FY 2020 IPPS/LTCH PPS final rule,
we adopted an alternative inpatient new technology add-on payment
pathway for certain transformative new devices and for Qualified
Infectious Disease Products, as set forth in the regulations at Sec.
412.87(c) and (d). The change in burden associated with these changes
to the new technology add-on payment application process were discussed
in a revision of the information collection requirement (ICR) request
currently approved under OMB control number 0938-1347, with an
expiration date of November 30, 2023. In accordance with the
implementing regulations of the PRA, we detailed the revisions of the
ICR and published the required 60-day notice on August 15, 2019 (84 FR
41723), and 30-day notice on December 17, 2019 (84 FR 68936), to
solicit public comments.
2. Public Input Before Publication of a Notice of Proposed Rulemaking
on Add-On Payments
Section 1886(d)(5)(K)(viii) of the Act, as amended by section
503(b)(2) of Public Law 108-173, provides for a mechanism for public
input before publication of a notice of proposed rulemaking regarding
whether a medical service or technology represents a substantial
clinical improvement. The process for evaluating new medical service
and technology applications requires the Secretary to do all of the
following:
Provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of Medicare beneficiaries.
Make public and periodically update a list of the services
and technologies for which applications for add-on payments are
pending.
Accept comments, recommendations, and data from the public
regarding whether a service or technology represents a substantial
clinical improvement.
Provide, before publication of a proposed rule, for a
meeting at which organizations representing hospitals, physicians,
manufacturers, and any other interested party may present comments,
recommendations, and data
[[Page 48908]]
regarding whether a new medical service or technology represents a
substantial clinical improvement to the clinical staff of CMS.
In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2023 prior
to publication of the FY 2023 IPPS/LTCH PPS proposed rule, we published
a notice in the Federal Register on September 24, 2021 (86 FR 53056),
and held a virtual town hall meeting on December 14, 2021. In the
announcement notice for the meeting, we stated that the opinions and
presentations provided during the meeting would assist us in our
evaluations of applications by allowing public discussion of the
substantial clinical improvement criterion for the FY 2023 new medical
service and technology add-on payment applications before the
publication of the FY 2023 IPPS/LTCH IPPS proposed rule.
Approximately 378 individuals registered to attend the virtual town
hall meeting. We posted the recordings of the virtual town hall on the
CMS web page at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.
We considered each applicant's presentation made at the town hall
meeting, as well as written comments received by the December 27, 2021,
deadline, in our evaluation of the new technology add-on payment
applications for FY 2023 in the development of the FY 2023 IPPS/LTCH
PPS proposed rule. In response to the published notice and the December
14, 2021, New Technology Town Hall meeting, we received written
comments regarding the applications for FY 2023 new technology add on
payments. As explained earlier and in the Federal Register notice
announcing the New Technology Town Hall meeting (86 FR 53056 through
53059), the purpose of the meeting was specifically to discuss the
substantial clinical improvement criterion with regard to pending new
technology add-on payment applications for FY 2023. Therefore, we did
not summarize the written comments in the proposed rule that are
unrelated to the substantial clinical improvement criterion. In section
II.F.6. of the preamble of the proposed rule, we summarized comments
regarding individual applications, or, if applicable, indicated that
there were no comments received in response to the New Technology Town
Hall meeting notice or New Technology Town Hall meeting, at the end of
each discussion of the individual applications.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and
Technologies
As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49434),
the ICD-10-PCS includes a new section containing the new Section ``X''
codes, which began being used with discharges occurring on or after
October 1, 2015. Decisions regarding changes to ICD-10-PCS Section
``X'' codes will be handled in the same manner as the decisions for all
of the other ICD-10-PCS code changes. That is, proposals to create,
delete, or revise Section ``X'' codes under the ICD-10-PCS structure
will be referred to the ICD-10 Coordination and Maintenance Committee.
In addition, several of the new medical services and technologies that
have been, or may be, approved for new technology add-on payments may
now, and in the future, be assigned a Section ``X'' code within the
structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS
website at https://www.cms.gov/medicare/icd-10/2021-icd-10-pcs,
including guidelines for ICD-10-PCS Section ``X'' codes. We encourage
providers to view the material provided on ICD-10-PCS Section ``X''
codes.
As discussed in more detail in section II.F.8. of the preamble of
this final rule, in the FY 2023 IPPS/LTCH PPS proposed rule, we
proposed to use NDCs instead of ICD-10-PCS Section ``X'' codes to
identify cases involving the use of therapeutic agents approved for new
technology add-on payments beginning with a transitional period in FY
2023. We refer the reader to section II.F.8. of the preamble of this
final rule for a full discussion of this proposal and the comments
received.
4. New COVID-19 Treatments Add-On Payment (NCTAP)
In response to the COVID-19 public health emergency (PHE), we
established the New COVID-19 Treatments Add-on Payment (NCTAP) under
the IPPS for COVID-19 cases that meet certain criteria (85 FR 71157
through 71158). We believe that as drugs and biological products become
available and are authorized for emergency use or approved by FDA for
the treatment of COVID-19 in the inpatient setting, it is appropriate
to increase the current IPPS payment amounts to mitigate any potential
financial disincentives for hospitals to provide new COVID-19
treatments during the PHE. Therefore, effective for discharges
occurring on or after November 2, 2020 and until the end of the PHE for
COVID-19, we established the NCTAP to pay hospitals the lesser of (1)
65% of the operating outlier threshold for the claim or (2) 65% of the
amount by which the costs of the case exceed the standard DRG payment,
including the adjustment to the relative weight under section 3710 of
the Coronavirus Aid, Relief, and Economic Security (CARES) Act, for
certain cases that include the use of a drug or biological product
currently authorized for emergency use or approved for treating COVID-
19.
In the FY 2022 IPPS/LTCH PPS final rule, we finalized a change to
our policy to extend NCTAP through the end of the FY in which the PHE
ends for all eligible products in order to continue to mitigate
potential financial disincentives for hospitals to provide these new
treatments, and to minimize any potential payment disruption
immediately following the end of the PHE. We also finalized that, for a
drug or biological product eligible for NCTAP that is also approved for
new technology add-on payments, we will reduce the NCTAP for an
eligible case by the amount of any new technology add-on payments so
that we do not create a financial disincentive between technologies
eligible for both the new technology add-on payment and NCTAP compared
to technologies eligible for NCTAP only (85 FR 45162).
Further information about NCTAP, including updates and a list of
currently eligible drugs and biologicals, is available on the CMS
website at https://www.cms.gov/medicare/covid-19/new-covid-19-treatments-add-payment-nctap.
5. FY 2023 Status of Technologies Receiving New Technology Add-On
Payments for FY 2022
In this section of the final rule, we discuss the proposed FY 2023
status of 37 technologies approved for FY 2022 new technology add-on
payments, including 2 technologies approved for 2 separate add-on
payments for different indications (RECARBRIOTM and
FETROJA[supreg]), and our finalized policies, as set forth in the
tables that follow. In general, we extend new technology add-on
payments for an additional year only if the 3-year anniversary date of
the product's entry onto the U.S. market occurs in the latter half of
the upcoming fiscal year. We note that, as discussed later in this
section, we provided a 1-year extension of new technology add-on
payments for FY 2022 for 13 technologies for which the new technology
add-on payment would otherwise have been discontinued beginning in FY
2022 using our authority under section 1886(d)(5)(I) of the Act.
[[Page 48909]]
Additionally, we note that we conditionally approved CONTEPO for FY
2022 new technology add-on payments under the alternative pathway for
certain antimicrobial products (86 FR 45155), subject to the technology
receiving FDA marketing authorization by July 1, 2022. In the FY 2023
IPPS LTCH/PPS proposed rule, we stated that if CONTEPO receives FDA
marketing authorization prior to July 1, 2022, we were proposing to
continue making new technology add-on payments for CONTEPO for FY 2023.
We stated that if CONTEPO does not receive FDA marketing authorization
by July 1, 2022, then it would not be eligible for new technology add-
on payments for FY 2022, and therefore would not be eligible for the
continuation of new technology add-on payments for FY 2023. Because
CONTEPO did not receive FDA approval by July 1, 2022, no new technology
add-on payments will be made for cases involving the use of CONTEPO for
FY 2022, and CONTEPO is therefore not eligible for the continuation of
new technology add-on payments for FY 2023.
a. FY 2023 Status of Technologies Approved for FY 2022 New Technology
Add-On Payments
As noted previously, we used our authority under section
1886(d)(5)(I) of the Act to allow a 1-year extension of new technology
add-on payments for FY 2022 for 13 technologies for which the add-on
payments would otherwise be discontinued beginning in FY 2022 because
the technologies would no longer be considered ``new'' for FY 2022. In
this section, we discuss the proposed FY 2023 status for the remaining
24 technologies approved for FY 2022 new technology add-on payments and
our finalized policies. Specifically, in the FY 2023 IPPS/LTCH PPS
proposed rule (87 FR 28210-28212), we presented our proposals to
continue the new technology add-on payment for FY 2023 for those
technologies that were approved for the new technology add-on payment
for FY 2022 and which would still be considered ``new'' for purposes of
new technology add-on payments for FY 2023. We also presented our
proposals to discontinue new technology add-on payment for FY 2023 for
those technologies that were approved for the new technology add-on
payment for FY 2022 and which would no longer be considered ``new'' for
purposes of new technology add-on payments for FY 2023.
Our policy is that a medical service or technology may continue to
be considered ``new'' for purposes of new technology add-on payments
within 2 or 3 years after the point at which data begin to become
available reflecting the inpatient hospital code assigned to the new
service or technology. Our practice has been to begin and end new
technology add-on payments on the basis of a fiscal year, and we have
generally followed a guideline that uses a 6-month window before and
after the start of the fiscal year to determine whether to extend the
new technology add-on payment for an additional fiscal year. In
general, we extend new technology add-on payments for an additional
year only if the 3-year anniversary date of the product's entry onto
the U.S. market occurs in the latter half of the fiscal year (70 FR
47362).
In the proposed rule, we provided a table listing the technologies
for which we proposed to continue making new technology add-on payments
for FY 2023 because they would still be considered ``new'' for purposes
of new technology add-on payments (87 FR 28213 through 28214). This
table also presented the newness start date, new technology add-on
payment start date, 3-year anniversary date of the product's entry onto
the U.S. market, relevant final rule citations from prior fiscal years,
proposed maximum add-on payment amount, and coding assignments for each
technology. We referred readers to the final rules cited in the table
for a complete discussion of the new technology add-on payment
application, coding and payment amount for each of these technologies,
including the applicable indications and discussion of the newness
start date.
We invited public comments on our proposals to continue new
technology add-on payments for FY 2023 for the technologies listed in
the table in the proposed rule.
Comment: Commenters overwhelmingly supported our proposed
continuation of new technology add-on payments for FY 2023 for those
technologies that were approved for the new technology add-on payment
for FY 2022 and which would still be considered ``new'' for purposes of
new technology add-on payments for FY 2023.
Response: We appreciate the commenters' support.
In the proposed rule, we noted, as discussed in the FY 2022 IPPS/
LTCH PPS final rule (86 FR 45104 through 45107), on May 1, 2020,
VEKLURY[supreg] (remdesivir) received an Emergency Use Authorization
(EUA) from FDA for the treatment of suspected or laboratory confirmed
COVID-19 in adults and children hospitalized with severe disease. The
applicant asserted that between July 1, 2020 and September 30, 2020, it
entered into an agreement with the U.S. Government to allocate and
distribute commercially-available VEKLURY[supreg] across the country.
The applicant stated that under this agreement, the first sale of
VEKLURY[supreg] was completed on July 10, 2020. The applicant stated
that they transitioned to a more traditional, unallocated model of
distribution as of October 1, 2020. In the FY 2022 IPPS/LTCH PPS final
rule (86 FR 45107), we determined that VEKLURY[supreg] meets the
newness criterion with an indication for use in adults and pediatric
patients (12 years of age and older and weighing at least 40 kg) for
the treatment of COVID-19 requiring hospitalization. We stated that
consistent with our longstanding policy, we considered the newness
period for VEKLURY[supreg] to begin on October 22, 2020, when the NDA
for VEKLURY[supreg] was approved by FDA for adults and pediatric
patients (12 years of age and older and weighing at least 40 kg) for
the treatment of COVID-19 requiring hospitalization. We also discussed
comments solicited regarding the newness period for products available
through an EUA for COVID-19 in section II.F.7. of the FY 2022 IPPS/LTCH
PPS final rule (86 FR 45159 through 45160), including comments we
received regarding the potential variability in cost estimates for
technologies available under an EUA due to government price subsidies
or variable treatment practices in the context of the global pandemic
and comments suggesting that CMS monitor pricing changes for products
available under an EUA once a product receives full marketing
authorization, instead of basing the newness period on data that may
have become available under an EUA, and indicated that we would
consider these comments for future rulemaking.
We stated in the proposed rule (87 FR 28212) that after further
review of the information provided by the applicant, we believed that
additional information related to VEKLURY[supreg]'s commercial
availability is relevant to assessing the start of the newness period
for VEKLURY[supreg]. We noted that the applicant stated that once
VEKLURY[supreg] was issued an EUA, from May through June 2020, the
entire existing supply of VEKLURY[supreg] was donated worldwide and
distributed to hospitals free of charge.\29\ The applicant further
stated that the commercial list price of the technology was announced
when it entered into the agreement with the U.S.
[[Page 48910]]
Government previously described, in anticipation of the post-donation
phase. Under this agreement, the U.S. Government allocated
VEKLURY[supreg] to each hospital, and the hospitals would then choose
to purchase quantities of VEKLURY[supreg] directly from the applicant's
subsidiary who was the sole distributor.30 31
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\29\ https://stories.gilead.com/articles/an-update-on-covid-19-from-our-chairman-and-ceo.
\30\ Remdesivir for the Commercial Marketplace. https://www.phe.gov/emergency/events/COVID19/investigation-MCM/Pages/factsheet.aspx.
\31\ Department of Health and Human Services, Office of the
Assistant Secretary for Preparedness and Response (ASPR). ASPR's
Portfolio of COVID-19 Medical Countermeasures Made Available as a
Licensed Product. https://www.phe.gov/emergency/events/COVID19/investigation-MCM/Pages/Veklury.aspx.
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We stated in the proposed rule that we continue to believe this
issue is complex, particularly as it relates to VEKLURY[supreg] as a
technology that has been available under both an EUA and an NDA. As
discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45159 through
45160), while an EUA is not marketing authorization within the meaning
of Sec. 412.87(e)(2) for purposes of eligibility for new technology
add-on payments, data reflecting the costs of products that have
received an EUA could become available as soon as the date of the EUA
issuance and prior to receiving FDA approval or clearance. In the case
of VEKLURY[supreg], we stated that we believe that there may be unique
considerations in determining the start of the newness period in light
of the donation period, during which the technology was distributed at
no cost. Accordingly, while we noted that we continue to believe that
data reflecting the costs of a product that has received an EUA could
become available as soon as the date of EUA issuance for that product,
we believed that with respect to VEKLURY[supreg], such data may not
have become available until after the end of the donation period, when
the technology became commercially available, on July 1, 2020. For
these reasons, after further consideration, we stated that we believe
the newness period for VEKLURY[supreg] may more appropriately begin on
July 1, 2020, the date on which the technology became available for
sale under the allocation agreement. We noted that VEKLURY[supreg]
would still be considered new for FY 2023 regardless of whether the
newness period began on May 1 (the date of the EUA), July 1 (the date
the donation phase ended), October 22 (the date of the NDA), or some
other date in between, as in all cases the three-year anniversary date
would occur after April 1, 2023, and therefore the product would remain
eligible for FY 2023 new technology add-on payments.
Therefore, we proposed to continue new technology add-on payments
for VEKLURY[supreg] for FY 2023. We invited public comments on this
proposal, including the newness start date for VEKLURY[supreg]. As
discussed, while we continue to believe that data reflecting the costs
of a product that has received an EUA could become available as soon as
the date of EUA issuance for that product, we also recognize that there
may be unique considerations in determining the start of the newness
period for a product available under an EUA. We are continuing to
consider the comments as discussed in the FY 2022 IPPS/LTCH PPS final
rule (86 FR 45159) regarding the newness period for products available
through an EUA for COVID-19, and we welcomed additional comments in the
proposed rule.
Comment: The applicant submitted a comment with respect to the
start of the newness period for VEKLURY[supreg]. The applicant noted
that there is no material impact on eligibility for new technology add-
on payments for VEKLURY[supreg], regardless of whether CMS uses July 1
2020, the date VEKLURY[supreg] became available for sale under the
allocation agreement, or October 22, 2020, the date of FDA approval as
the start of the newness period for VEKLURY[supreg]. The applicant
maintained that using either date and applying CMS' standard
methodology of calculating the period of eligibility for new technology
add-on payments would result in VEKLURY[supreg] staying within its
newness period through FY 2023 (October 1, 2022-September 30, 2023),
and that VEKLURY[supreg] would not be eligible for new technology add-
on payments in FY 2024 in either circumstance.
The applicant stated that the primary effect of CMS' revisiting of
the VEKLURY[supreg] newness determination would be to set a precedent
that would affect the future eligibility for new technology add-on
payments of other EUA products. To this point, the applicant referred
to the FY 2022 IPPS final rule where CMS originally finalized the
newness date for VEKLURY[supreg] and stated that products that do not
have FDA approval or clearance, including products available in the
U.S. under an EUA, are not eligible for new technology add-on payments
(86 FR 45106-07). The applicant also pointed to 42 CFR 412.87(b) which
outlines additional eligibility criteria for substantial clinical
improvement, cost, and newness that must all be met in order for a
product to be eligible for new technology add-on payments. The
applicant stated it is reasonable to assume these requirements should
not be in conflict with respect to how they are evaluated and
implemented, including with respect to the timelines applied to the
determination of eligibility for new technology add-on payments.
Furthermore, the applicant stated that CMS confirmed that using the
date of FDA approval as the beginning of the newness period for
VEKLURY[supreg] was consistent with its longstanding policy, with the
commenter referencing CMS's statement that generally, its policy is
``to begin the newness period on the date of FDA approval or clearance
or, if later, the date of availability of the product on the U.S.
market, when [data] reflecting the costs of the technology begin to
become available for the recalibration of the MS-DRGs'' (86 FR 45159)
(emphasis added). The applicant asserted that using a date prior to FDA
approval as the beginning of the newness period would therefore serve
as a departure from how CMS has traditionally determined newness for
the purposes of new technology add-on payments, as there is no
precedent to use a date earlier than FDA approval as the date of market
availability.
The applicant stated that VEKLURY[supreg]'s distribution and
commercialization framework over the course of the COVID-19 pandemic,
through which VEKLURY[supreg] was available through emergency and
compassionate use programs, donations, and a post-donation model in
collaboration with the federal government, were all implemented prior
to VEKLURY[supreg] receiving FDA approval and does not in any way
resemble the current distribution and reimbursement paradigm. The
applicant further stated that its experience during the EUA period does
not reflect the type of distribution and reimbursement environment that
would support a newness period that begins prior to the FDA approval
date for VEKLURY[supreg]. The applicant stated that the data collected
on utilization and resource use during the EUA period likely would not
be representative of utilization or resource use following FDA
approval, given that the EUA period occurred within the context of a
global pandemic and a time of extreme uncertainty for the health care
system. The applicant pointed to CMS's use of FY 2019 data for FY 2022
ratesetting for circumstances where the FY 2020 data was significantly
impacted by the COVID-19 PHE, and reasoned that VEKLURY[supreg]'s
utilization would be similarly impacted by the PHE as its EUA period
occurred almost entirely in FY 2020.
[[Page 48911]]
The applicant urged that CMS continue to determine the start of the
newness period for VEKLURY[supreg] and other products originally
available in the U.S. under an EUA using what it stated was the same
policy CMS has applied for all other products approved for new
technology add-on payment, which is to use the date of FDA approval or,
if later, the date of market availability in the U.S. For
VEKLURY[supreg], the applicant stated that this date is October 22,
2020, the date of FDA approval. The applicant stated that maintaining
this policy aligns to existing precedent, simplifies the newness
determination process, and applies a consistent policy across products.
Response: We thank the applicant for its input. As discussed in the
FY 2018 IPPS final rule (82 FR 38115), the period of newness does not
necessarily start with the approval date for the medical service or
technology and instead begins with availability of the product on the
U.S. market, which is when data become available. We have consistently
applied this standard and believe that it is consistent with the
purpose of new technology add-on payments. Therefore, while generally
our policy is to begin the newness period on the date of FDA approval
or clearance, we may also consider a documented delay in the
technology's market availability in our determination of newness (77 FR
53348 and 70 FR 47341). Accordingly, we agree that in general, we have
begun the newness period on the date of FDA approval or clearance or,
if later, the date of availability of the product onto the US market,
based on such a documented delay, as that is when data reflecting the
costs of the technology begin to become available. However, as we
discussed in the FY 2022 final rule, for a product with an EUA, the
data reflecting the costs of that product could become available as
soon as the date of EUA issuance, and prior to FDA approval or
clearance. Therefore, while a product approved under an EUA and for
which there is data reflecting the costs of the technology prior to FDA
approval may be factually distinct from a product for which there is a
documented delay in marketing availability following FDA approval, we
disagree that beginning the newness period on the date of EUA issuance
and prior to FDA approval would be inconsistent with our longstanding
policy of beginning the newness period with the availability of the
product on the U.S. market. With regard to the additional criteria for
eligibility for the new technology add-on payment, we refer readers to
the FY 2022 final rule for our discussion of the eligibility of a
product available only through an EUA for the new technology add-on
payment under section 412.87(e)(2) (86 FR 45048 through 45049), as well
as the comment solicitation on the new technology add-on payment
newness period for products available through an EUA (86 FR 45159
through 45160). With respect to the applicant's comment that
VEKLURY[supreg]'s utilization may have been impacted by the COVID-19
PHE during the EUA period, we note that the EUA for VEKLURY[supreg] was
directly related to COVID-19.
We agree with the applicant that regardless of whether
VEKLURY's[supreg] newness period begins on July 1, 2020, the date
VEKLURY[supreg] became available for sale under the allocation
agreement, or October 22, 2020, the date of FDA approval, the
application of CMS' standard methodology for determining the period of
eligibility for new technology add-on payments results in
VEKLURY[supreg] remaining within its newness period through FY 2023
(October 1, 2022-September 30, 2023), and that VEKLURY[supreg] would
not be eligible for new technology add-on payments in FY 2024 in either
circumstance. Accordingly, we are finalizing our proposal to continue
new technology add-on payments for VEKLURY[supreg] for FY 2023, as
reflected in Table II.F.-01 of this final rule. As stated previously,
we also recognize that there may be unique considerations associated
with determining the start of the newness period for a product
available under an EUA prior to receiving FDA approval, including as
discussed in the applicant's comments. Accordingly, we will continue to
consider the comments received regarding the newness period for
products available through an EUA for COVID-19 for future rulemaking.
In the FY 2023 IPPS/LTCH PPS proposed rule, we noted that we also
proposed to continue new technology add-on payments for Caption
Guidance for FY 2023, a technology sold on a subscription basis. We
stated we continued to welcome comments from the public as to the
appropriate method to determine a cost per case for technologies sold
on a subscription basis, including comments on whether the cost per
case should be estimated based on subscriber hospital data as described
previously, and if so, whether the cost analysis should be updated
based on the most recent subscriber data for each year for which the
technology may be eligible for the new technology add-on payment.
We did not receive any comments regarding the appropriate method to
determine a cost per case for technologies sold on a subscription
basis, and we will continue to consider these issues.
Comment: The applicant for Abecma[supreg] submitted a comment
stating its strong support for the continuation of new technology add-
on payments for Abecma[supreg] for FY 2023. The applicant stated that
although Abecma[supreg] received FDA approval on March 26, 2021, it did
not enter the U.S. market until May 10, 2021, when the date of first
sale occurred and the new technology was first reflected in claims
data. The applicant stated that the newness period for Abecma[supreg]
should therefore begin on May 10, 2021 as CMS' policy is to begin the
newness period on the date of a product's entry onto the U.S. market.
The applicant further stated that Abecma[supreg]'s new technology add-
on payment status should be extended beyond FY 2023, as CMS policy is
to extend new technology add-on payments for an additional year when
the 3-year anniversary of market entry occurs in the latter half of the
fiscal year.
Response: We thank the applicant for its comment. As stated
previously, while CMS may consider a documented delay in the
technology's market availability in our determination of newness, our
policy for determining whether to extend new technology add-on payments
for an additional year generally applies regardless of the volume of
claims for the technology after the beginning of the newness period (83
FR 41280). We do not consider the date of first sale of a product as an
indicator of the entry of a product onto the U.S. market. The applicant
states that the date of first sale of Abecma[supreg] was May 10, 2021,
but it is unclear from the information provided when the technology
first became available for sale and, absent additional information from
the applicant, we cannot determine a newness date based on a documented
delay in the technology's availability on the U.S. market.
We further note that, as discussed in section II.F.6.a. of the
preamble of this final rule, because CARVYKTITM is
substantially similar to ABECMA[supreg], we are using a single cost for
purposes of determining the new technology add-on payment amount for
CARVYKTITM and ABECMA[supreg] for FY 2023. As discussed in
section II.F.6.a., we determined a weighted average of the cost of
CARVYKTITM and ABECMA[supreg] based upon the projected
numbers of cases involving each technology to determine
[[Page 48912]]
the maximum new technology add-on payment. To compute the weighted cost
average, we summed the total number of projected cases for each of the
applicants, which equaled 420 cases (241 plus 179). We then divided the
number of projected cases for each of the applicants by the total
number of cases, which resulted in the following case weighted
percentages: 57% for CARVYKTITM and 43% for ABECMA[supreg].
We then multiplied the cost per case for the manufacturer specific drug
by the case-weighted percentage (0.57 * $465,000 = $265,050 for
CARVYKTITM and 0.43 * $419,500 = $180,385 for
ABECMA[supreg]). This resulted in a case-weighted average cost of
$445,435 for the technology.
Under Sec. 412.88(a)(2), we limit new technology add-on payments
to the lesser of 65% of the average cost of the technology, or 65% of
the costs in excess of the MS-DRG payment for the case. As a result,
the maximum new technology add-on payment for a case involving the use
of CARVYKTITM and ABECMA[supreg] is $289,532.75 for FY 2023,
as is reflected in Table II.F.-01 of this final rule.
Comment: Several commenters requested that CMS update the maximum
new technology add-on payment amount to reflect the current Wholesale
Acquisition Cost (WAC) per vial of their respective technologies. The
applicant for ZepzelcaTM requested the maximum new
technology add-on payment amount for ZepzelcaTM be updated
from $8,622.90 to $9,145.50 to reflect the updated WAC of $7,035 per
vial of ZepzelcaTM. The applicant for CoselaTM
requested the maximum new technology add-on payment amount for
CoselaTM be updated to reflect the updated WAC of $1,439 per
vial of CoselaTM.
Response: We appreciate the updated cost information.
ZepzelcaTM's current new technology add-on payment amount is
$8,622.90 for 2 single-dose vials and reflects the WAC at the time of
ZepzelcaTM's entry onto the U.S. market (2 single-dose vials
per dose x $6,633 per vial multiplied by 0.65). For FY 2023, the
maximum new technology add-on payment amount using the updated WAC is
$9,145.50 (2 single-dose vials per dose x $7,035 per vial multiplied by
0.65), as reflected in Table II.F.-01 in this final rule.
Similarly, CoselaTM's current new technology add-on
payment amount is $5,526.30 (3 doses of CoselaTM x 2 single-
dose vials per dose x $1,417 per vial multiplied by 0.65). For FY 2023,
the maximum new technology add-on payment amount using the updated WAC
is $5,612.10 (3 doses of CoselaTM x 2 single-dose vials x
$1,439 per vial multiplied by 0.65) as reflected in Table II.F.-01 in
this final rule.
After consideration of the public comments we received, we are
finalizing our proposal to continue new technology add-on payments for
FY 2023 for the technologies that were approved for new technology add-
on payment for FY 2022 and would still be considered ``new'' for
purposes of new technology add-on payments for FY 2023, as listed in
the proposed rule and in the following Table II.F.-01 in this section
of this final rule.
We note that Table II.F.-01 below is the same as Table II.F.-02
that was presented in the proposed rule, but Table II.F.-01 in this
final rule includes the updated cost information for
ZepzelcaTM, CoselaTM, and Abecma[supreg], as
discussed previously. Table II.F.-01 also includes updated cost
information for aScope Duodeno[supreg] to reflect the cost of the
technology alone, rather than a case-weighted average with EXALT Model
DTM, as discussed later in this section. The following table
also presents the newness start date, new technology add-on payment
start date, 3-year anniversary date of the product's entry onto the
U.S. market, relevant final rule citations from prior fiscal years,
maximum add-on payment amount, and coding assignments. We refer readers
to the final rules cited in the following table for a complete
discussion of the new technology add-on payment application, coding and
payment amount for these technologies, including the applicable
indications and discussion of the newness start date.
BILLING CODE 4120-01-P
[[Page 48913]]
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[[Page 48914]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.077
BILLING CODE 4120-01-C
[[Page 48915]]
In the proposed rule, we provided a table listing the technologies
for which we proposed to discontinue making new technology add-on
payments for FY 2023 because they are no longer ``new'' for purposes of
new technology add-on payments (87 FR 28211). This table also presented
the newness start date, new technology add-on payment start date, the
3-year anniversary date of the product's entry onto the U.S. market,
relevant final rule citations from prior fiscal years, and coding
assignments for each technology. We referred readers to the final rules
cited in the table for a complete discussion of the new technology add-
on payment application, coding and payment amount for these
technologies, including the applicable indications and discussion of
the newness start date.
We invited public comments on our proposals to discontinue new
technology add-on payments for FY 2023 for the technologies listed in
the table in the proposed rule.
Comment: A commenter supported our proposal to discontinue new
technology add-on payments for AZEDRA[supreg], which will no longer be
considered new as its 3-year anniversary date of entry onto the U.S.
market will occur prior to FY 2023.
Response: We appreciate the commenter's support and are finalizing
our proposal to discontinue new technology add-on payments for
AZEDRA[supreg] for FY 2023.
Comment: Many commenters stated their opposition to discontinuing
new technology add-on payments for technologies whose 3-year
anniversary of entry onto the U.S. market will occur prior to FY 2023
or in the first half of FY 2023. These commenters encouraged CMS to use
its legal authority under section 1886(d)(5)(I) of the Act to extend
new technology add-on payments through FY 2023 due to a historic
decline in utilization during the COVID-19 pandemic.
Response: We thank the commenters for their input. Consistent with
the statute and our implementing regulations, a technology is no longer
considered as ``new'' once it is more than 2 to 3 years old,
irrespective of how frequently the medical service or technology has
been used in the Medicare population (70 FR 47349). As such, once a
technology has been available on the U.S. market for more than 2 to 3
years, we consider the costs to be included in the MS-DRG relative
weights regardless of whether the technology's use in the Medicare
population has been frequent or infrequent. Therefore, we do not
believe that case volume is a relevant consideration for making the
determination as to whether a product is ``new,'' and we are not
extending new technology add-on payments for technologies whose 3-year
anniversary of entry onto the U.S. market will occur prior to FY 2023
or in the first half of FY 2023. We refer readers to the FY 2022 IPPS/
LTCH PPS final rule (86 FR 44975 through 44979) and section II.F.5.b of
this FY 2023 final rule for discussion of our policy to allow for a 1-
year extension of new technology add-on payments for FY 2022 because of
the unique circumstances associated with ratesetting for FY 2022, for
which CMS used FY 2019 data instead of FY 2020 data to develop the FY
2022 relative weights.
Comment: Several commenters disagreed with CMS's proposal to
discontinue new technology add-on payments for EXALT Model
DTM Single-Use Duodenoscope while continuing payments for
aScope[supreg] Duodeno through FY 2023 based on the different FDA
clearance dates for the two technologies. These commenters recommended
that CMS create a single newness date and extend new technology add-on
payments for both products through the end of FY 2023. The commenters
noted that there is no mechanism for hospitals to distinguish between
the two devices when reporting claims to CMS, as the duodenoscopes
share one add-on payment amount and are identified using the same ICD-
10-PCS codes.
Another commenter, the applicant for EXALT Model DTM,
stated that creating a single newness date and discontinuation date for
a combined new technology add-on payment is consistent with prior CMS
decision-making regarding substantially similar technologies such as
IMFINZI[supreg] and TECENTRIQ[supreg] from the FY 2021 IPPS final rule,
and the LUTONIX[supreg] and IN.PACTTM AdmiralTM
drug-coated balloons in the FY 2016 IPPS final rule. The commenter
noted that, in these instances, CMS finalized the proposal to
discontinue the new technology add-on payment for both technologies on
the same date and calculated a case-weighted average cost resulting in
the same maximum add-on payment for both technologies. The commenter
further noted that CMS determined the drug-coated balloons were
identifiable using the same ICD-10-PCS procedure codes, and that
IMFINZI[supreg] and TECENTRIQ[supreg] received a one-year extension
through FY 2022 based on CMS' decision to use FY 2019 data (instead of
FY 2020 data) for the FY 2022 IPPS rate setting. The commenter
requested that CMS discontinue the new technology add-on payments for
both EXALT Model DTM and aScopeTM Duodeno at the
same time, preferably at the end of FY 2023. As an alternative, the
applicant recommended that CMS recalculate the maximum payment amount
from the current case-weighted average of $1,715 per case to reflect
65% of the cost of aScopeTM Duodeno only.
Response: We thank the commenters for their input. As stated
previously, a technology is no longer considered ``new'' once it is
more than 2 to 3 years old, irrespective of how frequently the medical
service or technology has been used in the Medicare population (70 FR
47349). As such, once a technology has been available on the U.S.
market for more than 2 to 3 years, we consider the costs to be included
in the MS-DRG relative weights regardless of whether the technology's
use in the Medicare population has been frequent or infrequent.
Additionally, we note that under Sec. 412.87(c), applications received
for new technology add-on payments for FY 2021 and subsequent fiscal
years for medical devices that are part of FDA's Breakthrough Devices
Program and received FDA marketing authorization will be considered not
substantially similar to an existing technology for purposes of the new
technology add-on payment under the IPPS. Because EXALT Model
DTM and aScopeTM Duodeno both applied under the
alternative pathway for transformative new technologies, the
applicant's comparison to IMFINZI[supreg] and TECENTRIQ[supreg] from
the FY 2021 IPPS final rule (85 FR 58672 through 58684), and the
LUTONIX[supreg] and IN.PACTTM AdmiralTM drug-
coated balloons in the FY 2016 IPPS final rule (80 FR 49461 through
49470), where the technologies were determined to be substantially
similar and therefore had the same newness period, is not relevant.
Thus, we are finalizing our proposal to discontinue new technology add-
on payment for EXALTTM Model DTM for FY 2023.
We agree with the applicant's alternative recommendation that the
maximum new technology add-on payment amount should reflect the cost of
aScopeTM Duodeno only. Based on information provided in its
application for FY 2022 new technology add-on payment, the cost of the
aScopeTM Duodeno is $1,995. Under Sec. 412.88(a)(2), we
limit new technology add-on payments to the lesser of 65% of the
average cost of the technology, or 65% of the costs in excess of the
MS-DRG payment for the case. As a result, we are finalizing that the
maximum new technology add-on payment for a case involving the use of
the aScopeTM Duodeno would be $1,296.75 for FY
[[Page 48916]]
2022 (that is, 65% of the average cost of the technology). Cases
involving the use of aScopeTM Duodeno will continue to be
identified by the following ICD-10-PCS procedure codes: XFJB8A7
(Inspection of hepatobiliary duct using single-use duodenoscope, new
technology group 7) or XFJD8A7 (Inspection of pancreatic duct using
single-use duodenoscope, new technology group).
After consideration of the public comments we received, we are
finalizing our proposal to discontinue new technology add-on payments
for the technologies as listed in the proposed rule and in the
following Table II.F.-02 of this final rule for FY 2023 because they
are no longer ``new'' for purposes of new technology add-on payments.
This table also presents the newness start date, new technology add-on
payment start date, the 3-year anniversary date of the product's entry
onto the U.S. market, and relevant final rule citations from prior
fiscal years. We also refer readers to the final rules cited in the
following table for a complete discussion of the new technology add-on
payment application, coding and payment amount for these technologies,
including the applicable indications and discussion of the newness
start date.
BILLING CODE 4120-01-P
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[[Page 48917]]
BILLING CODE 4120-01-C
b. Status of Technologies Provided a One-Year Extension of New
Technology Add-On Payments in FY 2022
As stated in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44789),
our goal is always to use the best available data overall for
ratesetting. The best available MedPAR data will typically be the most
recent MedPAR file that contains claims from discharges for the fiscal
year that is 2 years prior to the fiscal year that is the subject of
the rulemaking.
In the FY 2022 IPPS/LTCH PPS final rule, for the reasons discussed,
we finalized that we would use FY 2019 MedPAR data instead of FY 2020
MedPAR data to develop the FY 2022 MS-DRG relative weights (86 FR 44789
through 44793). Because we finalized that we would use FY 2019 MedPAR
data instead of FY 2020 MedPAR data for the development of the FY 2022
MS-DRG relative weights, we stated that the costs for a new technology
for which the 3-year anniversary date of the product's entry onto the
U.S. market occurs prior to the latter half of FY 2022 may not be fully
reflected in the MedPAR data used to recalibrate the MS-DRG relative
weights for FY 2022. Therefore, in light of this final policy, we
finalized our proposal to use our authority under section 1886(d)(5)(I)
of the Act to allow for a 1-year extension of new technology add-on
payments for FY 2022 for 13 technologies (as listed in the proposed
rule and in Table II.F.-03 of this final rule) for which the new
technology add-on payment would have otherwise been discontinued
beginning with FY 2022. We refer the reader to the FY 2022 IPPS/LTCH
PPS final rule (86 FR 44975 through 44979) for a complete discussion
regarding this 1-year extension for FY 2022.
For FY 2023 ratesetting, as discussed in section I.F. of this final
rule, we believe the best available data is the FY 2021 MedPAR file. As
discussed in section I.F. of this final rule, for FY 2023, we are
finalizing our proposal to use the FY 2021 MedPAR (the best available
data at the time of this final rule) for FY 2023 ratesetting, including
for purposes of developing the FY 2023 relative weights. We refer the
reader to section I.F. of this final rule for a complete discussion
regarding our final policy to use the FY 2021 MedPAR for the FY 2023
ratesetting and recalibration of the FY 2023 MS-DRG relative weights.
As noted previously, our policy is that a medical service or
technology may continue to be considered ``new'' for purposes of new
technology add-on payments within 2 or 3 years after the point at which
data begin to become available reflecting the inpatient hospital code
assigned to the new service or technology. For FY 2023, because we
proposed to use FY 2021 MedPAR data to recalibrate the FY 2023 MS-DRG
relative weights, we stated in the proposed rule that we believe the
costs of the 13 technologies as listed in the proposed rule (87 FR
28216 through 28217) and in Table II.F.-03 of this final rule, for
which the 3-year anniversary date of the product's entry onto the U.S.
market occurs prior to FY 2023 (and therefore are no longer ``new''),
may now be fully reflected in the MedPAR data used to recalibrate the
MS-DRG relative weights for FY 2023. As a result, we proposed to
discontinue new technology add-on payments for these 13 technologies in
FY 2023. We also refer readers to the final rules cited in Table II.F.-
03 for a complete discussion of the new technology add-on payment
application, coding and payment amount for these technologies,
including the applicable indications and discussion of the newness
start date.
We invited public comments on our proposals to discontinue new
technology add-on payments for FY 2023 for these 13 technologies listed
in the proposed rule and Table II.F.-03.
Comment: Many commenters, including several applicants for
technologies currently receiving new technology add-on payments, stated
their opposition to discontinuing new technology add-on payments for
technologies that received a one-year extension in FY 2022. These
commenters stated that the FY 2021 MedPAR claims data are distorted due
to effects of the COVID-19 pandemic and should not be used to
recalibrate the MS-DRG relative weights. The commenters encouraged CMS
to use its legal authority under section 1886(d)(5)(I) of the Act to
extend new technology add-on payments through FY 2023.
Another commenter stated that while it is accurate that the costs
of the technologies are reflected in the FY 2021 MedPAR data used for
ratesetting purposes, the existence of such claims data does not mean
that the costs of the technology are truly captured, nor does it mean
that the pandemic has not impacted adoption of the new technologies and
services. This commenter referenced several studies to demonstrate the
impact of the PHE on hospitals, including critical staff shortages and
financial instability due to lower revenues and inflation. The
commenter also provided an analysis of FY 2021 claims data that found
that the average standardized costs when accounting for cases using its
technology or comparable technology reported under the same ICD-10-PCS
codes increased by less than 0.5% compared to average standardized
costs that do not account for cases reported under these codes.
Response: We thank the commenters for their input. Consistent with
the statute and our implementing regulations, a technology is no longer
considered as ``new'' once it is more than 2 to 3 years old,
irrespective of how frequently the medical service or technology has
been used in the Medicare population (70 FR 47349). As such, once a
technology has been available on the U.S. market for more than 2 to 3
years, we consider the costs to be included in the MS-DRG relative
weights regardless of whether the technology's use in the Medicare
population has been frequent or infrequent. Therefore, we do not
believe that case volume is a relevant consideration for making the
determination as to whether a product is ``new''. Additionally, as
previously discussed, in the FY 2022 IPPS/LTCH PPS final rule (86 FR
44975 through 44979), we finalized a 1-year extension of new technology
add-on payments for FY 2022 in light of the unique circumstances
associated with ratesetting for FY 2022, for which CMS finalized the
use of the FY 2019 MedPAR data instead of the FY 2020 MedPAR data to
develop the FY 2022 relative weights. For FY 2023, because we are
finalizing the use of the FY 2021 MedPAR data for FY 2023 ratesetting,
including for purposes of developing the FY 2023 relative weights, we
believe the costs of these technologies are now reflected in the MedPAR
data used to recalibrate the MS-DRG relative weights for FY 2023.
Therefore, we are not extending new technology add-on payments for
technologies that received a one-year extension in FY 2022. We refer
readers to sections section I.F. and II.E. of this final rule for
discussion of CMS's finalized policy to use the FY 2021 MedPAR claims
data to recalibrate the FY 2023 MS-DRG relative weights, including the
finalized modifications to the relative weight setting methodology to
account for the anticipated decline in COVID-19 hospitalizations of
Medicare beneficiaries at IPPS hospitals as compared to FY 2021.
After consideration of the public comments we received, we are
finalizing our proposal to discontinue new technology add-on payments
for the technologies as listed in the proposed rule and in the
following Table II.F.-03 of this final rule for FY 2023. This table
also presents the
[[Page 48918]]
newness start date, new technology add-on payment start date, the 3-
year anniversary date of the product's entry onto the U.S. market, and
relevant final rule citations from prior fiscal years. We also refer
readers to the final rules cited in the following table for a complete
discussion of the new technology add-on payment application, coding and
payment amount for these technologies, including the applicable
indications and discussion of the newness start date.
BILLING CODE 4120-01-P
[[Page 48919]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.079
[[Page 48920]]
BILLING CODE 4120-01-C
6. FY 2023 Applications for New Technology Add-On Payments (Traditional
Pathway)
We received 18 applications for new technology add-on payments for
FY 2023 under the traditional new technology add-on payment pathway. In
accordance with the regulations under Sec. 412.87(e), applicants for
new technology add-on payments must have received FDA approval or
clearance by July 1 of the year prior to the beginning of the fiscal
year for which the application is being considered. Five applicants
withdrew their applications prior to the issuance of the proposed rule.
Subsequently, seven applicants withdrew their respective applications
for lifileucel, narsoplimab, TERLIVAZ (terlipressin), teclistamab,
mosunetuzumab, XENOVIEW, and treosulfan prior to the issuance of this
FY 2023 IPPS/LTCH PPS final rule. In addition, in accordance with Sec.
412.87(c), applicants for new technology add-on payments must have FDA
approval or clearance by July 1 of each year prior to the beginning of
the fiscal year for which the application is being considered. One
applicant, Boehringer Ingelheim Pharmaceuticals, Inc., for spesolimab,
did not receive FDA approval for its technology by July 1, 2022.
Therefore, spesolimab is not eligible for consideration for new
technology add-on payments for FY 2023. Consistent with our standard
approach, we are not including in this final rule the description and
discussion of applications that were withdrawn or that are ineligible
for consideration for FY 2023 due to not meeting the July 1 deadline,
described previously, which were included in the FY 2023 IPPS/LTCH PPS
proposed rule. We are also not summarizing nor responding to public
comments received regarding these withdrawn or ineligible applications
in this final rule. A discussion of the five remaining applications is
presented below.
a. CARVYKTITM (Ciltacabtagene Autoleucel)
Janssen Biotech, Inc., submitted an application for new technology
add-on payments for CARVYKTITM (ciltacabtagene autoleucel)
for FY 2023. CARVYKTITM is an autologous chimeric-antigen
receptor (CAR) T-cell therapy directed against B cell maturation
antigen (BCMA) for the treatment of patients with multiple myeloma. We
note that Janssen Biotech, Inc. previously submitted an application for
new technology add-on payments for CARVYKTITM for FY 2022
under the name ciltacabtagene autoleucel, as summarized in the FY 2022
IPPS/LTCH PPS final rule (86 FR 25233 through 25239), but withdrew that
application prior to the issuance of the FY 2022 IPPS/LTCH PPS final
rule (86 FR 44979).
The applicant stated that ciltacabtagene autoleucel refers to both
JNJ-4528, an investigational BCMA-directed CAR T-cell therapy for
previously treated patients with multiple myeloma, and LCAR-B38M, the
investigational product (ciltacabtagene autoleucel) being studied in
China. Both JNJ-4528 and LCAR-B38M are representative of the same CAR
T-cell therapy, ciltacabtagene autoleucel.
Multiple myeloma is an incurable blood cancer that affects a type
of white blood cell called plasma cells.\32\ Plasma cells, found in
bone marrow, make the antibodies that help the body attack and kill
various pathogens. According to the applicant, when damaged, malignant
plasma cells rapidly spread and replace the normal cells in the bone
marrow.\33\ The applicant asserted the median age of onset is 69 years
old and only 3% of patients are less than 45 at the age of diagnosis;
it was estimated that in 2021 nearly 35,000 people would be diagnosed
and more than 12,000 will die from multiple myeloma in the US.\34\
According to the applicant, multiple myeloma is associated with
substantial morbidity and mortality\35\ and median 5 year survival is
56%.\36\
---------------------------------------------------------------------------
\32\ Ho, M., Chen, T., Liu, J. et al. Targeting histone
deacetylase 3 (HDAC3) in the bone marrow microenvironment inhibits
multiple myeloma proliferation by modulating exosomes and IL-6
trans-signaling. Leukemia 34, 196-209 (2020). https://doi.org/10.1038/s41375-019-0493-x.
\33\ Utley A, Lipchick B, Lee KP, Nikiforov MA. Targeting
Multiple Myeloma through the Biology of Long-Lived Plasma Cells.
Cancers (Basel). 2020 Jul 30;12(8):2117.
\34\ Surveillance, Epidemiology, and End Results (SEER) Program.
SEER database 2020; https://seer.cancer.gov/statfacts/html/mulmy.html.
\35\ Cowan AJ, Allen C, Barac A, Basaleem H, Bensenor I, Curado
MP, Foreman K, Gupta R, Harvey J, Hosgood HD, Jakovljevic M, Khader
Y, Linn S, Lad D, Mantovani L, Nong VM, Mokdad A, Naghavi M, Postma
M, Roshandel G, Shackelford K, Sisay M, Nguyen CT, Tran TT, Xuan BT,
Ukwaja KN, Vollset SE, Weiderpass E, Libby EN, Fitzmaurice C. Global
Burden of Multiple Myeloma: A Systematic Analysis for the Global
Burden of Disease Study 2016. JAMA Oncol. 2018 Sep 1;4(9):1221-1227.
\36\ SEER database 2020; https://seer.cancer.gov/statfacts/html/mulmy.html.
---------------------------------------------------------------------------
According to the applicant, introduction of new treatment options
in the last 2 decades has extended the median survival of multiple
myeloma patients. The applicant asserted that the introduction of
proteasome inhibitors (PI) (for example, bortezomib, carfilzomib, and
ixazomib), histone deacetylase inhibitors (for example, panobinostat,
vorinostat), immunomodulatory agents (IMiD) (for example, thalidomide,
lenalidomide, and pomalidomide), monoclonal antibodies (daratumumab and
elotuzumab), and stem cell transplantation, have allowed numerous
therapeutic options for patients with multiple myeloma (Rajkumar 2020).
According to the applicant, the National Comprehensive Cancer Network
(NCCN) recommended treatment regimen for first-line therapy of multiple
myeloma is bortezomib (a PI), lenalidomide (an IMiD) and
dexamethasone.\37\ According to the applicant, the strategy of triplet
therapies for patients with newly diagnosed multiple myeloma, followed
by high-dose chemotherapy and autologous stem-cell transplantation for
eligible patients, and subsequently consolidation and maintenance
therapy, is the current treatment roadmap for patients.\38\ However,
despite these treatments, according to the applicant, most patients
will relapse after first-line treatment and require further
treatment\39\ with only 50% survival of relapsed patients after 5
years.40 41 The applicant stated that as multiple myeloma
progresses, each subsequent line of treatment is associated with
shorter progression free survival (PFS) and decreased rate, depth, and
durability of response and worsening of quality of life.\42\ In
addition, cumulative and long-term toxicities are often associated with
long-term therapy (Ludwig, 2018). Thus, according to the applicant,
there remains an ongoing need for additional therapeutic approaches
when the disease is resistant to available therapy.
---------------------------------------------------------------------------
\37\ National Comprehensive Cancer Network (NCCN) NCCN clinical
practice guidelines in oncology. Multiple Myeloma. Version 2. 2021--
September 9, 2020.
\38\ Branagan A, Lei M, Lou U, Raje N. Current Treatment
Strategies for Multiple Myeloma. JCO Oncol Pract. 2020 Jan;16(1):5-
14.
\39\ Sonneveld P, Broij lA. Treatment of relapsed and refractory
multiple myeloma. Haematologica. 2016;101(4):396-406.
\40\ SEER database 2020; https://seer.cancer.gov/statfacts/html/mulmy.html.
\41\ Global Cancer Observatory. GLOBOCAN database 2018; https://gco.iarc.fr/today/data/factsheets/populations/900-world-fact-sheets.pdf.
\42\ Yong K, Delforge M, Driessen C, Fink L, Flinois A,
Gonzalez-McQuire S, Safaei R, Karlin L, Mateos MV, Raab MS, Schoen
P, Cavo M. Multiple myeloma: patient outcomes in real-world
practice. Br J Haematol. 2016 Oct;175(2):252-264.
---------------------------------------------------------------------------
The applicant asserted that relapsed and refractory (r/r) multiple
myeloma (RRMM) constitutes a specific unmet medical need. According to
the applicant, patients with r/r disease are defined as those who,
having achieved
[[Page 48921]]
a minor response or better, relapse and then progress while on therapy,
or experience progression within 60 days of their last
therapy.43 44 The applicant stated the introduction of a new
class of agents, CD38-targeting monoclonal antibodies (CD38 MoAbs),
daratumumab and isatuximab, have improved options in r/r patients.\45\
The applicant asserted that given these advances, guideline
recommendations following first-line therapy are varied, with treatment
options including combinations of novel agents with existing standard
of care regimens, and include triplet and quadruplet regimens, creating
a complex treatment landscape.\46\ According to the applicant, while
triplet regimens should be used as the standard therapy for patients
with multiple myeloma, elderly or frail patients may be treated with
double regimens.\47\ The applicant further stated that for patients
with RRMM who have received at least three prior lines of therapy,
including a PI, an IMiD and an anti-CD38, there does not exist a
standard or consensus for treatment at this time, and often, supportive
care/palliative care is the only option.\48\
---------------------------------------------------------------------------
\43\ Castelli R, Orofino N, Losurdo A, Gualtierotti R, Cugno M.
Choosing treatment options for patients with relapsed/refractory
multiple myeloma. Expert Rev Anticancer Ther. 2014 Feb;14(2):199-
215.
\44\ Nooka AK, Kastritis E, Dimopoulos MA, Lonial S. Treatment
options for relapsed and refractory multiple myeloma. Blood. 2015
May 14;125(20):3085-99.
\45\ Van de Donk NWCJ, Richardson PG, Malavasi F. CD38
antibodies in multiple myeloma: back to the future. Blood. 2018 Jan
4;131(1):13-29.
\46\ National Comprehensive Cancer Network (NCCN) NCCN clinical
practice guidelines in oncology. Multiple Myeloma. Version 2. 2021--
September 9, 2020.
\47\ Ibid.
\48\ Maples KT, Joseph NS, Harvey RD. Current developments in
the combination therapy of relapsed/refractory multiple myeloma.
Expert Rev Anticancer Ther. 2020 Sep 24.
---------------------------------------------------------------------------
According to the applicant, multiple myeloma remains incurable and
most patients eventually relapse, even with the advent of new
treatments.\49\ The applicant further stated that novel, innovative
therapies are needed to improve long-term survival and outcomes. The
applicant asserted that CAR T-cell-based therapies offer potential
advantages over current therapeutic strategies. According to the
applicant, while other therapies require long-term repetitive
administration generally until progression of disease, CAR T-cell
therapy is a single infusion treatment due to live T-cell expansion in
the patient and long-term disease response. The applicant asserted that
CARVYKTITM is an autologous CAR T-cell therapy directed
against B cell maturation antigen (BCMA) for the treatment of patients
with multiple myeloma. The applicant stated that BCMA, a protein that
is highly expressed on myeloma cells\50\ and is a member of the tumor
necrosis factor (TNF) receptor family, plays a central role in
regulating B-cell maturation and differentiation into plasma cells.\51\
\52\ The applicant stated BCMA is selectively expressed on a subset of
B cells (plasma cell neoplasms including myeloma cells) and is more
stably expressed specifically on the B cell lineage, compared with key
plasma cell marker CD138, which is also expressed on normal fibroblasts
and epithelial cells.53 54 55 According to the applicant,
these expression characteristics make BCMA an ideal therapeutic target
for the treatment of multiple myeloma.56 57
CARVYKTITM, according to the applicant, is a unique,
structurally differentiated BCMA-targeting chimeric antigen receptor
with two distinct BCMA-binding domains that can identify and eliminate
myeloma cells.
---------------------------------------------------------------------------
\49\ Rajkumar SV, Kumar S. Multiple myeloma current treatment
algorithms. Blood Cancer J. 2020 Sep 28;10(9):94.
\50\ Cho SF, Anderson KC, Tai YT. Targeting B Cell Maturation
Antigen (BCMA) in Multiple Myeloma: Potential Uses of BCMA-Based
Immunotherapy. Front Immunol. 2018 Aug 10;9:1821.
\51\ Cho SF, Anderson KC, Tai YT. Targeting B Cell Maturation
Antigen (BCMA) in Multiple Myeloma: Potential Uses of BCMA-Based
Immunotherapy. Front Immunol. 2018 Aug 10;9:1821.
\52\ Tai YT, Anderson KC. Targeting B-cell maturation antigen in
multiple myeloma. Immunotherapy. 2015;7(11):1187-99.
\53\ Cho SF, Anderson KC, Tai YT. Targeting B Cell Maturation
Antigen (BCMA) in Multiple Myeloma: Potential Uses of BCMA-Based
Immunotherapy. Front Immunol. 2018 Aug 10;9:1821.
\54\ Tai YT, Anderson KC. Targeting B-cell maturation antigen in
multiple myeloma. Immunotherapy. 2015;7(11):1187-99.
\55\ Palaiologou M, Delladetsima I, Tiniakos D. CD138 (syndecan-
1) expression in health and disease. Histol Histopathol. 2014
Feb;29(2):177-89.
\56\ Ibid.
\57\ Frigyesi I, Adolfsson J, Ali M, Christophersen MK, Johnsson
E, Turesson I, Gullberg U, Hansson M, Nilsson B. Robust isolation of
malignant plasma cells in multiple myeloma. Blood. 2014 Feb
27;123(9):1336-40.
---------------------------------------------------------------------------
The applicant asserted that CAR T-cell technology is a form of
immunotherapy and is a ``living drug'' that utilizes specially altered
T cells, part of the immune system, to fight cancer. According to the
applicant, a sample of the patient's T cells are collected from the
blood, then modified in a laboratory setting to express a CAR.\58\ The
applicant stated chimeric antigen receptors are specifically designed
receptor proteins that are made up of three distinct features: (1) a
target recognition domain (typically derived from a single domain of an
antibody) that sits on the cell's exterior; (2) a co-stimulatory domain
on the cell's interior that boosts activation, enhances survival and
expansion of the modified cells; and (3) an interior stimulatory domain
that supports activation and target killing.\59\ According to the
applicant, the binding domain expressed on the surface of T cells gives
them the new ability to target a specific protein. The applicant
stated, when the target is recognized, the intracellular portions of
the receptor send signals within the T cells to destroy the target
cells. The applicant asserted these engineered CAR T-cells are
reinfused back into the same patient, which enables these specialized T
cells to latch onto the target antigen and abolish the tumor cells.
---------------------------------------------------------------------------
\58\ June CH, Sadelain M. Chimeric Antigen Receptor Therapy. N
Engl J Med. 2018 Jul 5;379(1):64-73.
\59\ Sadelain M. Chimeric antigen receptors: driving immunology
towards synthetic biology. Curr Opin Immunol. 2016 Aug;41:68-76.
---------------------------------------------------------------------------
According to the applicant, CARVYKTITM is a CAR T-cell
immunotherapy designed to recognize myeloma cells and target their
destruction. According to the applicant, CARVYKTITM's CAR T-
cell technology consists of harvesting the patient's own T cells,
programming them to express a chimeric antigen receptor that identifies
BCMA, a protein highly expressed on the surface of malignant multiple
myeloma B-lineage cells, and reinfusing these modified cells back into
the patient where they bind to and eliminate myeloma tumor cells. The
applicant asserted that, unlike the chimeric antigen receptor design of
currently approved CAR T-cell immunotherapies, which are composed of a
single-domain antibody (sdAbs), CARVYKTITM is composed of
two antibody binding domains that allow for high recognition of human
BCMA (CD269) and elimination of BCMA expressing myeloma cells.
According to the applicant, the two distinct BCMA-binding domains
confer avidity and distinguish CARVYKTITM from other BCMA-
targeting products. The applicant stated the BCMA binding domains are
linked to the receptor's interior costimulatory (4-1BB) and signaling
(CD3[zeta]) domains through a transmembrane linker (CD8a). The
applicant asserted these intracellular domains are critical components
for T cell growth and anti-tumor activity \60\ in the body once CAR T-
cells are bound to a BCMA target on multiple myeloma cells.
---------------------------------------------------------------------------
\60\ Maher J, Brentjens RJ, Gunset G, Rivi[egrave]re I, Sadelain
M. Human T-lymphocyte cytotoxicity and proliferation directed by a
single chimeric TCRzeta/CD28 receptor.
---------------------------------------------------------------------------
[[Page 48922]]
With respect to the newness criterion, according to the applicant,
CARVYKTITM was granted Breakthrough Therapy designation in
December 2019 for the treatment of adult patients with relapsed or
refractory multiple myeloma, who previously received a proteasome
inhibitor, an immunomodulatory agent, and an anti-CD38 antibody. Per
the applicant, FDA approved the Biologics License Application (BLA) for
CARVYKTITM on February 28, 2022 for the treatment of adult
patients with relapsed or refractory multiple myeloma after four or
more prior lines of therapy, including a proteasome inhibitor, an
immunomodulatory agent, and an anti-CD38 monoclonal antibody. The
applicant stated that procedures involving the administration of
CARVYKTITM can be uniquely identified using the following
ICD-10-PCS procedure codes: XW033A7 (Introduction of ciltacabtagene
autoleucel into peripheral vein, percutaneous approach, new technology
group 7) or XW043A7 (Introduction of ciltacabtagene autoleucel into
central vein, percutaneous approach, new technology group 7). The
applicant also noted that they will submit a request for a Healthcare
Common Procedure Coding System (HCPCS) code specific to the
administration of CARVYKTITM once the product is eligible
for such a code.
As previously stated, if a technology meets all three of the
substantial similarity criteria as previously described, it would be
considered substantially similar to an existing technology and
therefore would not be considered ``new'' for purposes of new
technology add-on payments.
With respect to whether a product uses the same or a similar
mechanism of action when compared to an existing technology to achieve
a therapeutic outcome, the applicant asserted that
CARVYKTITM has a unique mechanism of action because it has
two distinct binding domains that confer avidity to the BCMA antigen, a
4-1BB costimulatory domain and a CD3z signaling domain, whereas other
CAR T-cell products have only one target binding domain. The applicant
asserted that ABECMA[supreg] also targets BCMA, but does so by binding
to a single BCMA domain. In addition to detail provided in the
applicant's FY 2022 application (as discussed in 86 FR 25235 through
25236), the applicant asserted that CARVYKTITM differs
significantly from ABECMA[supreg] and other BCMA-targeting agents,
including Blenrep, because it targets BCMA with two distinct binding
domains. According to the applicant, the distinct BCMA-binding moieties
confer avidity and distinguish CARVYKTITM from other BCMA
CAR T-cell constructs providing a novel mechanism of action.\61\ The
applicant added, the 4-1BB and CD3z domains on the CAR optimize T cell
activation and proliferation.\62\ According to the applicant, non-
clinical pharmacology and toxicology have been used to characterize the
biological activity and mechanism of action of CARVYKTITM
and confirm the on-target specificity to BCMA through (1) in vitro
binding characterization; (2) in vitro co-culture assays to assess CAR
T-cell cytotoxicity and cytokine release; (3) in vivo efficacy studies
in mice with human CAR T- cells; and (4) an in vivo safety study.
According to the applicant, because CARVYKTITM has a novel
mechanism of action with two distinct BCMA-binding domains that confer
binding avidity and unprecedented clinical activity compared with other
novel anti-myeloma treatments in comparable study populations, it is
unlike any existing technology utilized to treat relapsed/refractory
multiple myeloma.
---------------------------------------------------------------------------
\61\ Xu J, Chen LJ, Yang SS, Sun Y, Wu W, Liu YF, Xu J, Zhuang
Y, Zhang W, Weng XQ, Wu J, Wang Y, Wang J, Yan H, Xu WB, Jiang H, Du
J, Ding XY, Li B, Li JM, Fu WJ, Zhu J, Zhu L, Chen Z, Fan XF, Hou J,
Li JY, Mi JQ, Chen SJ. Exploratory trial of a biepitopic CAR T-
targeting B cell maturation antigen in relapsed/refractory multiple
myeloma. Proc Natl Acad Sci U S A. 2019 May 7;116(19):9543-9551.
\62\ Weinkove R, George P, Dasyam N, McLellan AD. Selecting
costimulatory domains for chimeric antigen receptors: functional and
clinical considerations. Clin Transl Immunology. 2019 May
11;8(5):e1049.
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With regard to whether a product is assigned to the same DRG when
compared to an existing technology, the applicant asserted that because
CMS has suggested that all inpatient hospitalizations involving a CAR
T-cell treatment will be assigned to DRG 018 (Chimeric Antigen Receptor
(CAR) T-Cell and Other Immunotherapies), CARVYKTITM is
expected to be assigned to the same DRG as other multiple myeloma cases
treated with a CAR T-cell therapy. We note that the DRG assignment was
finalized to Pre-MDC MS-DRG 018, effective October 1, 2022 and is
reflected in the V39.1 ICD-10 MS-DRG Grouper effective April 1, 2022
(86 FR 58021).\63\
---------------------------------------------------------------------------
\63\ CMS Manual System, Pub. 100-04 Medicare Claims Processing,
Transmittal 11255. February 4, 2022; https://www.cms.gov/files/document/r11255cp.pdf.
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With regard to whether the new use of the technology involves the
treatment of the same or similar type of disease and the same or
similar patient population when compared to an existing technology, the
applicant asserted in its application that CARVYKTITM is
indicated for a broader population than other available therapies,
specifically multiple myeloma patients having received three prior
therapies. The applicant asserted in its application that Blenrep and
ABECMA[supreg] are indicated only for those with at least 4 prior
therapies whereas CARVYKTITM had a proposed indication for
the treatment of patients with 3 or more prior therapies. According to
the applicant, CARVYKTITM could potentially be used in a
broader multiple myeloma population, that includes patients after 3
prior therapies as opposed to 4 for Blenrep and ABECMA[supreg].
According to the applicant, in the registrational trial CARTITUDE
1, 17% (a total of 17 patients) of patients had only three prior lines
of therapy; results were presented at the American Society of
Hematology (ASH) 2021 meeting on fourth line patients. The applicant
stated that among those with three prior lines of therapy, the response
rate was 100%, the median duration of response (DoR) was 21.8 months,
minimal residual disease (MRD) negativity was found in 80%, the 18-
month progression free survival (PFS) was 75.6%, and the 18-month
overall survival (OS) was 88.2 months. According to the applicant,
because the sample size was small (17), median endpoints may not be as
rigorous as in the larger population.
According to the applicant, the distinction between three and four
previous lines of therapy is important. The applicant asserted with
each subsequent therapy patients generally become frailer and their
prognosis worsens. The applicant stated that studies comparing fourth
line to fifth line are not as common as trials studying earlier lines,
but in a real-world study by Yong et al. the percent of myeloma
patients who were able to move from third line therapy to fourth line
was 15% of all diagnosed myeloma patients, and only 1% of patients
moved to a fifth line.\64\ The applicant added that in the same study
of those patients in first line therapy, approximately 90% of patients
were able to discontinue treatment due to remission and/or planned end
of treatment while only 13% of those in fifth line ended treatment due
to stable disease/remission.
---------------------------------------------------------------------------
\64\ Yong et al. 2016. Multiple Myeloma: Patient outcomes in
real-world practice. British Journal of Haematology, 175; 252-264.
doi: 10.1111/bjh.14213.
---------------------------------------------------------------------------
The applicant asserted that for these reasons,
CARVYKTITM does not meet the third criterion and is
therefore a new technology with regards to the
[[Page 48923]]
population having been studied and being targeted for use.
In summary, the applicant asserted that CARVYKTITM meets
the newness criterion because it is not substantially similar to other
available therapies due to its unique mechanism of action, with two
distinct binding domains that confer avidity to the BCMA antigen, and
because it treats a different patient population, RRMM patients who
received three prior therapies.
In the FY 2023 IPPS/LTCH PPS proposed rule, as stated in the FY
2022 proposed rule (86 FR 25236), we noted that CARVYKTITM
may have a similar mechanism of action to that of ABECMA[supreg]. We
also noted that ABECMA[supreg] received approval for new technology
add-on payments for FY 2022 for the treatment of adult patients with
RRMM after four or more prior lines of therapy, including an
immunomodulatory agent, a proteasome inhibitor, and an anti-CD38
monoclonal antibody (86 FR 45028 through 45035). We stated that
although the number of BCMA binding domains of CARVYKTITM
and ABECMA[supreg] differ, it appeared that the mechanism of action for
both therapies is the binding to BCMA by a CAR construct, which results
in T-cell activation and killing of malignant myeloma cells. We noted
that the applicant asserted that CARVYKTITM's mechanism of
action is unique due to its dual binding domain which affects the
therapy's clinical activity, as compared to existing technologies with
a single binding domain. However, we were unclear as to how the
additional BCMA binding domain represents a change in the mechanism of
action of this therapy, or if it may instead relate to an assessment of
whether the technology meets the substantial clinical improvement
criterion. Because of the potential similarity with the BCMA antigen
and other actions, we stated our belief that the mechanism of action
for CARVYKTITM may be the same or similar to that of
ABECMA[supreg].
We also noted that the applicant stated that CARVYKTITM
may serve a new patient population if approved as a fourth line
treatment, as existing treatments are approved for fifth line
treatment. However, because CARVYKTITM's recent approval
stated that it is indicated for fifth line treatment, we questioned
whether CARVYKTITM treats a new patient population.\65\
---------------------------------------------------------------------------
\65\ https://www.fda.gov/media/156572/download.
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Accordingly, as it appeared that CARVYKTITM and
ABECMA[supreg] are purposed to achieve the same therapeutic outcome
using the same or similar mechanism of action, are assigned to the same
MS-DRG, and treat the same or similar patient population and disease,
we stated our belief that these technologies may be substantially
similar to each other. We noted that if this technology is
substantially similar to ABECMA[supreg], we believe the newness period
for this technology would begin on March 26, 2021, the date
ABECMA[supreg] received FDA approval. We expressed our interest in
information on how these two technologies may differ from each other
with respect to the substantial similarity criteria and newness
criterion. We invited public comment on whether CARVYKTITM
meets the newness criterion, including whether CARVYKTITM is
substantially similar to ABECMA[supreg] for purposes of new technology
add-on payments.
Comment: Several commenters voiced their support for
CARVYKTITM in their general comments supporting all CAR T-
cell therapies. The commenters encouraged CMS to consider approving the
new technology add-on payment for new CAR T-cell therapies, including
CARVYKTI, as they stated this encourages hospitals to adopt
breakthrough technologies by helping them recover some of the increased
costs associated with offering innovative treatments to patients.
Response: We thank the commenters for their support.
Comment: The applicant submitted a comment in response to concerns
raised by CMS in the proposed rule, reiterating that
CARVYKTITM meets the newness criterion and is not
substantially similar to ABECMA[supreg] and other multiple myeloma
treatments. The applicant stated that, while both CARVYKTITM
and ABECMA[supreg] are CAR T-cell therapies directed against BCMA for
the treatment of patients with multiple myeloma, there are mechanistic
differences that contribute to a different CAR T-cell dose,
pharmacokinetic/pharmacodynamic profile, and a different time frame for
the development of cytokine release syndrome (CRS) as compared to
ABECMA[supreg]'s single binding domain. The applicant presented the
following table outlining the key scientific differences between
CARVYKTITM and ABECMA[supreg].
[[Page 48924]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.080
In terms of differences in dosage, the applicant stated the
clinical target dose of CARVYKTITM is 0.75 x10\6\ CAR-
positive viable T-cells/kg whereas ABECMA[supreg] is 300-400 x 10\6\
cells/kg. In terms of differences in expansion of T-cell populations,
the applicant stated that CARVYKTITM has preferential
expansion of CD8 T-cells as opposed to CD4 T-cells for ABECMA[supreg].
In terms of the differences in pharmacokinetic and pharmacodynamic
properties, the applicant stated that the median time to reach maximum
expansion for CARVYKTITM was approximately 13 days after
infusion, whereas for ABECMA[supreg] it was much sooner. According to
the applicant, because of this longer lag time for maximal expansion,
the highest peak IL-6 levels is around 10 days for
CARVYKTITM as opposed to 5 days with ABECMA[supreg], which
resulted in differences in the side effect profile, as the median time
to onset of CRS is 7 days for CARVYKTITM as opposed to 1 day
for ABECMA[supreg]. The applicant stated that patients with CRS of
Grade 3 severity had IL-6 peak levels of ~1,000 pg/ml with
CARVYKTITM as opposed to over 10,000 pg/ml with
ABECMA[supreg]. The applicant also stated that the return to baseline
levels of IL-6 occurred in 2-3 months for patients treated with
CARVYKTITM as opposed to 1 month with ABECMA[supreg].
Lastly, the applicant stated that another important distinction between
CARVYKTITM and ABECMA[supreg] was that CARVYKTITM
is derived from llama antibodies directed against BCMA whereas
ABECMA[supreg] is derived from mouse antibodies. We note that the
applicant agreed with our assessment that CARVYKTITM does
not treat a new population.
Another commenter requested that CARVYKTITM be
considered for a separate new technology add-on payment and should not
be combined with other new technologies as the commenter considers the
newness, cost, and substantial clinical improvement requirements met
for CARVYKTITM. Per the commenter, this would ensure the
maximum impact for each product for CAR T-cell therapy, which the
commenter stated is significantly underpaid.
Response: We appreciate the information submitted by commenters
regarding the newness criterion for CARVYKTITM. However, we
disagree that CARVYKTITM has a unique mechanism of action.
While the applicant highlighted differences between
CARVYKTITM and ABECMA[supreg], such as number of domains,
dosage, time to CRS onset, pharmacokinetic/pharmacodynamic profile,
side effects, source of antibodies, and CD4/CD8 ratios, we do not
believe these meaningfully differentiate the mechanism of action of
CARVYKTITM from other BCMA-directed CAR T-cell therapies
such as ABECMA[supreg], as they are both considered genetically
modified autologous T-cell immunotherapies that bind to BCMA-expressing
cancer cells.
While CARVYKTITM has two BCMA binding domains as opposed
to one binding domain for ABECMA[supreg], the resulting mechanism of
action produces the same therapeutic outcome of CAR expressing CD4 and
CD8 T-cells directed against BCMA for the treatment of multiple
myeloma. We also disagree with applicant's assertion that
CARVYKTITM's preferential expansion of CD8 T-cells leads to
a different mechanism of action, as both CARVYKTITM and
ABECMA[supreg] produce a combination of CD4 and CD8 T-cells. While the
ratio of these T-cells may vary, it does not substantiate a difference
in mechanism of action which, as noted previously, is the targeting of
and binding to the BCMA-expressing cancer cells. Lastly, we disagree
that a difference in dosage and production represents a different
mechanism of action. We refer the reader to the FY 2022 IPPS/LTCH PPS
final rule (86 FR 44996 through 45000) for a further discussion of this
issue, where we determined that BREYANZI[supreg] had a similar
mechanism of action to KYMRIAH[supreg] and YESCARTA[supreg].
After consideration of the comments received, and for the reasons
discussed, we believe that CARVYKTITM and ABECMA[supreg] use
the same or a similar mechanism of action to achieve a therapeutic
outcome, as both products are BCMA-targeting CAR T-cell immunotherapies
that result in similar T-cell activation and killing of malignant
myeloma cells. Furthermore, as discussed previously,
CARVYKTITM maps to the same MS-DRG and treats the same
patient population (those with multiple myeloma after 4 or more prior
lines of therapy) as ABECMA[supreg] and other CAR T-cell therapies.
Accordingly, because CARVYKTITM meets all three of the
substantial similarity criteria, we believe that it is substantially
similar to ABECMA[supreg]. In
[[Page 48925]]
accordance with our policy, because these technologies are
substantially similar to each other, we use the earliest market
availability date submitted as the beginning of the newness period for
both technologies. Therefore, we consider the beginning of the newness
period for CARVYKTI[supreg] to be March 26, 2021, which is the date
that ABECMA[supreg] received FDA marketing authorization.
Consistent with our policy statements in the past regarding
substantial similarity, we will not be making a determination on cost
and substantial clinical improvement for CARVYKTITM.
Specifically, we have noted that approval of new technology add-on
payments would extend to all technologies that are substantially
similar, and if substantially similar technologies are submitted for
review in different (and subsequent) years, we evaluate and make a
determination on the first application and apply that same
determination to the second application (85 FR 58679). Since
ABECMA[supreg] was approved for new technology add-on payments for FY
2022 and is still within its newness period for FY 2023, and we have
determined that CARVYKTITM is substantially similar to
ABECMA[supreg], we apply that same approval for new technology add-on
payments to CARVYKTITM. We note that we received public
comments with regard to the cost and substantial clinical improvement
criteria for this technology, but because the determination made in the
FY 2022 IPPS/LTCH PPS final rule for ABECMA[supreg] is applied to
CARVYKTITM due to their substantial similarity, we are not
summarizing comments received or making a determination on those
criteria in this final rule.
Cases involving the use of CARVYKTITM that are eligible
for new technology add-on payments will be identified by procedure
codes XW033A7 (Introduction of ciltacabtagene autoleucel into
peripheral vein, percutaneous approach, new technology group 7) or
XW043A7 (Introduction of ciltacabtagene autoleucel into central vein,
percutaneous approach, new technology group 7). In its application, the
applicant estimated that the cost of CARVYKTITM is
$465,000.00 per patient. Because CARVYKTITM is substantially
similar to ABECMA[supreg], we believe using a single cost for purposes
of determining the new technology add-on payment amount is appropriate
for CARVYKTITM and ABECMA[supreg] even though each applicant
has its own set of codes. We also believe using a single cost provides
predictability regarding the add-on payment when using
CARVYKTITM and ABECMA[supreg] for the treatment of patients
with RRMM. As such, we believe that the use of a weighted average of
the cost of CARVYKTITM and ABECMA[supreg] based upon the
projected numbers of cases involving each technology to determine the
maximum new technology add-on payment would be most appropriate. To
compute the weighted cost average, we summed the total number of
projected cases for each of the applicants, which equaled 420 cases
(241 plus 179). We then divided the number of projected cases for each
of the applicants by the total number of cases, which resulted in the
following case weighted percentages: 57% for CARVYKTITM and
43% for ABECMA[supreg]. We then multiplied the cost per case for the
manufacturer specific drug by the case-weighted percentage (0.57 *
$465,000 = $265,050 for CARVYKTITM and 0.43 * $419,500 =
$180,385 for ABECMA[supreg]). This resulted in a case-weighted average
cost of $445,435 for the technology.
Under Sec. 412.88(a)(2), we limit new technology add-on payments
to the lesser of 65% of the average cost of the technology, or 65% of
the costs in excess of the MS-DRG payment for the case. As a result,
the maximum new technology add-on payment for a case involving the use
of CARVYKTITM or ABECMA[supreg] is $289,532.75 for FY 2023.
b. DARZALEX FASPRO[supreg] (daratumumab and hyaluronidase-fihj)
Janssen Biotech, Inc., submitted an application for new technology
add-on payments for DARZALEX FASPRO[supreg] for FY 2023. DARZALEX
FASPRO[supreg] is a combination of daratumumab (a monoclonal CD38-
directed cytolytic antibody), and hyaluronidase (an endoglycosidase)
indicated for the treatment of light chain (AL) amyloidosis in
combination with bortezomib, cyclophosphamide and dexamethasone
(CyBorD) in newly diagnosed patients and is administered through a
subcutaneous injection.
According to the applicant, AL amyloidosis is a life-threatening
blood disorder caused by increased production of misfolded
immunoglobulin light chains by an abnormal proliferation of malignant
CD38+ plasma cells. Per the applicant, these deficient immunoglobulin
light chains aggregate into highly ordered amyloid fibrils that deposit
in tissues, eventually resulting in progressive organ dysfunction and
damage due to the toxic effect of the misfolded proteins
(proteotoxicity) and the distortion of the normal tissue architecture
by the amyloid deposits.\66\ The applicant stated that the most
frequently affected organs are the heart, kidney, liver, spleen,
gastrointestinal tract and nervous system. Per the applicant, patients
often have a poor prognosis, and as many as 30% of patients with AL
amyloidosis die within the first year after diagnosis. The applicant
stated that approximately 4,500 people in the US develop AL amyloidosis
each year.\67\ The applicant stated that while there were no FDA
approved therapies prior to daratumumab, a number of therapies were
used clinically to treat AL amyloidosis including combination therapies
like cyclophosphamide-bortezomib-dexamethasone (CyBorD), bortezomib-
lenalidomide-dexamethasone (VRd), bortezomib-melphalan-dexamethasone
(VMd), melphalan-dexamethasone (Md), and bortezomib-dexamethasone (Vd).
The applicant further noted that none of these combination regimens are
approved for use by FDA in this specific indication.
---------------------------------------------------------------------------
\66\ Merlini et al. Systemic immunoglobin light chain
amyloidosis. Nat Rev Dis Primers. 2018; 4:38-19.
\67\ Amyloidosis Foundation. AL amyloidosis facts. http://www.amyloidosis.org/facts/al/. Accessed September 2021.
---------------------------------------------------------------------------
According to the applicant, DARZALEX FASPRO[supreg] is the first
and only FDA-approved treatment for patients with AL amyloidosis and is
also approved for multiple indications for treatment of patients with
multiple myeloma. The applicant stated that the indication for the
technology for which it is submitting a new technology add-on payment
application is for the treatment of adult patients with AL amyloidosis
in combination with bortezomib, cyclophosphamide and dexamethasone in
newly diagnosed patients. The applicant noted that DARZALEX
FASPRO[supreg] is not indicated nor recommended to be used in patients
with AL amyloidosis who have NYHA Class IIIB or Class IV cardiac
disease or Mayo Stage IIIB, except in the context of controlled
clinical trials.
According to the applicant, DARZALEX FASPRO[supreg] is the
subcutaneous formulation of daratumumab, which is a human IgG-kappa
monoclonal antibody that targets CD38, an enzymatic protein that is
uniformly expressed on human plasma cells. Per the applicant, in
DARZALEX FASPRO[supreg], daratumumab is co-formulated with recombinant
human hyaluronidase (rHuP20), which critically allows daratumumab to be
administered in a volume of 15 mL by a 3-5 minute injection under the
skin, compared to the 500-1000 mL volume
[[Page 48926]]
and 3-7 hour administration time required for IV daratumumab. The
applicant further noted that given the cardiac and renal dysfunction
which afflicts many AL amyloidosis patients and makes them poor
candidates for large volume IV administration, rHuP20 is a critical
component of DARZALEX FASPRO[supreg]. Per the applicant, daratumamab
binds to the CD38 protein on the surface of the malignant plasma cells
which are responsible for abnormal amyloid protein production in AL
amyloidosis, directly killing the malignant CD38+ plasma cells and/or
directing the immune system to destroy them. The immunomodulatory
response consists of CD8+ clonal expansion, CD38 enzymatic inhibition,
complement activation and cell recruitment to enable antibody dependent
cellular phagocytosis (ADPC) and antibody dependent cellular
cytotoxicity (ADCC). Per the applicant, the mechanism of actions of
daratumumab in AL amyloidosis are the same as the mechanisms of action
of daratumumab in multiple myeloma, since both disease entities are
disorders of malignant CD38+ plasma cells.68 69 70
---------------------------------------------------------------------------
\68\ de Weers et al. Daratumumab, a Novel Therapeutic Human CD38
Monoclonal Antibody, Induces Killing of Multiple Myeloma and Other
Hematogical Tumors. J Immunol 2011;186:1840-1848).
\69\ Overdijk et al. Antibody-mediated phagocytosis contributes
to the anti-tumor activity of the therapeutic antibody daratumumab
in lymphoma and multiple myeloma. MAbs.2015;7:311-321).
\70\ Krejcik J, Casneuf T, Nijhof IS, et al. Daratumumab
depletes CD38+ immune regulatory cells, promotes T-cell expansion,
and skews T-cell repertoire in multiple myeloma. Blood 2016; 128:
384-94.
---------------------------------------------------------------------------
The applicant stated that without hyaluronidase, it is not possible
to inject more than 2-3 mL of drug directly into the subcutaneous
tissue under the skin. Per the applicant rHuPH20 naturally mimics
natural hyaluronidase and increases the permeability of subcutaneous
tissue by degrading hyaluronan. By co-formulating daratumumab with
rHuPH20, it becomes possible for 15 mL containing 1,800 mg of
daratumamab to be administered subcutaneously in approximately 3 to 5
minutes. The applicant stated that the ability to administer
daratumumab subcutaneously reduces the reaction rate to daratumumab,
may improve convenience and patient satisfaction, and greatly reduces
the volume of administration, which is critical in light of the cardiac
dysfunction and kidney dysfunction which afflict many patients with AL
amyloidosis.
With respect to the newness criterion, the applicant stated that
DARZALEX FASPRO[supreg] was granted accelerated approval from FDA on
January 15, 2021, indicated for the treatment of adult patients with
light chain (AL) amyloidosis in combination with bortezomib,
cyclophosphamide and dexamethasone in newly diagnosed patients. Per the
applicant, DARZALEX FASPRO[supreg] is not indicated and recommended for
the treatment of patients with AL amyloidosis who have NYHA Class IIIB
or Class IV cardiac disease or Mayo Stage IIIB outside of controlled
clinical trials.\71\ The applicant also stated that DARZALEX
FASPRO[supreg] received FDA approval on September 26, 2019, for the
treatment of adult patients with multiple myeloma as part of a
combination therapy in newly diagnosed patients eligible for autologous
stem cell transplant, and on May 1, 2020, for the treatment of patients
with multiple myeloma. As stated previously, the indication for which
the applicant submitted an application for new technology add-on
payments is for the treatment of adult patients with AL amyloidosis in
combination with bortezomib, cyclophosphamide and dexamethasone in
newly diagnosed patients. The applicant stated that DARZALEX
FASPRO[supreg] for newly diagnosed AL amyloidosis was commercially
available immediately following the accelerated approval granted by
FDA. The recommended dosage for DARZALEX FASPRO[supreg] for newly
diagnosed AL amyloidosis is 1,800 mg of daratumumab and 30,000 units of
hyaluronidase administered subcutaneously over approximately 3 to 5
minutes in combination with bortezomib, cyclophosphamide and
dexamethasone. According to the applicant, patients receiving DARZALEX
FASPRO[supreg] for this indication receive a weekly dose for the first
8 weeks (week 1 to week 8), one dose every 2 weeks from week 9 to week
24, followed by one dose monthly from week 25 onward until disease
progression for a maximum of 2 years.
---------------------------------------------------------------------------
\71\ According to the applicant, continued approval for this
indication may be contingent upon verification and description of
clinical benefit in confirmatory trials.
---------------------------------------------------------------------------
The applicant submitted a request for a unique ICD-10-PCS code to
identify procedures involving the administration of DARZALEX
FASPRO[supreg], and was granted approval to identify DARZALEX
FASPRO[supreg] administration with ICD-10-PCS code XW01318
(Introduction of daratumumab and hyaluronidase-fihj into subcutaneous
tissue, percutaneous approach, new technology group 8), effective
October 1, 2022. We note that DARZALEX FASPRO[supreg] is also approved
for multiple indications for the treatment of patients with multiple
myeloma, and this PCS code would not uniquely identify use of the
technology for the indication for which the applicant has applied for a
new technology add-on payment. The applicant stated that E85.81 (Light
chain (AL) amyloidosis) may be used to currently identify the
indication for DARZALEX FASPRO[supreg] under the ICD-10-CM coding
system. Therefore, the administration of DARZALEX FASPRO[supreg] for
the AL amyloidosis indication could be uniquely identified with
XW01318, in combination with E85.81.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purposes of new technology add-on
payments.
---------------------------------------------------------------------------
\72\ Adams et al. Proteasome Inhibitors: A Novel Class of Potent
and Effective Antitumor Agents. Cancer Res 1999;55; 2615-2622.
\73\ Adams et al. The proteasome: a suitable antineoplastic
target. Nat Rev Cancer 2004; 4:349-360.
---------------------------------------------------------------------------
With respect to the first criterion, whether a technology uses the
same or similar mechanism of action to achieve a therapeutic outcome,
the applicant stated that it does not use the same or similar mechanism
of action as existing technologies. The applicant stated that DARZALEX
FASPRO[supreg] was the first drug approved by FDA for treatment of AL
amyloidosis and its mechanism of action is different from that of any
other drug previously used to treat AL amyloidosis. According to the
applicant, the other therapies currently used to treat amyloidosis off-
label (for example, bortezomib, cyclophosphamide, melphalan,
lenlidomide) all have different mechanisms of action; none of them are
monoclonal antibodies that specifically bind to CD38 on malignant
plasma cells. The applicant stated that bortezomib induces cell death
of the malignant plasma cell by inhibition of the 26S proteasome which
plays a key role in cell survival by regulating protein breakdown in a
controlled fashion. The applicant further stated that when bortezomib
inhibits proteasome function, the normal balance within a cell is
disrupted, resulting in a buildup of cell cycle and regulatory proteins
which eventually leads to cell death.72 73 Per the
applicant, lenalidomide is an immunomodulator which modulates the E3
ubiquitin ligase complex. Modulation of this E3 ubiquitin ligase
[[Page 48927]]
complex by lenalidomide eventually leads to enhanced function of
specific immune cells and induction of cell death and the exact
mechanism of action of lenalidomide is still not fully
understood.74 75 The applicant stated that both melphalan
and cyclophosphamide are alkylating chemotherapy drugs that add an
alkyl group to the guanine base of the DNA molecule, preventing the
strands of the double helix from linking, which causes breakage of the
DNA strands, affecting the ability of the cancer cell to multiply. Per
the applicant, like bortezomib and lenalidomide, melphalan and
cyclophosphamide are not approved by FDA for the use in patients with
AL amyloidosis. The applicant also noted that while the National
Comprehensive Cancer Network[supreg] (NCCN[supreg]) Guidelines for
Systemic Light Chain Amyloidosis state that both IV and SQ daratumumab
can be used to treat previously treated amyloidosis,\76\ IV daratumumab
is not approved by FDA for the treatment of patients with amyloidosis
(newly diagnosed and previously treated). The applicant also stated
that DARZALEX FASPRO[supreg] is the more appropriate option in the AL
amyloidosis patient population due to the fact that subcutaneous dosing
has a negligible volume administration (15 ml for SC vs up to 1,000 ml
for IV), which is particularly important in patients with AL
amyloidosis who often have compromised cardiac and renal function due
to the amyloid deposition in cardiac and kidney tissue.
---------------------------------------------------------------------------
\74\ Kastritis et al. Primary treatment of light chain
amyloidosis with Bortezomib, lenalidomide and dexamethasone. Blood
Adv 2019;3:3002-3009.
\75\ Revlimid Prescribing Info.
\76\ NCCN Clinical Practice Guidelines in Oncology (NCCN
Guidelines[supreg]): Systemic Light Chain amyloidosis (Version
1.2022). National Comprehensive Cancer Network. www.nccn.org.
Published August 29 June 2021. Accessed July 21, 2021.
---------------------------------------------------------------------------
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant stated that this
product is not expected to change the DRG assignment of a case when
used for the treatment of AL amyloidosis.
With respect to the third criterion, whether the new use of
technology involves the treatment of the same or similar type of
disease and the same or similar patient population when compared to an
existing technology, the applicant stated that DARZALEX FASPRO[supreg]
does not meet this criterion because it was the first approved drug to
treat patients with AL amyloidosis. The applicant also stated that the
NCCN[supreg] Guidelines for Systemic Light Chain Amyloidosis reflect
the limited treatment options for this specific disease. The applicant
further stated that DARZALEX FASPRO[supreg] in combination with CyBorD
is the only treatment with a Category 1 recommendation \77\ in the
NCCN[supreg] Guidelines for patients with newly diagnosed AL
amyloidosis.\78\
---------------------------------------------------------------------------
\77\ Per the NCCN[supreg], a Category 1 recommendation is
``Based upon high-level evidence, there is uniform NCCN[supreg]
consensus that the intervention is appropriate.''
\78\ NCCN Clinical Practice Guidelines in Oncology (NCCN
Guidelines[supreg]): Systemic Light Chain amyloidosis (Version
1.2022). National Comprehensive Cancer Network. www.nccn.org.
Published August 29 June 2021. Accessed July 21, 2021.
---------------------------------------------------------------------------
In summary, the applicant believes that DARZALEX FASPRO[supreg] is
not substantially similar to other currently available therapies and/or
technologies because it has a unique mechanism of action and because it
is the first FDA approved treatment for AL amyloidosis.
We invited public comments on whether DARZALEX FASPRO[supreg] is
substantially similar to existing technologies and whether DARZALEX
FASPRO[supreg] meets the newness criterion.
Comment: The applicant submitted a comment reiterating its belief
that DARZALEX FASPRO[supreg] meets the newness criterion because it was
the first drug approved by FDA for patients with newly diagnosed light
chain amyloidosis and that the mechanism of action is different from
that of any other drug previously used to treat AL amyloidosis in that
it is a monoclonal antibody that specifically binds to CD38 on
malignant cancer cells. The applicant stated that because of this
unique mechanism of action, DARZALEX FASPRO[supreg] for AL is not
substantially similar to current treatments for AL and therefore meets
the newness criterion.
Response: We thank the applicant for its comment. Based on our
review of comments received and information submitted by the applicant
as part of its FY 2023 new technology add-on payment application for
DARZALEX FASPRO[supreg], we agree with the applicant that DARZALEX
FASPRO[supreg] has a unique mechanism of action as the first FDA
approved treatment for AL amyloidosis. Therefore, we believe that
DARZALEX FASPRO[supreg] is not substantially similar to existing
treatment options and meets the newness criterion. We consider the
beginning of the newness period to commence when DARZALEX
FASPRO[supreg] was approved by FDA for the treatment of adult patients
with light chain (AL) amyloidosis in combination with bortezomib,
cyclophosphamide and dexamethasone in newly diagnosed patients, on
January 15, 2021.
With respect to the cost criterion, the applicant presented the
following analysis to demonstrate that DARZALEX FASPRO[supreg] meets
the cost criterion. To identify cases representing patients who may be
eligible for treatment with DARZALEX FASPRO[supreg], the applicant
searched the FY 2019 MedPAR database released with the FY 2022 IPPS
final rule and stated that it used fee-for-service IPPS discharges,
plus Maryland hospital discharges. The applicant searched for claims
reporting ICD-10-CM diagnosis code E85.81 (Light chain amyloidosis) in
conjunction with at least one of the following additional ICD-10-CM
diagnosis codes:
BILLING CODE 4120-01-P
[[Page 48928]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.081
The applicant excluded cases with a length of stay greater than 7
days from the analysis. According to the applicant, administration of
DARZALEX FASPRO[supreg] would likely be delayed if a patient becomes
seriously ill during the course of treatment, so it is unlikely a
patient would receive DARZALEX FASPRO[supreg] during an inpatient stay
lasting longer than 7 days. The applicant indicated that based on the
advice of clinical experts, it also excluded cases mapped to the
following MS-DRGs, as DARZALEX FASPRO[supreg] would not be an
appropriate treatment for patients receiving treatment for such
conditions:
[[Page 48929]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.082
[[Page 48930]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.083
After applying the case selection and exclusion criteria, the
applicant's search resulted in the identification of 114 MS-DRGs using
the FY 2019 MedPAR file dataset. The applicant imputed a case count of
11 for 104 MS-DRGs with
[[Page 48931]]
fewer than 11 cases, resulting in a total of 1,494 cases mapping to the
114 MS-DRGs.
[GRAPHIC] [TIFF OMITTED] TR10AU22.084
[[Page 48932]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.085
[[Page 48933]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.086
BILLING CODE 4120-01-C
The applicant determined an average unstandardized case weighted
charge per case of $47,599.
The applicant did not remove charges for related or prior
technologies because, per the applicant, DARZALEX FASPRO[supreg] would
not replace other therapies a patient may receive during an inpatient
stay. Next, the applicant standardized the charges using the FY 2022
IPPS/LTCH PPS final rule impact file and applied a 4-year inflation
factor of 1.281834 or 28.1834% based on the inflation factor used in
the FY 2022 IPPS/LTCH PPS final rule to update the outlier threshold
(86 FR 45542). The applicant then added charges for the new technology
by multiplying the per treatment cost of DARZALEX FASPRO[supreg] by the
inverse of the national average drug CCR of 0.187 from the FY 2022
IPPS/LTCH PPS final rule (86 FR 44966).
The applicant calculated a final inflated average case-weighted
standardized charge per case of $92,916, which exceeded the average
case-weighted threshold amount of $61,426. Because the final inflated
average case-weighted standardized charge per case exceeded the average
case-weighted threshold amount, the applicant maintained that DARZALEX
FASPRO[supreg] meets the cost criterion.
We invited public comment on whether DARZALEX FASPRO[supreg] meets
the cost criterion.
Comment: The applicant submitted a comment reiterating its belief
that because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount,
DARZALEX FASPRO[supreg] meets the cost criterion.
Response: We thank the commenter for its comment. We agree the
final inflated average case-weighted standardized charge per case
exceeded the average case-weighted threshold amount. Therefore,
DARZALEX FASPRO[supreg] meets the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that DARZALEX FASPRO[supreg] represents a
substantial clinical improvement over existing technologies because it
offers a treatment option for a patient population unresponsive to, or
ineligible for, currently available treatments. The applicant also
asserted that DARZALEX FASPRO[supreg] demonstrates significant
improvement in a number of clinical outcomes including hematologic
complete response (hemCR), prolonged survival free from major organ
deterioration, increased cardiac and renal response rates, with a
demonstrated safety and tolerability profile and no negative impact to
health-related quality of life based on patient-reported outcomes.
With regard to the claim that DARZALEX FASPRO[supreg] offers a
treatment option for a patient population unresponsive to, or
ineligible for, currently available treatments, the applicant stated
that the initial standard of therapy (CyBorD) is considered inadequate,
as most patients do not respond adequately to the CyBorD regimen alone.
Furthermore, according to the applicant, the ANDROMEDA data shows that
>80% of patients do not achieve a hemCR, >75% of patients with cardiac
disease do not have an organ response, and >75% of patients with renal
disease do not have an organ response when treated with the initial
standard of therapy CyBorD. Per the applicant, there is a high unmet
need to improve treatment for AL amyloidosis patients. The applicant
stated that rapid and deep response like hemCR are critical and are
strongly associated with organ response and improved survival in AL
amyloidosis.\79\ Per the applicant, adding DARZALEX FASPRO[supreg] to
CyBorD increases the hemCR rate by three-fold and doubles the cardiac
and renal response rates, thereby addressing this high unmet medical
need.
---------------------------------------------------------------------------
\79\ Comenzo RL, Reece D, Palladini G, et al. Consensus
guidelines for the conduct and reporting of clinical trials in
systemic light chain amyloidosis. Leukemia. 2012;26: 2317-2325.
---------------------------------------------------------------------------
With regard to the claim that the use of DARZALEX FASPRO[supreg]
significantly improves clinical outcomes for a patient population as
compared to currently available treatments, as stated previously, the
applicant asserted that DARZALEX FASPRO[supreg] represents a
substantial clinical improvement over existing technologies because it:
(1) demonstrates a consistent safety profile; (2) significantly
improves hematologic complete response (hemCR rates); (3) maintains the
increased hemCR rates for pre-specified subgroups; (4) shortens the
time to hemCR; (5) improves very good partial response (VGPR) or better
rates; (6) substantially improves cardiac response at 6 and at 12
months; (7) improves renal response at 6 and at 12 months; (8) improves
major-organ deterioration or progression-free survival (MOD-PFS); (9)
improves Global Health status and fatigue as of cycle 6 of treatment,
and maintains health-related quality of life (HRQoL); and (10) provides
important advantages for the population with AL.
In support of these claims, the applicant submitted the ANDROMEDA
phase 3 trial as well as presentations related to these trials. The
applicant stated that data in the ANDROMEDA study demonstrated that
DARZALEX FASPRO[supreg] led to significantly better outcomes both at
the time of the
[[Page 48934]]
primary analysis \80\ as well as at the time of updated analyses which
were presented at the 2021 ASCO annual meeting and 2021 EHA annual
meeting.\81\
---------------------------------------------------------------------------
\80\ Kastritis et al. Daratumumab-Based Treatment for
Immunoglobulin Light-Chain Amyloidosis. New England Journal of
Medicine (NEJM). 2021; 385:46-58.
\81\ Kastritis E, et al., Subcutaneous Daratumumab +
Cyclophosphamide, Bortezomib, and Dexamethasone (CyBorD) in Patients
with Newly Diagnosed Light Chain (AL) Amyloidosis: Updated Results
from the Phase 3 ANDROMEDA Study, Oral presentation at: American
Society for Oncology (ASCO) Annual Virtual Meeting; June 4-8, 2021 &
Oral presentation at: European Hematology Association (EHA) Annual
Virtual Meeting; June 9-17, 2021.
---------------------------------------------------------------------------
ANDROMEDA was a randomized, open-label, phase 3 study of 388
patients with newly diagnosed AL amyloidosis randomized 1:1 to receive
6 cycles of CyBorD, either alone (control group, n=193) or in
combination with daratumumab SC (that is, DARZALEX FASPRO[supreg]),
followed by DARZALEX FASPRO[supreg] monotherapy every 4 weeks for up to
24 additional cycles (daratumumab group, n=195). The study enrolled
patients between May 3, 2018 and August 15, 2019. Median age was 64
(range 34-87). The study reported a median 11.4 month follow-up for the
published trial, and 20.3 months for the follow-up data. The primary
endpoint was hemCR, defined as having negative serum and urine
immunofixation and a free light chain ratio (FLCr) within the reference
range or abnormal free light-chain ratio if the uninvolved free light
chain (uFLC) is higher than the involved free light chain (iFLC).
According to the applicant, this definition of hemCR is in line with a
recent clarification of the Internal Society of Amyloidosis
guidelines.\82\ Secondary endpoints were survival free from major organ
deterioration or hematologic progression (composite end point that
included end-stage cardiac or renal failure, hematologic progression),
or death, organ response, overall survival, hematologic complete
response at 6 months, VGPR or better, time to and duration of
hematologic complete response, time to next treatment, and reduction in
fatigue. The applicant noted that the safety population in the
ANDROMEDA study consisted of 193 patients in the daratumumab arm and
188 patients in the control arm.
---------------------------------------------------------------------------
\82\ Palladini et al. Daratumumab plus CyBord for patients with
newly diagnosed AL amyloidosis: safety run-in results of ANDROMEDA.
Blood.2020;136:71-80.
---------------------------------------------------------------------------
The applicant also cited an oral presentation, presented at the
American Society of Clinical Oncology (ASCO) 2021 and European
Hematology Association (EHA) 2021 annual meetings, with updated data
from the ANDROMEDA study after 20.3 months of follow-up, which
described sustained primary outcome of higher rates of hemCR across
subgroups as well as improved secondary endpoints of cardiac and renal
response rate at 12 months. In the intent to treat population, there
were 11 deaths in the CyBorD group compared to 7 deaths in the control
group.\83\
---------------------------------------------------------------------------
\83\ Kastritis E, et al., Subcutaneous Daratumumab +
Cyclophosphamide, Bortezomib, and Dexamethasone (CyBorD) in Patients
with Newly Diagnosed Light Chain (AL) Amyloidosis: Updated Results
from the Phase 3 ANDROMEDA Study, Oral presentation at: American
Society for Oncology (ASCO) Annual Virtual Meeting; June 4-8, 2021 &
Oral presentation at: European Hematology Association (EHA) Annual
Virtual Meeting; June 9-17, 2021.
---------------------------------------------------------------------------
In support of its assertion that DARZALEX FASPRO[supreg]
demonstrates a consistent safety profile, the applicant cited Kastritis
et al., discussed previously, stating that the safety profiles of
daratumumab and bortezomib, cyclophosphamide, and dexamethasone in the
ANDROMEDA trial were consistent with their known profiles and the
underlying disease from previous trials.\84\ To support its assertion
that DARZALEX FASPRO[supreg] significantly improves hemCR rate, the
applicant stated that the trial results showed that patients treated
with DARZALEX FASPRO[supreg] demonstrated a statistically significant
increase in hemCR compared to control (53.3% versus 18.1%; relative
risk ratio, 2.9; 95% CI, 2.1 to 4.1; odds ratio, 5.1; 95% CI, 3.2 to
8.2; p <0.001 for both comparisons) at the 11.4 month median follow-up.
To support its assertion that DARZALEX FASPRO[supreg] results in a
shorter time to hemCR, the applicant noted that in the trial, median
time to hemCR was 60 days in the daratumumab group and 85 days in the
control group. In support of its assertion that the increased hemCR
rate was maintained for pre-specified subgroups, the applicant also
stated that hemCR remained consistent in most prespecified subgroups
(for example, sex, age, weight, race, cardiac stage, etc.) receiving
daratumumab.\85\ The applicant also cited results from the oral
presentation, discussed previously, stating that after a median follow
up of 20.3 months, the percentage of patients who achieved hemCR
increased to 59% in the daratumumab group vs 19% in the control group
(odds ratio: 5.9; 95% CI, 3.7 to 9.4; P <0.001), and that this
advantage was seen consistently across all prespecified subgroups.\86\
The applicant stated that rapid and deep hematologic responses are
critical and are strongly associated with organ response and improved
survival in AL amyloidosis.\87\
---------------------------------------------------------------------------
\84\ Kastritis E, et al., Daratumumab-Based Treatment for
Immunoglobulin Light-Chain Amyloidosis, N Eng J Med. 2021; 385:46-
58.
\85\ Kastritis E, et al., Daratumumab-Based Treatment for
Immunoglobulin Light-Chain Amyloidosis, N Eng J Med. 2021; 385:46-
58.
\86\ Kastritis E, et al., Subcutaneous Daratumumab +
Cyclophosphamide, Bortezomib, and Dexamethasone (CyBorD) in Patients
with Newly Diagnosed Light Chain (AL) Amyloidosis: Updated Results
from the Phase 3 ANDROMEDA Study, Oral presentation at: American
Society for Oncology (ASCO) Annual Virtual Meeting; June 4-8, 2021 &
Oral presentation at: European Hematology Association (EHA) Annual
Virtual Meeting; June 9-17, 2021.
\87\ Comenzo RL, Reece D, Palladini G, et al. Consensus
guidelines for the conduct and reporting of clinical trials in
systemic light chain amyloidosis. Leukemia. 2012;26: 2317-2325.
---------------------------------------------------------------------------
In support of its assertion that DARZALEX FASPRO[supreg] improved
VGPR or better rates, the applicant also stated that the trial
demonstrated that the secondary endpoint of VGPR or better was 78.5% in
the daratumumab group and 49.2% in the control group (relative risk
ratio, 1.6; 95% CI, 1.4 to 1.9; odds ratio, 3.8; 95% CI, 2.4 to
5.9).\88\ Per the applicant, the substantial improvements in
hematologic response rates and other endpoints like cardiac and renal
response and MOD-PFS indicate the clinical meaningfulness of these
efficacy results.
---------------------------------------------------------------------------
\88\ Kastritis et al., Daratumumab for immunoglobulin light-
chain amyloidosis. N Eng J Med 2021; 385:48-58.
---------------------------------------------------------------------------
In support of its assertion that DARZALEX FASPRO[supreg]
substantially improves cardiac response at 6 and at 12 months,
according to the applicant, of the subgroup that was evaluated for
cardiac response (118 in the daratumumab group and 117 in the control
group), 41.5% in the daratumumab group and 22.2% in the control group
(odds ratio, 2.44; 95% CI: 1.35 to 4.42) demonstrated a cardiac
response at 6 months.\89\ The applicant noted that at a median follow
up of 20.3 months, cardiac response rates were higher with in the
daratumumab group compared to CyBorD alone at 6 months (42% versus 22%,
odds ratio 2.4, 95% CI 1.4 to 4.4; P = .0029) and at 12 months (57%
versus 28%, odds ratio 3.5 95% CI 2.0 to 6.2; P <0.0001).\90\ In
addition, in support of its assertion that
[[Page 48935]]
DARZALEX FASPRO[supreg] improves renal response at 6 and at 12 months,
the applicant noted that in the subgroup evaluated for renal response
(117 in the daratumumab group and 113 in the control group), 53.0% of
patients in the daratumumab group and 23.9% in the control group (odds
ratio, 3.34; 95% CI: 1.88 to 5.94) demonstrated a renal response at 6
months.\91\ The applicant noted that at a median follow up of 20.3
months, renal response rates were higher with in the daratumumab group
compared to CyBorD alone at 6 months (54% vs 27%; odds ratio 3.3 95% CI
1.9 to 5.9; P <0.0001) and at 12 months (57% vs 27%; odds ratio 4.1 95%
CI 2.3 to 7.3; P <0.0001).\92\ The applicant noted that the percentages
of patients who had a cardiac or renal response were substantially
higher in the daratumumab group than in the control group, which it
stated was an important finding given that organ responses are also a
predictor of improved survival.
---------------------------------------------------------------------------
\89\ Kastritis E, et al., Daratumumab-Based Treatment for
Immunoglobulin Light-Chain Amyloidosis, N Eng J Med. 2021; 385:46-
58.
\90\ Kastritis E, et al., Subcutaneous Daratumumab +
Cyclophosphamide, Bortezomib, and Dexamethasone (CyBorD) in Patients
with Newly Diagnosed Light Chain (AL) Amyloidosis: Updated Results
from the Phase 3 ANDROMEDA Study, Oral presentation at: American
Society for Oncology (ASCO) Annual Virtual Meeting; June 4-8, 2021 &
Oral presentation at: European Hematology Association (EHA) Annual
Virtual Meeting; June 9-17, 2021.
\91\ Kastritis E, et al., Daratumumab-Based Treatment for
Immunoglobulin Light-Chain Amyloidosis, N Eng J Med. 2021; 385:46-
58.
\92\ Kastritis E, et al., Subcutaneous Daratumumab +
Cyclophosphamide, Bortezomib, and Dexamethasone (CyBorD) in Patients
with Newly Diagnosed Light Chain (AL) Amyloidosis: Updated Results
from the Phase 3 ANDROMEDA Study, Oral presentation at: American
Society for Oncology (ASCO) Annual Virtual Meeting; June 4-8, 2021 &
Oral presentation at: European Hematology Association (EHA) Annual
Virtual Meeting; June 9-17, 2021.
---------------------------------------------------------------------------
In support of its assertion that DARZALEX FASPRO[supreg] improves
MOD-PFS, the applicant noted significant findings of secondary endpoint
survival free from major organ deterioration or hematologic progression
in the daratumumab group compared to control (hazard ratio for major
organ deterioration, hematologic progression, or death, 0.58; 95% CI,
0.36 to 0.93; P = 0.02).\93\
---------------------------------------------------------------------------
\93\ Kastritis et al. Daratumumab-Based Treatment for
Immunoglobulin Light-Chain Amyloidosis. NEJM. 2021;385:46-58.
---------------------------------------------------------------------------
With regard to the claim that DARZALEX FASPRO[supreg] improves
Global Health status (GHS) and fatigue as of cycle 6 of treatment, as
well as maintains HRQoL, the applicant cited a poster presentation of a
subgroup analysis on patient reported outcomes (PRO) for patients
participating in the ANDROMEDA study.\94\ The applicant noted that the
patients were provided with PRO questionnaires and assessed on day 1 of
cycles -1-6 as well as every 8 weeks thereafter in the daratumumab
group. The applicant stated that of the 388 patients randomized in the
study, compliance rates for all PRO questionnaires were >90% at
baseline and >83% through Cycle 6. The questionnaires included the
European Organization for Research and Treatment of Cancer Quality of
Life Questionnaire Core 30-item (EORTC QLQ-C30), the EuroQol 5-
dimensional descriptive system (EQ-5D-5L), and Short Form-36 (SF-36).
Secondary endpoints centered around improvements in EORTC QLQ-C30
global health status (GHS), fatigue scale scores, and SF-36 mental
component summary (MCS) score. Exploratory outcomes included physical
function assessment, symptom improvement, functional improvement, and
health utility as measured by the SF-36, EORTC QLQC30 with supplemental
symptom items, and the EQ-5D-5L.
---------------------------------------------------------------------------
\94\ Sanchorawala et al., Health-Related Quality of Life in
Patients with AL Amyloidosis Treated with Daratumumab, Bortezomib,
Cyclophosphamide, and Dexamethasone: Results from the Phase 3
ANDROMEDA Study, Poster presentation at: American Society of
Hematology (ASH) Annual Virtual Meeting; December 5-8, 2020.
---------------------------------------------------------------------------
The applicant stated that the results from this presentation show
that following Cycle 6, improvements in GHS and fatigue were reported
in patients in the treatment group, and that these findings further
support the value of daratumumab SQ plus CyBorD (Dara-CyBorD) in
patients with AL amyloidosis. The applicant also stated that patients
with AL amyloidosis treated with Dara-CyBorD experienced clinical
improvements without any decrement in HRQoL over 6 cycles. The
applicant noted that the findings demonstrated that the median time to
improvement was shorter in the treatment group than in the control
group for EORTC QLQ-C30 GHS (CyBorD: 16.79 months, 95% CI:11.79 to NE,
Dara-CyBorD: 7.82 months, 95% CI: 3.94 to 17.58, HR 1.53; 95% CI: 1.10
to 2.13), fatigue scales (CyBorD: NE, 95% CI:8.44 to NE, Dara-CyBorD:
9.30 months, 95% CI: 5.55 to 13.01, HR 1.39; 95% CI: 1.00 to 1.93) and
EQ-5D-5L visual analog scale (CyBorD: NE, 95% CI:16.79 to NE, Dara-
CyBorD: 10.05 months, 95% CI: 8.41 to NE, HR 1.21; 95% CI: 0.86 to
1.71). The applicant also noted that the findings demonstrated that
median time to worsening was longer in the treatment group than in the
control group for EORTC QLQ-C30 GHS (CyBorD: 2.89 months, 95% CI:2.23
to 3.78, Dara-CyBorD: 4.70 months, 95% CI: 2.83 to 7.36, HR 0.87; 95%
CI: 0.66 to 1.13) and fatigue scales (CyBorD: 3.75 months, 95% CI: 2.86
to 4.76 Dara-CyBorD: 8.84 months, 95% CI: 3.75 to NE, HR 0.78; 95% CI:
0.58 to 1.04) and EQ-5D-5L visual analog scale (CyBorD: 3.38 months,
95% CI:2.79 to 4.67, Dara-CyBorD: 4.14 months, 95% CI: 2.86 to 7.66, HR
0.89; 95% CI: 0.67 to 1.19).\95\
---------------------------------------------------------------------------
\95\ Sanchorawala et al., Health-Related Quality of Life in
Patients with AL Amyloidosis Treated with Daratumumab, Bortezomib,
Cyclophosphamide, and Dexamethasone: Results from the Phase 3
ANDROMEDA Study, Poster presentation at: American Society of
Hematology (ASH) Annual Virtual Meeting; December 5-8, 2020.
---------------------------------------------------------------------------
Finally, the applicant stated that DARZALEX FASPRO[supreg] provides
important advantages to the population with AL amyloidosis because the
subcutaneous administration allows for a negligible volume of
administration and a reduced rate of systemic administration-related
reactions.\96\
---------------------------------------------------------------------------
\96\ Kastritis et al. Daratumumab-Based Treatment for
Immunoglobulin Light-Chain Amyloidosis. NEJM. 2021;385:46-58.
---------------------------------------------------------------------------
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28234 through
28235), after review of the information provided by the applicant, we
stated we had the following concerns regarding whether DARZALEX
FASPRO[supreg] meets the substantial clinical improvement criterion.
First, with respect to the ANDROMEDA trial, we noted that the study's
open label and unblinded design adds a potential risk of bias which may
affect the treatment effect reported by the applicant. Additionally, we
noted that the ANDROMEDA trial used stratified randomization which
resulted in potentially substantive differences between the treatment
and control group at baseline; for example, the control group was
slightly older, with more males, and more people at higher cardiac
stage (based on N-terminal pro-B-type natriuretic peptide and high-
sensitivity cardiac troponin T). The groups also differed by Eastern
Cooperative Oncology Group (ECOG) performance-status scores and
uninvolved free light chain (dFLC) levels, and renal function.
Additionally, compared to control, the daratumumab group appeared to
have higher rates of peripheral sensory neuropathy, upper respiratory
infection, and neutropenia in the longer term data.\97\ We questioned
whether these differences noted at baseline are in fact significant and
would have the potential to impact the treatment effect seen in this
study. In terms of study outcomes, the ANDROMEDA study relied on
hematologic and organ-based laboratory-based outcomes, but we
questioned
[[Page 48936]]
whether a primary endpoint of overall survival would have provided
stronger evidence.
---------------------------------------------------------------------------
\97\ Kastritis E, et al., Subcutaneous Daratumumab +
Cyclophosphamide, Bortezomib, and Dexamethasone (CyBorD) in Patients
with Newly Diagnosed Light Chain (AL) Amyloidosis: Updated Results
from the Phase 3 ANDROMEDA Study, Oral presentation at: American
Society for Oncology (ASCO) Annual Virtual Meeting; June 4-8, 2021 &
Oral presentation at: European Hematology Association (EHA) Annual
Virtual Meeting; June 9-17, 2021.
---------------------------------------------------------------------------
Second, we had concerns about the generalizability of the ANDROMEDA
population and subgroups. As clarified by the applicant during the New
Technology Town Hall meeting, all subjects in the ANDROMEDA trial
received DARZALEX FASPRO[supreg] in the outpatient setting. As such, we
questioned whether the outcomes for this outpatient population are
generalizable to patients who are sufficiently ill to require
hospitalization. In regard to subpopulations, we noted that the
prespecified groups and the studies of cardiac stage and Asian cohorts
exhibit the same potential limitations of the main trial with small
sample size, open-label, and limited follow-up. We noted that small
sample size resulted in wider confidence intervals in some subgroups,
which may limit the generalizability of the treatment results. For
example, in the ANDROMEDA prespecified groups, the subgroups `other'
race, cardiac stage I at baseline, and renal stage III had wider
confidence intervals than other subgroups. Finally, while the applicant
provided a phase 2 poster presentation in support of DARZALEX
FASPRO[supreg] we questioned the extent to which these results are
generalizable to the indication for which the applicant has applied for
the new technology add-on payment (that is, the treatment of adult
patients with light chain (AL) amyloidosis in combination with
bortezomib, cyclophosphamide and dexamethasone in newly diagnosed
patients) given that the indication within this source (that is
monotherapy in patients with Stage 3B AL amyloidosis), does not
match.\98\
---------------------------------------------------------------------------
\98\ Kastritis E, et al., Subcutaneous Daratumumab +
Cyclophosphamide, Bortezomib, and Dexamethasone (CyBorD) in Patients
with Newly Diagnosed Light Chain (AL) Amyloidosis: Updated Results
from the Phase 3 ANDROMEDA Study, Oral presentation at: American
Society for Oncology (ASCO) Annual Virtual Meeting; June 4-8, 2021 &
Oral presentation at: European Hematology Association (EHA) Annual
Virtual Meeting; June 9-17, 2021.
---------------------------------------------------------------------------
We noted that the applicant provided the outcomes of secondary
endpoints which appear to be exploratory or novel for some of the data
presented in posters in support of its claims, such as the quality of
life assessments \99\ and hematologic response as measured by involved
and uninvolved free light chain,\100\ and we noted that some of the
endpoints are still being studied and validated. Specifically, we
questioned whether these surrogate endpoints may be used to
appropriately evaluate the measure for which they are intended to
assess. We requested further information on whether these secondary
endpoints have been appropriately validated in relevant clinical
settings.
---------------------------------------------------------------------------
\99\ Sanchorawala et al., Health-Related Quality of Life in
Patients with AL Amyloidosis Treated with Daratumumab, Bortezomib,
Cyclophosphamide, and Dexamethasone: Results from the Phase 3
ANDROMEDA Study, Poster presentation at: American Society of
Hematology (ASH) Annual Virtual Meeting; December 5-8, 2020.
\100\ Comenzo et al., Reduction in Absolute Involved Free Light
Chain and Difference Between Involved and Uninvolved Free Light
Chain is Associated with Prolonged Major Organ Deterioration
Progression Free survival in Patient with Newly Diagnosed AL
Amyloidosis Receiving Bortezomib, Cyclophosphamide and Dexamethasone
with or without Daratumumab: Results from ANDROMEDA, Oral
presentation at: American Society of Hematology (ASH) Annual Virtual
Meeting; December 5-8, 2020.
---------------------------------------------------------------------------
We invited public comments on whether DARZALEX FASPRO[supreg] meets
the substantial clinical improvement criterion.
Comment: The applicant submitted a comment in response to CMS'
concerns pertaining to substantial clinical improvement. With respect
to our concern that the open label and unblinded study design of the
ANDROMEDA trial may result in a biased treatment effect, the applicant
stated that clinical trials designed to evaluate treatment effects in
patients with AL amyloidosis need to account for the heterogeneity of
the disease, the number of affected organs, including the heart,
kidney, and liver, and the severity of organ involvement. Per the
applicant, in addition to randomization by chance to the experimental
Dara-CyBorD arm or the control CyBorD arm, subjects in the ANDROMEDA
trial were randomized by cardiac stage, by whether transplant was
typically offered, and by renal function. The applicant stated that
efficacy data were adjudicated by an independent review committee whose
members were unaware of the trial-group assignments. The applicant
stated that patients in the control arm were marginally older and that
there were slightly more males than females but that these small
differences are not expected to cause a major difference in outcomes.
The applicant also stated that the slight increase in males in this
study is similar to an analysis of U.S. commercial and Medicare
Supplemental claims data that found the prevalence of AL amyloidosis is
higher in males (approximately 55% male).\101\
---------------------------------------------------------------------------
\101\ Quock et al. Epidemiology of AL amyloidosis: a real-world
study using US claims data. Blood Adv 2018: 2: 1046-1053.
---------------------------------------------------------------------------
The applicant stated that the percentage of subjects in cardiac
stage IIIA was similar in the two treatment arms.\102\ Per the
applicant, neither the slightly higher percentage of subjects with
cardiac stage IIIB (3.1% vs. 1.0%) in the CyBorD arm nor the observed
small differences in the ECOG status and renal status between the two
arms are expected to have a major difference on the final outcomes.
---------------------------------------------------------------------------
\102\ Kastritis et al., NEJM, 2021.
---------------------------------------------------------------------------
With regard to the concern regarding higher peripheral sensory
neuropathy, upper respiratory infection, and neutropenia in longer term
data for the daratumumab group compared to the control group, the
applicant stated that the relative incidence of infections like
pneumonia as well as peripheral sensory neuropathy and neutropenia
should be interpreted in the context of longer treatment exposure for
patients receiving Dara-CyBorD vs. CyBorD. The applicant stated that
when adjusted for exposure to trial treatment, the incidence of overall
and grade 3 or 4 adverse events was lower in the daratumumab group than
in the control group.\103\
---------------------------------------------------------------------------
\103\ Kastritis et al., NEJM, 2021.
---------------------------------------------------------------------------
With regard to the concern regarding hematologic and organ-based
laboratory-based outcomes instead of overall survival, the applicant
stated that primary treatment is targeted toward suppression of amyloid
light chain synthesis in order to improve organ function. The applicant
stated that treatment efficacy is typically determined by hematologic
response and that the current staging systems for AL amyloidosis are
based on circulating markers of cardiac, renal, and B cell clonal
disease and are used for clinical trial design and to determine patient
management. The applicant stated that because clinical presentation and
long-term outcomes depend on adequate organ function, complete response
(CR) does not completely describe the clinical efficacy of treatment in
patients with AL amyloidosis. The applicant stated that organ response
rates can be used but there are limitations with only using these
biomarkers to monitor organ response. The applicant stated that, in
consultation with and with the approval of the FDA, major organ
deterioration-progression free survival (MOD-PFS) and major organ
deterioration-event free survival (MOD-EFS) were chosen as secondary
endpoints and were calculated as a composite endpoint of clinically
observable endpoints. The applicant stated that several clinical
studies have demonstrated that hematologic and organ responses were
[[Page 48937]]
very strong predictors of overall survival.\104\ \105\ \106\
---------------------------------------------------------------------------
\104\ Palladini G et al. Management of AL amyloidosis in 2020.
Blood 2020; 136:2620-2627.
\105\ Palladini et al., J Clin Oncology 2012.
\106\ Comenzo et al. Leukemia 2012.
---------------------------------------------------------------------------
With regard to the concern for generalizability of the study
population in an outpatient setting, the applicant stated that many
factors contribute to whether a patient is treated as an outpatient or
as an inpatient. Per the applicant, patients with similar clinical
status might be treated in the inpatient setting because of the
availability of health care personnel, insurance status, and available
outpatient resources for patient follow-up. The applicant stated that
the ANDROMEDA study was performed in an outpatient setting but there
were patients with cardiac organ involvement that might have been
hospitalized for treatment of cardiac disease and may have also be
receiving treatment for AL amyloidosis, either as initiation of
treatment or a part of a subsequent treatment cycle. The applicant
stated that although the number of inpatient hospitalized individuals
receiving a treatment cycle with Dara-CyBorD is expected to be low, it
is important to ensure health care equity and access to the only FDA
approved drug for treatment of newly diagnosed AL amyloidosis,
regardless of treatment setting.
With regard to the small sample size and large confidence intervals
in subgroup studies, the applicant stated that the variability in
subgroup sizes could lead to wide confidence intervals, especially in
the smaller subgroup sizes. The applicant also stated that there is
strong numerical trend for improved outcomes with similar odds ratios
in the Dara-CyborD arm across all subgroups.
With regard to the concern that the poster presentation did not
match the indication for which the applicant has applied for the new
technology add-on payment, the applicant stated that the use of
daratumumab monotherapy in cardiac stage IIIB is still under
investigation and although related data might be included in supporting
documents, this information should be considered investigational. The
applicant stated that its request for the new technology add-on payment
is limited to the FDA approved indication: treatment of adult patients
with newly diagnosed AL amyloidosis with NYHA or Mayo cardiac stage
IIIA or less in combination with CyBorD.
With regard to our inquiry about the use of exploratory secondary
endpoints in relevant clinical settings, the applicant stated that
information about patient reported outcomes assessing the impact of
treatment on quality of life provides early positive findings
associated with the addition of DARZALEX FASPRO[supreg] to the CyBorD
treatment combination but agreed that the information is preliminary
and additional patient reported outcomes need to be obtained for AL
amyloidosis patients at the time of diagnosis, during follow-up, and as
the disease progresses. The applicant stated that the exploratory
endpoints of iFLC <=20mg/L and dFLC <=10 mg/L also confirm the
consistency of improved results of adding daratumumab to CyBorD.
Finally, the applicant stated that besides the exploratory endpoints,
the ANDROMEDA trial used the established primary endpoint of
hematologic CR and the secondary endpoint of organ response which are
defined in the International Society of Amyloidosis (ISA) guidelines
and have been shown to be very good predictors for overall survival.
We also received an additional comment stating that DARZALEX
FASPRO[supreg] improves progression free survival and organ survival
across staging and that its combination with CyBorD has become standard
of care and frontline treatment for patients with AL amyloidosis. The
commenter further stated that rapidly achieving normalization of
circulating immunogloblin free light chain is critical to offer the
best chances of organ response and survival as time is of the essence
in this disease, and organ response cannot occur in the absence of a
hematologic remission. The commenter stated that adequate reimbursement
will allow healthcare providers to adequately serve this critically ill
patient population in both inpatient and outpatient settings, and will
prevent having to withhold or delay the best possible regimen in the
face of a requirement for an inpatient stay.
Response: We thank the commenters for their comments regarding the
substantial clinical improvement criterion. Based on the additional
information received, we agree that DARZALEX FASPRO[supreg] represents
a substantial clinical improvement over existing technologies for the
treatment of AL amyloidosis patients because it demonstrates improved
clinical outcomes as compared to the standard of care CyBorD, including
a higher rate of hemCR and longer major MOD-PFS.
After consideration of the public comments we received and the
information included in the applicant's new technology add-on payment
application, we have determined that DARZALEX FASPRO[supreg] meets the
criteria for approval for new technology add-on payment. Therefore, we
are approving new technology add-on payments for this technology for FY
2023. Cases involving the use of DARZALEX FASPRO[supreg] that are
eligible for new technology add-on payments will be identified by ICD-
10-PCS code XW01318 (Introduction of daratumumab and hyaluronidase-fihj
into subcutaneous tissue, percutaneous approach, new technology group
8) in combination with ICD-10-CM code E85.81 (Light chain (AL)
amyloidosis).
In its application, the applicant estimated that the cost of
DARZALEX FASPRO[supreg] is $7,937.55 per patient. Under Sec.
412.88(a)(2), we limit new technology add-on payments to the lesser of
65% of the average cost of the technology, or 65% of the costs in
excess of the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment for a case involving the use of DARZALEX
FASPRO[supreg] is $5,159.41 for FY 2023.
c. Hemolung Respiratory Assist System (Hemolung RAS)
ALung Technologies, Inc. submitted an application for new
technology add-on payments for the Hemolung Respiratory Assist System
(Hemolung RAS) for FY 2023. The applicant stated that the Hemolung RAS
is the first and only FDA authorized technology for the treatment of
acute, hypercapnic respiratory failure using an extracorporeal circuit
to remove CO2 directly from the blood. Per the applicant,
patients experiencing acute, hypercapnic respiratory failure are unable
to remove excess CO2 waste molecules from their blood via
their lungs, resulting in accumulation of CO2 in their blood
(hypercapnia), acid/base derangement (respiratory acidosis), and life-
threatening clinical sequelae.\107\ The applicant stated that the
Hemolung RAS does not treat a specific disease but removes
CO2 directly from the blood to treat a variety of underlying
respiratory disease states, including, but not limited to, cystic
fibrosis (CF), chronic obstructive pulmonary disease (COPD), and
asthma, where CO2 retention (hypercapnia) is the primary
cause of continued clinical deterioration.
---------------------------------------------------------------------------
\107\ Nin, N. et al. Severe hypercapnia and outcome of
mechanically ventilated patients with moderate or severe acute
respiratory distress syndrome. Intensive Care Med 43, 200-208
(2017).
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Per the applicant, the Hemolung RAS provides low-flow, veno-venous
extracorporeal carbon dioxide removal (ECCO2R) using a 15.5
French dual lumen catheter inserted percutaneously in the femoral or
jugular vein, providing
[[Page 48938]]
partial ventilatory lung support independent of the lungs as an
alternative or supplement to invasive mechanical ventilation. The
applicant stated that the Hemolung RAS removes up to 50% of basal
metabolic carbon dioxide (CO2) production at circuit blood
flows of 350-550 mL/min. According to the applicant, the Hemolung RAS
is not intended to provide therapeutic levels of oxygenation. The
applicant stated that during the Hemolung RAS therapy, blood passing
through the circuit is oxygenated; however, at low extracorporeal blood
flows, the limited oxygen-carrying capacity of blood precludes
meaningful oxygenation of mixed venous blood. The applicant explained
that extracorporeal therapy with the Hemolung RAS requires continuous
systemic anticoagulation with unfractionated heparin or a standard of
care alternative to prevent clotting of blood in the circuit.
With respect to the newness criterion, the applicant stated that
the Hemolung RAS received Breakthrough Device Designation from FDA in
2015 specific to COPD patients experiencing acute, refractory,
hypercapnic respiratory failure. The applicant stated it is not
applying under the Breakthrough Device Alternative Pathway in the
current application for new technology add-on payments, as the
Breakthrough Device indication is different from its FDA De Novo
indication. The applicant explained that the Hemolung RAS was
classified as a Class III device and received a Breakthrough Device
designation for COPD only. According to the applicant, on April 22,
2020, the Hemolung RAS received an Emergency Use Authorization (EUA) to
treat lung failure due to COVID-19 when used as an adjunct to
noninvasive or invasive mechanical ventilation in reducing hypercapnia
and hypercapnic acidosis due to COVID-19 and/or maintaining normalized
levels of partial pressure of carbon dioxide (PCO2) and pH
in patients suffering from acute, reversible respiratory failure due to
COVID-19 for whom ventilation of CO2 cannot be adequately,
safely, or tolerably achieved. The applicant further explained Hemolung
RAS was later classified as a Class II device under the De Novo
pathway. The applicant indicated its De Novo classification request
(DEN210006) was granted on November 13, 2021, for the indication of
respiratory support providing extracorporeal carbon dioxide
(CO2) removal from the patient's blood for up to five days
in adults with acute, reversible respiratory failure for whom
ventilation of CO2 cannot be adequately or safely achieved
using other available treatment options and continued clinical
deterioration is expected. According to the applicant, the De Novo
classified Hemolung RAS became available on the market on November 15,
2021, the first business day following the FDA authorization. The
applicant indicated that it is seeking new technology add-on payments
for FY 2023 for the FDA De Novo indication for the treatment of
hypercapnic respiratory failure due to all causes in adults, which
would include the EUA indication for the use of the Hemolung RAS in
patients with respiratory failure caused by COVID-19. The applicant
stated that the following ICD-10-PCS code may be used to uniquely
describe procedures involving the use of the Hemolung RAS: 5A0920Z
(Assistance with respiratory filtration, continuous,
ECCO2R).
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purposes of new technology add-on
payments. According to the applicant, patients experiencing acute,
hypercapnic respiratory failure are treated pharmacologically and with
non-invasive ventilatory support as a first line treatment. The
applicant stated that if these treatments are insufficient to support
the failing lungs, escalation of ventilatory support via intubation and
invasive mechanical ventilation (IMV) are the only available treatment
options. According to the applicant, patients who are intubated and
invasively mechanically ventilated are at significant risk for
increased morbidity and mortality. The applicant stated that no
additional treatments are available if IMV is insufficient to correct
refractory hypercapnia and respiratory acidosis, which ultimately lead
to cardiopulmonary collapse and death. Furthermore, the applicant
stated that no treatment options are available for patients who have a
Do Not Intubate (DNI) order.
With respect to the first criterion, whether a product uses the
same or similar mechanism of action to achieve a therapeutic outcome,
the applicant stated that the Hemolung RAS has a different mechanism of
action compared to existing technologies. According to the applicant,
IMV, the only existing technology used to treat acute, refractory,
hypercapnic respiratory failure, utilizes positive airway pressure to
deliver oxygen and remove CO2 from the lungs, whereas the
Hemolung RAS removes CO2 directly from the blood,
independent of the lungs and allowing the lungs to rest and recover.
Thus, the applicant asserted that the Hemolung RAS uses a different
mechanism of action when compared to the existing therapeutic option
(that is, IMV). The applicant also stated that extracorporeal membrane
oxygenation (ECMO) is a rescue therapy for patients experiencing
refractory hypoxemic respiratory failure, where insufficient
oxygenation is the source of the respiratory failure. However, the
applicant stated that ECMO is not suitable, nor FDA-approved, as a
treatment for acute, hypercapnic respiratory failure. Therefore, the
applicant asserted that ECMO and the Hemolung RAS are fundamentally
different technologies used to treat different patient populations.
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG when compared to an existing
technology, the applicant stated that the Hemolung RAS is assigned to
the same MS-DRGs when compared to an existing technology. Per the
applicant, the Hemolung RAS is an escalation therapy to be used when
current therapies are unable to support a patient's failing lungs and
continued clinical deterioration is expected. The applicant noted that
MS-DRGs 207 and 208 (Respiratory System Diagnosis with Ventilator
Support >96 Hours and Respiratory System Diagnosis with Ventilator
Support <=96 Hours, respectively) relate to the treatment of
respiratory failure using mechanical ventilation, so the Hemolung RAS
may be assigned to the same MS-DRGs if mechanical ventilation is unable
to safely or adequately remove CO2 from the blood.
With respect to the third criterion, whether the new use of
technology involves the treatment of the same or similar type of
disease and the same or similar patient population when compared to an
existing technology, the applicant stated that the Hemolung RAS and IMV
are both used to treat patients experiencing acute, refractory,
hypercapnic respiratory failure due to numerous disease etiologies and
pathophysiologies. However, the applicant noted that the Hemolung RAS
is indicated for use as an escalation therapy when IMV is unable to
safely or adequately remove CO2 from the blood and continued
clinical deterioration is expected.
In summary, the applicant maintained that the Hemolung RAS is not
substantially similar to currently available therapies and/or
technologies because it uses a new mechanism of
[[Page 48939]]
action and therefore the technology meets the ``newness'' criterion.
We stated in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28236
through 28237) that, as noted previously, the applicant received an FDA
De Novo classification for the device on November 13, 2021 (with the
product becoming commercially available on November 15, 2021), for the
FDA De Novo indication that is the subject of this application, for the
treatment of hypercapnic respiratory failure due to all causes in
adults. This De Novo indication would include use of the product for
the indication for which the applicant initially received an EUA from
FDA, for the use of the Hemolung RAS in patients with respiratory
failure caused by COVID-19. In the FY 2005 IPPS/LTCH PPS final rule, we
stated that the intent of section 1886(d)(5)(K) of the Act and
regulations under Sec. 412.87(b)(2) is to pay for new medical services
and technologies for the first 2 to 3 years that a product comes on the
market, during the period when the costs of the new technology are not
yet fully reflected in the MS-DRG weights (69 FR 49002). While our
policy is, generally, to begin the newness period on the date of FDA
approval or clearance or, if later, the date of availability of the
product on the U.S. market as discussed in prior rulemaking (77 FR
53348), we have noted that data reflecting the costs of products that
have received an EUA could become available as soon as the date of the
EUA issuance and prior to receiving FDA approval or clearance (86 FR
45159). We refer readers to section II.F.7. of the FY 2022 IPPS/LTCH
PPS final rule (86 FR 45159 through 45160), for discussion of our
solicitation of comments regarding the newness period for products
available through an EUA for COVID-19. As discussed in section II.F.4.
of the preamble of this final rule, we are continuing to consider the
comments we received regarding the newness period for products
available through an EUA for COVID-19 as discussed in the FY 2022 IPPS/
LTCH PPS final rule (86 FR 45159), and we welcomed additional comments
in the proposed rule.
Therefore, we stated that because data reflecting the costs of the
Hemolung RAS used for the indication of COVID-19 could be available
beginning with the EUA on April 22, 2020, we questioned whether the
newness period for the use of the Hemolung RAS for patients with COVID-
19 should begin with the date of EUA issuance, April 22, 2020, while
the newness period for the use of Hemolung RAS for patients with other
causes of hypercapnic respiratory failure unrelated to COVID-19 should
begin on the date of commercial availability of the De Novo classified
device, November 15, 2021. As discussed in the FY 2022 IPPS/LTCH PPS
final rule (86 FR 45159 through 45160), under the current regulations
at 42 CFR 412.87(e)(2) and consistent with our longstanding policy of
not considering eligibility for new technology add-on payments prior to
a product receiving FDA approval or clearance, a product available only
through an EUA would not be eligible for new technology add-on
payments. Therefore, cases involving pediatric patients, or cases
involving the use of the Hemolung RAS for greater than 5 days, would
not be eligible for new technology add-on payment if the Hemolung RAS
is approved for new technology add-on payment for the patient
population indicated in its FDA De Novo marketing authorization.
We invited public comments on whether the newness period for the
Hemolung RAS when used for patients with COVID-19 should begin on April
22, 2020 (the date of its EUA), when the product became available on
the market for this indication. We also invited public comments on
whether the Hemolung RAS is substantially similar to existing
technologies and whether the Hemolung RAS meets the newness criterion.
Comment: The applicant submitted a public comment regarding the
newness date for the Hemolung RAS. The applicant stated that the
newness period for COVID-19 Hemolung RAS cases should begin on November
15, 2021 (the date of commercial availability of the De Novo classified
device), instead of April 22, 2020 (the date of the Hemolung RAS EUA).
The applicant indicated that it provided the Hemolung RAS to hospitals
free or at cost to swiftly respond to the global pandemic, and that it
did not profit from EUA therapies. The applicant stated that
additionally, during the EUA period, hospitals were not seeking payment
for Hemolung RAS therapy. The applicant stated that, therefore, cost
data collected during the EUA period and prior to FDA clearance do not
accurately reflect the added cost of Hemolung RAS therapy.
Response: We thank the applicant for its comment. We note that, as
discussed in previous rulemaking, the intent of section 1886(d)(5)(K)
of the Act and regulations under Sec. 412.87(b)(2) is to pay for new
medical services and technologies for the first 2 to 3 years that a
product comes on the market, during the period when the costs of the
new technology are not yet fully reflected in the DRG weights. While
the commenter stated that it provided the Hemolung RAS to hospitals
free or at cost, and that hospitals were not seeking payment for the
Hemolung RAS therapy during the EUA period, additional information
regarding whether hospitals charged for use of the Hemolung RAS therapy
between the date of its EUA and the date of commercial availability of
the De Novo classified device, and how it impacts whether use of the
technology may be reflected in the data, would be helpful in
determining that data reflecting the cost of the product did not become
available until the date of commercial availability of the De Novo
classified device. However, we note that regardless of whether we
consider the beginning of the newness period to commence for the use of
the Hemolung RAS for patients with COVID-19 on April 22, 2020 (the date
of its EUA) or November 15, 2021 (the date of commercial availability
of the De Novo classified device), in both cases, the three-year
anniversary date would occur after April 1, 2023, and, therefore, the
technology would be considered new for this indication for FY 2023. As
we discuss elsewhere in this rule, we also recognize that there may be
unique considerations associated with determining the start of the
newness period for a product available under an EUA prior to receiving
FDA approval, and will continue to consider the comments received
regarding the newness period for products available through an EUA for
COVID-19 for future rulemaking. We consider the beginning of the
newness period to commence for the use of the Hemolung RAS for patients
with other causes of hypercapnic respiratory failure unrelated to
COVID-19 on the date of commercial availability of the De Novo
classified device, November 15, 2021. Accordingly, we consider the
Hemolung RAS to be new for FY 2023 for use in patients with both COVID-
19 and hypercapnic respiratory failure unrelated to COVID-19, and
therefore the product meets the newness criterion for all patient
populations indicated in its FDA De Novo marketing authorization.
Based on the information provided in the application for new
technology add-on payments, and after consideration of the public
comments we received, we believe the Hemolung RAS is not substantially
similar to existing treatment options and meets the newness criterion.
With respect to the cost criterion, the applicant presented the
following analysis. The applicant searched the FY 2019 MedPAR Limited
Data Set (LDS) for cases that received ventilator support to identify
patients who may
[[Page 48940]]
have been eligible for the Hemolung RAS. The applicant reviewed
multiple ICD-10-CM and ICD-10-PCS codes related to respiratory failure
and hypercapnic disease and determined that two ICD-10-PCS codes were
most applicable: 5A1955Z (Respiratory ventilation, greater than 96
consecutive hours) and 5A1945Z (Respiratory ventilation, 24-96
consecutive hours). We noted that, in the applicant's analysis, it
listed ICD-10-PCS code 5A1955Z as 5A1935Z (Respiratory ventilation,
greater than 96 consecutive hours), but we believed the applicant
intended to reference the correct ICD-10-PCS code 5A1955Z (Respiratory
ventilation, greater than 96 consecutive hours) to correctly map to MS-
DRG 207 (Respiratory System Diagnosis with Ventilator Support >96
Hours).
The applicant identified 68,317 cases mapping to MS-DRGs 207
(Respiratory System Diagnosis with Ventilator Support >96 Hours) and
208 (Respiratory System Diagnosis with Ventilator Support <= 96 Hours).
MS-DRG 207 contained 24.6% of the cases and MS-DRG 208 contained the
remaining 75.4% of cases.
Next, the applicant removed 100% of the inhalation charges and
charges associated with a 1-day length of stay (LOS) in the ICU. The
applicant explained that it removed the 1 day of routine care plus ICU
day charges based on an assumed LOS reduction associated with the use
of the Hemolung RAS from relevant cases (as compared to cases without
the Hemolung RAS) to estimate the potential decrease in costs as a
result of the use of the Hemolung RAS.\108\ The applicant then
standardized the charges and applied a 4-year inflation factor of
1.281834 or 28.1834%, based on the inflation factor used in the FY 2022
IPPS/LTCH PPS final rule and correction notice to calculate outlier
threshold charges (86 FR 45542). The applicant then added charges for
the new technology, which it calculated by dividing the cost of the
Hemolung RAS by the national average CCR for inhalation therapy, which
is 0.147 (86 FR 44966).
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\108\ Tiruvoipati, et al., ``Effects of Hypercapnia and
Hypercapnic Acidosis on Hospital Mortality in Mechanically
Ventilated Patients:'' Crit Care Med. Vol 456(7). e649-e656
---------------------------------------------------------------------------
The applicant calculated a final inflated average case-weighted
standardized charge per case of $178,436, which exceeded the average
case-weighted threshold amount of $102,867. Because the final inflated
average case-weighted standardized charge per case exceeded the average
case-weighted threshold amount, the applicant maintained that the
Hemolung RAS meets the cost criterion.
After review of the cost analysis provided by the applicant, we
questioned whether the analysis should have included patients who would
also require a tracheostomy, which could result in cases mapping to the
Pre-Major Diagnostic Category (Pre-MDC) MS-DRGs 003 or 004 if used with
mechanical ventilation, and whether the inclusion of those additional
MS-DRGs would impact the cost analysis. We sought comments on whether
the Hemolung RAS meets the cost criterion.
Comment: The applicant submitted a public comment and updated cost
criterion analysis, which included a subset of cases in MS-DRG 003 and
MS-DRG 004 in response to our concerns. The applicant stated that cases
mapping to these MS-DRGs included non-extracorporeal membrane
oxygenation (ECMO) cases with a tracheostomy, receiving mechanical
ventilation, and with a primary diagnosis code for hypercapnia or
chronic obstructive pulmonary disease (COPD). The applicant followed
the same methodology as its original analysis and stated that even when
including the subset of cases in MS-DRGs 003 and 004, the case-weighted
standardized charges exceed the threshold amount, and the Hemolung RAS
meets the cost criterion.
Response: We appreciate the applicant providing an updated cost
criterion analysis that includes a subset of patients who would also
require a tracheostomy, which resulted in cases mapping to the Pre-
Major Diagnostic Category (Pre-MDC) MS-DRGs 003 or 004 if used with
mechanical ventilation. Based on the information provided by the
applicant, because the final inflated average case-weighted
standardized charge per case exceeded the case-weighted threshold
amount in all scenarios presented by the applicant, we agree with the
applicant that the Hemolung RAS meets the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that the Hemolung RAS offers a treatment option for
patients unresponsive to non-invasive mechanical ventilation (NIV),
patients unresponsive to invasive mechanical ventilation (IMV), and
patients ineligible for currently available treatments (that is,
failure of NIV with DNI order). Further, the applicant asserted that
the Hemolung RAS significantly improves clinical outcomes relative to
available services or technologies.
With regard to the claim that the Hemolung RAS offers a treatment
option for patients unresponsive to NIV, the applicant noted that while
acute respiratory failure can often be treated with NIV, which does not
require intubation and is typically safe and well tolerated, 12-50% of
patients are unresponsive to NIV as a result of several factors,
including elevated respiratory rates, uncorrected respiratory acidosis,
and reduced level of consciousness.109 110 111 Further, the
applicant stated that if a patient fails NIV, the only currently
indicated treatment is escalation to IMV; however, per the applicant,
intubation and IMV following NIV failure is associated with a 200%
increase in mortality compared to patients successfully treated with
NIV; 27% vs 9% mortality rate, respectively.\112\
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\109\ Conti, V. et al. Predictors of outcome for patients with
severe respiratory failure requiring noninvasive mechanical
ventilation. Eur Rev Med Pharmacol Sci 19, 3855-3860 (2015).
\110\ Bott, J. et al. Randomised controlled trial of nasal
ventilation in acute ventilatory failure due to chronic obstructive
airways disease. Lancet 341, 1555-1557 (1993).
\111\ Phua, J., Kong, K., Lee, K.H., Shen, L. & Lim, T.K.
Noninvasive ventilation in hypercapnic acute respiratory failure due
to chronic obstructive pulmonary disease vs. other conditions:
effectiveness and predictors of failure. Intensive Care Med 31, 533-
539 (2005).
\112\ Chandra, D. et al. Outcomes of noninvasive ventilation for
acute exacerbations of chronic obstructive pulmonary disease in the
United States, 1998-2008. Am. J. Respir. Crit. Care Med. 185, 152-
159 (2012).
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The applicant asserted that the Hemolung RAS can be an effective
tool for patients unresponsive to NIV by rapidly correcting respiratory
acidosis (pH and arterial partial pressure of carbon dioxide
(PaCO2)), thereby reducing respiratory drive and improving
NIV efficacy. In support of this claim, the applicant submitted a
consensus paper by Combes et al.\113\ In this consensus paper, 14
clinical experts in critical care and respiratory support using
ECCO2R convened to determine how ECCO2R therapy
is applied, identify how patients are selected, and discuss how
treatment decisions are made. Per the applicant, the results of the
paper showed that there were two groups of patients where
ECCO2R therapy was indicated--patients with acute
respiratory distress syndrome (ARDS) or patients with COPD. The
treatment goal for ECCO2R therapy in patients with ARDS is
to provide ultra-protective lung ventilation via managing
CO2 levels. The criteria for initiating ECCO2R
therapy in patients with ARDS and on NIV is when there was no decrease
in PaCO2 and no decrease in respiratory rate. In patients
with acute
[[Page 48941]]
COPD exacerbation, treatment targets were patient comfort, pH between
7.30-7.35, respiratory rate less than 20-25 breaths per minute,
decrease of PaCO2 by 10-20%, weaning from NIV, decrease in
bicarbonate levels (HCO3\-\), and maintaining hemodynamic
stability. The clinical experts came to the consensus that
ECCO2R therapy may be an effective support treatment for
adults with ARDS or COPD exacerbation, but noted the need for further
evidence from randomized clinical trials and/or high quality
prospective studies to better guide decision-making.
---------------------------------------------------------------------------
\113\ Combes, A. et al. ECCO2R therapy in the ICU:
consensus of a European round table meeting. Critical Care 24,
(2020).
---------------------------------------------------------------------------
The applicant also submitted three peer-reviewed publications in
support of this claim. First the applicant cited Bonin et al.,\114\ a
case study of a 50-year-old male awaiting a bilateral lung transplant,
admitted for COPD exacerbation caused by infection. The patient was
initially treated with antibiotics and continuous NIV, which he
tolerated for three days. After three days, the patient decompensated
due to a spontaneous pneumothorax. The lung was emergently reinflated,
but the patient's respiratory status continued to decline with a
PaCO2 between 72-85 mmHg, pH of less than 7.3, and a
respiratory rate of 30-40. The patient showed signs of exhaustion but
did not qualify for intubation due to the recent pneumothorax. The
patient consented to the Hemolung RAS therapy and within the first hour
of treatment, the patient's respiratory rate improved to around 10
breaths/minute. However, the patient was no longer able to tolerate the
NIV minimum set breathing rate, so the minimum set breathing rate was
turned off. The PaCO2 decreased to 55-60 mmHg for the
duration of therapy (6 days). The patient was able to be successfully
weaned from continuous NIV. The patient was also able to take oral
nutrition and participate in interventions against pressure sores.
After day 6, the patient was able to wean from the Hemolung RAS support
and continue with intermittent NIV support.
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\114\ Bonin, F., Sommerwerck, U., Lund, L. & Teschler, H.
Avoidance of intubation during acute exacerbation of chronic
obstructive pulmonary disease for a lung transplant candidate using
extracorporeal carbon dioxide removal with the Hemolung. The Journal
of Thoracic and Cardiovascular Surgery 145, e43-e44 (2013).
---------------------------------------------------------------------------
Second, the applicant cited a multi-national pilot study done by
Burki et al.\115\ in India and Germany. There were 20 COPD patients
with hypercapnic respiratory failure treated with ECCO2R therapy and
placed into 1 of 3 groups. Group 1 had seven patients on NIV with a
high likelihood of requiring IMV; Group 2 had two patients who could
not be weaned from NIV; and Group 3 had 11 patients on IMV who failed
weaning attempts. The authors found that the device was well-tolerated
with complications and rates similar to those seen with central venous
catheterization. The patients in Group 1 successfully avoided IMV as a
result of ECCO2R therapy, although three patients died
within 30 days of ECCO2R therapy due to underlying disease
states. The patients in Group 2 were successfully weaned from
continuous NIV after receiving ECCO2R therapy and were alive
30 days after ECCO2R therapy, but remained on intermittent
non-invasive, positive-pressure ventilation (NIPPV) support. Of the
patients in Group 3, nine of the 11 patients had been on IMV for
greater than 15 days prior to ECCO2R therapy. In Group 3,
three patients were weaned from IMV, three patients had decreased IMV
support, one patient expired from retroperitoneal bleed following
catheterization, and one patient remained on the same level of
ventilatory support despite receiving ECCO2R therapy. The
authors concluded that the single catheter, low-flow ECCO2R
system, provided clinically useful levels of CO2 removal in
patients with COPD and could be a potentially valuable addition to the
treatment of hypercapnic respiratory failure.
---------------------------------------------------------------------------
\115\ Burki, N. et al. A novel extracorporeal CO2
removal system: Results of a pilot study of hypercapnic respiratory
failure in patients with COPD. Chest 143, 678-686 (2013).
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Third, the applicant cited a case series by Tiruvoipati et al.
(2016),\116\ which retrospectively reviewed 15 patients among three
Australian ICUs treated with the Hemolung RAS who had severe
hypercapnic respiratory failure due to COPD, ARDS, asthma, or
bronchiolitis obliterans syndrome (BOS), to show that ECCO2R
was safe and effective in the removal of CO2. For five
patients (four with COPD and one with BOS), the indication for the
Hemolung RAS was to avoid intubation, whereas for the other 10 patients
(five with acute lung injury/ARDS, three with asthma, and two with
COPD), the indication was to institute lung-protective ventilation. The
median age of the patients was 61.5 years; 12 patients were men, the
median Acute Physiology and Chronic Health Evaluation III (APACHE III)
score was 85, and the median duration of ECCO2R was 5 days.
The primary outcome measures of the study were clearance of
CO2 and change in pH with the use of ECCO2R.
Secondary outcome measures included complications associated with
Hemolung RAS use, survival to weaning from the Hemolung RAS, and
survival to ICU and hospital discharge. There was no specified protocol
for managing mechanical ventilation across the three centers; however,
all centers used low-pressure ventilation for ARDS. For asthma, the
mechanical ventilation was characterized by low tidal volume, low
respiratory rate, and short inspiratory time associated with prolonged
expiratory time to avoid dynamic hyperinflation. Four of the five
patients treated for this indication, as well as all 10 patients who
were treated to institute lung-protective ventilation, avoided
intubation; successful lung-protective ventilation was achieved by a
reduction in peak inspiratory pressure, tidal volume, and minute
ventilation. The clearance of CO2 and return of
PaCO2 to near-normal levels was achieved within 6 hours, and
there was significant reduction in minute ventilation and peak airway
pressures. Complications reported during the study included hemorrhage,
thrombocytopenia, and compartment syndrome, none of which required
cessation of the Hemolung RAS therapy. Overall, 93.3% of the patients
survived to discontinuation of ECCO2R, 73.3% of patients
survived to ICU discharge, and 66.66% of patients survived to hospital
discharge. In conclusion, the study authors stated that the Hemolung
RAS appears to be safe and effective for managing hypercapnic
respiratory failure of various etiologies, but noted that more research
is needed to clarify which patients may benefit most from this therapy.
---------------------------------------------------------------------------
\116\ Tiruvoipati, R. et al. Early experience of a new
extracorporeal carbon dioxide removal device for acute hypercapnic
respiratory failure. Crit Care Resusc 18, 261-269 (2016).
---------------------------------------------------------------------------
In addition to the previous peer-reviewed studies, the applicant
also cited the Hemolung RAS Registry Program Analysis in support of its
claim.\117\ Per the applicant, the voluntary Hemolung RAS Registry
Program collected data from commercial use of the Hemolung RAS outside
of the US as well as US EUA therapies. 176 patients from the Hemolung
RAS Registry were analyzed to evaluate the benefits and safety of the
Hemolung RAS therapy. The applicant stated that the Hemolung RAS
Registry Program Analysis demonstrated that 86% (19/22) of patients
failing NIV avoided
[[Page 48942]]
intubation due to the Hemolung RAS therapy.
---------------------------------------------------------------------------
\117\ Alung, Inc., HL-CA-1600, Hemolung RAS Registry. A
Retrospective Registry Involving Voluntary Reporting of De-
identified, Standard of Care Data Following the Commercial Use of
the Hemolung Respiratory Assist System (RAS). ClinicalTrials.gov.
Retrieved December 21, 2021, from Hemolung RAS Registry Program--
Full Text View--ClinicalTrials.gov.
---------------------------------------------------------------------------
With respect to the applicant's assertion that the Hemolung RAS
offers a treatment option for patients unresponsive to IMV and are
retaining CO2, the applicant stated that the Hemolung RAS
de-couples CO2 removal from the mechanical ventilator
thereby allowing correction of hypercapnia and hypercapnic acidosis
without a dangerous escalation of ventilator settings. The applicant
provided 10 publications that document the use of the Hemolung RAS in
patients unresponsive to IMV to significantly reduce ventilator
settings to lung safe levels or to significantly correct and control
hypercapnic acidosis, including Tiruvoipati et al. (2016) \118\ and
Combes et al.,\119\ discussed previously.
---------------------------------------------------------------------------
\118\ Tiruvoipati, R. et al. Early experience of a new
extracorporeal carbon dioxide removal device for acute hypercapnic
respiratory failure. Crit Care Resusc 18, 261-269 (2016).
\119\ Combes, A. et al. ECCO2R therapy in the ICU:
consensus of a European round table meeting. Critical Care 24,
(2020).
---------------------------------------------------------------------------
In the first case study, a 44-year-old male with acute asthma
exacerbation went into respiratory arrest and was intubated in the
emergency department (ED).\120\ The patient was found to have a left
tension pneumothorax, which was decompressed, and then developed a
second tension pneumothorax on the right side, which was also
decompressed. The patient was transferred to the ICU for further
management. The patient continued to deteriorate over the subsequent 48
hours due to subcutaneous emphysema and ongoing air leaks, and after 72
hours had uncontrollable hypercapnia (PaCO2 73, pH 7.22)
despite optimal medical management with corticosteroids, nebulized and
intravenous bronchodilators, magnesium, ketamine, and muscle relaxants.
ECCO2R was indicated for hypercapnia and to facilitate de-
escalation of IMV. After initiating ECCO2R, it was possible
to decrease the support on the IMV while maintaining satisfactory gas
exchange and allowing the withdrawal of muscle relaxants. Within 1 hour
of initiation of ECCO2R, the pH improved from 7.22 to 7.28,
and the PaCO2 went from 68.1 to 60.6. The patient remained
on ECCO2R for a total of 7 days mainly due to ongoing air
leaks from three chest drains and a bleeding complication that was
managed with transfusion. After discontinuing ECCO2R
therapy, the patient received a tracheostomy to assist in weaning from
IMV. The patient was successfully weaned from IMV after 23 days in the
ICU and was ultimately discharged home. The authors discussed that
while this patient could have been treated with ECMO, the use of ECMO
is limited to specialized centers and requires a multidisciplinary
approach for a successful outcome.
---------------------------------------------------------------------------
\120\ Tiruvoipati R., et al. Low-flow veno-venous extracorporeal
carbon dioxide removal in the management of severe status
asthmatics: a case report. Clin Respir J. 2014;10(5):653-656.
---------------------------------------------------------------------------
In the second case study, the Hemolung RAS system was used to treat
hypercapnia in a 58-year-old male patient with an out-of-hospital
cardiac arrest where mechanical ventilation failed to achieve
normocapnia.\121\ The patient was intubated in the ED and treated with
nebulized bronchodilators, corticosteroids, and therapeutic
hypothermia. Initially, the PaCO2 was 82 mmHg (baseline 50
mmHg) with a pH of 7.20, but as the next few hours progressed, the
patient became more difficult to ventilate and the PaCO2
increased to 94 mmHg. ECCO2R therapy was indicated to
prevent lung injury and secondary brain injury. After initiating the
Hemolung RAS, the minute ventilation and the respiratory rate could be
decreased and the team was able to optimize the inspiratory and
expiratory time ration to minimize the risk of barotrauma. The patient
was on the Hemolung RAS therapy for 3 days and was able to de-escalate
the ventilator settings, but still required mechanical ventilation.
After cessation of the Hemolung RAS therapy, the patient started to
show signs of significant hypoxic brain injury. Despite maximal medical
treatment, the neurological prognosis was considered to be very poor,
and all life-sustaining therapies were withdrawn. The authors stated
that ECCO2R therapy is safe to use in a metropolitan
hospital where the staff have a limited period of education, and that
the extracorporeal therapy was delivered without complications. The
authors also stated that ECMO is not an option in every health care
center since it requires a specialized team including cardiac surgeons
and perfusionists and is costly. The authors stated that
ECCO2R is less invasive and able to provide partial
respiratory support. Thus, the authors concluded that ECCO2R
may have a role in patients with severe respiratory failure when IMV
alone is inadequate and in centers that are not capable of initiating
ECMO in the management of severe hypercapnic respiratory failure.
---------------------------------------------------------------------------
\121\ Tiruvoipati R., et al. Management of severe hypercapnia
post cardiac arrest with extracorporeal carbon dioxide removal.
Anaesth Intensive Care. 2014;42(2):248-252.
---------------------------------------------------------------------------
Next, the applicant cited a United Kingdom case study about a 48-
year-old male presenting to the ED with 7 days of cough, fever, and
shortness of breath.\122\ He tested positive for COVID-19 via
respiratory viral swab and had a chest x-ray demonstrating bilateral
infiltrates. He initially required supplemental oxygen via facemask and
oral doxycycline to treat possible bacterial co-infection. He continued
to deteriorate, was trialed on NIV and failed, and was then
transitioned to IMV on day four of the hospitalization and transferred
to the ICU for further management. The patient continued to deteriorate
and within a week and was found to be in ARDS due to COVID-19
pneumonitis. The patient was treated with several strategies for lung
recruitment, and was referred to ECMO but was declined on the basis of
futility. The treatment team believed that continuing to treat the
patient with high airway pressure was contributing to the progression
of the ARDS, so the Hemolung RAS was initiated as a rescue therapy.
After initiation, the PaCO2 and pH improved, which allowed
the treatment team to reduce the tidal volume and respiratory rate. The
patient spent 6 days on the Hemolung RAS without bleeding events or
vasopressors and could continue to receive prone position ventilation
without complication. The patient was successfully weaned from the
Hemolung RAS and then completed a slow respiratory wean followed by a
percutaneous tracheostomy. The patient was ultimately discharged from
the ICU to home with mobility and cognition intact. The authors
concluded that ECCO2R can be used as a rescue therapy for
patients with hypercapnic respiratory failure resulting from ARDS in
COVID-19 pneumonitis and to facilitate lung protective ventilation in
patients on IMV. According to the authors, refractory hypercapnia is an
acceptable indication for ECMO in ARDS and that ECCO2R can
be considered as rescue therapy if ECMO is deemed inappropriate or
cannot be delivered due to resource constraints. Per the authors,
potential advantages of using ECCO2R over ECMO include lack
of requirement for transfer to an ECMO center, smaller catheter size,
and lower blood flow rate which may reduce the likelihood of
complications.
---------------------------------------------------------------------------
\122\ Tully R.P., et al. The successful use of extracorporeal
carbon dioxide removal as a rescue therapy in a patient with severe
COVID-19 pneumonitis. Anaesthesia Reports 2020; 8:113-115.
---------------------------------------------------------------------------
The applicant also cited a case study of an 18-year-old male with
solitary mediastinal metastasis and ARDS, in which the Hemolung RAS was
used to facilitate de-escalation of mechanical
[[Page 48943]]
ventilation.\123\ Post-treatment with chemotherapy, a residual
mediastinal mass was found with extension to the left lung hilum. The
patient underwent lung resection and was extubated postoperatively
without issue. The patient became febrile and developed a progressively
extensive right lung infiltrate. On postoperative day five, the patient
developed severe hypercapnia, hypoxemia, and hypotension, necessitating
re-intubation and invasive mechanical ventilation. The Hemolung RAS was
initiated to provide ECCO2R. Arterial PCO2
decreased from 73 to 53 mmHg within 4 hours (with a concomitant pH
increase from 7.28 to 7.44), permitting tidal volume reduction to 3.5
mL/kg, and plateau airway pressure to 25 cm H2O, with simultaneous
hemodynamic improvement. ECCO2R was titrated to maintain an
arterial PCO2 between 45 and 50 mmHg, and the patient was
weaned and decannulated after 71 hours of support. The patient was
removed from mechanical ventilation within 24 hours and then
transferred to an intermediate care unit. No ECCO2R-related
complications were observed. The authors stated the Hemolung RAS has a
conceptual advantage over ECMO as the Hemolung RAS uses one small dual-
lumen venous catheter, without additional arterial access and its
attendant risks. The authors concluded that in appropriately selected
patients, a minimally invasive ECCO2R approach may be
useful.
---------------------------------------------------------------------------
\123\ Akkanti B., et al. Low-flow extracorporeal carbon dioxide
removal using the Hemolung Respiratory Dialysis System[supreg] to
facilitate lung-protective mechanical ventilation in acute
respiratory distress syndrome. J Extra Corpor Technol.
2017;49(2):112-114.
---------------------------------------------------------------------------
Next, the applicant cited a case study by Saavedra-Romero et
al.,\124\ which describes the use of ECCO2R immediately
administered with lung-protective mechanical ventilation on a patient
with COVID-19 ARDS in her mid-60s. The authors stated that, upon
arrival to the ICU, on inpatient day 5, the patient's oxygen saturation
by pulse oximeter (SpO2) was 77%, blood pressure (BP) 90/40
on norepinephrine at 10[thinsp]mcg/min, and the patient's initial
arterial blood gas (ABG) results were pH = 7.14, PaCO2 = 90
mmHg, PaO2 = 52 mmHg, and HCO3 = 30 mEq/L. The
patient had significant whole-body subcutaneous crepitus, and the chest
x-ray (CXR) showed an inflated right lung, subcutaneous emphysema, and
an appropriately positioned endotracheal tube (ETT). The patient became
increasingly tachycardic and tachypneic due to further worsening of
hypercapnia and respiratory acidosis. ECCO2R was initiated
using the Hemolung RAS and was administered for 17 days without
complications. Ventilator settings were maintained at PEEP of 14, rate
of 26, and minute ventilation at 7.8 liters during the first 24 hours.
Respiratory rate and tidal volumes were subsequently titrated downward,
maintaining adequate oxygen levels and permissive hypercapnia. The
patient's chest tubes were removed 4 days after the Hemolung RAS
decannulation, and the patient was weaned from mechanical ventilation
28 days from ICU admission, and discharged 47 days after admission. The
authors stated that this case report highlights the use of
ECCO2R to facilitate effective treatment of a patient with
severe hypercapnic respiratory failure secondary to COVID-19 ARDS and
multiple risk factors for death. The authors stated that treatment with
ECCO2R allowed a lung-protective ventilator management
strategy with ultralow tidal volumes, minimizing the risk of
ventilator-induced lung injury, attenuating severe hypercapnia and
acidosis, and limiting the expansion of an existing pneumothorax. The
authors concluded that ECCO2R facilitates early lung-
protective ventilation and control of refractory hypercapnia and can be
safely utilized to increase the likelihood of survival among patients
with severe COVID-19 ARDS.
---------------------------------------------------------------------------
\124\ Saavedra-Romero R., et al. Treatment of Severe Hypercapnic
Respiratory Failure Caused by SARS-CoV-2 Lung Injury with
ECCO2R Using the Hemolung Respiratory Assist System. Case
Reports in Critical Care 2021; 1-5.
---------------------------------------------------------------------------
Finally, the applicant cited a case study by Bermudez et al.,\125\
in which a 33-year-old male with cystic fibrosis (CF), post double lung
transplantation who developed severe hypercarbic respiratory failure
due to adenovirus pneumonia requiring hospitalization, tracheostomy,
and prolonged IMV for greater than 30 days. The patient was transferred
to a tertiary care center and was treated with the Hemolung RAS because
of persistent hypoxemia and hypercarbia. The patient was not a
candidate for ECMO because of frail clinical condition, volume
overload, and need for a redo lung transplantation. After 4 days of the
Hemolung RAS support, the patient was weaned from vasopressors, and
after 9 days, the patient was accepted as a candidate for redo lung
transplantation because of considerable clinical improvement.
---------------------------------------------------------------------------
\125\ Bermudez, et al. ``Prolonged Use of the Hemolung
Respiratory Assist System as a Bridge to Redo Lung Transplantation''
Annals of Thorac Surg. 2015 Vol 100 (6). P. 2330-2333.
---------------------------------------------------------------------------
Lastly, the applicant provided a retrospective, multicenter study
of 31 patients placed on the Hemolung RAS at 8 sites across the
U.S.\126\ The cohort was comprised of patients with COVID-19 who were
mechanically ventilated with severe hypercapnia and respiratory
acidosis and treated with low-flow extracorporeal CO2
removal treated between March 4 and September 30, 2020. Two patients
underwent cannulation but were never started on therapy due to a
vascular access failure in one patient and immediate circuit clotting
in the other. For the 29 patients who received the Hemolung RAS
treatment, analysis of covariance revealed a significant improvement
trend in both pH and PaCO2 (p < 0.0001). Comparison of time
intervals yielded a statistically significant improvement in pH (7.24
0.12 to 7.35 0.07; p < 0.0001) and decrease
in PCO2 (79 23 to 58 14; p <
0.0001) from baseline to 24 hours after start of therapy. There were
numerical, but not significant, decreases from baseline to 24 hours in
respiratory rate (26.6 5.4 to 23.4 4.9),
tidal volume (407 100 to 386 75[thinsp]mL),
and minute ventilation (10.2 3.2 to 8.7
2.2[thinsp]L/min). The authors indicated that this is the first
reported use of ECCO2R in the U.S. for this patient
population. The authors reported that limitations of the study are its
small size and single-cohort retrospective nature. The applicant stated
that the study results demonstrated the efficacy of ECCO2R
using the Hemolung RAS to improve respiratory acidosis in patients with
severe hypercapnic respiratory failure due to COVID-19.
---------------------------------------------------------------------------
\126\ Akkanti B., et al. Physiologic Improvement in Respiratory
Acidosis Using Extracorporeal CO2 Removal With Hemolung
Respiratory Assist System in the Management of Severe Respiratory
Failure From Coronavirus Disease 2019. Critical Care Explorations.
2021;3:e0372.
---------------------------------------------------------------------------
In addition to the case reports and retrospective study, the
applicant also cited to the Hemolung RAS Registry Program Analysis,
discussed previously, in support of its claim.\127\ The applicant
stated that the Hemolung RAS Registry Program Analysis demonstrated
clinically and statistically significant correction of pH and
PaCO2 within the first day of the Hemolung RAS therapy
(p<0.05).\128\ Additionally, the applicant noted that the statistical
analysis showed this correction in pH and PaCO2
[[Page 48944]]
was independent of the patient's primary diagnosis.
---------------------------------------------------------------------------
\127\ Alung, Inc., HL-CA-1600, Hemolung RAS Registry. A
Retrospective Registry Involving Voluntary Reporting of De-
identified, Standard of Care Data Following the Commercial Use of
the Hemolung Respiratory Assist System (RAS). ClinicalTrials.gov.
Retrieved December 21, 2021, from Hemolung RAS Registry Program--
Full Text View--ClinicalTrials.gov.
\128\ Ibid. ClinicalTrials.gov. Retrieved December 21, 2021,
from Hemolung RAS Registry Program--Full Text View--
ClinicalTrials.gov.
---------------------------------------------------------------------------
With respect to the applicant's assertion that the Hemolung RAS
offers a treatment option for patients ineligible for currently
available treatments (for example, patients with a DNI order), the
applicant reiterated that intubation with IMV is the only currently
available treatment option for patients failing NIV; however, the
applicant indicated that these patients have no other therapeutic
options if they were to fail NIV because of their preference to not be
intubated. According to the applicant, the CO2 removal by
the Hemolung RAS would rapidly correct the pH and PaCO2
which would reduce the respiratory drive and improve NIV efficacy and
prevent continued clinical deterioration.129 130
---------------------------------------------------------------------------
\129\ Burki, N. et al. A novel extracorporeal CO2
removal system: Results of a pilot study of hypercapnic respiratory
failure in patients with COPD. Chest 143, 678-686 (2013).
\130\ Tiruvoipati, R. et al. Early experience of a new
extracorporeal carbon dioxide removal device for acute hypercapnic
respiratory failure. Crit Care Resusc 18, 261-269 (2016).
---------------------------------------------------------------------------
The applicant submitted three peer-reviewed case reports that have
documented the use of the Hemolung RAS in patients failing NIV with a
DNI order. In the first case study done in Germany,\131\ a 72-year-old
female with a past medical history of severe COPD (GOLD 4, nocturnal
home ventilation therapy) with a DNI order presented to an ED in a
hypercapnic coma. The patient had a Glasgow Coma Score of 3, pH of
6.97, and PaCO2 greater than 150 mmHg. The patient was
hemodynamically stable on NIV with a respiratory rate of 28, oxygen
saturation of 88% on supplemental oxygen with an inspired fraction
(FiO2) of 30%. After 30 minutes of NIV treatment, the
patient's PaCO2 improved, but the patient was nearly
unconscious and was transferred to the ICU. Because of the high
predictive mortality for patients with severe COPD who fail NIV and
require intubation and invasive mechanical ventilation, combined with
the patient's DNI order, the Hemolung RAS was initiated to supplement
treatment. Within the first hour of treatment with both NIV and
Hemolung RAS, the PaCO2 levels continued to decrease from
109 mmHg to 89 mmHg and the patient's level of consciousness improved
after about 25 minutes. Ultimately, the patient was able to start oral
nutrition, communicate, and start mobilizing early because of her
improved mental state within four hours of starting the Hemolung RAS
and was discharged to rehabilitation.
---------------------------------------------------------------------------
\131\ Engel, M., Albrecht, H. & Volz, S. Use of Extracorporeal
CO2 Removal to Avoid Invasive Mechanical Ventilation in
Hypercapnic Coma and Failure of Noninvasive Ventilation. J Pulm
Respir Med 6, 1-3 (2016).
---------------------------------------------------------------------------
The second case study by Mani et al. described two patients with
severe COPD admitted to the ICU with an acute COPD exacerbation
requiring NIV, but failed NIV treatments.\132\ A 69-year-old female in
India was admitted with acute COPD exacerbation, waning consciousness
and a pH of 7.20 and PaCO2 of 101 mmHg. After starting NIV
for 2 hours, the PaCO2 had risen to 105 mmHg and pH had
dropped to 7.193. After 1 hour of the Hemolung RAS treatment and NIV,
the PaCO2 declined to 93 mmHg with a pH 7.25. After 6 hours
of treatment with the Hemolung RAS and NIV, the patient was awake with
a PaCO2 of 68 mmHg and a pH of 7.35. Ultimately, she was
discharged to home on home oxygen and nocturnal NIV. There was also a
report of a 78-year-old male with COPD and other comorbidities who had
a DNI order in Germany. He was admitted with an acute COPD exacerbation
and treated with NIV after his initial arterial blood gas (ABG) showed
PaCO2 92 mmHg and pH of 7.24. After treatment with both the
Hemolung RAS and NIV for 1 hour, the patient's PaCO2 dropped
to 68 mmHg and pH 7.33. Ultimately, the patient was discharged to home
on nocturnal NIV. Both patients were both diagnosed with
thrombocytopenia as a known complication of extracorporeal therapy, but
neither required transfusion.
---------------------------------------------------------------------------
\132\ Mani, R.K., Schmidt, W., Lund, L.W. & Herth, F.J.F.
Respiratory dialysis for avoidance of intubation in acute
exacerbation of COPD. ASAIO J 59, 675-678 (2013).
---------------------------------------------------------------------------
The applicant submitted a third case study in which Cole et al.
describe a 62-year-old female with past medical history of COPD (GOLD
class 3) and 2 recent hospitalizations for COPD exacerbations in the
past 60 days.\133\ The patient had hypercapnic respiratory failure for
which she did not want to be intubated, so she was started on NIV. She
initially improved, but by day four of NIV treatment, she deteriorated,
as evidenced by tachypnea and fatigue due to increased work of
breathing. She was started on the Hemolung RAS and within two hours
therapy with the Hemolung RAS alone (patient requested to stop NIV with
the initiation of the Hemolung RAS), the patient's respiratory rate
improved. Within 6 hours, the patient was able to converse and fully
engage with her treatment. Ultimately the patient was discharged to
home at her baseline activity level and did not require home oxygen
therapy, and was not readmitted to hospital within 30 days of
discharge.
---------------------------------------------------------------------------
\133\ Cole, S. et al. Extracorporeal carbon dioxide removal as
an alternative to endotracheal intubation for noninvasive
ventilation failure in acute exacerbation of COPD. J Int Care Soc
15, 344-346 (2014).
---------------------------------------------------------------------------
Furthermore, the applicant claimed that the Hemolung RAS
significantly improves clinical outcomes relative to services or
technologies previously available by mitigating the harmful clinical
sequelae from hypercapnic acidosis and facilitates de-escalation of
high pressure and high volume ventilatory support or prevent
intubation, both of which are known predictors for poor clinical
outcomes. Thus, per the applicant, the correction of hypercapnia and
hypercapnic acidosis (that is, pH and PaCO2) are appropriate
surrogate markers for improved clinical outcomes in critically ill,
mechanically ventilated patients. Per the applicant, the use of
correction of hypercapnia and hypercapnic acidosis as surrogate markers
for improved clinical outcomes was accepted by FDA as evidence of the
clinical benefit of the Hemolung RAS as part of FDA's clearance of its
De Novo request.
The applicant asserted that the pH and PaCO2 correction
due to the Hemolung RAS therapy provide the following six improved
outcomes: (1) reduced mortality in intubated and IMV patients; (2)
reduced length of stay in IMV patients; (3) de-escalation of mechanical
ventilation settings (decreased rate of subsequent diagnostic or
therapeutic interventions); (4) avoidance of intubation following NIV
failure; (5) reduced mortality in NIV patients; and (6) improvement in
activities of daily living/quality of life.
In support of its assertion that the Hemolung RAS reduces mortality
in intubated and IMV patients, the applicant cited two background
studies.134 135 In the study by Nin et al., the authors
completed a secondary analysis of 3 prospective, non-interventional
cohort studies in 1,899 patients with ARDS among 40 ICUs. The goal of
the study was to determine the relationship between severe hypercapnia
(PaO2 >=50 mmHg) in the first 48 hours following onset of
ARDS and mortality. The applicant stated that the study results
demonstrate that severe hypercapnia in IMV patients was independently
associated with increased risk of ICU mortality (odds
[[Page 48945]]
ratio: 1.93, 95% CI: 1.32-2.81, p = 0.001). The second study by
Tiruvoipati et al. (2017), was a multicenter, binational, retrospective
study that included 252,812 patients of 3 cohorts: normocapnia and
normal pH (n = 110,104), compensated hypercapnia (n = 20,463), and
hypercapnic acidosis (n = 122,245), that aimed to determine the
relationship between these states and Acute Physiology and Chronic
Health Evaluation (APACHE) III score and mortality. The study found
that those with compensated hypercapnia and hypercapnic acidosis had
higher APACHE III scores (49.2 vs. 53.2 vs. 68.6, p<0.01); mortality
was highest in the hypercapnic acidosis patients (OR: 1.18, 95% CI:
1.1-1.25) and lowest in the normocapnia and normal pH, p < 0.001. The
applicant stated that the adjusted odds ratio for hospital mortality
remained significantly higher in compensated hypercapnia and
hypercapnic acidosis when compared with patients with normocapnia and
normal pH irrespective of their P/F ratios.
---------------------------------------------------------------------------
\134\ Nin, et al., ``Severe hypercapnia and outcome of
mechanically ventilated patients with moderate or severe acute
respiratory distress syndrome'' Intensive Care Med. 2017. p. 200--
208.
\135\ Tiruvoipati, et al., ``Effects of Hypercapnia and
Hypercapnic Acidosis on Hospital Mortality in Mechanically
Ventilated Patients'' Crit Care Med. 2017. Vol 456(7). e649-e656.
---------------------------------------------------------------------------
In support of the applicant's second assertion that use of the
Hemolung RAS contributes to reduced LOS in IMV patients, the applicant
cited Tiruvoipati et al. (2017), previously discussed.\136\ The median
hospital LOS was 10.5 days in the normocapnia and normal pH group, 12
days in the compensated hypercapnia group and 11 days in the
hypercapnic acidosis group (p<0.001). The median ICU LOS was 1.9 days
vs 2.2 days vs. 2.9 days in the normocapnia/normal pH group vs.
compensated hypercapnia group vs. the hypercapnic acidosis group,
respectively (p<0.001). The authors noted that that there was increased
mortality in patients with hypercapnic acidosis and compensated
hypercapnia with unclear cause.
---------------------------------------------------------------------------
\136\ Ibid.
---------------------------------------------------------------------------
In support of the applicant's assertion that use of the Hemolung
RAS results in de-escalation of mechanical ventilation settings and
decreased rate of subsequent diagnostic or therapeutic interventions,
the applicant cited the Tully et al. case report,\137\ discussed
previously, in which intubated patients had a 20% decrease in peak
airways pressure and 30% decrease in driving pressure during the
Hemolung RAS therapy. The applicant also cited the Tiruvoipati et al.
(2016) study, discussed previously, in which 10 patients showed a 19%
decrease in peak respiratory pressure and a 26% decrease in minute
ventilation within 1 day of the Hemolung RAS therapy.\138\ The
applicant also cited the Hemolung RAS Registry Program Analysis,\139\
which demonstrated statistically significant correction of pH and
PaCO2 within the first day of the Hemolung RAS therapy
(p<0.05).
---------------------------------------------------------------------------
\137\ Tully R.P., et al. The successful use of extracorporeal
carbon dioxide removal as a rescue therapy in a patient with severe
COVID-19 pneumonitis. Anaesthesia Reports 2020; 8:113-115.
\138\ Tiruvoipati, R., et al. Effects of Hypercapnia and
Hypercapnic Acidosis on Hospital Mortality in Mechanically
Ventilated Patients*: Critical Care Medicine. 2017;45(7):e649-e656.
\139\ Alung, Inc., HL-CA-1600, Hemolung RAS Registry. A
Retrospective Registry Involving Voluntary Reporting of De-
identified, Standard of Care Data Following the Commercial Use of
the Hemolung Respiratory Assist System (RAS). ClinicalTrials.gov.
Retrieved December 21, 2021, from Hemolung RAS Registry Program--
Full Text View--ClinicalTrials.gov.
---------------------------------------------------------------------------
In support of its assertion that use of the Hemolung RAS
contributes to avoidance of intubation following NIV failure, the
applicant noted that respiratory acidosis is the primary determinant of
NIV failure citing risk charts using a background study from
Confalonieri et al.,\140\ in which data from 1,033 patients admitted to
experienced hospital units was used to predict the likelihood of
failure of noninvasive positive pressure ventilation (NPPV). The
prediction charts were calculated using the APACHE II, GCS, pH, and
respiratory rate data of 1,033 patients admitted with acute respiratory
failure due to exacerbation of COPD treated with NIV. The applicant
stated that the study results show that pH <7.25 (acidosis) after 2
hours of NIV is the primary determinant of NIV failure [odds ratio:
21.02; 95% CI: 10.07-43.87], and that additionally, a pH between 7.25
and 7.29 (acidosis) after 2 hours of NIV is also significant predictor
of NIV failure [odds ratio:2.92; 95% CI: 1.62-5.28]. The applicant
stated that accuracy and generalizability of the model's ability to
predict NIV failure was validated on an independent group of 145 COPD
patients treated with NIV.
---------------------------------------------------------------------------
\140\ Confalonieri M., et al. A chart of failure risk for
noninvasive ventilation in patients with COPD exacerbation. European
Respiratory Journal. 2005;25(2):348-355.
---------------------------------------------------------------------------
In a prospective, single-arm feasibility study, Burki et al.,
previously discussed, stated that 100% (7/7) patients failing NIV and
treated with the Hemolung RAS therapy avoided intubation and 100% (2/2)
patients failing NIV with a DNI and treated with the Hemolung RAS
therapy were successfully weaned from NIV.\141\ The applicant cited a
retrospective review by Tiruvoipati et al. (2016), also previously
discussed, in which 80% (4/5) of patients failing NIV and treated with
Hemolung RAS therapy avoided intubation.\142\ Furthermore, the
applicant cited an unpublished study of the Hemolung RAS Registry
Program Analysis,\143\ in which 86% of patients (19 of the 22 patients
in the analysis) who failed NIV and were treated with the Hemolung RAS
therapy avoided intubation.
---------------------------------------------------------------------------
\141\ Burki N., et al. A novel extracorporeal CO2
removal system: Results of a pilot study of hypercapnic respiratory
failure in patients with COPD. Chest. 2013;143(3):678-686.
\142\ Tiruvoipati R., et al. Early experience of a new
extracorporeal carbon dioxide removal device for acute hypercapnic
respiratory failure. Crit Care Resusc. 2016;18(4):261-269.
\143\ The applicant cited an unpublished study using data
collected from physicians as part of the Hemolung Registry Program.
We believe information regarding the Hemolung Registry Program is
available here: Alung, Inc., HL-CA-1600, Hemolung RAS Registry. A
Retrospective Registry Involving Voluntary Reporting of De-
identified, Standard of Care Data Following the Commercial Use of
the Hemolung Respiratory Assist System (RAS). ClinicalTrials.gov.
Retrieved December 21, 2021, from Hemolung RAS Registry Program--
Full Text View--ClinicalTrials.gov.
---------------------------------------------------------------------------
In support of the assertion that the Hemolung RAS reduced mortality
in NIV patients, the applicant submitted two retrospective studies as
background studies, in addition to two case studies that utilized the
technology. The first background study \144\ was a retrospective
analysis of data from the Healthcare Cost and Utilization Project's
Nationwide Inpatient Sample between 1998 and 2008 to assess the pattern
and NIPPV use for acute exacerbations of COPD. The patient cohort was
defined as people greater than 35-years-old admitted with a primary
diagnosis of COPD or a primary diagnosis of respiratory failure with a
secondary diagnosis of COPD. The study demonstrated a decline over time
in overall in-hospital mortality for those patients treated with NIPPV
without a subsequent need for IMV. Mortality was high and increased
over time in patients who transitioned from NIPPV to IMV (27%) compared
to those patients who did not transition (9%). Charges for
hospitalization increased from 1998 to 2008, especially for patients
who transitioned from NIPPV to IMV. LOS decreased in all patients
except those who transitioned from NIPPV to IMV. The authors noted a
few limitations that would have allowed for a more detailed examination
of predictors of NIPPV failure and death, including the lack of
information on the severity of the exacerbation, response to NIPPV
treatment, end-of-life decision-making,
[[Page 48946]]
or location of the patient in the hospital (ICU vs. medical ward vs.
ED, etc.).
---------------------------------------------------------------------------
\144\ Chandra, et al, ``Outcomes of noninvasive ventilation for
acute exacerbations of chronic obstructive pulmonary disease in the
United States, 1998-2008'' Am J. Respir Crit Care Med. 2012. Vol 185
(2). p. 152-159
---------------------------------------------------------------------------
The applicant also cited a retrospective study by Sprooten et
al.\145\ as background, that looked at patients admitted to the
Respicare Unit located in Maastricht University Medical Center (MUMC)
in the Netherlands between 2009 and 2011 who met the criteria of
admitted for exacerbation of COPD requiring NIV therapy and a
definitive COPD diagnosis. In-hospital mortality was 14% with a median
LOS of 16.5 days. Overall, this single-center study showed that
patients who are admitted to the hospital for a first hospitalization
requiring NIV for acute respiratory due to COPD exacerbation have a
high short- and long-term mortality rate. According to the article,
older age, NIV use greater than eight days and lack of successful NIV
response were independent prognostic factors to two-year mortality
rather than response of levels of PaCO2 or pH.
---------------------------------------------------------------------------
\145\ Sprooten, et al. ``Predictors for long-term mortality in
COPD patients requiring non-invasive positive pressure ventilation
for the treatment of acute respiratory failure'' Clinical Resp J.
2020. Vol 14 (12). p. 1144-1152
---------------------------------------------------------------------------
The applicant also cited two case studies where the Hemolung RAS
was used to successfully treat patients in hypercapnic respiratory
failure caused by COPD. The applicant stated that in these case
reports, the Hemolung RAS therapy prevented imminent death in COPD
patients with a DNI order who were failing NIV. In a case study by
Engel et al., previously described,\146\ a 72-year-old female with
hypercapnic coma due to COPD exacerbation was administered the Hemolung
RAS; after 4 hours, PaCO2, pH, and clinical parameters
improved, and the patient was weaned off therapy after 7 days.
---------------------------------------------------------------------------
\146\ Engel, et al. ``Use of Extracorporeal CO2
Removal to Avoid Invasive Mechanical Ventilation in Hypercapnic Coma
and Failure of Noninvasive Ventilation'' J. Pulm & Resp Med. 2016
Vol 6 (3) p.1-3.
---------------------------------------------------------------------------
In a second study by Mani et al., previously described,\147\ the
Hemolung RAS was used to treat two patients. The first patient, a 69-
year-old female with COPD, was placed on the Hemolung RAS after failing
NIV treatment. After 66 hours of treatment, the patient was weaned off
the Hemolung RAS, and was discharged home 4 days later. The second
patient, a 78-year-old male with COPD, was placed on the Hemolung RAS
after failing NIV treatment. After 48 hours of treatment, the patient
was weaned off the Hemolung RAS, and was discharged home 10 days later.
---------------------------------------------------------------------------
\147\ Mani, R.K., Schmidt, W., Lund, L.W. & Herth, F.J.F.
Respiratory dialysis for avoidance of intubation in acute
exacerbation of COPD. ASAIO J. 59, 675-678 (2013).
---------------------------------------------------------------------------
In support of the assertion that the Hemolung RAS improves
activities of daily living/quality of life, the applicant submitted one
randomized controlled trial (RCT) abstract and three case studies. In
the RCT abstract by Barrett at al.,\148\ 18 patients (median age: 67.5
years) with acute hypercapnic respiratory failure due to exacerbations
of COPD were randomized to receive NIV alone or ECCO2R and
NIV. The applicant stated that the study included patients who were at
high risk of failing NIV (pH<7.30 after >=1 hour of NIV). The applicant
stated that the control arm continued to be treated with NIV only (n=9)
and the test arm was treated with ECCO2R (n=9). The primary
endpoint was the time to cessation of NIV. Secondary outcomes included
device tolerance and complications, changes in arterial blood gases
(ABGs) and hospital survival. The time to NIV discontinuation was
shorter in the ECCO2R arm (7 hours) vs in the NIV alone arm
(24.5 hours), p = 0.004. The study claimed that dyspnea rapidly
improved with ECCO2R, but that ICU and hospital LOS were
longer with the ECCO2R group and there was no difference in
mortality or functional outcomes at follow-up. The authors concluded
that ECCO2R can be an alternative to NIV for patients who
are at risk of failing or cannot tolerate NIV, or for patients in whom
a more rapid correction of hypercapnia is desirable.
---------------------------------------------------------------------------
\148\ Barrett, N., et al. A randomized controlled trial of Non-
Invasive Ventilation compared with ECCO2R for Acute
Hypercapnic Exacerbations of COPD. ASAIO J. 2021; 67 (Supp 3)
Presented at the 32nd Annual ELSO Conference.
---------------------------------------------------------------------------
The applicant referred to three case studies using the Hemolung RAS
to treat hypercapnic respiratory failure, to demonstrate improvement in
activities of daily living/quality of life. In the case study by Engel
et al., previously described,\149\ the applicant stated that early
mobilization, communication, and nutrition were facilitated with
Hemolung therapy. In the Bermudez et al. case study, previously
discussed,\150\ the Hemolung RAS was successfully used to bridge a
patient with COPD to a lung transplantation. The applicant stated that
considerable clinical improvement attributed to Hemolung therapy
permitted the patient to be awake and mobilized to sit on the edge of
the bed. In the Bonin et al. case study, previously discussed,\151\ the
applicant stated that drinking and recovery from pressure sores were
possible by day three of the Hemolung RAS.
---------------------------------------------------------------------------
\149\ Engel, et al. ``Use of Extracorporeal CO2
Removal to Avoid Invasive Mechanical Ventilation in Hypercapnic Coma
and Failure of Noninvasive Ventilation'' J. Pulm & Resp Med. 2016
Vol 6 (3) p.1-3.
\150\ Bermudez, et al. ``Prolonged Use of the Hemolung
Respiratory Assist System as a Bridge to Redo Lung Transplantation''
Annals of Thorac Surg. 2015 Vol 100 (6). p. 2330-2333.
\151\ Bonin, et al. ``Avoidance of intubation during acute
exacerbation of chronic obstructive pulmonary disease for a lung
transplant candidate using extracorporeal carbon dioxide removal
with the Hemolung''. J. Thorac Cardiovac Surg. 2013. Vol 145 (5).
e43-e44.
---------------------------------------------------------------------------
After review of the information provided by the applicant, we
stated that we had the following concerns regarding whether the
Hemolung RAS meets the substantial clinical improvement criterion. We
noted that the evidence provided for several of the claims of
substantial clinical improvement include small, non-randomized studies
without the use of comparators or controls, including case studies,
which may affect the ability to draw meaningful conclusions about
treatment outcomes from the results of the studies. We stated that the
benefits of avoiding intubation or de-escalating IMV settings are
described in case studies, but the absence of comparative data may make
it more difficult to determine whether there are clinically meaningful
changes in these outcomes. We also noted that in the one abstract of an
RCT using the Hemolung RAS,\152\ although the time to NIV
discontinuation was shorter in the ECCO2R arm than in the
NIV alone arm, the ICU and hospital length of stay were longer with the
ECCO2R group and there were no differences in mortality or
functional outcomes at follow-up. Additionally, while the applicant
stated that the Hemolung RAS results in improved clinical outcomes,
such as reducing mortality in NIV patients compared to continuing the
patient's previous treatment, given that many of the case studies
provided as evidence to support improved clinical outcomes included
only one or two patients, it was not clear whether or not the results
of these studies are generalizable to the Medicare population. We also
noted that several of the case studies, for example, Bonin et al., Mani
et al., Tully et al., etc., mentioned by the applicant included
patients and cases from outside the U.S., and we questioned if there
may be differences in treatment guidelines between these countries that
may have affected clinical outcomes. Lastly, we noted that for several
of the claims of substantial clinical improvement, the applicant
provided
[[Page 48947]]
evidence from background studies that did not utilize the Hemolung RAS
to support the use of the technology to improve clinical outcomes. For
example, in support of its assertion that the Hemolung RAS reduces
mortality in NIPPV patients, the study cited by the applicant only
addressed NIPPV as a treatment option to treat exacerbations in
patients with COPD, but did not directly address the use of the
Hemolung RAS as an intervention.
---------------------------------------------------------------------------
\152\ Barrett, N., et al. A randomized controlled trial of Non-
Invasive Ventilation compared with ECCO2R for Acute
Hypercapnic Exacerbations of COPD. ASAIO J. 2021; 67 (Supp 3)
Presented at the 32nd Annual ELSO Conference.
---------------------------------------------------------------------------
We invited public comments on whether the Hemolung RAS meets the
substantial clinical improvement criterion.
Comment: The applicant submitted comments in response to CMS'
concerns in the FY2023 IPPS/LTCH PPS proposed rule (87 FR 28243)
regarding whether the Hemolung RAS meets the substantial clinical
improvement criterion. In response to our concerns as to whether the
results of non-controlled data may affect the ability to draw
meaningful conclusions regarding treatment outcomes and the use of
background studies to support claims of substantial clinical
improvement, the applicant stated that it acknowledges randomized
controlled trial (RCT) data is the gold standard and the limitations of
non-controlled data, but that large RCTs investigating medical devices
in the critical care setting present unique enrollment challenges. The
applicant stated that it is currently conducting the VENT-AVOID RCT in
the US (``the Trial''--NCT03255057) investigating the use of the
Hemolung RAS in COPD patients, which has faced slow enrollment since it
began in 2018, with the COVID-19 pandemic further slowing enrollment.
The applicant explained that one reason for the slow enrollment is the
highly specific inclusion and exclusion criteria required by RCTs,
which is typical of COPD trials. The applicant cited a study that
evaluated the number of patients who would meet the inclusion criteria
commonly used in COPD clinical trials, where the results demonstrated
only 17% of the COPD population would meet the inclusion criteria.\153\
---------------------------------------------------------------------------
\153\ Herland K, Akselsen JP, Skj[oslash]nsberg OH, Bjermer L.
How representative are clinical study patients with asthma or COPD
for a larger ``real life'' population of patients with obstructive
lung disease? Respiratory Medicine. 2005;99(1):11-19. doi:10.1016/
j.rmed.2004.03.026.
---------------------------------------------------------------------------
The applicant stated that it believes a substantial amount of real-
world evidence supports the technology's use, and as such, the
background studies (with a combined >200,000 mechanically ventilated
patients) are included to provide evidence demonstrating the life-
threatening clinical sequelae that result from hypercapnia and
respiratory acidosis in critically ill patients, including increased
risk of ICU and hospital mortality, and longer ICU and hospital lengths
of stay.154 155 The applicant stated that it believes the
Hemolung evidence submitted to demonstrate substantial clinical
improvement reflects the real-world use and the true impact the
Hemolung RAS will have on the Medicare population, and that it is clear
that providing clinicians with a tool to effectively correct pH and
PaCO2 independently of the lungs will have a significant
positive impact on the outcomes of acute respiratory failure patients.
---------------------------------------------------------------------------
\154\ Nin N., Muriel A., Pe[ntilde]uelas O., et al. Severe
hypercapnia and outcome of mechanically ventilated patients with
moderate or severe acute respiratory distress syndrome. Intensive
Care Med. 2017;43(2):200-208. doi:10.1007/s00134-016-4611-1.
\155\ Tiruvoipati R., Pilcher D., Buscher H., Botha J., Bailey
M. Effects of Hypercapnia and Hypercapnic Acidosis on Hospital
Mortality in Mechanically Ventilated Patients*: Critical Care
Medicine. 2017;45(7):e649-e656. doi:10.1097/CCM.0000000000002332.
---------------------------------------------------------------------------
In response to our concerns as to whether the results of the
Hemolung RAS case studies that included only one or two patients were
generalizable to the Medicare population, the applicant stated that the
epidemiology of acute respiratory distress and need for mechanical
ventilation in older adults is well established. The applicant noted
that there is a natural physiologic decline in lung function with age,
which makes safely and adequately ventilating older patients,
especially those with respiratory disease, challenging. The applicant
noted that at generally accepted lung protective ventilation settings,
older patients are more susceptible to an accumulation CO2
due to poor baseline lung function. The applicant also stated that use
of the Hemolung RAS in COPD patients is highly generalizable to the
Medicare population given that the prevalence of COPD increases with
age, and that in COPD patients failing non-invasive ventilation (NIV),
avoiding intubation has a substantial mortality benefit (9% vs
27%).\156\
---------------------------------------------------------------------------
\156\ Chandra D., Stamm J.A., Taylor B., et al. Outcomes of
noninvasive ventilation for acute exacerbations of chronic
obstructive pulmonary disease in the United States, 1998-2008. Am J.
Respir Crit Care Med. 2012;185(2):152-159. doi:10.1164/rccm.201106-
1094OC.
---------------------------------------------------------------------------
In response to our concern as to whether the potential differences
in treatment guidelines between countries of case studies may have
affected clinical outcomes, the applicant referenced the consensus
guideline in the US and Europe that generally the goal when ventilating
patients is to utilize low volumes and pressures, which can result in
CO2 accumulation in the blood. The applicant explained that
as CO2 accumulation is a basic physiologic response to these
ventilator settings, patient location does not affect clinical
improvements resulting from the Hemolung RAS therapy.
In response to our concern that the ICU and hospital stays were
longer with the ECCO2R group and there were no differences
in mortality or functional outcomes at follow-up, the applicant
submitted a recently published RCT \157\ with additional data and
analysis of its study results on LOS. The applicant cited that the ICU
and hospital LOS were both 4-5 days longer with ECCO2R than
with NIV, which was due to a longer ICU LOS. The applicant noted that
time from ICU discharge to home discharge was equal in both groups. The
applicant noted that with NIV, nurse-led weaning occurred 24/7, based
around arterial blood gases, respiratory rate and patient preference,
and that patients were discharged to the ward during the daytime if
they had been off NIV overnight. In addition, the applicant stated that
patients who consistently declined NIV were discharged to a ward bed
regardless of pH and this will have contributed to the lower ICU length
of stay in the NIV arm. The applicant noted that the protocol for
patients receiving ECCO2R did not allow weaning overnight,
and there was a median of eight hours from cessation of
ECCO2R to decannulation and unit protocols required a
further overnight stay for observation.
---------------------------------------------------------------------------
\157\ Barrett N.A., Hart N., Daly K.J.R., et al. A randomised
controlled trial of non-invasive ventilation compared with
extracorporeal carbon dioxide removal for acute hypercapnic
exacerbations of chronic obstructive pulmonary disease. Ann
Intensive Care. 2022;12(1):36. doi:10.1186/s13613-022-01006-8.
---------------------------------------------------------------------------
The applicant also explained that the study results showed that
time to NIV cessation was significantly shorter in the
ECCO2R arm than in the NIV arm (7 hrs. vs 24:30 hrs., p =
0.004). The applicant noted that at one-hour post-randomization the pH
was significantly higher in the ECCO2R arm (p<0.001), and at
4 hours post randomization the PaCO2 was significantly lower
(p<0.001) in the ECCO2R arm, compared to the NIV only arm.
The applicant stated that ECCO2R also resulted in a
significant and rapid reduction in subjective discomfort and dyspnea
measured using a visual analogue scale (VAS), where a higher score
indicates higher subjective discomfort and dyspnea.
Several other commenters also indicated their support for the
[[Page 48948]]
Hemolung RAS. A commenter stated that the Hemolung RAS was used in
their center and proved to be reliable (removing approximately 80 ccs
of CO2/min) and was well-accepted by staff. The commenter
noted that the staff considered it easy to use compared to ECMO, and
were generally able to manage it while also managing other ECMO
patients. The commenter stated that the Hemolung RAS will occupy an
important niche in treating patients with acute hypercapnic respiratory
failure, avoiding intubation up front in some patients as well as
facilitating weaning off the ventilator in other cases where intubation
was necessary initially.
A group of commenters submitted a comment stating that their
experience with the Hemolung RAS underscored the importance of this
technology in the Medicare population requiring inpatient management of
hypercapnic respiratory failure. The commenters stated that IMV not
only does not address the underlying clinical condition leading to
hypercapnia, but it also compounds it by elevating pressures applied to
the lung in an attempt to increase tidal ventilation, which contributes
to morbidity and mortality, and that prior to the introduction of the
Hemolung, it was the only option available. The commenters stated that
they considered the Hemolung RAS a new technology that allows the
patient on IMV to be managed with lower pressures instead of higher,
earlier removal from mechanical ventilation, or even avoid mechanical
ventilation, which the commenter noted is particularly important for
patients with a do not intubate order for whom there are no other
treatment alternatives. The commenters considered the Hemolung RAS as
representing a significant clinical improvement for patients with
hypercapnic respiratory failure in the inpatient setting, particularly
for Medicare patients due to their age and risk of complications of the
current standard of care.
Response: We thank the applicant and other commenters for their
comments. Based on the additional information received, we agree with
the applicant that the Hemolung RAS represents a substantial clinical
improvement over existing technologies because the technology offers a
treatment option for hypercapnic respiratory failure due to all causes
in adults while avoiding intubation or facilitating extubation. We also
agree with the applicant that the Hemolung RAS fills an unmet need for
patients ineligible for currently available treatments, such as
mechanical ventilation (for example, in patients with a DNI order). The
Hemolung RAS provides extracorporeal CO2 removal from the
patient's blood for up to 5 days in adults with acute, reversible
respiratory failure for whom ventilation of CO2 cannot be
adequately or safely achieved using other available treatment options
and continued clinical deterioration is expected. For this reason, we
agree that the Hemolung RAS offers a valuable treatment option for
patients at risk for complications from, unresponsive to, and/or
ineligible for, mechanical ventilation.
After consideration of the public comments we received, we have
determined that the Hemolung RAS meets the criteria for approval for
new technology add-on payments. Therefore, we are approving new
technology add-on payments for use of the Hemolung RAS for the
indications approved under its FDA De Novo marketing authorization for
FY 2023. As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28236) consistent with our longstanding policy of not considering
eligibility for new technology add-on payments prior to a product
receiving FDA approval or clearance, a product available only through
an EUA would not be eligible for new technology add-on payments.
Therefore, cases involving pediatric patients, or cases involving the
use of the Hemolung RAS for greater than 5 days, would not be eligible
for new technology add-on payments, as they do not fall under the
patient population indicated in its FDA De Novo marketing
authorization. Cases involving the use of the Hemolung RAS that are
eligible for new technology add-on payments will be identified by ICD-
10-PCS procedure code 5A0920Z (Assistance with respiratory filtration,
continuous).
In its application, the applicant estimated that the cost of
Hemolung RAS is $10,000, which includes the $7,500 cost of the
cartridge and the $2,500 cost of the catheter. Under Sec.
412.88(a)(2), we limit new technology add-on payments to the lesser of
65% of the average cost of the technology, or 65% of the costs in
excess of the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment for a case involving the use of Hemolung RAS
is $6,500 for FY 2023.
d. LIVTENCITYTM (Maribavir)
Takeda Pharmaceuticals U.S.A., Inc. submitted an application for
new technology add-on payments for LIVTENCITYTM (maribavir)
for FY 2023. LIVTENCITYTM is a cytomegalovirus (CMV) pUL97
kinase inhibitor indicated for the treatment of adults and pediatrics
(12 years of age and older and weighing at least 35 kg) with post-
transplant CMV infection/disease that is refractory to treatment (with
or without genotypic resistance) to ganciclovir, valganciclovir,
cidofovir, or foscarnet.
According to the applicant, LIVTENCITYTM is the only
antiviral therapy indicated to treat post-transplant patients with CMV
in solid organ transplant (SOT) and hematopoietic stem cell transplant
(HCT). Per the applicant, LIVTENCITYTM provides multi-
targeted anti-CMV activity by inhibiting protein kinase UL97 and its
natural substrates, which subsequently inhibits CMV DNA replication,
encapsidation, and nuclear egress of viral capsids.
The applicant stated that CMV is one of the most common viral
infections experienced by transplant recipients, with an estimated
incidence rate between 16%-56% in SOT recipients and 30%-70% in HCT
recipients.\158\ CMV is a beta herpesvirus that commonly infects
humans; serologic evidence of prior infection can be found in 40%-100%
of various populations.\159\ CMV typically resides latent and
asymptomatic in the body but may reactivate during periods of
immunosuppression. The applicant estimated that there are approximately
200,000 adult transplants per year globally and an estimated 1,435
cases of CMV post-transplant in the Medicare population per year. The
applicant stated that in transplant patients, reactivation of CMV can
potentially lead to serious consequences including loss of the
transplanted organ and, in extreme cases, death.
---------------------------------------------------------------------------
\158\ Azevedo L, Pierrotti L, Abdala E, et al. Cytomegalovirus
infection in transplant recipients. Clinics.2015;70(7):515-523.
doi:10.6061/clinics/2015(07)09; World Health Organization (WHO).
International Report on Organ Donation and Transplantation
Activities--Executive Summary 2018.
\159\ Krech U. Complement-fixing antibodies against
cytomegalovirus in different parts of the world. Bull WHO.
1973(49):103-106.
---------------------------------------------------------------------------
Per the applicant, there are four FDA-approved therapies for the
treatment and/or prevention (that is, prophylaxis) of CMV disease:
valganciclovir, ganciclovir, foscarnet, and cidofovir. The applicant
stated that ganciclovir and valganciclovir are approved for prevention
of CMV disease in transplant recipients and for treatment of CMV
retinitis in immunocompromised hosts, including those with Acquired
Immune Deficiency Syndrome (AIDS); and foscarnet and cidofovir are
approved for treatment of CMV retinitis in AIDS patients. Per the
applicant, none of these four therapies are FDA-approved for the
treatment of resistant or
[[Page 48949]]
refractory CMV infection and disease. The applicant provided a table
that included the therapy, transplant type, mechanism of action,
approved indications that were CMV-related, and the formulation(s).
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR10AU22.087
BILLING CODE 4120-01-C
With respect to the newness criterion, the applicant stated that
LIVTENCITYTM was granted Breakthrough Therapy, Priority
Review, and Orphan Drug designations from FDA, and subsequently
received FDA approval for its New Drug Application on November 23,
2021. LIVTENCITYTM is indicated for the treatment of adults
and pediatric patients (12 years of age or older and weighing at least
35 kg) with post-transplant CMV infection/disease that is refractory to
treatment (with or without genotypic resistance) with ganciclovir,
valganciclovir, cidofovir, or foscarnet. Per the applicant,
LIVTENCITYTM became commercially available on December 2,
2021. The applicant did not explain the reason for the delay between
market authorization and commercial availability. The recommended
dosing is 400 mg (two 200 mg tablets) orally twice daily with or
without food. The applicant stated that if LIVTENCITYTM is
co-administered with carbamazepine, then the dosage is increased to 800
mg twice daily; if co-administered with phenytoin or phenobarbital, the
dosage is increased to 1,200 mg twice daily.
---------------------------------------------------------------------------
\160\ VALCTE[supreg] (valganciclovir) United States Prescibing
Information (2018).
\161\ CYTOVENE-IV[supreg] (ganciclovir) United States Prescibing
Information (2018).
\162\ FOSCAVIR[supreg] (foscarnet) United States Prescibing
Information (2017).
\163\ VISTIDE[supreg] (cidofovir) United States Prescibing
Information (2010).
---------------------------------------------------------------------------
According to the applicant, ICD-10-PCS code 3E0DX29 (Introduction
of other anti-infective into mouth and pharynx, external approach) may
be used to identify administration of LIVTENCITYTM but does
not uniquely identify it. The following ICD-10-PCS procedure codes were
created to uniquely describe the use of LIVTENCITYTM,
effective October 1, 2022: XW0DX38 (Introduction of
[[Page 48950]]
maribavir anti-infective into mouth and pharynx, external approach, new
technology group 8), XW0G738 (Introduction of maribavir anti-infective
into upper gi, via natural or artificial opening, new technology group
8), and XW0H738 (Introduction of maribavir anti-infective into lower
gi, via natural or artificial opening, new technology group 8).
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purposes of new technology add-on
payments.
With respect to the first criterion, whether a technology uses the
same or similar mechanism of action to achieve a therapeutic outcome,
the applicant stated that LIVTENCITYTM targets a different
gene locus (pUL97 vs. pUL54) than the existing therapies to treat CMV
infection, including those resistant or refractory to conventional
therapy. Specifically, LIVTENCITYTM inhibits CMV DNA
replication, encapsidation, and nuclear egress of viral capsids through
inhibition of pUL97 and its natural substrates. The applicant provided
the mechanisms of action for the other existing anti-CMV drugs, namely
valganciclovir ganciclovir, foscarnet, and cidofovir in the table
previously listed and concluded that LIVTENCITYTM uses a
different mechanism of action compared to existing anti-CMV drugs.
With respect to the second criterion, whether a technology is
assigned to the same or a different MS-DRG when compared to an existing
technology, the applicant stated that LIVTENCITYTM is
expected to be assigned to the same MS-DRGs as therapies that are
currently used off-label for the treatment of CMV infection or disease.
With respect to the third criterion, whether the new use of
technology involves the treatment of the same or similar type of
disease and the same or similar patient population when compared to an
existing technology, the applicant noted that there are no other
existing therapies indicated to treat the same or similar type of
disease or patient population as LIVTENCITYTM. The applicant
noted that currently available therapies are used off-label to treat
patients with refractory or resistant CMV infection or disease. Thus,
the applicant maintained that LIVTENCITYTM is indicated to
treat a different patient population compared to existing technologies.
In summary, the applicant asserted that LIVTENCITYTM is
not substantially similar to other currently available therapies
because it uses a new mechanism of action and is indicated to treat a
unique patient population and/or disease and, therefore, the technology
meets the newness criterion. We invited public comments on whether
LIVTENCITYTM is substantially similar to existing
technologies and whether LIVTENCITYTM meets the newness
criterion. As noted in the proposed rule, the applicant did not explain
the reason for the delay between market authorization and commercial
availability, and we requested additional information regarding this
point.
Comment: The applicant submitted comments in response to CMS'
request for additional information on the delay between market
authorization and commercial availability of LIVTENCITYTM.
Per the applicant, between FDA marketing authorization on November 23,
2021 and commercial availability on December 2, 2021, the applicant
applied final packaging and labeling and worked to ship the product to
specialty pharmacies and distributors as soon as finished goods were
available.
Response: We thank the applicant for the additional information
regarding the delay between market authorization and commercial
availability. We agree with the applicant that the beginning of the
newness period for LIVTENCITYTM is December 2, 2021, the
date the product became commercially available.
Comment: A commenter agreed that LIVTENCITYTM does not
meet the first and third substantial similarity criteria as it stated
that there are no other antivirals with a similar mechanism of action
and LIVTENCITYTM offers a novel treatment option for
patients with no other antivirals currently approved for the treatment
of post-transplant CMV refractory to traditional treatments. They
agreed with the applicant that LIVTENCITYTM is likely to
share the same MS-DRGs as off-label agents currently used for CMV
infection or disease.
Response: We thank the commenter for their input. We agree with the
commenter that LIVTENCITYTM has a unique mechanism of action
and offers a novel treatment option for patients with post-transplant
CMV refractory to traditional treatments.
Based on information submitted by the applicant in its comment and
as part of its FY 2023 new technology add-on payment application for
LIVTENCITYTM, as discussed in the proposed rule (87 FR 28258
through 28259) and previously summarized, we believe that
LIVTENCITYTM has a unique mechanism of action because it
inhibits pUL97, which is involved in terminal DNA processing, including
DNA elongation, encapsidation, and nuclear egress of viral capsids,
whereas existing therapies inhibit CMV DNA polymerase (pUL54) or the
CMV DNA terminase complex (pUL51, pUL56, and pUL89) that is required
for viral DNA processing and packaging. We also believe that
LIVTENCITYTM is indicated to treat a unique patient
population and/or disease, as it is the only FDA-approved antiviral
therapy indicated to treat post-transplant patients with CMV disease in
solid organ transplant (SOT) and hematopoietic stem cell transplant
(HCT). Therefore, LIVTENCITYTM is not substantially similar
to existing treatment options and meets the newness criterion. As
stated previously, we consider the beginning of the newness period to
commence on December 2, 2021 based on information provided by the
applicant that the product first became available for sale on that
date.
With respect to the cost criterion, the applicant presented the
following analysis. To identify patients who may be eligible to receive
LIVTENCITYTM as a treatment, the applicant searched the 2019
MedPAR dataset for cases with the following ICD-10-CM codes for CMV and
post-transplant SOT and HCT infection. The applicant included inpatient
discharges under Medicare fee-for-service (FFS) and excluded Medicare
Advantage discharges.
BILLING CODE 4120-01-P
[[Page 48951]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.088
The applicant identified 1,435 claims mapping to 108 MS-DRGs. For
MS-DRGs where the case volume was below 11, the applicant imputed a
count of 11 cases. The table lists the nine MS-DRGs with the highest
volume of cases.
[GRAPHIC] [TIFF OMITTED] TR10AU22.089
BILLING CODE 4120-01-C
The applicant did not remove charges for a prior technology, as the
applicant claimed that any current treatment that is used off-label to
treat CMV patients post-transplant SOT and HCT may not be reflected in
claims data. The applicant further explained that in cases where an
off-label treatment is reflected on the claim, LIVTENCITYTM
might be used as a second-line treatment rather than to replace the
off-label treatment. The applicant then standardized the charges and
applied a 4-year inflation factor of 1.281834 or 28.1834%, based on the
inflation factor used in the FY 2022 IPPS/LTCH PPS final rule and
correction notice to update the outlier threshold (86 FR 45542). The
applicant added charges for the new technology by dividing the cost of
LIVTENCITYTM by the national average CCR for drugs which is
0.187 (86 FR 44966). The applicant estimated the costs of
LIVTENCITYTM based on 8-week dosing regimens to complete the
full treatment.
The applicant calculated a final inflated average case-weighted
standardized charge per case of $508,855 which exceeded the average
case-weighted threshold amount of $76,739.
We invited public comments on whether LIVTENCITYTM meets
the cost criterion.
We did not receive any comments on whether LIVTENCITY\TM\ meets the
cost criterion. Based on the information submitted by the applicant as
part of its FY 2023 new technology add-on payment application for
LIVTENCITYTM, as discussed in the proposed rule (87 FR 28259
through 28260) and previously summarized, the final inflated average
case-weighted
[[Page 48952]]
standardized charge per case exceeds the average case-weighted
threshold amount. Therefore, LIVTENCITYTM meets the cost
criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that LIVTENCITYTM represents a new
treatment option for a patient population unresponsive to, or
ineligible for, currently available treatments. To support this claim,
the applicant reiterated that there are no existing therapies that are
approved by FDA to treat post-transplant patients with refractory or
resistant CMV infection or disease. The applicant also asserted that
the use of LIVTENCITYTM may significantly improve clinical
outcomes by improving efficacy and reducing adverse effects compared to
available therapies.
To support the claim of improved efficacy, the applicant cited
results from SOLSTICE, a phase III, open-label, randomized controlled
trial in which 352 transplant recipients [HCT (n=211) and SOT (n=141)]
with refractory \164\ or resistant \165\ CMV were assigned 2:1 to
receive 400 mg of LIVTENCITYTM twice daily (n=235) or
investigator-assigned therapy (IAT) with drug-specific dosing (n=117)
for 8 weeks, with 12 weeks of follow-up.\166\ The choice of specific
IAT was at the investigators' discretion and included mono- or
combination therapy (<=2 drugs) with intravenous (IV) ganciclovir, oral
valganciclovir, IV foscarnet or IV cidofovir, where switching between
ganciclovir and valganciclovir was permitted. The median (range)
duration of exposure was 57 (2-64) days in the LIVTENCITYTM
arm and 34 (4-64) days with IAT. The primary endpoint was the
proportion of patients achieving CMV clearance at 8 weeks, and the key
secondary endpoint was achievement of CMV clearance \167\ and symptom
control \168\ at the end of week 8, maintained through week 16. With
respect to the primary endpoint, the applicant indicated that CMV
clearance at 8 weeks was achieved in 55.7% (n=131/235) of the
LIVTENCITYTM group and 23.9% (n=28/117) of the IAT group
with an adjusted difference of 32.8%, where the results achieved
statistical significance [95% CI, 22.8-42.7%, p<0.001]. With respect to
the secondary endpoint, the applicant indicated that 18.7% (n=44/235)
of the LIVTENCITYTM-treated group and 10.3% (n=12/117) of
IAT-treated group maintained CMV viremia clearance and symptom control
through week 16 (p=0.013).\169\ The applicant stated that, based on
these results, LIVTENCITYTM is superior to conventional
antiviral therapies in achieving and maintaining CMV viremia clearance
and symptom control.
---------------------------------------------------------------------------
\164\ Failure to achieve >1 log10 decrease in CMV DNA
after at least 14 days of anti-CMV treatment.
\165\ At least 1 genetic mutation associated with resistance to
ganciclovir/valganciclovir, foscarnet, and/or cidofovir.
\166\ Avery RK, Alain S, Alexander B, et al. Maribavir for
refractory cytomegalovirus infections with or without resistance
post-transplant: results from a phase 3 randomized clinical trial
(accepted manuscript). Clin Infect Dis. 2021; ciab988, https://doi.org/10.1093/cid/ciab988.
\167\ Measured as CMV DNA level less than lower limit of
quantification.
\168\ Resolution or improvement in tissue-invasive CMV disease
or syndrome for participants symptomatic at baseline or no new
symptoms of tissue-invasive CMV disease or syndrome for participants
asymptomatic at baseline.
\169\ Avery RK, Alain S, Alexander B, et al. Maribavir for
refractory cytomegalovirus infections with or without resistance
post-transplant: results from a phase 3 randomized clinical trial
(accepted manuscript). Clin Infect Dis. 2021; ciab988, https://doi.org/10.1093/cid/ciab988.
---------------------------------------------------------------------------
The applicant also claimed that the efficacy of
LIVTENCITYTM is consistent across SOT types, as evidenced by
an unpublished subgroup analysis by Avery et al.\170\ which evaluated
211 SOT patients from the SOLSTICE trial for CMV clearance
(LIVTENCITYTM vs. conventional) by transplant type, with the
following results: heart: 42.9% (n=6/14) vs. 11.1% (n=1/9) (adjusted
difference: 30.7% [95% CI, -1.72-63.15%]); lung: 47.5% (n=19/40) vs.
13.6% (n=3/22), adjusted difference: 38.2% [95% CI, 16.89-59.53%];
kidney: 59.5% (n=44/74) vs. 34.4% (n=11/32); adjusted difference: 26.7%
[95% CI, 7.48-45.85%].
---------------------------------------------------------------------------
\170\ Avery RK, Blumberg EA, Florescu D, et al. A randomized
phase 3 open-label study of maribavir vs. investigator-assigned
therapy for refractory/resistant cytomegalovirus infection in
transplant recipients: subgroup analyses of efficacy by organ. in:
The 2021 American Transplant Congress; 2021. Abstract LB 9.
---------------------------------------------------------------------------
Finally, with regard to efficacy, the applicant stated that
LIVTENCITYTM is active against refractory or resistant CMV
infections and tolerable across doses. To support this claim, the
applicant pointed to a randomized, dose-ranging, open-label, phase II
study by Papanicolaou et al.,\171\ in which HCT and SOT recipients with
refractory or resistant CMV infections (n=120) were randomized 1:1:1 to
twice-daily LIVTENCITYTM doses of 400 mg (n=40), 800 mg
(n=40), or 1,200 mg (n=40) for up to 24 weeks. The primary efficacy
endpoint was the proportion of patients with confirmed undetectable
plasma CMV DNA within 6 weeks of treatment. About two-thirds (n=80/120)
of the patients achieved undetectable plasma CMV DNA within 6 weeks of
treatment among all doses [95% CI, 57-75%], and 70% of patients
receiving 400 mg of LIVTENCITYTM twice daily [95% CI, 53-
83]; 62% of patients receiving 800 mg twice daily [95% CI, 46-77%], and
68% of patients receiving 1,200 mg twice daily [95% CI, 51-81%]
achieved the primary endpoint. About a third of patients experienced
recurrent CMV infection while on LIVTENCITYTM (n=25) and 13
patients developed mutations conferring LIVTENCITYTM
resistance.
---------------------------------------------------------------------------
\171\ Papanicolaou GA, Silveira FP, Langston AA, et al. MBV for
r/r CMV infections in HCT or SOT recipients: A randomized, dose-
ranging, double-blind, phase 2 study. Clin Infect Dis.
2019;68(8):1255-1264. doi:10.1093/cid/ciy706.
---------------------------------------------------------------------------
To support the claim of decreased adverse effects, the applicant
cited the results of two secondary endpoints from the SOLSTICE trial.
Per the applicant, neutropenia and acute kidney injury are known,
common adverse effects associated with valganciclovir/ganciclovir and
foscarnet, respectively. The applicant noted that the rates of
treatment-related neutropenia and acute kidney injury were both 1.7%
(n=4/234), separately, in the LIVTENCITYTM treatment group.
The applicant also noted that the rate of neutropenia was 25% (n=14/56)
in the valganciclovir/ganciclovir group, and the rate of acute kidney
injury was 19.1% (n=9/47) in the foscarnet group.\172\ The applicant
maintained that the rate of treatment-related neutropenia and acute
kidney injury was lower in the LIVTENCITYTM group vs.
conventional therapy group. The applicant asserted that, based on these
results, LIVTENCITYTM has a lower incidence of treatment-
related toxicities than existing therapies.
---------------------------------------------------------------------------
\172\ Avery R.K., Alain S., Alexander B., et al. Maribavir for
refractory cytomegalovirus infections with or without resistance
post-transplant: results from a phase 3 randomized clinical trial
(accepted manuscript). Clin Infect Dis. 2021; ciab988, https://doi.org/10.1093/cid/ciab988.
---------------------------------------------------------------------------
The applicant more specifically claimed that transplant patients
treated with LIVTENCITYTM for CMV infection experienced a
lower incidence of treatment-related neutropenia compared with
valganciclovir. To support this claim, the applicant cited the primary
safety endpoint from Maertens et al.,\173\ a parallel-group, phase II
study. In this open-label, LIVTENCITYTM-blinded trial, 120
HCT or SOT recipients with CMV reactivation were randomly assigned to
receive LIVTENCITYTM at a dose of 400 mg (n=40), 800 mg
(n=40), or 1,200 mg (n=40) twice daily or the standard dose of
valganciclovir for 12 weeks for preemptive treatment. The primary
efficacy endpoint was the
[[Page 48953]]
percentage of patients with a response to treatment, defined as
confirmed undetectable CMV DNA in plasma, within 3 weeks and 6 weeks
after the start of treatment. The primary safety endpoint was the
incidence of adverse events that occurred or worsened during treatment.
Specifically, the applicant cited the rate of treatment-emergent
neutropenia in this study which was identified in 4% (n=5/118) of
patients administered LIVTENCITYTM versus 15% (n=6/39) of
patients administered valganciclovir through week 6. Similar results
were found through week 12: 5% (n=6/118) vs. 18% (n=7/39). The
statistical significance of the difference in treatment-emergent
neutropenia between the two groups was not reported in the study.
---------------------------------------------------------------------------
\173\ Maertens J., Cordonnier C., Jaksch P., et al. Maribavir
for preemptive treatment of cytomegalovirus reactivation. N. Engl J.
Med. 2019;381(12):1136-1147. doi:10.1056/NEJMoa1714656.
---------------------------------------------------------------------------
Finally, the applicant stated that LIVTENCITYTM had a
lower incidence of adverse events leading to discontinuation. To
support this assertion, the applicant cited the rate of treatment-
emergent adverse effects (TEAEs) leading to discontinuation from
SOLSTICE, which was lower in the LIVTENCITYTM group (13.2%
(n=31/324)) vs. the conventional group (31.9% (n=37/116)).\174\
---------------------------------------------------------------------------
\174\ Avery R.K., Alain S., Alexander B., et al. Maribavir for
refractory cytomegalovirus infections with or without resistance
post-transplant: results from a phase 3 randomized clinical trial
(accepted manuscript). Clin Infect Dis. 2021; ciab988, https://doi.org/10.1093/cid/ciab988.
---------------------------------------------------------------------------
In the proposed rule, we stated we had the following concerns
regarding whether LIVTENCITYTM meets the substantial
clinical improvement criterion. First, while the applicant provided
data to demonstrate that the proportion of patients achieving CMV
clearance at 8 weeks was higher among patients using
LIVTENCITYTM, there were similar rates of mortality and new-
onset CMV between the 2 treatment groups in this trial:
LIVTENCITYTM vs. comparator: 11% (n=27/235) vs. 6% (n=13/
117) and 6% (n=14/235) vs. 6% (n=7/113), respectively.\175\ We also
noted that it is unclear whether the SOLSTICE study was sufficiently
powered to detect a difference in CMV viremia clearance at week 16, one
of the study's secondary endpoints.\176\ We further noted that while
the rate of TEAEs leading to discontinuation was lower in the
LIVTENCITYTM group, the rate of overall TEAEs and serious
TEAEs in the SOLSTICE trial was similar between the two treatment
groups [LIVTENCITYTM vs. comparator: any TEAE: 97.4% (n=229/
234) vs. 91.4% (n=106/116), serious TEAE: 38.5% vs. 37.1%].\177\
Furthermore, we stated that we would appreciate additional information
from the applicant regarding safeguards taken to minimize or prevent
bias from the treating physician in choosing the conventional therapy
for patients in the investigator-assigned therapy group of the phase
III trial.
---------------------------------------------------------------------------
\175\ Ibid.
\176\ Ibid.
\177\ Ibid.
---------------------------------------------------------------------------
We invited public comments on whether LIVTENCITYTM meets
the substantial clinical improvement criterion.
Comment: We received several comments in support of approving new
technology add-on payments for LIVTENCITYTM. The applicant
reiterated four reasons LIVTENCITYTM meets the substantial
clinical improvement criterion, including: (1) being a new treatment
option for a patient population unresponsive to, or ineligible for,
currently available treatments; (2) more rapid resolution of infection/
disease; (3) reduction in at least one clinically significant adverse
event, and (4) decreased number of hospitalizations. The applicant also
submitted comments in response to CMS' concerns regarding the
substantial clinical improvement criterion.
With respect to the concern that there were similar rates of
mortality and new-onset CMV between the two treatment groups in the
SOLSTICE study, the applicant stated that the study was not
sufficiently powered nor was it long enough in duration to detect a
difference in these two endpoints. With respect to all-cause mortality,
the applicant stated that 8 weeks is often the longest duration
permissible due to toxicities associated with the IAT treatment group,
and that the underlying medical history of the patients and the short
study duration contributed to the similar rate of mortality. The
applicant further explained that all-cause mortality rates were
assessed based on the randomized treatment group, regardless of
LIVTENCITYTM rescue treatment in the IAT group. With respect
to new-onset CMV, the applicant stated that CMV treatment, either via
secondary prophylaxis or treatment with LIVTENCITYTM, was
not allowed after 8 weeks which could explain the similar rates between
the two groups. They also noted that a higher proportion of
LIVTENCITYTM patients with new onset symptomatic CMV were
primary responders to LIVTENCITYTM treatment versus the IAT
patients. Furthermore, the study participants had a history of multiple
past recurrences, increasing the likelihood of CMV recurrence. Finally,
the applicant emphasized that clinically relevant recurrence is more
clinically meaningful than overall recurrence.
Another commenter concurred with the applicant, stating that the
SOLSTICE study design and imbalances in certain, therapy-independent
baseline characteristics for the LIVTENCITYTM group (for
example, presence of CMV disease) could make it difficult to identify
true differences in all-cause mortality and new-onset CMV amongst
LIVTENCITYTM and comparators.
The applicant also responded to CMS' concern that the SOLSTICE
study was not sufficiently powered to detect difference in CMV viremia
clearance at week 16, one of the study's secondary endpoints. The
applicant noted that the study was powered to detect difference in CMV
viremia at week 8, which was the primary endpoint of the study.
In response to CMS' concern that overall rate of TEAEs and serious
TEAEs in the SOLSTICE trial was similar between the two treatment
groups, the applicant stated that the similar rate of TEAEs was due to
complexity of the patient population. They noted that the rate of TEAEs
in the LIVTENCITYTM group was driven by mild dysgeusia.
Similarly, a commenter stated that while the rate of any TEAEs was
similar for LIVTENCITYTM versus IAT, patients in the
LIVTENCITYTM group primarily experienced dysgeusia which did
not result in treatment discontinuation, while patients in the IAT
group experienced cytopenias and renal disorders that did lead to
treatment discontinuation. The applicant also stated that the rate of
TEAEs was not adjusted for drug exposure; drug exposure was longer in
the LIVTENCITYTM group versus the IAT group due to
toxicities in the IAT group. Finally, they noted that TEAEs leading to
discontinuation was higher in the IAT group versus the
LIVTENCITYTM group.
Another commenter stated, with respect to the same concern, that
while the rates of any serious TEAEs were similar between the groups,
the rate of treatment-related serious TEAEs was lower in the
LIVTENCITYTM group versus IAT (5.1% vs. 14.7%,
respectively), with the benefit persisting when taking into account
discontinuation rates. The commenter cited this result in support of a
finding that LIVTENCITYTM is a unique oral therapeutic
option for CMV that does not share the same problematic adverse events
of currently used off-label agents which the commenter stated often
lead to treatment discontinuation and thus,
[[Page 48954]]
suboptimal treatment of CMV infection and disease.
The applicant also responded to CMS' request for additional
information on safeguards taken to minimize or prevent bias from the
treating physician in choosing the conventional therapy for patients in
the IAT group of the SOLSTICE study. The applicant noted that SOLSTICE
was designed as an open-label study because the investigators had to
individualize the selection of the effective comparator in medically
complex patients with concomitant medications and adjust dosing of the
IAT agents based on renal function. Thus, the applicant asserted that
an open-label design was a safe and practical way to conduct the study.
The applicant also noted that the primary endpoint of the study was
assessed based on an objective laboratory endpoint at a fixed
timepoint. They stated that multiple sensitivity analyses were
conducted to address potential bias due to different rates of early
treatment discontinuation and that the primary endpoint was evaluated
in subgroups to establish treatment consistency and study
generalizability. The results of these sensitivity analyses of the
primary efficacy endpoint were consistent with the results of the
primary efficacy analysis and the benefit of the technology was also
consistent across key subpopulations.
Response: We thank the commenters for their input and appreciate
the clarifications in response to our concerns regarding the similar
rates of mortality and new-onset CMV between the two treatment groups,
the insufficient power to detect a difference in CMV viremia clearance
at week 16, and the similar rates of overall TEAEs and serious TEAEs in
the SOLSTICE study. Based on the additional information received, we
agree that LIVTENCITYTM represents a substantial clinical
improvement over existing technologies because it provides a new
treatment option for a patient population unresponsive to, or
ineligible for, currently available treatments, and significantly
improves the proportion of patients achieving CMV viremia at 8 weeks
and maintaining CMV clearance and symptom control at week 8 through
week 16, as well as reduces adverse effects such as neutropenia and
nephrotoxicity compared to available therapies.
After consideration of the public comments we received, we have
determined that LIVTENCITYTM meets the criteria for approval
for new technology add-on payment. Therefore, we are approving new
technology add-on payments for LIVTENCITYTM for FY 2023.
Cases involving the use of LIVTENCITYTM that are eligible
for new technology add-on payments will be identified by ICD-10-PCS
procedure codes XW0DX38 (Introduction of maribavir anti-infective into
mouth and pharynx, external approach, new technology group 8), XW0G738
(Introduction of maribavir anti-infective into upper GI, via natural or
artificial opening, new technology group 8), or XW0H738 (Introduction
of maribavir anti-infective into lower GI, via natural or artificial
opening, new technology group 8).
In its application, the applicant estimated that the cost of
LIVTENCITYTM is $50,000 for an 8-week course of therapy.
Under Sec. 412.88(a)(2), we limit new technology add-on payments to
the lesser of 65% of the average cost of the technology, or 65% of the
costs in excess of the MS-DRG payment for the case. As a result, the
maximum new technology add-on payment for a case involving the use of
LIVTENCITYTM is $32,500 for FY 2023.
e. UPLIZNA[supreg] (Inebilizumab-Cdon)
HTI-DAC, the manufacturer under the distributor Horizon
Therapeutics USA, Inc., submitted an application for new technology
add-on payment for UPLIZNA[supreg] (inebilizumab-cdon) for FY 2023. Per
the applicant, UPLIZNA[supreg] is the first FDA-approved anti-cluster
of differentiation 19 (CD19) B-cell depleter for the treatment of
neuromyelitis optica spectrum disorder (NMOSD) in adults who are anti-
aquaporin-4 (AQP4) antibody positive, for which 80% of all patients
with NMOSD test positive.\178\ According to the applicant, the goal of
UPLIZNA[supreg] is to reduce the risk of relapse and disability
progression. The applicant explained UPLIZNA[supreg] is a CD19+ B cell-
directed humanized afucosylated immunoglobulin F1 (IgG1) monoclonal
antibody. The applicant further explained that CD19 is a cell surface
antigen expressed on a broad range of B lymphocytes. Per the applicant,
UPLIZNA[supreg] is a B-cell depleter that binds specifically to CD19,
allowing it to target an extended range of B-cells that play a role in
NMOSD. The applicant stated that following cell surface binding to
CD19+ B lymphocytes, UPLIZNA[supreg] causes antibody-dependent cellular
cytolysis (ADCC), resulting in significant and robust B-cell depletion.
---------------------------------------------------------------------------
\178\ Wingerchuck, D. (2009, November 15). Neuromyelitis optica:
Effect of gender. Journal of the Neurological Sciences. Retrieved
October 6, 2021, from https://pubmed.ncbi.nlm.nih.gov/19740485/.
---------------------------------------------------------------------------
NMOSD is a rare, severe autoimmune disease of the central nervous
system that causes damage to the optic nerve, spinal cord, and brain
stem. NMOSD affects approximately 10,000-15,000 people in the United
States, and the incidence rate may be up to 9 times higher for women
than for men, with prevalence approximately 2- to 3-fold higher among
Black and Asian populations.\179\ According to the applicant, NMOSD is
characterized by unpredictable, recurrent attacks of inflammation of
the optic nerve (optic neuritis) and/or of the spinal cord (transverse
myelitis), and may also affect regions of the brain. The applicant
stated that attacks can be severe and result in life-altering permanent
disability, such as blindness and paralysis, and that recurring attacks
can have cumulative effects resulting in significant morbidity.
According to the applicant, aquaporin-4 antibodies are highly specific
to NMOSD and AQP4 is expressed on astrocytes throughout the central
nervous system. Per the applicant, in NMOSD, AQP4 antibodies bind to
AQP4, resulting in astrocyte cell death and inflammation. The applicant
stated that a sub-population of B-lineage cells, CD19+ plasmablasts,
produce AQP4 antibodies and that certain CD19+ B-cells are increased in
the blood of AQP4-seropositive individuals with NMOSD, with the highest
levels observed during an attack. According to the applicant, by
depleting a wide range of B-cells that express CD19 (including
plasmablasts and some plasma cells), UPLIZNA[supreg] reduces the risk
of relapses or attacks that may lead to permanent disability in NMOSD
patients.
---------------------------------------------------------------------------
\179\ Flanagan, E.P. et al. (2016, April 4). Epidemiology of
aquaporin[hyphen]4 autoimmunity and Neuromyelitis Optica Spectrum.
Wiley Online Library. Retrieved October 6, 2021, from https://onlinelibrary.wiley.com/doi/10.1002/ana.24617.
---------------------------------------------------------------------------
With respect to the newness criterion, the applicant stated that
UPLIZNA[supreg] was designated as a Breakthrough Therapy and received
Orphan Drug designation on February 10, 2016 for the treatment of
NMOSD.\180\ Per the applicant, UPLIZNA[supreg] received FDA approval on
June 11, 2020, for the treatment of NMOSD in adult patients who are
AQP4 antibody positive (BLA #761142). The applicant stated that
UPLIZNA[supreg] became commercially available on July 9, 2020,
following FDA approval. According to the applicant, UPLIZNA[supreg] is
administered as an intravenous infusion, and titrated to completion,
over approximately 90 minutes under the close supervision of an
experienced
[[Page 48955]]
healthcare professional. The applicant stated that the recommended
initial dose is a 300 mg intravenous infusion followed 2 weeks later by
a second 300 mg intravenous infusion. The applicant also stated that
subsequent doses, starting 6 months from the first infusion, consist of
a single 300 mg intravenous infusion every 6 months.
---------------------------------------------------------------------------
\180\ U.S. Food and Drug Administration website: https://www.accessdata.fda.gov/scripts/opdlisting/oopd/listResult.cfm.
---------------------------------------------------------------------------
According to the applicant, the following ICD-10-PCS procedure
codes may be used to identify administration of UPLIZNA[supreg] in the
inpatient setting, though they are not specific to UPLIZNA[supreg]:
3E033GC (Introduction of other therapeutic substance into the
peripheral vein, percutaneous approach) or 3E043GC (Introduction of
other therapeutic substance into central vein, percutaneous approach).
Effective October 1, 2022, the following ICD-10-PCS procedure codes
were created to uniquely describe the use of UPLIZNA[supreg]: XW03398
(Introduction of inebilizumab-cdon into peripheral vein, percutaneous
approach, new technology group 8) and XW04398 (Introduction of
inebilizumab-cdon into central vein, percutaneous approach, new
technology group 8).
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purposes of new technology add-on
payments. According to the applicant, the only approved treatments for
NMOSD are UPLIZNA[supreg], Soliris[supreg] (eculizumab), and
ENSPRYNGTM (satralizumab). We note that
ENSPRYNGTM and Soliris[supreg] previously submitted
applications for new technology add-on payments. Please see discussion
of ENSPRYNGTM in the FY 2022 IPPS/LTCH PPS final rule (86 FR
45019 through 45028) and Soliris[supreg] in the FY 2021 IPPS/LTCH PPS
final rule (85 FR 58684 through 58689).
With respect to the first criterion, whether a product uses the
same or similar mechanism of action to achieve a therapeutic outcome,
the applicant stated that UPLIZNA[supreg] is the only treatment for
NMOSD that targets B-cells and causes B-cell depletion. The applicant
contrasted the mechanism of action of UPLIZNA[supreg] with those of
Soliris[supreg] and ENSPRYNGTM. Per the applicant, the
mechanism of action of Soliris[supreg] is the inhibition of aquaporin-
4-antibody induced terminal complement C5b-9 deposition.\181\ The
applicant explained that Soliris[supreg] specifically binds to
complement protein C5, inhibiting its cleavage to C5a and C5b and
preventing the generation of C5b-9. The applicant also stated that
ENSPRYNGTM is a recombinant humanized anti-human
interleukin-6 (IL-6) receptor monoclonal antibody. Per the applicant,
the mechanism of action of ENSPRYNGTM involves the
inhibition of IL-6-mediated signaling through binding to soluble and
membrane-bound IL-6 receptors.\182\ Thus, the applicant asserted that
each of the three FDA approved treatments for NMOSD--UPLIZNA[supreg],
Soliris[supreg], and ENSPRYNGTM--bind to a different
molecular target and have different mechanisms of action.
---------------------------------------------------------------------------
\181\ U.S. Food and Drug Administration. (2019, June). Soliris
Prescribing Information. Retrieved October 6, 2021, from https://www.accessdata.fda.gov/drugsatfda_docs/label/2019/125166s431lbl.pdf.
\182\ Genentech. (2020, August). ENSPRYNG Factsheet. Retrieved
October 6, 2021, from https://www.gene.com/download/pdf/genentech_enspryng_factsheet.pdf.
---------------------------------------------------------------------------
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG when compared to an existing
technology, the applicant stated that cases representing patients who
may be eligible for treatment with UPLIZNA[supreg] map to MS-DRGs 058,
059, or 060 (Multiple Sclerosis and Cerebellar Ataxia with MCC, with
CC, or without CC/MCC, respectively), which are the same MS-DRGs to
which existing technologies may also be assigned.
With respect to the third criterion, whether the new use of
technology involves the treatment of the same or similar type of
disease and the same or similar patient population when compared to an
existing technology, the applicant asserted that, while UPLIZNA[supreg]
treats a patient population with the same type of disease (NMOSD) as
Soliris[supreg] or ENSPRYNGTM, it offers a treatment option
for a subset of this patient population, which differentiates it from
existing technologies. Per the applicant, UPLIZNA[supreg] has not been
shown to carry an increased risk of meningitis and may be used in
patient populations who are unvaccinated with the meningococcal vaccine
and/or are not able to use prophylactic antibiotics. The applicant
noted that while patients with NMOSD who are unvaccinated with the
meningococcal vaccine can still receive other approved treatments for
NMOSD, such as Soliris[supreg] or ENSPRYNGTM, they need to
have a risk reduction protocol instituted at the time of treatment and,
in some cases, may require two weeks of prophylactic antibacterial
treatment first.183 184
---------------------------------------------------------------------------
\183\ Soliris[supreg] prescribing details: https://solirispro.com/pdf/Soliris_USPI.pdf.
\184\ ENSPRYNGTM prescribing information: https://www.gene.com/download/pdf/enspryng_prescribing.pdf.
---------------------------------------------------------------------------
In summary, the applicant maintained that UPLIZNA[supreg] is not
substantially similar to other currently available therapies and/or
technologies because it uses a new mechanism of action and treats a
different subset of the patient population with NMOSD compared to an
existing technology.
In the proposed rule, we questioned whether the subset of the
patient population with NMOSD--specifically, patients who are
unvaccinated with the meningococcal vaccine--is considered a new
patient population since, as previously discussed in the FY 2022 IPPS/
LTCH PPS final rule (86 FR 45021), ENSPRYNGTM is also not
contraindicated in patients with unresolved serious Neisseria
meningitidis infections, and therefore, may be a treatment option for
patients with meningococcal disease as well as UPLIZNA[supreg].
Furthermore, as we previously stated in the FY 2022 IPPS/LTCH PPS final
rule, individuals that are not vaccinated against Neisseria
meningitidis are not considered a separate patient population because
eligibility can be easily attained via a widely available vaccine (86
FR 45027). Additionally, we questioned whether the additional
requirements for patients taking Soliris[supreg]--namely participation
in a risk reduction protocol related to the associated risk of
meningococcal infections, and prophylactic antibiotic treatment that
may result in a 2-week delay for treatment--constitute a new patient
population for technologies without those requirements.
We invited public comments on whether UPLIZNA[supreg] is
substantially similar to existing technologies and whether
UPLIZNA[supreg] meets the newness criterion.
Comment: The applicant submitted a public comment regarding the
newness criterion. With respect to the first criterion to determine
newness, whether a product uses the same or similar mechanism of
action, the applicant reiterated its assertion that UPLIZNA[supreg] has
a novel mechanism of action which satisfies the newness criterion. The
applicant stated that UPLIZNA[supreg] is the first and only B-cell
depleting monotherapy approved for neuromyelitis optica spectrum
disorder (NMOSD) in adult patients who are anti-aquaporin-4 antibody
positive. The applicant explained that the mechanism of action of
UPLIZNA[supreg] involves binding to CD19+ B-cells leading to antibody-
dependent, cell-mediated B-cell depletion. As a result, the applicant
[[Page 48956]]
stated UPLIZNA[supreg] reduces the damage caused to the optic nerve,
spinal cord, and brain by NMOSD attacks, thus reducing cumulative
damage and rates of disability.
With respect to the third criterion to determine newness and our
concern that patients who are unvaccinated with the meningococcal
vaccine may not represent a new patient population for NMOSD, the
applicant stated that in small populations such as those with rare
diseases, special considerations such as vaccination status, prior
therapies, drug interactions, or contraindications are important as
certain nuances related to a particular treatment within these small
populations can be uncovered, and providers must often choose one
therapy over another due to specific patient attributes and health
histories.
Response: We appreciate the applicant's input and agree that
UPLIZNA[supreg] has a unique mechanism of action when compared to
existing technologies for treating NMOSD, as UPLIZNA[supreg] is the
only CD19+ B-cell depleting monotherapy approved for NMOSD in adult
patients who are anti-aquaporin-4 antibody positive, compared to
Soliris[supreg] which specifically binds to complement protein C5, and
ENSPRYNGTM which binds to soluble and membrane-bound IL-6
receptors. However, we continue to believe that UPLIZNA[supreg] does
not represent a treatment option for a new patient population. We
stated in the FY 2022 IPPS/LTCH PPS final rule that individuals who are
not vaccinated against Neisseria meningitidis are not considered a
separate patient population because eligibility can easily be attained
via a widely available vaccine (86 FR 45027). In addition,
ENSPRYNGTM, another approved medication for the treatment of
NMOSD, is also not contraindicated in patients with unresolved serious
Neisseria meningitidis infections and therefore, may be a treatment
option for patients with meningococcal disease along with
UPLIZNA[supreg].
Based on the comments received and the information submitted as
part of the FY 2023 new technology add-on payment application for
UPLIZNA[supreg], as discussed in the proposed rule (87 FR 28303 through
28304) and in this final rule, we believe that UPLIZNA[supreg] has a
unique mechanism of action and is not substantially similar to existing
treatment options for NMOSD. While the applicant stated that it became
commercially available on July 9, 2020, we believe that the beginning
of the newness period for UPLIZNA[supreg] would be June 11, 2020, which
is the date that UPLIZNA[supreg] received FDA marketing authorization,
as the applicant did not provide documentation of a delay in commercial
availability.
With respect to the cost criterion, the applicant presented the
following analysis. The applicant searched the FY 2019 Medicare
Provider Analysis and Review (MedPAR) Hospital Limited Data Set (LDS)
for cases with ICD-10-CM diagnosis code G36.0 for Neuromyelitis optica
[Devic] (NMOSD) coded in the first diagnosis position. The applicant
determined that cases representing patients who may be eligible for
treatment with UPLIZNA[supreg] would map to MS-DRGs 058, 059, or 060
(Multiple Sclerosis and Cerebellar Ataxia with MCC, with CC, or without
CC/MCC, respectively).
The applicant determined a case count of 257 after imputing a value
of 11 for MS-DRGs with a case volume under 11. The applicant then
removed 100% of the drug charges to estimate the potential decrease in
costs due to the use of UPLIZNA[supreg]. The applicant noted that,
although use of UPLIZNA[supreg] would replace current drug charges for
therapies such as azathioprine, methotrexate, and rituximab, it is not
possible to differentiate between drug costs on MedPAR claims, and so
it removed all drug charges to be conservative. The applicant then
standardized the charges and applied a 4-year inflation factor of
1.281834, or 28.1834%, based on the inflation factor used to update the
outlier threshold in the FY 2022 IPPS/LTCH PPS final rule (86 FR
45542). The applicant added charges for the new technology by dividing
the estimated cost of UPLIZNA[supreg] by the national average CCR for
drugs which is 0.187, from the FY 2022 IPPS/LTCH PPS final rule (86 FR
44966).
The applicant calculated a final inflated average case-weighted
standardized charge per case of $764,547, which exceeded the average
case-weighted threshold amount of $48,165. Because the final inflated
average case-weighted standardized charge per case exceeded the average
case-weighted threshold amount, the applicant asserted that
UPLIZNA[supreg] meets the cost criterion.
We invited public comments on whether UPLIZNA[supreg] meets the
cost criterion.
We did not receive any comments on whether UPLIZNA[supreg] meets
the cost criterion. Based on the information submitted by the applicant
as part of its FY 2023 new technology add-on payment application for
UPLIZNA[supreg], as discussed in the proposed rule (87 FR 28304) and
previously summarized, the final inflated average case-weighted
standardized charge per case exceeded the average case-weighted
threshold amount. Therefore, UPLIZNA[supreg] meets the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant made two assertions. First, the applicant asserted that
UPLIZNA[supreg] offers a treatment option for a patient population that
is ineligible for currently available treatments. Specifically, the
applicant asserted that UPLIZNA[supreg] is a new treatment option for
patients who carry an increased risk of meningitis, patients following
treatments with more frequent and burdensome dosing schedules, and
patient populations more likely to be impacted by health disparities.
Finally, the applicant asserted that UPLIZNA[supreg] significantly
improves clinical outcomes relative to currently available technologies
because it reduced the risk of NMOSD attacks and disability progression
among patients with NMOSD when compared to placebo in the N-MOmentum
trial, which the applicant asserted is the largest NMOSD study
conducted.\185\
---------------------------------------------------------------------------
\185\ Marignier, R. et al., (2021, March 26). Disability
Outcomes in the N-MOmentum Trial of Inebilizumab in Neuromyelitis
Optica Spectrum Disorder. Neurology[supreg] neuroimmunology &
neuroinflammation. Retrieved October 6, 2021, from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8054974/.
---------------------------------------------------------------------------
With respect to the applicant's assertion that UPLIZNA[supreg] is a
substantial clinical improvement over existing technologies because it
represents a new treatment option for a patient population ineligible
for currently available treatments, the applicant stated that
UPLIZNA[supreg] may be used in patient populations who are unvaccinated
with the meningococcal vaccine and/or are not able to use prophylactic
antibiotics because UPLIZNA[supreg] has not been shown to carry an
increased risk of meningitis, as compared with Soliris[supreg].
To support this claim, the applicant cited an article from the CDC
explaining that patients taking complement inhibitors, such as
Soliris[supreg], are at an increased risk for meningococcal disease
\186\ and referenced the CDC's recommendation that patients receive the
meningococcal vaccination prior to initiating treatment with a
complement inhibitor. The applicant also cited a
[[Page 48957]]
study by McNamara et al.\187\ that identified 16 cases in the U.S.
between 2008 and 2016 of patients who were taking Soliris[supreg] who
had meningococcal disease despite having received at least 1 dose of
meningococcal vaccine before disease onset. Referring to the same
article by McNamara et al., the applicant stated that some healthcare
providers recommend prophylactic antibiotics even for vaccinated
patients during treatment with Soliris[supreg], exposing them to long-
term antibiotic use, which carries the risk of developing antimicrobial
resistance.
---------------------------------------------------------------------------
\186\ Centers for Disease Control and Prevention. (2019, May
31). Taking complement inhibitors increases risk for meningococcal
disease/CDC. Centers for Disease Control and Prevention. Retrieved
October 1, 2021, from https://www.cdc.gov/meningococcal/about/soliris-patients.html.
\187\ McNamara, L. et al. (2017, July 7). High Risk for Invasive
Meningococcal Disease Among Patients Receiving Eculizumab (Soliris)
Despite Receipt of Meningococcal Vaccine. Retrieved October 6, 2021,
from https://www.cdc.gov/mmwr/volumes/66/wr/pdfs/mm6627e1.pdf.
---------------------------------------------------------------------------
Furthermore, the applicant claimed that UPLIZNA[supreg] represents
a new treatment option for patients following treatments with more
frequent and burdensome dosing schedules than UPLIZNA[supreg]. Per the
applicant, the dosing schedule for UPLIZNA[supreg] consists of 2
initial doses delivered 2 weeks apart, followed by 1 dose every 6
months after that.\188\ In comparison, based on the FDA prescribing
information for Soliris[supreg], the applicant asserted that
UPLIZNA[supreg]'s 6-month dosing regimen is less frequent than that of
Soliris[supreg], and, therefore, is less burdensome to follow.\189\ The
applicant asserted the dosing schedule for UPLIZNA[supreg] is more
amenable to NMOSD patients for whom more frequent intravenous infusions
may be burdensome and stated that its characteristics as a treatment
regimen, compared to SolirisTM, may help to improve
medication adherence and decrease likelihood of relapse and
hospitalization relative to placebo. To further demonstrate that
UPLIZNA[supreg] may help to improve long-term patient adherence,
compared to SolirisTM, the applicant provided a review by
Vlasnik et al.\190\ noting that medication regimen complexity is one
factor that can negatively affect adherence. The applicant emphasized
that, for NMOSD, medication adherence to maintain immune suppression is
essential for reducing the risk of attacks, which can lead to
hospitalization, vision loss and paralysis. Finally, the applicant
stated that UPLIZNA[supreg] poses less of a barrier for patient access,
as it does not require patients or providers to participate in FDA's
Risk Evaluation and Mitigation Strategy (REMS) program, or receive
additional counselling regarding the program, as required by
Soliris[supreg].\191\
---------------------------------------------------------------------------
\188\ U.S. Food and Drug Administration. (2007, March).
Highlights of prescribing information administration. Retrieved
October 6, 2021, from https://www.accessdata.fda.gov/drugsatfda_docs/label/2007/125166lbl.pdf.
\189\ U.S. Food and Drug Administration. Alexion briefing
information for the November 18, 2014, meeting of the Drug Safety
and Risk Management Advisory Committee. https://www.fda.gov/advisory-committees/human-drug-advisory-committees/drug-safety-and-risk-management-advisory-committee.
\190\ Vlasnik, J. J., Aliotta, S. L., & DeLor, B. (2005, April
7). Medication adherence: Factors influencing compliance with
prescribed medication plans. The Case Manager. Retrieved October 6,
2021, from https://www.sciencedirect.com/science/article/abs/pii/S1061925905000263?via%3Dihub.
\191\ Alexion Pharmaceutical, Inc. (2020). Soliris REMS.
Retrieved October 6, 2021, from https://solirisrems.com/.
---------------------------------------------------------------------------
To support its claim that UPLIZNA[supreg] is a new treatment option
for populations that are more likely to be impacted by health
disparities, the applicant noted UPLIZNA[supreg]'s durable efficacy and
favorable safety profile among African Americans with NMOSD. To support
this claim, the applicant cited the safety results published by Cree et
al.\192\ from both a randomized control period (RCP) and an open label
period (OLP) of the N-MOmentum trial. The RCP phase of N-Momentum was a
multicenter, double-blind, 2/3 study conducted at 99 outpatient
specialty clinics or hospitals in 25 countries that lasted up to 197
days. The primary endpoint was time to onset of an NMOSD attack, as
determined by the investigator and adjudication committee. Eligible
participants were randomized in a 3:1 ratio to receive either 300 mg
intravenous UPLIZNA[supreg] (n=174) or a saline placebo (n=56) on days
1 and 15. Participants continued through the RCP for up to 28 weeks
unless they had a confirmed NMOSD attack, at which point they could
choose to continue in the OLP phase of the trial. The OLP included
eligible adult participants (n=230) who had had at least 1 NMOSD attack
in the year before screening or at least 2 attacks requiring rescue
therapy in the 2 years before screening. During the OLP, all patients
received UPLIZNA[supreg] for at least 2 years. As recommended by an
independent committee, enrollment in the RCP phase stopped prior to
study completion due to the early findings where 21 of 174 participants
(12%) receiving UPLIZNA[supreg] had an attack as compared with 22 of
the 56 placebo recipients (39%). Marignier et al. (2021) assessed
treatment effects in N-MOmentum by measuring score worsening of the
Expanded Disability Status Scale (EDSS) and modified Rankin Scale (mRS)
scores.\193\ EDSS scores were measured at baseline, then at RCP study
weeks 12 and 28, and every 3 months during the OLP, and within 5 days
of a potential attack. mRS scores were measured at baseline, and at
weeks 4, 8, 12, 16, 22, and 28 of the RCP. The Marignier results from
the N-MOmentum study found the annualized attack rate for African
Americans was lower at 0.06 compared to an annualized attack rate of
0.09 in the overall group exposed to UPLIZNA[supreg]. The applicant
stated that among the 19 African American participants who received
UPLIZNA[supreg] or placebo during the RCP and/or OLP of the N-MOmentum
trial, three had attacks 18, 29, and 104 days after their first
UPLIZNA[supreg] dose. The summary of baseline demographics and
characteristics of the intent-to-treat population notes that there were
14 African American participants who received UPLIZNA[supreg] and 5 who
received the placebo.\194\
---------------------------------------------------------------------------
\192\ Cree BAC, Bennett JL, Kim HJ, Weinshenker BG, Pittock SJ,
Wingerchuk DM, Fujihara K, Paul F, Cutter GR, Marignier R, Green AJ,
Aktas O, Hartung HP, Lublin FD, Drappa J, Barron G, Madani S,
Ratchford JN, She D, Cimbora D, Katz E; N-MOmentum study
investigators. Inebilizumab for the treatment of neuromyelitis
optica spectrum disorder (N-MOmentum): a double-blind, randomised
placebo-controlled phase 2/3 trial. Lancet. 2019 Oct
12;394(10206):1352-1363. doi: 10.1016/S0140-6736(19)31817-3. Epub
2019 Sep 5. PMID: 31495497.
\193\ Marignier R, Bennett JL, Kim HJ, Weinshenker BG, Pittock
SJ, Wingerchuk D, Fujihara K, Paul F, Cutter GR, Green AJ, Aktas O,
Hartung HP, Lublin FD, Williams IM, Drappa J, She D, Cimbora D, Rees
W, Smith M, Ratchford JN, Katz E, Cree BAC; N-MOmentum Study
Investigators. Disability Outcomes in the N-MOmentum Trial of
Inebilizumab in Neuromyelitis Optica Spectrum Disorder. Neurol
Neuroimmunol Neuroinflamm. 2021 Mar 26;8(3):e978. doi: 10.1212/
NXI.0000000000000978. PMID: 33771837; PMCID: PMC8054974.
\194\ Ibid.
---------------------------------------------------------------------------
With respect to its claim that UPLIZNA[supreg] significantly
improves clinical outcomes relative to previously available treatment
options, the applicant stated that patients taking UPLIZNA[supreg] had
a reduced risk of NMOSD attacks and disability progression when
compared to placebo in the N-MOmentum trial. The applicant again
referenced the results of the N-MOmentum trial reported by Cree et al.,
where 21 (12%) of the 174 participants receiving UPLIZNA[supreg] had an
attack by the time enrollment ended versus 22 (39%) of the 56
participants receiving placebo (hazard ratio (HR) 0[middot]272 [95% CI
0[middot]150-0[middot]496]; p<0[middot]0001). The applicant also
referred to the N-MOmentum results from the OLP and asserted that they
show long-term treatment with UPLIZNA[supreg] provided a sustained
reduction in NMOSD attack risk, MRI lesions, and NMOSD-related
hospitalizations regardless of treatment provided during the RCP. The
applicant
[[Page 48958]]
referenced the disability data published by Marignier et al.\195\ from
the results of the N-MOmentum trial on the use of UPLIZNA[supreg] and
asserted that they showed favorable results among patients with NMOSD
when compared to placebo. Specifically, Marignier et al. assessed the
treatment effects of UPLIZNA[supreg] in comparison with placebo by
using a worsening score of the Expanded Disability Status Scale (EDSS)
to measure confirmed disability progression (CDP). The applicant
asserted that the results show UPLIZNA[supreg] reduced the risk of 3-
month CDP compared with placebo (HR: 0.375; 95% CI: 0.148-0.952;
p=0.0390). The applicant also stated that UPLIZNA[supreg] showed a
significantly lower risk of relapse among patients with NMOSD when
compared to placebo. The applicant cited results from Pittock et
al.,\196\ a randomized, double-blind, time-to-event trial in which 143
adult subjects were randomly assigned to receive either UPLIZNA[supreg]
or placebo weekly and continued use of an immunosuppressive therapy, as
needed. The primary endpoint was the first adjudicated relapse, while
secondary endpoints included the adjudicated annualized relapse rate.
Pittock et al. reported that adjudicated relapses occurred in 3 of 96
patients (3%) in the UPLIZNA[supreg] group and 20 of 47 (43%) in the
placebo group (hazard ratio 0.06; 95% confidence interval [CI], 0.02 to
0.20; P<0.001). The adjudicated annualized relapse rate was 0.02 in the
eculizumab group and 0.35 in the placebo group (rate ratio, 0.04; 95%
CI, 0.01 to 0.15; P<0.001). Referring to the results from the Pittock
et al. study, the applicant asserted that UPLIZNA[supreg] showed a
consistent effect in reducing the risk of attack compared to placebo,
regardless of baseline disability status, attack history, or disease
duration.\197\
---------------------------------------------------------------------------
\195\ Marignier R, Bennett JL, Kim HJ, Weinshenker BG, Pittock
SJ, Wingerchuk D, Fujihara K, Paul F, Cutter GR, Green AJ, Aktas O,
Hartung HP, Lublin FD, Williams IM, Drappa J, She D, Cimbora D, Rees
W, Smith M, Ratchford JN, Katz E, Cree BAC; N-MOmentum Study
Investigators. Disability Outcomes in the N-MOmentum Trial of
Inebilizumab in Neuromyelitis Optica Spectrum Disorder. Neurol
Neuroimmunol Neuroinflamm. 2021 Mar 26;8(3): e978. doi: 10.1212/
NXI.0000000000000978. PMID: 33771837; PMCID: PMC8054974.
\196\ Pittock SJ, Berthele A, Fujihara K, Kim HJ, Levy M, Palace
J, Nakashima I, Terzi M, Totolyan N, Viswanathan S, Wang KC, Pace A,
Fujita KP, Armstrong R, Wingerchuk DM. Eculizumab in Aquaporin-4-
Positive Neuromyelitis Optica Spectrum Disorder. N Engl J Med. 2019
Aug 15;381(7):614-625. doi: 10.1056/NEJMoa1900866. Epub 2019 May 3.
PMID: 31050279.
\197\ Ibid.
---------------------------------------------------------------------------
In the proposed rule, we stated we had the following concerns
regarding whether UPLIZNA[supreg] meets the substantial clinical
improvement criterion. First, we noted that while the applicant
provided data comparing UPLIZNA[supreg] to placebo, we did not receive
any data to demonstrate improved outcomes over existing FDA approved
treatments. We stated that additional information comparing outcomes
such as relapse rate, risk of relapse, and disability progression for
patients receiving UPLIZNA[supreg] versus other currently available
treatments would help inform our assessment of whether UPLIZNA[supreg]
demonstrates a substantial clinical improvement over existing
technologies. Second, while the applicant asserted that UPLIZNA[supreg]
represents a new treatment option for patients who are unvaccinated
with the meningococcal vaccine, similar to the discussion in the FY
2022 IPPS/LTCH PPS final rule (86 FR 45021) in response to a similar
assertion with respect to ENSPRYNGTM, we noted that
ENSPRYNG[supreg] is also not contraindicated in patients with
unresolved serious Neisseria meningitidis infection and therefore may
also be a treatment option for patients with meningococcal disease. We
further noted that the use of ENSPRYNGTM to treat patients
with NMOSD does not require a meningococcal vaccination. We noted that
the applicant sought to support its claim that UPLIZNA[supreg]
represents a new treatment option for patients who are unvaccinated
against Neisseria meningitidis through the inference that
Soliris[supreg] has a high risk of causing meningitis; however, as
stated in the proposed rule, we had concerns about the applicant's
claim because Neisseria meningitidis may easily be mitigated through
the use of a common vaccine or antimicrobials. As discussed in the FY
2022 IPPS/LTCH PPS final rule in response to similar claims with
respect to ENSPRYNG[supreg], and as noted previously, individuals that
are not vaccinated against Neisseria mengitidis are not considered a
separate patient population because eligibility can be easily attained
via a widely available vaccine and are also able to receive treatment
with UPLIZNA[supreg] which does not require a vaccine (86 FR 45027).
With regard to the applicant's claim that UPLIZNA[supreg] is a new
treatment option for patients following treatments with more frequent
dosing schedules, we stated in the proposed rule that we are unsure
whether these patients may be considered as a separate patient
population ineligible for currently available treatments. For example,
although the applicant compared the UPLIZNA[supreg] dosing regimen
against Soliris[supreg], it did not provide a similar comparison
against ENSPRYNGTM, which--similar to UPLIZNA[supreg]--does
not require frequent intravenous infusions or participation in the FDA
REMS program (see 86 FR 45020). Therefore, we stated that it is unclear
whether UPLIZNA[supreg] provides a treatment option for a separate
patient population that is ineligible for currently available
treatments, when there are other available treatments, like
ENSPRYNGTM, without the limitations that the applicant
described with respect to Soliris[supreg]. In addition, while the
applicant stated that UPLIZNA's[supreg] dosing regimen may help to
improve long-term patient medication adherence and decrease the
likelihood of relapse and hospitalization, we questioned the strength
of the correlation between UPLIZNA's[supreg] dosing regimen and these
outcomes. We stated our interest in additional information on the
efficacy results of UPLIZNA[supreg] among African Americans with NMOSD,
as cited by the applicant, as we understand that NMOSD
disproportionately affects African American and Asian populations at
rates approximately 2- to 3-fold higher than their Caucasian
counterparts.\198\ Specifically, we questioned whether the
retrospective analysis of the results from the N-MOmentum trial on the
annualized attack rate for African Americans (0.06 compared with 0.09
in the overall group) is generalizable to larger populations because
the study included low numbers of participants. Of the 20 African
American participants randomized in N-Momentum, 19 were AQP4 antibody
positive and 1 was AQP4 antibody negative. As a result, of the 19
participants, 14 received UPLIZNA[supreg], and only 5 received
placebo.199 200 We further noted that the applicant did not
provide comparative data on the efficacy of UPLIZNA[supreg],
[[Page 48959]]
Soliris[supreg], and ENSPRYNGTM in these populations.
---------------------------------------------------------------------------
\198\ Flanagan, E.P. et al. (2016, April 4). Epidemiology of
aquaporin[hyphen]4 autoimmunity and Neuromyelitis Optica Spectrum.
Wiley Online Library. Retrieved October 6, 2021, from https://onlinelibrary.wiley.com/doi/10.1002/ana.24617.
\199\ Bernitsas, E., Cimbora, D., Dinh, Q., She, D., Katz, E.
Safety and Efficacy of Inebilizumab in African Americans with
Neuromyelitis Optica Spectrum Disorder. Poster presentation at the
15th World Congress on Controversies in Neurology (CONy Virtual).
September 23-26, 2021.
\200\ Cree BAC, Bennett JL, Kim HJ, Weinshenker BG, Pittock SJ,
Wingerchuk DM, Fujihara K, Paul F, Cutter GR, Marignier R, Green AJ,
Aktas O, Hartung HP, Lublin FD, Drappa J, Barron G, Madani S,
Ratchford JN, She D, Cimbora D, Katz E; N-MOmentum study
investigators. Inebilizumab for the treatment of neuromyelitis
optica spectrum disorder (N-MOmentum): a double-blind, randomised
placebo-controlled phase 2/3 trial. Lancet. 2019 Oct
12;394(10206):1352-1363. doi: 10.1016/S0140-6736(19)31817-3. Epub
2019 Sep 5. PMID: 31495497.
---------------------------------------------------------------------------
We invited public comments on whether UPLIZNA[supreg] meets the
substantial clinical improvement criterion.
Comment: We received several comments in support of new technology
add-on payments for UPLIZNA[supreg], including one from the applicant,
in response to CMS' concerns in the proposed rule. With respect to the
concern regarding the lack of data comparing UPLIZNA[supreg] to
existing FDA-approved treatments, the applicant stated that conducting
head-to-head trials is often not possible when studying rare diseases
due to the small patient populations and potential delays if trials for
the same indication are running simultaneously. The applicant noted
that the timing and availability of Soliris[supreg] and
ENSPRYNGTM (approved by FDA on June 27, 2019 and August 17,
2020, respectively) did not allow for comparative trials, as there were
no approved medications for the treatment of NMOSD for the entirety of
the N-MOmentum study. The applicant stated that CMS has granted new
technology add-on payments in situations where comparative head-to-head
trials were not available, referencing two technologies without
comparative clinical data that were granted new technology add-on
payments in FY 2019 and FY 2022, as well as two additional examples
from FY 2022 that were both FDA-approved based on the results of
single-arm clinical trials. We note that the applicant did not identify
the specific technologies. The applicant stated that, because these
products were granted new technology add-on payments without direct
comparative data with their respective clinical competitors, that
substantial clinical improvement can be ascertained through product
attributes and randomized clinical trial outcomes in the absence of
direct, comparative head-to-head trials.
With respect to the concern regarding the lack of data
demonstrating improved outcomes over existing FDA approved treatments,
the applicant noted that N-MOmentum is the largest-ever clinical trial
conducted in patients with NMOSD, the results of which showed that
patients taking UPLIZNA[supreg] experienced fewer relapses and fewer
hospitalizations than patients on placebo. The applicant stated that
compared with placebo, patients treated with UPLIZNA[supreg] had a
reduced risk of 3-month EDSS-confirmed disability progression (CDP).
The applicant also noted that although disability outcomes data cannot
be compared across therapies, other therapies' disability data were
studied using different endpoints as secondary measures and/or were not
reported because of lack of statistical significance. The applicant
referred to the PREVENT trial for Soliris[supreg], which studied EDSS
and mRS as secondary outcome measures up to 211 weeks and noted that
there was no significant difference in disability progression between
the Soliris[supreg] groups and placebo. The applicant also referred to
the SakuraStar and SakuraSky trials for ENSPRYNG and noted that no
significant effect on disability was observed. In contrast, the
applicant stated that UPLIZNA[supreg] showed a consistent effect in
reducing the risk of disability worsening compared to placebo,
regardless of baseline disability status, attack history, or disease
duration. The applicant asserted that despite head-to-head studies not
being possible at the time registrational trials were conducted, the
data and efficacy and clinical efficiency attributes of UPLIZNA[supreg]
present an improvement for patients over other therapies.
In response to CMS' feedback regarding the comparison of dosing and
long-term adherence to other available treatments for NMOSD, the
applicant confirmed it had provided details of dosing for
Soliris[supreg] in its application and included dosing details for
ENSPRYNGTM in its comments, noting that
ENSPRYNGTM requires more frequent administration than
UPLIZNA[supreg]. The applicant referenced long-term adherence data
showing that UPLIZNA[supreg] adherence was approximately 85% after two
years. The applicant stated that the improved medication adherence data
from analogue disease states suggest that twice yearly dosing, as with
UPLIZNA[supreg], is associated with improved adherence over other
regimens. The applicant also stated that the data suggest that
adherence and persistence to therapy may lead to improved clinical
outcomes.
In addition, the applicant extrapolated results from a
retrospective claims analysis looking at the use of MS disease-
modifying therapies (DMTs) that concluded that a twice-yearly dosing
schedule achieved superior adherence and persistence at 12, 18, and 24
months versus other dosing regimens or routes of administration. Other
commenters also mentioned the convenient dosing schedule of
UPLIZNA[supreg], which potentially simplifies the lives of NMOSD
patients and thereby improves compliance, which they noted is critical
for the prevention of disease relapse and for ensuring good patient
outcomes.
The applicant noted that persistence and adherence to a therapy
such as UPLIZNA[supreg] are important to achieving positive clinical
outcomes, and reiterated that studies have shown that relapses can lead
to hospitalizations, long-term disability, and permanent harm to the
patient. According to a commenter, administration of UPLIZNA[supreg] in
the hospital setting, immediately after diagnosis and acute treatment
of the relapse can be life saving for the patient, as early treatment
leads to better outcomes and reduces relapse rate and subsequent
disability. Commenters emphasized the potential for permanent damage
related to relapses of NMOSD and therefore the importance of timely
treatment to prevent relapse.
The applicant also responded to CMS' question regarding the
generalizability of the retrospective analysis of the efficacy results
of UPLIZNA[supreg] among Black/African American patients with NMOSD,
which the applicant provided to support its claim that UPLIZNA[supreg]
is a new treatment option for populations that are more likely to be
impacted by health disparities. NMOSD disproportionately affects Black/
African American and Asian populations at rates approximately 2-to 3-
fold higher than Caucasians. As noted in its application, the applicant
stated that the annualized attack rates for Black/African American
participants observed in the N-MOmentum study were promising, despite
the relatively low number of participants in the study. The applicant
noted that the FDA Statistical Review of UPLIZNA[supreg] confirmed that
the applicant could report subgroup analyses based on sex, race, age,
and region and these data suggest that UPLIZNA[supreg] is at least as
effective in the Black/African American subpopulation as it is in the
general patient population. The applicant noted the difficulty of
enrolling large numbers of patients in studies for rare conditions, and
stated that subgroup data provided can still represent important
considerations in identifying a benefit in populations that face
disproportionately higher rates of NMOSD. As is often the case with
rare diseases such as NMOSD, relatively small numbers of participants
result in small subpopulations; however, the applicant noted,
interpreting results in small subgroups must be done cautiously.
Response: We thank the commenters for their input. After further
review, we continue to have concerns as to whether UPLIZNA[supreg]
meets the substantial clinical improvement criterion to be approved for
new technology add-on payments. We agree with the
[[Page 48960]]
commenters that timely treatment for relapse prevention in NMOSD is
important. However, it is unclear whether UPLIZNA[supreg] leads to
improved relapse prevention, or other improved outcomes, as compared to
other available treatments for NMOSD. We note that the applicant did
not provide data comparing outcomes such as time to first relapse and
number of relapses with Soliris[supreg] or UPLIZNA[supreg]. We further
note that the applicant stated that, of the available therapies, only
UPLIZNA[supreg] demonstrated a statistically significant effect on
disability progression compared to placebo in its clinical trial.
However, as the applicant noted, there were differences between the
trials, including size of the trials and disability endpoints assessed.
We believe this makes it difficult to demonstrate superior effect on
disability progression, especially without a comparison of relapse
rates, with which disability is associated. We also note that time-to-
first-relapse is one endpoint that was consistent across all three
trials, and that the results of a meta analysis comparing published
efficacy outcomes for Soliris[supreg], UPLIZNA[supreg], and
ENSPRYNGTM showed that Soliris[supreg] demonstrated greater
efficacy in prolonging time-to-relapse compared to UPLIZNA[supreg] and
ENSPRYNGTM.\201\ While we agree with the applicant that substantial
clinical improvement can be determined without head-to-head trials, we
note that we evaluate every application on its own data and merits to
determine whether it meets the new technology add-on payment criterion
for substantial clinical improvement, and we consider variations in the
currently available technologies that an applicant technology is
compared against for the purposes of determining whether the technology
represents a substantial clinical improvement over existing
technologies. We further note that it is unclear which technologies the
applicant is referring to in stating that CMS has previously approved
new technology add-on payments for technologies without a demonstration
of comparative outcomes.
---------------------------------------------------------------------------
\201\ Wingerchuck, et al. Indirect comparison analysis of FDA-
approved treatment options for adults with aquaporin-4
immunoglobulin G-positive neuromyelitis optica spectrum disorder.
---------------------------------------------------------------------------
Furthermore, with regard to improved adherence, while the applicant
provided information regarding UPLIZNA[supreg] adherence, it did not
compare these values to adherence for other therapies and therefore
this information does not support a finding of substantial clinical
improvement. Lastly, the retrospective claims analysis the applicant
provided to support a correlation between long-term medication
adherence and decreased relapse and hospitalization assessed the
adherence and persistence of multiple sclerosis patients treated with a
drug that had the same dosing regimen as UPLIZNA[supreg]--but not NMOSD
patients treated with UPLIZNA[supreg].
After review of the information submitted by the applicant as part
of its FY 2023 new technology add-on payment application for
UPLIZNA[supreg] and consideration of the comments received, we are
unable to determine that UPLIZNA[supreg] meets the substantial clinical
improvement criterion for the reasons discussed in the proposed rule
and in this final rule, and therefore we are not approving new
technology add-on payments for UPLIZNA[supreg] for FY 2023.
7. FY 2023 Applications for New Technology Add-On Payments (Alternative
Pathways)
As discussed previously, beginning with applications for FY 2021,
under the regulations at Sec. 412.87(c), a medical device that is part
of FDA's Breakthrough Devices Program and has received marketing
authorization for the indication covered by the Breakthrough Device
designation may qualify for the new technology add-on payment under an
alternative pathway. Additionally, beginning with FY 2021, under the
regulations at Sec. 412.87(d), a medical product that is designated by
FDA as a QIDP and has received marketing authorization for the
indication covered by the QIDP designation, and, beginning with FY
2022, a medical product that is a new medical product approved under
FDA's LPAD and used for the indication approved under the LPAD pathway,
may also qualify for the new technology add-on payment under an
alternative pathway. Under an alternative pathway, a technology will be
considered not substantially similar to an existing technology for
purposes of the new technology add-on payment under the IPPS and will
not need to meet the requirement that it represents an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries. These
technologies must still be within the 2-3 year newness period to be
considered ``new,'' and must also still meet the cost criterion. We
refer readers to section II.H.8. of the preamble of the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42292 through 42297) and section II.F.6 of
preamble of the FY 2021 IPPS/LTCH PPS final rule (85 FR 58715 through
58733) for further discussion of the alternative new technology add-on
payment pathways for these technologies.
We note, section 1886(d)(5)(K)(ii)(II) of the Act provides for the
collection of data with respect to the costs of a new medical service
or technology described in subclause (I) for a period of not less than
2 years and not more than 3 years beginning on the date on which an
inpatient hospital code is issued with respect to the service or
technology. Our regulations in Sec. 412.87(c)(2) for breakthrough
devices and Sec. 412.87(d)(2) for certain antimicrobial products state
that a medical device/product that meets the condition in paragraph
(c)(1) or (d)(1) of Sec. 412.87 will be considered new for not less
than 2 years and not more than 3 years after the point at which data
begin to become available reflecting the inpatient hospital code (as
defined in section 1886(d)(5)(K)(iii) of the Act) assigned to the new
technology (depending on when a new code is assigned and data on the
new technology become available for DRG recalibration). After CMS has
recalibrated the DRGs, based on available data, to reflect the costs of
an otherwise new medical technology, the medical technology will no
longer be considered ``new'' under the criterion of this section.
We received 19 applications for new technology add-on payments for
FY 2023 under the new technology add-on payment alternative pathways.
Six applicants withdrew applications prior to the issuance of the
proposed rule. Subsequently, five applicants withdrew their respective
applications for LigaPASS 2.0 PJK Prevention System, Magnus
Neuromodulation System with SAINT Technology, the Precision
TAVITM Coronary Module, the TOPSTM System, and
the VITARIA[supreg] System prior to the issuance of this final rule.
Two applicants, Phagenesis Ltd. (the applicant for Phagenyx[supreg]
System) and Neuro Event Labs, Inc. (the applicant for the Nelli[supreg]
Seizure Monitoring System), did not meet the July 1 deadline for FDA
approval or clearance of the technology and, therefore, the
technologies are not eligible for consideration for new technology add-
on payments for FY 2023. A discussion of the remaining 6 applications
is presented in this final rule, including 5 technologies that have
received a Breakthrough Device designation from FDA and 1 that was
designated as a QIDP by FDA.
In accordance with the regulations under Sec. 412.87(e)(2),
applicants for new technology add-on payments, including Breakthrough
Devices, must have FDA marketing authorization by July 1 of the
[[Page 48961]]
year prior to the beginning of the fiscal year for which the
application is being considered. Under the policy finalized in the FY
2021 IPPS/LTCH PPS final rule (85 FR 58742), we revised the regulations
at Sec. 412.87(e) by adding a new paragraph (e)(3) which provides for
conditional approval for a technology for which an application is
submitted under the alternative pathway for certain antimicrobial
products (QIDPs and LPADs) at Sec. 412.87(d) that does not receive FDA
marketing authorization by the July 1 deadline specified in Sec.
412.87(e)(2), provided that the technology receives FDA marketing
authorization by July 1 of the particular fiscal year for which the
applicant applied for new technology add-on payments. We refer the
reader to the FY 2021 IPPS/LTCH PPS final rule for a complete
discussion of this policy (85 FR 58737 through 58742).
As we did in the FY 2022 IPPS/LTCH PPS proposed rule, for
applications under the alternative new technology add-on payment
pathway, in the FY 2023 IPPS/LTCH PPS proposed rule, we proposed to
approve or disapprove each of these six applications for FY 2023 new
technology add-on payments. Therefore, in this section of the preamble
of this final rule, we provide background information on each of the
remaining six alternative pathway applications and our determinations
as to whether or not each technology is eligible for new technology
add-on payments for FY 2023. Consistent with our standard approach, we
are not including in this final rule the description and discussion of
applications that were withdrawn or that are ineligible for
consideration for FY 2023 due to not meeting the July 1 deadline,
described previously, which were included in the FY 2023 IPPS/LTCH PPS
proposed rule. We are also not summarizing nor responding to public
comments received regarding these withdrawn or ineligible applications
in this final rule.
a. Alternative Pathway for Breakthrough Devices
(1) CERAMENT[supreg] G
BONESUPPORT AB submitted an application for new technology-add on
payments for CERAMENT[supreg] G for FY 2023. Per the applicant,
CERAMENT[supreg] G is an injectable bone-void filler made of calcium
sulfate, hydroxyapatite, and gentamicin sulfate indicated for the
surgical treatment of osteomyelitis. Per the applicant, this bone graft
substitute fills gaps resulting from debridement of infected bone and
prevents colonization of sensitive bacteria, promoting bone healing in
two ways. The applicant stated that the primary mode of action is for
CERAMENT[supreg] G to act as a resorbable ceramic bone-void filler
intended to fill gaps and voids in the skeleton system created when
infected bone is debrided. The applicant also stated that the secondary
mode of action is to prevent the colonization of gentamicin-sensitive
microorganisms in order to protect bone healing. Per the applicant,
CERAMENT[supreg] G may eliminate the need to harvest autologous bone,
avoiding pain and infection at the donor site. We note that BONESUPPORT
Inc. previously submitted an application for new technology add-on
payments for CERAMENT[supreg] G for FY 2022, as summarized in the FY
2022 IPPS/LTCH PPS proposed rule (86 FR 25368 through 25373) but the
technology did not meet the deadline of July 1, 2021, for FDA approval
or clearance of the technology and, therefore, was not eligible for
consideration for new technology add-on payments for FY 2022 (86 FR
45126 through 45127).
According to the applicant, CERAMENT[supreg] G is designated as a
Breakthrough Device for use as a bone-void filler as an adjunct to
systemic antibiotic therapy and surgical debridement as part of the
surgical treatment of osteomyelitis. The technology received FDA De
Novo marketing authorization on May 17, 2022 with an indication for use
as a bone void filler in skeletally mature patients as an adjunct to
systemic antibiotic therapy and surgical debridement (standard
treatment approach to a bone infection) as part of the surgical
treatment of osteomyelitis in defects in the extremities. The applicant
applied for and received a unique ICD-10-PCS procedure code to identify
cases involving the administration of CERAMENT[supreg] G in 2021.
Effective October 1, 2021, CERAMENT[supreg] G administration can be
identified by ICD-10-PCS procedure code XW0V0P7 (Introduction of
antibiotic eluting bone void filler into bones, open approach, new
technology group 7), which is unique to CERAMENT[supreg] G
administration. The applicant stated that the following existing ICD-
10-CM codes for osteomyelitis appropriately describe the proposed
indication for which the device received Breakthrough Device
designation (``Breakthrough Device Indication''):
[GRAPHIC] [TIFF OMITTED] TR10AU22.090
With respect to the cost criterion, the applicant identified
candidate cases using ICD-10-PCS procedure and ICD-10-CM diagnosis
codes, which are detailed in the tables in this section. With these
codes identified, the applicant then went through the Grouper logic in
the MS-DRG v39.0 Definitions Manual and located where cases with these
codes would be assigned in the MS-DRG system. This process yielded 13
MS-DRGs which the applicant used for their analysis. The applicant also
submitted an additional subanalysis using only cases from the
applicant's top three identified MS-DRGs (464, 493, and 504), to
demonstrate that the technology meets the cost criterion.
Under the first analysis, the applicant searched claims in the FY
2019
[[Page 48962]]
MedPAR final rule dataset within the 13 identified MS-DRGs that
reported one of the M86 ICD-10-CM diagnosis codes listed previously in
combination with the ICD-10-PCS procedure codes listed in the following
table, which identify procedures that could involve the use of
CERAMENT[supreg] G as an adjunct to systemic antibiotic therapy and
surgical debridement where there is a need for supplemental bone void
filler material.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR10AU22.091
[[Page 48963]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.092
[[Page 48964]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.093
[[Page 48965]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.094
The applicant identified 11,620 cases across 13 MS-DRGs as
identified in the table that follows:
[GRAPHIC] [TIFF OMITTED] TR10AU22.095
BILLING CODE 4120-01-C
The applicant noted that candidate cases for CERAMENT[supreg] G
with osteomyelitis would qualify for the CC/MCC MS-DRGs because
osteomyelitis is listed in the Grouper as a CC condition. Therefore,
the applicant concluded that cases with osteomyelitis would not be
grouped in the uncomplicated MS-DRGs (for example, 465, 494, etc.). The
applicant stated that because osteomyelitis is never assigned to
uncomplicated surgical MS-DRGs, it excluded uncomplicated MS-DRGs from
its analysis.
The applicant then removed charges for the prior technology that
may be replaced by CERAMENT[supreg] G. The applicant conducted a market
analysis that identified 3 types of prior technology devices:
Poly(methyl methacrylate) (PMMA) manually mixed with antibiotics, PMMA
pre-loaded with antibiotics, and calcium sulfate (CaS) mixed with
antibiotics. The applicant researched the average sales price (ASP) for
major competitors for 5cc and 10cc of each device type and calculated a
weighted average cost of $444 per 5cc and $727 per 10cc.\202\ Then the
applicant converted costs to charges by dividing costs by the Supplies
&
[[Page 48966]]
Equipment CCR of 0.297 (86 FR 44966). Using this CCR, $444 per 5cc and
$727 per 10cc yielded an estimated hospital charge of prior
technologies of $1,495 per 5cc and $2,449 per 10cc. The applicant
explained that the total amount of antibiotics depends on the amount of
product required for different sized bones. The applicant then
standardized the charges and applied a 4-year inflation factor of
1.281834 based on the inflation factor used to update the outlier
threshold in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45542).
---------------------------------------------------------------------------
\202\ The applicant's analysis was informed by 2019 and 2020
data for Osteoset, Stimulan, and Calcigen S (calcium sulfates mixed
with antibiotics), Palacos, Cobalt (PMMA manually mixed with
antibiotics), Cobalt G, Biomet Bone Cement R, and Refobacin Bone
Cement R (PMMA pre-loaded with antibiotics) from three sources: an
iData Market Research 2019 Sku Data Report, Global Data US Hospital
Bone Grafts and Substitutes Q3 2019 Report, and feedback from sales
representatives in the field.
---------------------------------------------------------------------------
The applicant added estimated charges for the new technology by
dividing the estimated, expected hospital list price for the device
(based on expected 5/10/15 cc costs for CERAMENT[supreg] G, by MS-DRG),
by the aforementioned Supplies & Equipment CCR of 0.297.
The applicant calculated a final inflated case-weighted average
standardized charge per case of $135,258 and an average case-weighted
threshold of $86,603. Because the final inflated average case-weighted
standardized charge per case exceeded the average case-weighted
threshold amount, the applicant asserted that the technology meets the
cost criterion.
The applicant also provided an alternate cost analysis using the
applicant's top three identified MS-DRGs (464, 493, and 504), which
together constituted more than half of the applicant's identified
cases. Using the same methodology and data sources noted previously,
the applicant calculated a final inflated case-weighted average
standardized charge per case of $112,316 and an average case-weighted
threshold of $77,375. The applicant maintained that CERAMENT[supreg] G
meets the cost criterion under this alternate analysis.
We stated in the proposed rule that we agree with the applicant
that CERAMENT[supreg] G meets the cost criterion and therefore, subject
to the technology receiving FDA marketing authorization for use as a
bone-void filler as an adjunct to systemic antibiotic therapy and
surgical debridement as part of the surgical treatment of osteomyelitis
by July 1, 2022, we proposed to approve CERAMENT[supreg] G for new
technology add-on payments for FY 2023.
Based on preliminary information from the applicant at the time of
the proposed rule, the total cost of CERAMENT[supreg] G for a typical
patient was determined to be $7,567 per procedure. Per the applicant,
the amount of CERAMENT[supreg] G used per patient depends on the
complexity of the patient's injury, subsequent comorbidities, as well
as the location and size of the bone void. The applicant expects that
an average patient will require ~10cc per procedure, based on the case
weighted volume of expected utilization across the MS-DRGs. From this
weighted average, the applicant derived the average, weighted cost of
$7,567 per patient. We noted that the cost information for this
technology may be updated in the final rule based on revised or
additional information CMS receives prior to the final rule. Under
Sec. 412.88(a)(2), we limit new technology add-on payments to the
lesser of 65% of the average cost of the technology, or 65% of the
costs in excess of the MS-DRG payment for the case. As a result, we
proposed that the maximum new technology add-on payment for a case
involving the use of the product CERAMENT[supreg] G would be $4,918.55
for FY 2022 (that is, 65% of the average cost of the technology).
We invited public comments on whether CERAMENT[supreg] G meets the
cost criterion and our proposal to approve new technology add-on
payments for CERAMENT[supreg] G for FY 2023, subject to
CERAMENT[supreg] G receiving FDA marketing authorization for use as a
bone-void filler as an adjunct to systemic antibiotic therapy and
surgical debridement as part of the surgical treatment of osteomyelitis
by July 1, 2022.
Comment: We received a public comment urging CMS to finalize its
proposals to approve new technology add-on payments for multiple
technologies for FY 2023, including CERAMENT G[supreg], in order to
foster innovation and make life and ability-saving devices more readily
available to patients.
Response: We appreciate the comment.
Based on the information provided in the application for new
technology add-on payments, we believe CERAMENT[supreg] G meets the
cost criterion. The technology received FDA De Novo marketing
authorization on May 17, 2022 with an indication for use as a bone void
filler in skeletally mature patients as an adjunct to systemic
antibiotic therapy and surgical debridement (standard treatment
approach to a bone infection) as part of the surgical treatment of
osteomyelitis in defects in the extremities, that is covered by its
Breakthrough Device designation. Therefore, we are finalizing our
proposal to approve new technology add-on payments for CERAMENT[supreg]
G for FY 2023. We consider the beginning of the newness period to
commence on May 17, 2022, the date on which the technology received its
FDA De Novo marketing authorization for the indication covered by its
Breakthrough Device designation.
Based on the information available at the time of this final rule,
the cost per case of CERAMENT[supreg] G is $7,567.00. Under Sec.
412.88(a)(2), we limit new technology add-on payments to the lesser of
65% of the average cost of the technology, or 65% of the costs in
excess of the MS-DRG payment for the case. As a result, we are
finalizing that the maximum new technology add-on payment for a case
involving the use of CERAMENT[supreg] G is $4,918.55 for FY 2023 (that
is, 65% of the average cost of the technology). Cases involving the use
of CERAMENT[supreg] G that are eligible for new technology add-on
payments will be identified by ICD-10-PCS procedure code XW0V0P7
(Introduction of antibiotic-eluting bone void filler into bones, open
approach, new technology group 7).
(2) GORE[supreg] TAG[supreg] Thoracic Branch Endoprosthesis (TBE
Device)
W.L. Gore and Associates, Inc., submitted an application for new
technology add-on payments for the GORE[supreg] TAG[supreg] Thoracic
Branch Endoprosthesis (TBE) device for FY 2023. According to the
applicant, the GORE[supreg] TAG[supreg] TBE device is a modular device
consisting of three components, an Aortic Component, a Side Branch
Component, and an optional Aortic Extender Component, each of which is
pre-mounted on a catheter delivery system for treatment of thoracic
aortic aneurysms, traumatic aortic transection, and aortic dissection.
According to the applicant, the GORE[supreg] TAG[supreg] TBE device
was granted designation under the Expedited Access Pathway (EAP) by FDA
(and is therefore considered part of the Breakthrough Devices Program
by FDA) on July 17, 2015, for endovascular repair of descending
thoracic aortic and aortic arch for patients who have appropriate
anatomy. The applicant indicated that it anticipated receiving
premarket approval of the GORE[supreg] TAG[supreg] TBE device as a
Class III device from FDA in Spring 2022 with a proposed indication for
endovascular repair of lesions of the descending thoracic aorta, while
maintaining flow into the left subclavian artery, in patients who have
adequate iliac/femoral access, and eligible proximal aorta, left
subclavian, or distal landing zones (isolated lesion patients only). We
noted in the proposed rule that since the indication for which the
applicant anticipated receiving premarket approval was included within
the scope of the EAP designation, it appeared that the
[[Page 48967]]
proposed PMA indication was appropriate for new technology add-on
payment under the alternative pathway criteria. Subsequently, the
applicant received premarket approval on May 13, 2022 with an
indication for endovascular repair of lesions of the descending
thoracic aorta, while maintaining flow into the left subclavian artery,
in patients who are at high risk for debranching subclavian procedures
and who have appropriate anatomy, which is within the scope of the EAP
designation.
The applicant noted that a combination of two existing ICD-10-PCS
procedure codes can be used to uniquely identify the GORE[supreg]
TAG[supreg] TBE: 02VW4EZ (Restriction of thoracic aorta, descending
with branched or fenestrated intraluminal device, one or two arteries,
percutaneous endoscopic approach), in combination with 02VX4EZ
(Restriction of thoracic aorta, ascending/arch with branched or
fenestrated intraluminal device, one or two arteries, percutaneous
endoscopic approach). Per the applicant, the GORE[supreg] TAG[supreg]
TBE device is placed such that it straddles two anatomic regions, the
descending thoracic aorta and thoracic aortic arch, thereby
necessitating the use of both ICD-10-PCS procedure codes to accurately
describe the use of the device.
With regard to the cost criterion, the applicant searched the FY
2019 MedPAR dataset from the FY 2022 IPPS proposed rule for cases
reporting a combination of a thoracic endovascular repair (TEVAR)
procedure and a bypass procedure. The applicant listed the following
ICD-10-PCS codes for TEVAR procedures and bypass procedures, which the
applicant used to identify potential cases that may be eligible for
treatment with the GORE[supreg] TAG[supreg] TBE device. Per the
applicant, cases with at least one ICD-10-PCS procedure code from each
category were included in the analysis.
[GRAPHIC] [TIFF OMITTED] TR10AU22.096
[GRAPHIC] [TIFF OMITTED] TR10AU22.097
The applicant identified 210 cases mapping to five MS-DRGs. The
applicant then removed charges for the technology being replaced. The
applicant stated that the use of TAG[supreg] Conformable devices in
cases that also use the GORE[supreg] TAG[supreg] TBE device is entirely
dependent on the patient's anatomy. The applicant explained that the
average case utilizing the GORE[supreg] TAG[supreg] TBE device uses 0.6
TAG[supreg] Conformable devices, compared to an average of 1.4
TAG[supreg] Conformable devices per procedure for current TEVAR cases,
resulting in a difference of 0.8 TAG[supreg] Conformable devices which
will no longer be used in cases utilizing the GORE[supreg] TAG[supreg]
TBE device. Accordingly, 80% of all device implant charges were removed
from the claims to be conservative, per the applicant. The applicant
then removed other charges related to the prior technology. According
to the applicant, a research study \203\ that compared 24 patients
treated with TBE to 31 patients treated with the traditional method at
one facility found that TBE device cases have a 19% reduction in
operating room (OR) time compared to the OR time for the combined
procedures (TEVAR with a bypass procedure), and a 48% reduction in
length of stay. Accordingly, the applicant removed 19% of OR charges
(revenue code 0360), removed 48% of routine charges (revenue code 01XX)
when a claim showed routine charges, and removed 48% of intensive care
unit (ICU) charges if a claim included no routine charges. The
applicant then standardized the charges and applied a 4-year inflation
factor of 1.2818 based on the inflation factor used in the FY 2022
IPPS/LTCH PPS final rule (86 FR 45538), to update the charges from FY
2019 to FY 2023. The applicant then added charges for the new
technology by dividing the average per patient cost of the GORE[supreg]
TAG[supreg] TBE device by the national CCR for implantable devices
(0.293) from the FY
[[Page 48968]]
2022 IPPS/LTCH PPS final rule (86 FR 44966). The applicant calculated a
final inflated case-weighted average standardized charge per case of
$400,515 and an average case-weighted threshold of $217,182. Because
the final inflated average case-weighted standardized charge per case
exceeded the average case-weighted threshold amount, the applicant
asserted that the technology meets the cost criterion.
---------------------------------------------------------------------------
\203\ Shultze W, Baxter R, Gable C, et al. Comparison Of
Surgical Debranching Versus Branched Endografts In Zone 2 TEVAR.
Oral presentation at the Society for Vascular Surgery Meeting; March
2021, Miami FL. https://symposium.scvs.org/abstracts/2021/M76.cgi.
---------------------------------------------------------------------------
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28324), we noted
that the charges removed for prior technology are based on length of
stay in a small study conducted at a single institution. Specifically,
the study involved 24 patients who received the TBE device during
elective procedures and 31 who had the procedures with bypass. Three of
these procedures were emergent and only 14 and 17, respectively, were
procedures in Zone 2 where the GORE[supreg] TAG[supreg] TBE would be
indicated. Given the small percentage of procedures that directly
relate to the proposed GORE[supreg] TAG[supreg] TBE indication, we
questioned the extent to which these results are generalizable to the
cost analysis performed above and the greater Medicare population.
Additionally, the applicant did not specify the revenue codes used to
identify and remove intensive care unit charges. We noted the applicant
listed two ICD-10-PCS codes (03S43ZZ and 03SQ3ZZ) in their analysis
which are percutaneous procedures and questioned whether the inclusion
of these codes was appropriate as the devices currently used to repair
the aortic arch require the creation of a bypass performed in an open
surgery. We also questioned whether the cases that the applicant
identified were appropriately representative of cases eligible for
treatment with GORE[supreg] TAG[supreg] TBE and requested additional
information to clarify this issue.
Subject to the applicant adequately addressing these concerns, we
stated in the proposed rule that we agreed that the technology meets
the cost criterion and therefore proposed to approve the GORE[supreg]
TAG[supreg] TBE device for new technology add-on payments for FY 2023,
subject to the technology receiving FDA marketing authorization for the
proposed indication by July 1, 2022.
Based on preliminary information from the applicant at the time of
the proposed rule, the per-patient anticipated hospital cost of the
GORE[supreg] TAG[supreg] TBE device was $42,780. We noted that the cost
information for this technology may be updated in the final rule based
on revised or additional information CMS receives prior to the final
rule. Under Sec. 412.88(a)(2), we limit new technology add-on payments
to the lesser of 65% of the average cost of the technology, or 65% of
the costs in excess of the MS-DRG payment for the case. In the proposed
rule, we stated that in the event we were to receive supplemental
information from the applicant to adequately address our concerns
regarding the cost criterion, and we were to approve new technology
add-on payments for the GORE[supreg] TAG[supreg] TBE device in the
final rule, the maximum new technology add-on payment for a case
involving the use of the GORE[supreg] TAG[supreg] TBE device would be
$27,807 for FY 2023 (that is, 65% of the average cost of the
technology).
We invited public comments on whether the GORE[supreg] TAG[supreg]
TBE device meets the cost criterion and our proposal to approve new
technology add-on payments for the GORE[supreg] TAG[supreg] TBE device
for FY 2023, subject to the technology receiving FDA marketing
authorization for the proposed indication that corresponds to the EAP
designation by July 1, 2022.
Comment: The applicant provided comments and a revised cost
analysis in response to CMS' concerns identified in the proposed rule.
With respect to the concern that the charges removed for prior
technology were based on length of stay in a small study conducted at a
single institution, the applicant stated that the pivotal trial for the
GORE[supreg] TAG[supreg] TBE device was conducted at 40 U.S. sites and
the separate outcome sub-study was based at a site that had the highest
numbers of enrolled participants. In addition, the applicant stated
that the length of stay and length of time in the ICU was similar for
all sites in the clinical trial and therefore the cost estimates from a
single institution are reflective of the cost of care provided at other
sites.
With respect to the concern about results being generalizable to
the greater Medicare population, the applicant stated that the median
age of outcome sub-study participants was 65 years, and that half of
all participants were of Medicare-eligible age. The applicant also
noted that the outcome sub-study population (24 GORE[supreg]
TAG[supreg] TBE patients and 31 SR-TEVAR patients) represented more
than a quarter of a total of 202 GORE[supreg] TAG[supreg] TBE-eligible
cases in the FY 2019 Medicare claims. Per the applicant, this sample of
the 202 eligible cases in the FY 2019 Medicare claims is large enough
to appropriately estimate the costs associated with the GORE[supreg]
TAG[supreg] TBE procedure and that, based on the median age, the
estimate is generalizable to the Medicare population.
With respect to the concern as to whether the cases identified by
the applicant were appropriately representative of cases eligible for
treatment with GORE[supreg] TAG[supreg] TBE, the applicant stated that
the GORE[supreg] TAG[supreg] TBE device replaces two separate operating
room procedures: a left subclavian artery (SA) bypass procedure,
usually an open surgery, and a percutaneous thoracic endograft implant
procedure, commonly referred to as SR-TEVAR, because it contains a
branched element that is inserted into the left subclavian artery
thereby maintaining blood flow and eliminating the need for a SA bypass
procedure. The applicant stated that the outcome sub-study provides
information on resource use differences between patients undergoing TBE
procedures compared to a combination of surgical revascularization and
thoracic endograft implant. The applicant stated that including cases
that involved both procedures (that is, the SA bypass procedure and the
TEVAR procedure) in the cost criterion analysis and removing 100% of
device charges as well as other related service charges (19% of OR
charges and 48% of routine care charges) better reflects the estimate
of the GORE[supreg] TAG[supreg] TBE standardized charges. In the
updated analysis, the applicant removed 100% of all device charges from
the MedPAR cases compared to removing 80%, which it did in its original
application.
The applicant further indicated that while every patient
presentation of aortic disease is unique in length, type, and severity
of disease, all patients in the outcome sub-study had serious aortic
disease that needed repair in the left subclavian artery, even if cases
were characterized as an elective surgery for purposes of the study
reporting. The applicant also stated that the ends of the device must
exceed the length of the diseased aorta on both ends, the proximal and
distal locations of the implanted device varied, depending on the
length of the aortic disease, and as such, the devices can span several
zones. The applicant further noted that all cases, emergent or
elective, had similar resource use.
With respect to the concern that the revenue codes used to identify
and remove intensive care unit charges were not specified, the
applicant stated that it used CMS revenue codes 020x and 021x to
identify intensive care unit charges in the rate-setting methodology.
We note that revenue code descriptions for 021x and 021x are Intensive
Care Unit and Coronary Care Unit, respectively.
[[Page 48969]]
With respect to our inquiry about the inclusion of two codes for
percutaneous procedures, the applicant explained that it included the
two percutaneous approach codes in its original cost analysis in order
to pick up all bypass surgery codes. The applicant then explained that
eliminating these two codes from the inclusion criteria for the revised
analysis excluded only one case. The applicant noted that removing the
one percutaneous SA bypass case limited the revised cost criterion
analysis to only those cases where the subclavian artery bypass surgery
was coded as an open approach.
The applicant reported that the updated cost criterion analysis
resulted in a threshold amount of $217,080 and a new standardized
charge estimate of $377,857. The applicant stated that the new
standardized charge estimate still greatly exceeds the new technology
add-on payment threshold and the GORE[supreg] TAG[supreg] TBE device
meets the cost criterion requirement.
The applicant also stated that upon further consultation with
clinical experts, the better combination of ICD-10-PCS codes to
identify cases utilizing the technology would be 02VW3DZ (Restriction
of thoracic aorta, descending with intraluminal device, percutaneous
approach), in combination with 02VX3EZ (restriction of thoracic aorta,
ascending/arch with branched or fenestrated intraluminal device, one or
two arteries, percutaneous approach) and requested that these codes be
used to identify the GORE[supreg] TAG[supreg] TBE for purposes of new
technology add-on payment instead of the codes included in the proposed
rule.
Another commenter familiar with the applicant's cost study
submitted a public comment reiterating the applicant's statements
regarding the characteristics of the single institution upon which the
applicant's cost analysis was based, disease severity in the patient
population, the uniform requirement of Zone 2 repair despite variation
of distal zones treated, and generalizability of the study population
to the Medicare population. Based on the results achieved for patients
receiving the TBE graft as compared to the TEVAR and subclavian artery
bypass, this commenter recommended that CMS approve the GORE[supreg]
TAG[supreg] TBE for new technology add on payments.
Response: We thank the commenters for their comments and appreciate
the additional clarification regarding the cost criterion. Based on the
information provided in the application for new technology add-on
payments, and after consideration of the public comments we received,
we believe the GORE[supreg] TAG[supreg] Thoracic Branch Endoprosthesis
(TBE) meets the cost criterion. GORE[supreg] TAG[supreg] TBE received
marketing authorization from FDA on May 13, 2022 for the indication
covered by its Breakthrough Device designation for endovascular repair
of lesions of the descending thoracic aorta, while maintaining flow
into the left subclavian artery, in patients who are at high risk for
debranching subclavian procedures and who have appropriate anatomy.
Therefore, we are finalizing our proposal to approve new technology
add-on payments for the GORE[supreg] TAG[supreg] TBE for FY 2023 and we
consider the beginning of the newness period to commence on May 13,
2022, which is the date on which the technology received FDA marketing
authorization for the indication covered by its Breakthrough Device
designation.
Based on the information at the time of this final rule, the cost
per case of the GORE[supreg] TAG[supreg] TBE is $42,780. Under Sec.
412.88(a)(2), we limit new technology add-on payments to the lesser of
65% of the average cost of the technology, or 65% of the costs in
excess of the MS DRG payment for the case. As a result, we are
finalizing that the maximum new technology add-on payment for a case
involving the use of the GORE[supreg] TAG[supreg] TBE is $27,807 for FY
2023 (that is, 65% of the average cost of the technology). Cases
involving the use of GORE[supreg] TAG[supreg] TBE that are eligible for
new technology add-on payments will be identified by ICD-10-PCS codes:
02VW3DZ (Restriction of thoracic aorta, descending with intraluminal
device, percutaneous approach) in combination with 02VX3EZ (Restriction
of thoracic aorta, ascending/arch with branched or fenestrated
intraluminal device, one or two arteries, percutaneous approach).
(3) iFuse Bedrock Granite Implant System
SI-BONE, Inc., submitted an application for new technology add-on
payments for the iFuse Bedrock Granite Implant System for FY 2023.
According to the applicant, the iFuse Bedrock Granite Implant System is
a sterile, single-use permanent implant intended to provide sacropelvic
fusion of the sacroiliac joint and fixation to the pelvis when used in
conjunction with commercially available pedicle screw fixation systems
as a foundational element for segmental spinal fusion. The applicant
stated that the joint fusion occurs as a result of the device's porous
surface and interstices, and fixation occurs through the device's
helical threaded design and traditional posterior fixation rod
connection. Per the applicant, the iFuse Bedrock Granite Implant System
can be placed into the pelvis in two trajectories: sacroalar-iliac
(SAI) trajectory (that is, into the sacrum, across the SI joint and
into the ilium) or directly into the ilium, and joint fusion occurs
only when the SAI trajectory is used.
According to the applicant, the iFuse Bedrock Granite Implant
System received FDA Breakthrough Device designation on November 23,
2021 for sacropelvic fixation and as an adjunct for sacroiliac joint
fusion (when used with commercially available sacroiliac joint fusion
promoting devices) in conjunction with commercially available posterior
pedicle screw systems for the treatment of the acute and chronic
instabilities or deformities of the thoracic, lumbar, and sacral spine;
degenerative disc disease (DDD) as defined by back pain of discogenic
origin with degeneration of the disc confirmed by patient history and
radiographic studies; severe spondylolisthesis (Grades 3 and 4) of the
L5-S1 vertebra in skeletally mature patients receiving fusions by
autogenous bone graft having implants attached to the lumbar and sacral
spine (L3 to sacrum) with removal of the implants after the attainment
of a solid fusion; spondylolisthesis; trauma (that is, fracture or
dislocation); spinal stenosis; deformities or curvatures (that is,
scoliosis, kyphosis, and/or lordosis); spinal tumor; pseudarthrosis;
and/or failed previous fusion. Subsequently, the iFuse Bedrock Granite
Implant System received 510(k) clearance from FDA on May 26, 2022
(K220195) for the same indication.
The applicant stated that ICD-10-PCS codes that may be utilized to
describe the placement of an internal fixation device into the pelvic
bone or acetabulum, listed in the following table, do not distinctly
identify the iFuse Bedrock Granite Implant System.
[[Page 48970]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.098
The applicant submitted a request to the ICD-10 Coordination and
Maintenance Committee for approval of a unique code for FY 2023 and was
granted approval to identify the iFuse Bedrock Granite Implant System
using the following procedure codes effective October 1, 2022:
[GRAPHIC] [TIFF OMITTED] TR10AU22.099
With regard to the cost criterion, the applicant conducted two
analyses based on 100% of identified claims and 78% of identified
claims. To identify potential cases where the iFuse Bedrock Granite
Implant System could be utilized, the applicant searched the FY 2019
MedPAR final rule file for claims reporting a combination of at least
one of the ICD-10-PCS procedure codes for the placement of an internal
fixation device into the pelvic bone or acetabulum, noted previously,
and at least one of the following ICD-10-CM diagnosis codes used to
describe the indication under the Breakthrough Device designation.
BILLING CODE 4120-01-P
[[Page 48971]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.100
[[Page 48972]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.101
For the analysis using 100% of cases, the applicant identified
2,165 cases mapping to the following 26 MS-DRGs:
[[Page 48973]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.102
BILLING CODE 4120-01-C
The applicant then removed 50% of the charges associated with
medical supplies and implantable devices (revenue centers 027x and
0624). The applicant stated that the removal of 50% of the charges
associated with medical supplies and implantable devices reflects a
conservative estimate as the iFuse Bedrock Granite Implant System is
used in conjunction with commercially available pedicle screw fixation
systems as a foundational element for segmental spinal fusion. The
applicant then standardized the charges and applied the three-year
inflation factor of 20.4% used to update the outlier threshold in the
FY 2022 IPPS/LTCH PPS final rule (86 FR 45542) to update the charges
from FY 2019 to FY 2022. The applicant then added charges for the new
technology by dividing the per-patient anticipated hospital cost of the
iFuse Bedrock Granite Implant System by the national average cost-to-
charge ratio for implantable devices (0.239) from the FY 2022 IPPS/LTCH
PPS final rule. Under the analysis based on 100% of identified claims,
the applicant calculated a final inflated case-weighted average
standardized charge per case of $254,264 and an average case-weighted
threshold of $159,841.
For the analysis using 78% of cases, the applicant identified 1,682
cases mapping to 4 MS-DRGs. The applicant conducted the same analysis
noted previously and determined a final inflated case-weighted average
standardized charge per case of $253,333 and an average case-weighted
threshold of $164,561. Because the final inflated case-weighted average
standardized charge per case exceeded the average case-weighted
threshold amount under both analyses, the applicant asserted that the
technology meets the cost criterion.
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28327), we agreed
with the applicant that iFuse Bedrock Granite Implant System meets the
cost criterion and therefore we proposed to approve the iFuse Bedrock
Granite Implant System for new technology add-on payments for FY 2023,
subject to the technology receiving FDA marketing authorization for the
indication corresponding to the Breakthrough Device designation by July
1, 2022.
Based on preliminary information from the applicant at the time of
the proposed rule, the per-patient anticipated hospital cost of the
iFuse Bedrock Granite Implant System was $15,120. We noted that the
cost information for this technology may be updated in the final rule
based on revised or additional information CMS receives prior to the
final rule. Under Sec. 412.88(a)(2), we limit new technology add-on
payments to the lesser of 65% of the average cost of the technology, or
65% of the costs in excess of the MS-DRG payment for the case. As a
result, we proposed that the maximum new technology add-on payment for
a case involving the use of the iFuse Bedrock Granite Implant System
would be $9,828 for FY 2023 (that is, 65% of the average cost of the
technology).
We invited public comments on whether the iFuse Bedrock Granite
Implant System meets the cost criterion and our proposal to approve new
technology add-on payments for the iFuse Bedrock Granite Implant System
for FY 2023, subject to the technology receiving FDA marketing
authorization for the indication corresponding to the Breakthrough
Device designation by July 1, 2022.
Comment: We received a few comments supporting CMS' proposal to
approve the iFuse Bedrock Granite Implant System for new technology
add-on payments. One of the commenters also agreed with CMS that the
technology meets the cost criterion.
Response: We appreciate the input from the commenters.
[[Page 48974]]
Based on the information provided in the application for new
technology add-on payments, and after consideration of the public
comments we received, we believe the iFuse Bedrock Granite Implant
System meets the cost criterion. The iFuse Bedrock Granite Implant
System received marketing authorization from FDA on May 26, 2022 for
the indication covered by the Breakthrough Device designation, for
sacropelvic fixation and as an adjunct for sacroiliac joint fusion
(when used with commercially available sacroiliac joint fusion
promoting devices) in conjunction with commercially available posterior
pedicle screw systems for the treatment of the acute and chronic
instabilities or deformities of the thoracic, lumbar, and sacral spine;
degenerative disc disease (DDD) as defined by back pain of discogenic
origin with degeneration of the disc confirmed by patient history and
radiographic studies; severe spondylolisthesis (Grades 3 and 4) of the
L5-S1 vertebra in skeletally mature patients receiving fusions by
autogenous bone graft having implants attached to the lumbar and sacral
spine (L3 to sacrum) with removal of the implants after the attainment
of a solid fusion; spondylolisthesis; trauma (that is, fracture or
dislocation); spinal stenosis; deformities or curvatures (that is,
scoliosis, kyphosis, and/or lordosis); spinal tumor; pseudarthrosis;
and/or failed previous fusion. Therefore, we are finalizing our
proposal to approve new technology add-on payments for the iFuse
Bedrock Granite Implant System for FY 2023, and we consider the
beginning of the newness period to commence on May 26, 2022, which is
the date on which the technology received FDA marketing authorization
for the indication covered by its Breakthrough Device designation.
Based on the information at the time of this final rule, the cost
per case of the iFuse Bedrock Granite Implant System is $15,120. Under
Sec. 412.88(a)(2), we limit new technology add-on payments to the
lesser of 65% of the average cost of the technology, or 65% of the
costs in excess of the MS-DRG payment for the case. As a result, we are
finalizing that the maximum new technology add-on payment for a case
involving the use of the iFuse Bedrock Granite Implant System is $9,828
for FY 2023 (that is, 65% of the average cost of the technology). Cases
involving the use of the iFuse Bedrock Granite Implant System that are
eligible for new technology add-on payments will be identified by one
of the following ICD-10- PCS codes:
[GRAPHIC] [TIFF OMITTED] TR10AU22.103
(4) ThoraflexTM Hybrid Device
Terumo Aortic submitted an application for new technology-add on
payments for the ThoraflexTM Hybrid Device for FY 2023. Per
the applicant, the device is a sterile single-use, gelatin sealed
Frozen Elephant Trunk (FET) surgical medical device. The applicant
explained that the device is deployed through an opened aortic arch and
then positioned into the descending thoracic aorta. The applicant
further explained that, once it is completely deployed, the collar is
sutured to the aorta, and graft anastomoses are then performed in a
manner depending upon the chosen product design (which the applicant
specified as either the Plexus or the Ante-Flo). The device includes a
proximal crimped polyester surgical graft, central polyester collar,
and distal nitinol ring stents supported by thin wall polyester fabric.
The applicant also noted that the device has a unique gelatin sealant
that acts as a seal, preventing blood loss through the polyester fabric
product wall. We note that Terumo Aortic previously submitted an
application for new technology add-on payments for the
ThoraflexTM Hybrid Device for FY 2022, as summarized in the
FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25390) which was withdrawn
prior to the issuance of the FY 2022 IPPS/LTCH PPS final rule (86 FR
45127).
According to the applicant, the ThoraflexTM Hybrid
Device received Breakthrough Device designation on March 20, 2020 for
the open surgical repair or replacement of damaged or diseased vessels
of the aortic arch and descending aorta, with or without involvement of
the ascending aorta, in cases of aneurysm and/or dissection. The
applicant received FDA marketing authorization on April 19, 2022 for
the same indication as the Breakthrough Device designation. According
to the applicant, the ICD-10 Coordination and Maintenance Committee
approved the following ICD-10-PCS codes to specifically describe the
use of the ThoraflexTM Hybrid Device, effective October 1,
2021: X2RX0N7 (Replacement of thoracic aorta arch with branched
synthetic substitute with intraluminal device, new technology
[[Page 48975]]
group 7) and X2VW0N7 (Restriction of thoracic descending aorta with
branched synthetic substitute with intraluminal device, new technology
group 7).
With respect to the cost criterion, the applicant conducted two
analyses based on 100% of identified claims and 74% of identified
claims. To identify potential cases where the ThoraflexTM
Hybrid Device could be utilized, the applicant searched the FY 2019
MedPAR file for claims reporting the following ICD-10-PCS codes for
thoracic aortic replacement procedures: 02RX08Z (Replacement of
thoracic aorta, ascending/arch with zooplastic tissue, open approach),
02RX0JZ (Replacement of thoracic aorta, ascending/arch with synthetic
tissue, open approach), and 02RX0KZ (Replacement of thoracic aorta,
ascending/arch with nonautologous tissue substitute, open approach).
For the analysis using 100% of cases, the applicant identified
5,374 cases mapping to 21 MS-DRGs. The applicant then removed charges
for the technology being replaced. Per the applicant, the use of the
ThoraflexTM Hybrid device is expected to replace a portion
of prior technologies. The applicant explained that because an estimate
of the percentage of these total charges that would be replaced could
not be determined, it removed 100% of charges associated with medical/
surgical supplies and devices (revenue centers 027x and 0624). The
applicant then standardized the charges and applied the 3-year outlier
inflation factor of 1.204686 used to update the outlier threshold in
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45542) to update the
charges from FY 2019 to FY 2022. The applicant then added charges for
the new technology. The applicant multiplied the cost of the technology
by the national cost-to-charge ratio for implantable devices from the
FY 2022 IPPS/LTCH PPS final rule (0.293) to calculate estimated average
hospital charges associated with the device. Under this analysis, based
on 100% of identified claims, the applicant calculated a final inflated
case-weighted average standardized charge per case of $420,924 and an
average case-weighted threshold of $230,659.
Under the analysis based on 74% of cases, the applicant used the
same methodology, which identified 3,980 cases across MS-DRGs 219 and
220. The applicant determined the average case-weighted threshold of
$211,423 and a final inflated average standardized charge per case of
$373,273. Because the final inflated case-weighted average standardized
charge per case exceeded the average case-weighted threshold amount
under both analyses, the applicant asserted that the technology meets
the cost criterion.
In the proposed rule, we stated that we agree with the applicant
that the ThoraflexTM Hybrid Device meets the cost criterion
and therefore proposed to approve the ThoraflexTM Hybrid
Device for new technology add-on payments for FY 2023, subject to the
technology receiving FDA marketing authorization for the open surgical
repair or replacement of damaged or diseased vessels of the aortic arch
and descending aorta, with or without involvement of the ascending
aorta, in cases of aneurysm and/or dissection by July 1, 2022.
Based on preliminary information from the applicant at the time of
the proposed rule, the cost of the ThoraflexTM Hybrid Device
was $35,000 per patient. We noted that the cost information for this
technology may be updated in the final rule based on revised or
additional information CMS receives prior to the final rule. Under
Sec. 412.88(a)(2), we limit new technology add-on payments to the
lesser of 65% of the average cost of the technology, or 65% of the
costs in excess of the MS-DRG payment for the case. As a result, we
proposed that the maximum new technology add-on payment for a case
involving the use of ThoraflexTM Hybrid Device would be
$22,750 per patient for FY 2023 (that is, 65% of the average cost of
the technology).
We invited public comments on whether the ThoraflexTM
Hybrid Device meets the cost criterion and our proposal to approve new
technology add-on payments for the ThoraflexTM Hybrid Device
for FY 2023, subject to the ThoraflexTM Hybrid Device
receiving FDA marketing authorization by July 1, 2022 for the open
surgical repair or replacement of damaged or diseased vessels of the
aortic arch and descending aorta, with or without involvement of the
ascending aorta, in cases of aneurysm and/or dissection.
Comment: The applicant submitted a public comment expressing
support for the approval of the ThoraflexTM Hybrid Device
for the new technology add-on payment for FY 2023. The applicant
emphasized that both X2RX0N7 (Replacement of thoracic aorta arch with
branched synthetic substitute with intraluminal device, new technology
group 7) and X2VW0N7 (Restriction of thoracic descending aorta with
branched synthetic substitute with intraluminal device, new technology
group 7) need to be reported concurrently to appropriately describe the
implant procedure for the ThoraflexTM Hybrid Device.
Response: We appreciate the applicant's support.
Based on the information provided in the application for new
technology add-on payments, and after consideration of the public
comments we received, we believe the ThoraflexTM Hybrid
Device meets the cost criterion. The ThoraflexTM Hybrid
Device received marketing authorization from FDA on April 19, 2022 for
the indications covered by its Breakthrough Device designation for the
open surgical repair or replacement of damaged or diseased vessels of
the aortic arch and descending aorta, with or without involvement of
the ascending aorta, in cases of aneurysm and/or dissection. Therefore,
we are finalizing our proposal to approve new technology add-on
payments for the ThoraflexTM Hybrid Device for FY 2023, and
we consider the beginning of the newness period to commence on April
19, 2022, which is the date on which the technology received FDA
marketing authorization for the indication covered by its Breakthrough
Device designation.
Based on the information at the time of this final rule, the cost
per case of the ThoraflexTM Hybrid Device is $35,000 per
patient. Under Sec. 412.88(a)(2), we limit new technology add-on
payments to the lesser of 65% of the average cost of the technology, or
65% of the costs in excess of the MS DRG payment for the case. As a
result, we are finalizing that the maximum new technology add-on
payment for a case involving the use of the ThoraflexTM
Hybrid Device is $22,750 for FY 2023 (that is, 65% of the average cost
of the technology). Cases involving the use of the
ThoraflexTM Hybrid Device that are eligible for new
technology add-on payments will be identified by the ICD-10-PCS code
X2RX0N7 (Replacement of thoracic aorta arch with branched synthetic
substitute with intraluminal device, new technology group 7) in
combination with the ICD-10-PCS code X2VW0N7 (Restriction of thoracic
descending aorta with branched synthetic substitute with intraluminal
device, new technology group 7).
(5) ViviStim[supreg] Paired VNS System
MicroTransponder, Inc. submitted an application for new technology
add-on payments for the ViviStim[supreg] Paired VNS System for FY 2023.
According to the applicant, the ViviStim[supreg] Paired VNS System is a
paired vagus nerve stimulation therapy intended to stimulate the vagus
nerve during rehabilitation therapy to reduce upper extremity motor
deficits and improve
[[Page 48976]]
motor function in chronic ischemic stroke patients with moderate to
severe arm impairment. The applicant stated that the Vivistim[supreg]
Paired VNS System is comprised of an Implantable Pulse Generator (IPG),
an implantable stimulation Lead, and an external paired stimulation
controller which is composed of the external Wireless Transmitter (WT)
and the external Stroke Application and Programming Software (SAPS).
According to the applicant, the external paired stimulation controller
(SAPS and WT) enables the implanted components (the IPG and Lead) to
stimulate the vagus nerve during rehabilitation. The applicant stated
that patients undergo 25-30 hours of in-clinic rehabilitation over 6
weeks, where the ViviStim[supreg] Paired VNS System is actively paired
with rehabilitation by a therapist. The applicant further stated that
following this in-clinic rehabilitation period, when directed by a
physician and with appropriate programming to the IPG, the patient can
initiate at-home use by swiping a magnet over the IPG implant site
which activates the IPG to deliver stimulation while rehabilitation
movements are performed.
The applicant stated that the ViviStim[supreg] Paired VNS System
was designated as a Breakthrough Device on February 10, 2021 for use in
stimulating the vagus nerve during rehabilitation therapy in order to
reduce upper extremity motor deficits and improve motor function in
chronic ischemic stroke patients with moderate to severe arm
impairment. According to the applicant, the ViviStim[supreg] Paired VNS
System received FDA premarket approval on August 27, 2021 as a Class
III implantable device for the same indication. The applicant stated
that the technology became commercially available on April 29, 2022 due
to manufacturing delays.
According to the applicant, there are no unique ICD-10-PCS
procedure codes to report the implantation of the device. The applicant
noted that together the following two ICD-10-PCS codes describe the
insertion of the ViviStim[supreg] Paired VNS System: 0JH60BZ (Insertion
of single array stimulator generator into chest subcutaneous tissue and
fascia, open approach) and 00HE0MZ (Insertion of neurostimulator lead
into cranial nerve, open approach). The applicant noted that these
codes may be used for any cranial nerve stimulator insertion procedure,
including VNS therapy for treatment resistant depression, VNS therapy
for refractory epilepsy, and upper airway stimulation to treat
obstructive sleep apnea. The applicant submitted a request to the ICD-
10 Coordination and Maintenance Committee for approval of a unique code
for FY 2022 to identify insertion of the ViviStim[supreg] Paired VNS
System and was granted approval for the following procedure code
effective October 1, 2022: X0HQ3R8 (Insertion of neurostimulator lead
with paired stimulation system into vagus nerve, percutaneous approach,
new technology group 8).
The applicant also provided the ICD-10-CM diagnosis codes in the
table that follows. The applicant stated that moderate to severe upper
limb impairment is described in the ICD-10-CM as monoplegia (single
limb) or hemiplegia (single laterality, including upper limb). The
applicant stated that the FY 2021 ICD-10-CM code set \204\ includes
monoplegia and hemiplegia as a sequela of infarction (stroke), and
delineates codes based upon stroke type (hemorrhagic versus ischemic).
Therefore, the applicant stated that the ICD-10-CM diagnosis codes in
the following table describe chronic moderate to severe upper arm
impairment as a sequela of ischemic stroke, and are related to the use
of the ViviStim[supreg] Paired VNS System.
[GRAPHIC] [TIFF OMITTED] TR10AU22.104
With respect to the cost criterion, the applicant presented the
following analysis. The applicant searched the FY 2019 MedPAR claims
data set released with the FY 2022 IPPS/LTCH PPS final rule for cases
representing patients who may be eligible for the ViviStim[supreg]
Paired VNS System. The applicant identified cases reporting the ICD-10-
PCS codes 0JH60BZ and 00HE0MZ in combination with one of the ICD-10-CM
diagnosis codes, noted previously, describing moderate to severe upper
limb impairment. The applicant then mapped the cases to the appropriate
MS-DRGs using MS-DRG Grouper Version 39.0. After imputing a case count
of 11 for those MS-DRGs with fewer than 11 cases, the applicant
identified 285 claims mapping to 12 MS-DRGs, with 65% of cases mapping
to MS-DRGs 024 (Craniotomy with Major Device Implant or Acute Complex
CNS Principal Diagnosis without MCC), 041 (Peripheral Cranial Nerve and
Other Nervous System Procedures with CC or Peripheral Neurostimulator)
and 042 (Peripheral Cranial Nerve and Other Nervous System Procedures
without CC/MCC).
---------------------------------------------------------------------------
\204\ https://www.cms.gov/medicare/icd-10/2021-icd-10-cm,
effective October 1, 2020 through September 30, 2021.
---------------------------------------------------------------------------
The applicant then removed 100% of charges associated with Medical/
Surgical Supplies and Devices (prior technology, revenue centers 027X,
and 0624). The applicant asserted that the use of the Vivistim[supreg]
Paired VNS System is expected to replace the majority of existing
technologies, although some devices would still be required to perform
the procedure. The applicant stated that because it could not determine
the estimated percentage of the total charges that would be replaced,
it removed 100% of these total charges to be as conservative as
possible. The applicant did not remove charges related to the
technology being replaced,
[[Page 48977]]
stating that the financial impact of utilizing the Vivistim[supreg]
Paired VNS System on hospital resources compared to prior technologies
other than on Medical Supplies is minimal, and that 100% of charges for
Medical/Surgical Supplies had been removed in the previous step.
The applicant standardized the charges by applying the three-year
inflation factor of 1.20469 used in the FY 2022 IPPS/LTCH PPS final
rule and correction notice to calculate outlier threshold charges (86
FR 45542). The applicant then added charges for the new technology by
dividing the cost of the ViviStim[supreg] Paired VNS System by the
national average CCR for implantable devices which is 0.293 as
published in the FY 2022 IPPS/LTCH IPPS final rule (86 FR 44966). The
applicant calculated a final inflated average case-weighted
standardized charge per case of $200,398 which exceeded the average
case-weighted threshold amount of $107,963. Because the final inflated
average case-weighted standardized charge per case exceeded the average
case-weighted threshold amount, the applicant maintained that the
ViviStim[supreg] Paired VNS System meets the cost criterion.
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28350), we agreed
with the applicant that the ViviStim[supreg] Paired VNS System meets
the cost criterion and therefore proposed to approve the
ViviStim[supreg] Paired VNS System for new technology add-on payments
for FY 2023.
Based on preliminary information from the applicant at the time of
the proposed rule, the total cost of the ViviStim[supreg] Paired VNS
System to the hospital was $36,000 per patient. According to the
applicant, this cost represents the entire per-patient cost of the
system to hospital providers--specifically for the cost of the
Implantable Pulse Generator and stimulation lead. Per the applicant,
there is no charge associated with the external paired stimulation
controller and the magnet/take-home patient programmer. The applicant
stated that the external paired stimulation controller may be used on
multiple patients and that it retains a service agreement with each
provider to own, maintain, and update the hardware and software that
resides on that device component. The applicant has also stated that
they have this service agreement with providers for the magnet/take-
home patient programmer. Therefore, as the applicant has stated they
retain and maintain the reusable hardware components at no charge to
the providers, we stated that it appeared that capital components were
not included in the cost of the technology. We welcomed public comment
on the cost information provided by the applicant for the purpose of
calculating the new technology add-on payment amount.
We noted that the cost information for this technology may be
updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Under Sec. 412.88(a)(2), we
limit new technology add-on payments to the lesser of 65% of the
average cost of the technology, or 65% of the costs in excess of the
MS-DRG payment for the case. As a result, we proposed that the maximum
new technology add-on payment for a case involving the use of the
ViviStim[supreg] Paired VNS System would be $23,400 for FY 2023 (that
is, 65% of the average cost of the technology).
We invited public comments on whether the ViviStim[supreg] Paired
VNS System meets the cost criterion and our proposal to approve new
technology add-on payments for the ViviStim[supreg] Paired VNS System
for FY 2023 for use in stimulating the vagus nerve during
rehabilitation therapy in order to reduce upper extremity motor
deficits and improve motor function in chronic ischemic stroke patients
with moderate to severe arm impairment.
Comment: We received a few comments supporting our proposal to
approve new technology add-on payments for FY 2023. The applicant also
noted that the ViviStim[supreg] Paired VNS System received FDA
premarket approval on August 27, 2021; however, a manufacturing delay
prevented market availability of the device until April 29, 2022. The
applicant requested that CMS begin the newness period for the
Vivistim[supreg] Paired VNS System using the latter market availability
date of April 29, 2022. The applicant also supported our proposed
maximum new technology add-on payment amount.
Response: We thank the commenters for their support and feedback.
We agree that the newness date for this technology is the date on which
ViviStim[supreg] Paired VNS System became available on the market,
April 29, 2022. We note that though, generally, our policy is to begin
the newness period on the date of FDA approval or clearance, we may
consider a documented delay in the technology's market availability in
our determination of newness (77 FR 53348 and 70 FR 47341).
Based on the information provided in the application for new
technology add-on payments, and after consideration of the public
comments we received, we believe the ViviStim[supreg] Paired VNS System
meets the cost criterion. Therefore, we are finalizing our proposal to
approve new technology add-on payments for the ViviStim[supreg] Paired
VNS System for FY 2023, and we consider the beginning of the newness
period to commence on April 29, 2022, which is when the technology
became commercially available for the indication covered by its
Breakthrough Device designation, for use in stimulating the vagus nerve
during rehabilitation therapy in order to reduce upper extremity motor
deficits and improve motor function in chronic ischemic stroke patients
with moderate to severe arm impairment.
Based on the information at the time of this final rule, the cost
per case of the ViviStim[supreg] Paired VNS System is $36,000.
According to the applicant, this cost represents the entire per-patient
cost of the system to hospital providers, specifically for the
implantable pulse generator and stimulation lead. Under Sec.
412.88(a)(2), we limit new technology add-on payments to the lesser of
65% of the average cost of the technology, or 65% of the costs in
excess of the MS DRG payment for the case. As a result, we are
finalizing that the maximum new technology add-on payment for a case
involving the use of the ViviStim[supreg] Paired VNS System would be
$23,400 for FY 2023 (that is, 65% of the average cost of the
technology). Cases involving the use of the ViviStim[supreg] Paired VNS
System that are eligible for new technology add-on payments will be
identified by the ICD-10-PCS procedure code X0HQ3R8 (Insertion of
neurostimulator lead with paired stimulation system into vagus nerve,
percutaneous approach, new technology group 8).
[[Page 48978]]
b. Alternative Pathways for Qualified Infectious Disease Products
(QIDPs)
(1) DefenCathTM (Solution of Taurolidine (13.5 mg/mL) and
Heparin (1000 USP Units/mL))
CorMedix Inc. submitted an application for new technology add-on
payments for DefenCathTM (solution of taurolidine (13.5 mg/
mL) and heparin (1000 USP Units/mL)) for FY 2023. The applicant stated
that DefenCathTM is a proprietary formulation of
taurolidine, a thiadiazinane antimicrobial, and heparin, an anti-
coagulant, that is under development for use as catheter lock solution,
with the aim of reducing the risk of catheter-related bloodstream
infections (CRBI) from in-dwelling catheters in patients undergoing
hemodialysis (HD) through a central venous catheter (CVC). According to
the applicant, in vitro studies of DefenCathTM indicate
broad antimicrobial activity against gram-positive and gram-negative
bacteria, including antibiotic resistant strains as well as
mycobacteria and clinically relevant fungi. The applicant stated that
DefenCathTM is available in a single-dose vial, which is
sufficient to fill both lumens of the HD catheter, and is instilled
into the catheter lumen as a lock solution at the conclusion of each
dialysis session and aspirated at the beginning of the next dialysis
session. The applicant noted that DefenCathTM cannot be
flushed or injected into the patient and that dosing is calibrated to
the volume of the catheter lumens.
Per the applicant, DefenCathTM was designated by FDA as
a QIDP in 2015 for the prevention of CRBSI in patients with end-stage
renal disease (ESRD) receiving HD through a central venous catheter,
and has been granted FDA Fast Track status. The applicant indicated
that it is pursuing an NDA under FDA's LPAD for the same indication,
which the applicant also stated received Priority Review. The applicant
noted that FDA issued a Complete Response Letter in 2021 denying the
NDA due to concerns with the third-party manufacturing facility. The
applicant stated that the NDA has been resubmitted and anticipates
approval in the third quarter of CY 2022.\205\ We note that, as an
application submitted under the alternative pathway for certain
antimicrobial products at Sec. 412.87(d), DefenCathTM is
eligible for conditional approval for new technology add-on payments if
it does not receive FDA marketing authorization by the July 1 deadline
specified in Sec. 412.87(e)(2), provided that the technology receives
FDA marketing authorization by July 1 of the particular fiscal year for
which the applicant applied for new technology add-on payments (that
is, July 1, 2023).
---------------------------------------------------------------------------
\205\ The statement in the proposed rule (87 FR 28350) that the
applicant anticipated approval before July 1, 2022 was in error and
has been corrected here.
---------------------------------------------------------------------------
The applicant applied for and received a unique ICD-10-PCS
procedure code to identify cases involving the administration of
DefenCathTM in 2022. Effective October 1, 2022,
DefenCathTM administration can be identified by ICD-10-PCS
procedure XY0YX28 (Extracorporeal introduction of taurolidine anti-
infective and heparin anticoagulant, new technology group 8).
With regard to the cost criterion, the applicant provided two
analyses to demonstrate that DefenCathTM meets the cost
criterion. The applicant first searched the FY 2019 MedPAR file
released with the FY 2022 IPPS/LTCH PPS final rule for claims based on
the presence of one of the following ICD-10-CM diagnosis codes used to
identify ESRD, chronic kidney disease (CKD), acute kidney injury (AKI)
or acute tubular necrosis (ATN).
[GRAPHIC] [TIFF OMITTED] TR10AU22.105
Per the applicant, DefenCathTM will be used for patients
receiving HD through a CVC. The applicant stated that coding to
identify this population is difficult because the available CVC codes
only describe the insertion of a CVC. The applicant asserted that it is
not possible to identify in the MedPAR file those patients who had
previously received a CVC and are now hospitalized and receiving HD.
Therefore, the applicant developed two sets of selection criteria:
claims with codes for HD (Analysis A) and claims with codes for both HD
and CVC (Analysis B). The applicant asserted that Analysis A overstates
the population of patients eligible for DefenCathTM because
it includes any patient receiving HD, regardless of whether a central
venous catheter is used. The applicant also asserted that Analysis B
undercounts the potential cases because CVC codes are not always
available on inpatient claims.
In the first analysis (Analysis A), which included only claims with
codes for chronic HD, the applicant searched for claims based on the
presence of one of the ICD-10-CM diagnosis codes previously listed and
then limited the selection criteria to claims including ICD-10-CM
diagnosis code Z49.31 (encounter for adequacy testing for HD)
[[Page 48979]]
or one of the following ICD-10-PCS procedure codes for HD:
[GRAPHIC] [TIFF OMITTED] TR10AU22.106
After imputing a case count of 11 to any MS-DRG with fewer than 11
cases in the FY 2019 MedPAR file released with the FY 2022 IPPS final
rule, the applicant identified a total of 490,790 cases mapping to 512
MS-DRGs. The following table shows the top 20 MS-DRGs, which account
for 57% of all cases included in Analysis A.
[GRAPHIC] [TIFF OMITTED] TR10AU22.107
For Analysis B, the applicant used the same case selection criteria
as Analysis A (the presence of an ICD-10-procedure or diagnosis code
for HD only) but further limited cases to those that include one of the
following ICD-10 procedure codes for the insertion of a CVC.
[[Page 48980]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.108
The applicant asserted that the patient population in Analysis B
(HD and central venous catheter) is more likely to receive
DefenCathTM during an inpatient stay. After imputing a case
count of 11 to any MS-DRG with fewer than 11 cases, the applicant
identified a total of 60,679 cases mapping to 408 MS-DRGs. The
following table shows the top 20 MS-DRGs by case count, which account
for 72% of all cases included in Analysis B.
[GRAPHIC] [TIFF OMITTED] TR10AU22.109
In both analyses, the applicant did not remove charges for prior
technology because DefenCathTM would not replace other
therapies a patient may receive during an inpatient stay. The applicant
standardized the charges using the FY 2022 IPPS final rule impact file
and applied a 4-year inflation factor of 1.281834 to update the charges
from FY 2019 to FY 2023 based on the inflation factor used to update
the outlier threshold in the FY 2022 IPPS/LTCH PPS final rule (86 FR
45542). The applicant did not add charges for new technology as the
cost of DefenCathTM has not yet been determined but believes
that the technology meets the
[[Page 48981]]
cost criterion without the additional charges.
The applicant calculated a final inflated case-weighted average
standardized charge per case of $116,221 for Analysis A and a final
inflated case-weighted average standardized charge per case of $203,746
for Analysis B. The applicant also determined an average case weighted
threshold amount of $77,290 in Scenario A and $96,645 in Scenario B.
Because the final inflated case-weighted average standardized charge
per case for each scenario exceeded the average case-weighted threshold
amount for both scenarios, the applicant asserted that
DefenCathTM meets the cost criterion.
In the proposed rule, we agreed that the technology meets the cost
criterion and therefore proposed to approve DefenCath\TM\ for new
technology add on payments for FY 2023. We stated in the proposed rule
that we expected the applicant to submit its cost per case information
prior to the final rule, and that we would provide an update regarding
the new technology add-on payment amount for the technology in this
final rule. We stated that any new technology add-on payment for
DefenCathTM would be subject to our policy under Sec.
412.88(a)(2) where we limit new technology add-on payments for QIDPs to
the lesser of 75% of the average cost of the technology, or 75% of the
costs in excess of the MS-DRG payment for the case.
We invited comments on whether DefenCathTM meets the
cost criterion and our proposal to approve DefenCathTM for
new technology add-on payments for FY 2023.
Comment: The applicant submitted a public comment in support of
CMS' proposal to approve new technology add-on payments for FY 2023 for
DefenCathTM. The applicant requested that CMS correct
erroneous information from the proposed rule, stating that the FDA new
device approval date is expected later in the third quarter of 2022,
rather than by July 1, 2022, as stated in the proposed rule. The
applicant also provided the anticipated cost of DefenCathTM,
which the applicant states is $5,850 to the hospital, per patient.
Response: We appreciate the applicant's support and provision of
the cost information. We appreciate the applicant's clarification that
the FDA new device approval date is anticipated late in the third
quarter of CY 2022 rather than by July 1, 2022 as stated in the
proposed rule. This discussion now accurately reflects the anticipated
timeline for FDA approval.
Comment: A commenter expressed concern that without information on
the cost of DefenCathTM at the time of the publication of
the proposed rule, it is difficult to comment positively or negatively
on the cost of the technology. This commenter also expressed concern
that, without FDA approval at the time of the publication of the
proposed rule, it is likewise difficult to comment on the potential
impact of the technology. The commenter raised concerns that applicants
under the Alternative Pathway for Transformative New Devices and
Alternative Pathway for Certain Antimicrobial Products do not have to
meet the substantial clinical improvement criterion under 412.87(d) and
recommend that CMS incorporate substantial clinical improvement in its
evaluation of applicants under the alternative pathways.
Response: We thank the commenter for its input. As discussed in FY
2020 IPPS/LTCH PPS final rule (84 FR 42294 through 42295), we believe
that although there may be less certainty of clinical benefit or data
representing the Medicare beneficiary population as compared to the
evidence standard for substantial clinical improvement under the
current new technology add-on payment policy pathway, the benefits of
providing early access to critical and life-saving new cures and
technologies that improve beneficiary health outcomes support the
alternative pathway. We also stated our belief that the evidence base
to demonstrate substantial clinical improvement may not be fully
developed at the time of FDA marketing authorization. We refer the
reader to the FY 2020 IPPS/LTCH PPS final rule for a further discussion
of the development of these alternative pathways.
With respect to cost information, consistent with the formula
specified in section 1886(d)(5)(K)(ii)(I) of the Act, we assess the
adequacy of the MS-DRG prospective payment rate otherwise applicable to
discharges involving the new medical service or technology by
evaluating whether the charges for cases involving the new technology
exceed certain threshold amounts. The MS-DRG threshold amounts used in
evaluating new technology add-on payment applications for FY 2023 are
presented in a data file that is available, along with the other data
files associated with the FY 2022 IPPS final rule on the CMS website
at: https://www.cms.gov/medicare/acute-inpatient-pps/fy-2022-ipps-final-rule-home-page. As discussed in the proposed rule, we agreed that
based on the applicant's cost analysis, the final inflated case-
weighted average standardized charge per case for the technology
exceeded the applicable average case-weighted threshold amount. We also
note that applicants for new technology add-on payment are not required
to have FDA approval by the time of the publication of the proposed
rule. In addition, and as discussed in the proposed rule and later in
this final rule, where cost information is not yet available at the
time of the proposed rule, we note our expectation is that the
applicant will submit cost information prior to the final rule, and
indicate that we will provide an update regarding the new technology
add-on payment amount for the technology, if approved, in the final
rule.
Based on the information provided in the application for new
technology add-on payments, and after consideration of the public
comments we received, we believe DefenCathTM (a single dose
vial, solution of Taurolidine (13.5 mg/mL) and Heparin (1000 USP Units/
mL)) meets the cost criterion. Therefore, we are granting a conditional
approval for DefenCathTM for new technology add-on payments
for FY 2023, subject to the technology receiving FDA marketing
authorization by July 1, 2023 (that is, by July 1 of the fiscal year
for which the applicant applied for new technology add-on payments
(2023)). In the proposed rule we stated that as an application
submitted under the alternative pathway for certain antimicrobial
products at Sec. [thinsp]412.87(d), DefenCathTM is eligible
for conditional approval for new technology add-on payments if it does
not receive FDA marketing authorization by the July 1 deadline
specified in Sec. [thinsp]412.87(e)(2), provided that the technology
receives FDA marketing authorization by July 1 of the particular fiscal
year for which the applicant applied for new technology add-on payments
(that is, July 1, 2023) (87 FR 28350). If DefenCathTM
receives FDA marketing authorization before July 1, 2023, the new
technology add-on payment for cases involving the use of this
technology would be made effective for discharges beginning in the
first quarter after FDA marketing authorization is granted. If FDA
marketing authorization is received on or after July 1, 2023, no new
technology add-on payments will be made for cases involving the use of
DefenCathTM for FY 2023.
Based on the information at the time of this final rule, the cost
per case of the DefenCathTM is $5,850. Under Sec.
412.88(a)(2) we limit new technology add-on payments for QIDPs to the
lesser of 75% of the average cost of the technology, or 75% of the
costs in excess of the MS-DRG payment for the case. As a result, we are
finalizing that,
[[Page 48982]]
subject to DefenCathTM receiving marketing authorization by
July 1, 2023, the maximum new technology add-on payment for a case
involving the use of DefenCathTM will be for $4,387.50 for
FY 2023 (that is, 75% of the average cost of the technology). Cases
involving the use of DefenCathTM that are eligible for new
technology add-on payments will be identified by ICD-10-PCS procedure
code XY0YX28 (Extracorporeal introduction of taurolidine anti-infective
and heparin anticoagulant, new technology group 8).
c. Other Comments
We received several public comments on new technology add-on
payment alternative pathway recommendations that were outside the scope
of the proposals included in the FY 2023 IPPS/LTCH PPS proposed rule
and we are therefore not addressing them in this final rule. We
appreciate these comments and may consider them for possible proposals
in future rulemaking.
8. Use of National Drug Codes (NDCs) To Identify Cases Involving Use of
Therapeutic Agents Approved for New Technology Add-On Payment
As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49434
through 49435), as a part of the transition to the ICD-10-CM diagnosis
and ICD-10-PCS procedure coding system from the ICD-9-CM coding system,
CMS established the use of Section ``X'' New Technology codes within
the ICD-10-PCS classification to more specifically identify new
technologies or procedures that have historically not been captured
through ICD-9-CM codes, or to more precisely describe information on a
specific procedure or technology than is found with the other sections
of ICD-10-PCS. However, as noted in the FY 2023 IPPS/LTCH PPS proposed
rule (87 FR 28353 through 28355), CMS continued to receive comments
from interested parties, including representatives from hospital
associations, software vendors, professional societies, and coding
professionals, opposing the continued creation of new ICD-10-PCS (for
example, Section X) procedure codes for the purpose of administering
the new technology add-on payment for drugs and biologics.
Specifically, public comments from the ICD-10 Coordination and
Maintenance Committee Meetings have stated that the ICD-10-PCS
classification system was not intended to represent unique drugs/
therapeutic agents and is not an appropriate code set for this purpose.
Commenters explained that, since the implementation of ICD-10, Section
X codes have been established for procedures describing the
administration of a drug/therapeutic agent, which historically were not
typically coded in the inpatient hospital setting. Commenters stated
their belief that it was not logical nor should it be expected for
hospital coding professionals to seek codes for the administration of
drugs within the ICD-10-PCS classification system. In addition, we
noted that over the past 3 years, the number of applications for new
technology add-on payments has continued to increase, which has
subsequently resulted in an increasing number of requests for unique
ICD-10-PCS (for example, Section X) procedure codes specifically for
the purposes of administering the new technology add-on payments.
As discussed in the proposed rule, the current process of
requesting, proposing, finalizing and assigning new ICD-10-PCS
procedure codes to identify and describe the administration of drugs
involves several steps, as described further in this section, and
frequently results in a number of procedure codes that are created
unnecessarily when the drug/therapeutic agents do not receive approval
for the new technology add-on payments, as the administration of drugs/
therapeutic agents is not typically coded in the inpatient hospital
setting. Applicants seeking a unique ICD-10-PCS (for example, Section
X) procedure code to identify the use of their technology for purposes
of new technology add-on payments must complete the code request
process prior to learning the outcome of their new technology add-on
payment application. This process involves a number of steps,
including: gathering relevant information and submitting the ICD-10-PCS
code request; developing a slide deck for the ICD-10 Coordination and
Maintenance Committee Meeting; and reviewing the background paper draft
for the ICD-10 Coordination and Maintenance Committee Meeting agenda
and meeting materials. CMS also expends significant time, effort, and
resources to administer this process, which is compounded by the
increasing number of requests for unique ICD-10-PCS (for example,
Section X) procedure codes. CMS must work with applicants to review,
prepare, and present the code proposals at ICD-10 Coordination and
Maintenance Committee Meetings, then review and summarize public
comments received in response to the meetings, and ultimately make a
decision on the codes requested for new technology add-on payment
policy purposes before the outcome of the new technology add-on payment
application (approval or denial) is known. Following the end of the
three-year timeframe for which a code was created in connection with a
new technology add-on payment application, the disposition of the
Section X code is addressed at a later ICD-10 Coordination and
Maintenance Committee meeting and CMS subsequently receives public
comments that must be reviewed regarding this disposition.
We stated that interested parties had submitted comments that
suggested alternative options to the use of Section X procedure codes
to identify therapeutic agents for the administration of the new
technology add-on payment policy. The majority of commenters supported
using National Drug Codes (NDCs), because it would avoid creating
duplicate codes within the ICD-10-PCS and NDC code sets to identify the
same technology/product, which would allow for predictive and efficient
coding. Commenters also stated that using NDCs would generate product
data on inpatient claims that would allow for outcomes analyses, thus
providing the same benefit as a unique ICD-10-PCS code. Some commenters
suggested using the 3E0 Administration Table within the ICD-10-PCS code
set, as opposed to Section X, as they stated this would be a more
intuitive location for coders to look for ICD-10-PCS procedure codes
describing the administration of therapeutic agents. However, a
commenter noted that this would be unsustainable due to the potentially
large number of new products coming to market. A few commenters also
suggested using different drug terminologies, such as RxNorm, in lieu
of using Section X codes for the time period needed to administer the
new technology add-on payment. We also noted that we have previously
established the use of NDCs as an alternative code set for the purposes
of administering the new technology add-on payment in circumstances
where an ICD-10-PCS code was not available to uniquely identify the use
of the technology. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53351
through 53354), we established the use of the NDC code set to identify
oral medications where no inpatient procedure was associated, to report
the oral administration of the drug DIFICIDTM. We finalized
that the NDC for DIFICIDTM would be used in conjunction with
an ICD-9-CM diagnosis code to uniquely identify the indication for
which administration of the drug (technology) was performed for
[[Page 48983]]
new technology add-on payment purposes. In the FY 2019 IPPS/LTCH PPS
final rule (83 FR 41311), we stated that we believed that the
circumstances with respect to the identification of eligible cases
reporting the use of VABOMERETM, which was administered by
IV infusion, were similar to those addressed in the FY 2013 IPPS/LTCH
PPS final rule with regard to DIFICIDTM because we also did
not have current ICD-10-PCS code(s) to uniquely identify the use of
VABOMERETM to make the new technology add-on payments.
Therefore, consistent with our approach in FY 2013, we stated that we
would identify cases involving the use of VABOMERETM that
were eligible for FY 2019 new technology add-on payments using its NDCs
65293-0009-01 or 70842-0120-01\206\ (VABOMERETM Meropenem-
Vaborbactam Vial). At the time of its new technology add-on payment
application approval, VABOMERETM was not assigned a
corresponding ICD-10-PCS procedure or ICD-10-CM diagnosis code along
with its NDCs. In addition, cases involving the use of two therapeutic
agents that qualify for NCTAP, which is administered similarly to the
new technology add-on payment, are identified using the NDCs for these
products for the purposes of the NCTAP, because there are not currently
ICD-10-PCS procedure codes that uniquely describe the administration of
these therapies.\207\
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\206\ We note that these are not the FDA assigned NDCs, but
rather have been converted from 10-digit NDCs assigned by FDA to the
HIPAA compliant 11-digit format.
\207\ New COVID-19 Treatments Add-On Payment (NCTAP) https://www.cms.gov/medicare/covid-19/new-covid-19-treatments-add-payment-nctap.
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In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28353 through
28355), we stated that we believed that our previous policies regarding
the use of NDCs to identify the administration of certain therapeutic
agents could be consistently applied toward broader future usage of the
NDCs to identify therapeutic agents eligible for the new technology
add-on payment. Additionally, we stated that we believed that the use
of an existing code set to identify therapeutic agents eligible for the
new technology add-on payment would address concerns raised by
commenters regarding the use of the ICD-10-PCS classification system to
identify these agents, and reduce the need for applicants to seek a
unique ICD-10-PCS code through the ICD-10-PCS Section X code request
process in advance of a determination on their new technology add-on
payment applications.
Therefore, as we discussed further in this section of the proposed
rule and this final rule, we proposed for FY 2024 to instead use NDCs
to identify cases involving the use of therapeutic agents approved for
the new technology add-on payment. We stated that we anticipated that
this proposal would reduce work for hospital coding professionals in
becoming familiar with newly created ICD-10-PCS Section X codes to
describe the administration of therapeutic agents and in searching for
these codes within the documentation and within the classification in
what may be non-intuitive locations. We stated that we also expected
that the proposed change would address concerns regarding the creation
of duplicative codes within the ICD-10-PCS procedure coding system to
describe the administration of therapeutic agents, which would also
reduce the need for vendors to incorporate additional procedure codes
into their coding products; for educators to provide training on these
codes; and for programmers to maintain codes that may be seldom
reported on inpatient claims but for the purposes of the new technology
add-on payment, in their databases. We stated it would also reduce
efforts associated with determining the disposition of procedure codes
describing therapeutic agents that have reached the end of their 3-year
new technology add-on payment timeframe.
Furthermore, we stated that we believed that NDCs are a viable
alternative to Section X codes for the administration of the new
technology add-on payment for therapeutic agents. We stated that we
believed inpatient hospital staff are familiar with using NDCs, and as
stated earlier, we have previously utilized NDCs to administer the new
technology add-on payment. However, to allow for adequate time to
implement this regular usage of NDCs with the new technology add-on
payment for health care providers and hospital coding professionals, we
proposed a transitional period for FY 2023. During this transitional
period, we proposed to utilize NDCs to identify the administration of
therapeutic agents for new technology add-on payment purposes. However,
we also proposed to utilize ICD-10-PCS Section X codes, including codes
newly created for FY 2023, for therapeutic agents during the FY 2023
new technology add-on payment application cycle. Beginning with the FY
2024 new technology add-on payment application cycle, we proposed to
utilize only NDCs to identify claims involving the administration of
therapeutic agents approved for the new technology add-on payment, with
the exception of claims involving therapeutic agents that are not
assigned an NDC by FDA (for example, blood, blood products, etc.) and
are approved for the new technology add-on payment. Cases involving the
use of these technologies approved for the new technology add-on
payment would continue to be identified based on the assigned ICD-10-
PCS procedure code. A unique ICD-10-PCS procedure code would also still
be needed to identify cases involving the use of CAR T-cell and other
immunotherapies that may be assigned to Pre-MDC MS-DRG 018, because the
ICD-10 MS-DRG GROUPER logic for assignment to Pre-MDC MS-DRG 018 is
comprised of the procedure codes describing these CAR T-cell and other
immunotherapy products. Therefore, under the proposal, beginning with
FY 2024 new technology add-on payment applications submitted for a
therapeutic agent, CMS would review the information and inform the
applicant, in advance of the deadline for submitting an ICD-10-PCS
procedure code request to the ICD-10 Coordination and Maintenance
Committee for consideration at the March meeting, if it would be
necessary to submit such a code request for purposes of identifying
cases involving the use of the therapeutic agent for the new technology
add-on payment, if approved, or if, based on the information made
available with the application, the NDC could be used to identify such
cases, and therefore, the applicant would not need to submit an ICD-10-
PCS procedure code request. For each applicable technology that may be
approved for new technology add-on payment, we proposed to indicate the
NDC(s) to use to identify cases involving the administration of the
therapeutic agent for purposes of the new technology add-on payment.
Specifically, we proposed that, during the transitional period
beginning with discharges on or after October 1, 2022 (FY 2023), the
administration of therapeutic agents newly approved for new technology
add-on payments would be uniquely identified using either their
respective NDC(s) or ICD-10-PCS procedure code(s), in combination with
ICD-10-CM codes when appropriate. As stated in our FY 2013 IPPS/LTCH
PPS final rule, the use of the NDCs ``does not preclude CMS from using
additional ICD-9-CM procedure or diagnosis codes to identify cases for
this new technology in conjunction with this alternative code
[[Page 48984]]
set'' (77 FR 53352). Therefore, we stated when necessary, we may
require the use of additional ICD-10-PCS procedure and/or ICD-10-CM
diagnosis codes to uniquely identify cases using these technologies. We
stated that we would continue the use of the existing ICD-10-PCS
procedure codes to identify the administration of therapeutic agents
previously approved for the new technology add-on payment and that
remain eligible for the new technology add-on payment for FY 2023.
We further proposed that, beginning with discharges on or after
October 1, 2023 (FY 2024), the administration of therapeutic agents
newly approved for the new technology add-on payments beginning FY 2024
or a subsequent fiscal year would be uniquely identified only by their
respective NDC(s), along with the corresponding existing ICD-10 code(s)
required to uniquely identify the therapeutic agents, when necessary,
to make the new technology add-on payments. For technologies that were
newly approved for new technology add-on payments for FY 2023
(beginning with discharges on or after October 1, 2022) and remain
eligible for the new technology add-on payment for FY 2024 or a
subsequent fiscal year, we proposed to continue to allow the use of
either the existing ICD-10-PCS procedure codes or NDCs to identify the
administration of those therapeutic agents. For technologies that were
newly approved for new technology add-on payments prior to FY 2023 and
remain eligible for the new technology add-on payment for FY 2024 or a
subsequent fiscal year, we stated we would continue to use the existing
ICD-10-PCS procedure codes to identify the administration of those
therapeutic agents. We invited public comments on our proposal to
utilize NDCs to identify claims involving the use of therapeutic agents
approved for new technology add-on payments, including any potential
concerns regarding adoption of this code set for the identification of
therapeutic agents for purposes of new technology add-on payments.
Comment: We received multiple comments related to the proposed
policy. A commenter stated that the ICD-10-PCS coding system is not
intended to represent unique therapeutic agents and is not an
appropriate code set for this purpose. The commenter also stated that
ICD-10-PCS codes have often been created unnecessarily because the
therapeutic agent was not approved for a new technology add-on payment,
and that in the absence of a new technology add-on payment,
administration of therapeutic agents is not typically coded in the
hospital inpatient setting. The commenter stated that assignment of
ICD-10-PCS codes by coding professionals solely for new technology add-
on payment purposes, for services that would not otherwise be coded in
the inpatient setting, is administratively burdensome. Another
commenter mentioned that using FDA's NDCs would allow for superior data
capture methods and eliminate manual intervention to complete coding.
Another commenter stated that given the likelihood of continued
therapeutic innovation, it viewed this proposed policy as a path toward
earlier access to these therapies by Medicare beneficiaries. A
commenter stated that as hospitals typically capture all NDCs related
to a patient stay within their electronic medical record systems, these
codes could easily be included with claims. The commenter requested
that CMS configure its system to accept all NDC codes, not just those
related to products eligible to receive new technology add-on payments,
to significantly reduce administrative burden for hospitals.
Several commenters also suggested that if CMS finalizes this
policy, we should establish a process to promote and educate hospitals
on this policy change to ensure that they are prepared for billing
under the new process, including clearly indicating which NDC(s) should
be used to identify a particular therapeutic agent for new technology
add-on payment purposes, as some therapeutic agents may have more than
one applicable NDC. Multiple commenters also urged CMS to extend the
proposed transitional process from one year to two years, that is,
through FY 2024, with NDC utilization beginning in FY 2025. Some
commenters also suggested that during this two-year transition period,
CMS should analyze claims data and obtain feedback from interested
parties to understand hospitals' usage of NDCs, prior to eliminating
the process for using ICD-10-PCS codes.
A commenter expressed support for our proposal to continue use of
ICD-10-PCS codes for cases assigned to Pre-MDC MS-DRG 018 (Chimeric
Antigen Receptor (CAR) T-cell and Other Immunotherapies) because
hospitals may not have had experience with submitting NDCs as part of
hospital inpatient claim forms for such cases. Another commenter stated
that it was concerned with our proposal to use NDCs in lieu of ICD-10-
PCS codes for allogeneic HSCT donor sources because providers, such as
hospitals, primarily report ICD-10-PCS codes and are unfamiliar with
NDCs for these donor sources. The commenter requested that CMS expand
our proposed exceptions to the use of NDCs for therapeutic agents to
also include the unique ICD-10-PCS codes describing the infusion of
therapeutics that begin with the characters XW1, as well as any future
advanced cell therapy donor sources.
A commenter explained that it disagreed with creating individual
ICD-10-PCS codes for specific drugs because it believed that ICD-10-PCS
nomenclature is for surgical procedures and not specific drugs. The
commenter expressed that coders do not routinely assign ICD-10-PCS
codes for example, for drugs, radiology procedures, and lab tests, and
that this would be an administrative burden on coders, as well as
billers, to ensure these drugs are identified through ICD-10-PCS
coding. The commenter stated that it would be more cost effective to
identify these specific drugs by their NDC number and not an ICD-10-PCS
code to ensure adequate reimbursement. Another commenter recommended
that CMS reevaluate our proposal to transition to the use of NDCs to
identify the administration of a therapeutic agent for purposes of new
technology add-on payment because the commenter stated that it would
add undue burden on coders who typically do not assign ICD-10-PCS codes
for drug administration for inpatient cases. The commenter also
requested that CMS pursue broader inpatient claims reporting
improvements.
Response: We appreciate the input from the commenters on our
proposed use of NDCs to identify cases involving use of therapeutic
agents approved for new technology add-on payment and have taken these
comments into consideration, as discussed later in this section.
Comment: A couple of commenters were grateful to CMS for listening
to feedback from interested parties and putting this proposal forward,
but had significant questions about implementation and existing
hospital resources for CMS to address prior to finalizing the use of
NDCs, and recommended that CMS retain the ICD-10-PCS coding for new
technology add-on payments. Other commenters stated that CMS does not
currently require NDC reporting on Medicare inpatient claims, except in
rare cases of previous new technology add-on payments, and that
reporting NDCs for only the occasional drug, and on an inpatient claim,
would create new operational burdens for hospitals, especially smaller
and rural hospitals, that do not currently have a system for concurrent
scanning of NDCs upon administration
[[Page 48985]]
of therapeutic agents. Another commenter stated that some hospitals
already have systems that would provide an automated method of
capturing NDC codes on inpatient claims, but that other facilities,
will face new and laborious manual processes despite reporting NDCs on
certain outpatient claims. A commenter noted that a recent analysis of
hospitals by Deloitte found that incorrect or missing NDC data had
caused inaccurate billing.\208\ The commenter further stated that it
believed the process to educate hospitals and subsequently require the
use of NDCs could possibly create a greater administrative burden than
it would save. Some commenters also noted that these burdens would come
at a time when hospitals continue to address resource and staffing
constraints resulting from the COVID-19 PHE. A commenter explained that
the transition to NDCs may create complexity in tracking patient cases,
which may make it difficult to perform further valuable research on
quality of care issues and health outcomes. Another commenter stated
that it believed any changes to the current process should be done in a
careful manner to ensure that CMS' efforts to move to a more
streamlined system do not have any inadvertent implications on claims
data.
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\208\ Evaluating Hospital Pharmacy Inventory Management and
Revenue Cycle Processes, White Paper Guidance for Healthcare
Internal Auditors https://ahia.org/assets/Uploads/pdfUpload/WhitePapers/EvaluatingHospitalPharmacyInventoryManagementandRevenueCycleProcesses.pdf.
---------------------------------------------------------------------------
A commenter stated that because there are multiple proposed
exceptions to the use of NDCs, the streamlining and burden reduction of
this policy may be limited. Another commenter stated that this proposal
would unnecessarily require two separate standards for devices and
drugs.
A commenter stated that hospitals are faced with increasingly
complex requirements to report drugs to secure reimbursement with
variations based upon code sets and patient status. The commenter
stated that for inpatient claims there are two ways of reporting drugs
for additional payment: hemophilia products reported with HCPCS codes
and billed units per date of service (DOS), and new technology add-on
payment-eligible drugs reported with a single ICD-10-PCS code
independent of number of doses or days administered. The commenter
further stated that outpatient claims are reported with HCPCS code and
billed units per DOS, with the exception of self-administered oral
drugs that were not assigned HCPCS codes, as well as specific new drugs
and biologicals billed under the HCPCS Code C9399 (Unclassified drug or
biological) and for which the commenter stated that CMS requires that
the drug name, dose, amount of waste and NDC number be manually added
to the remarks section of the claim. The commenter stated that hospital
pharmacy and billing IT systems need remediation with complex
maintenance in order to accurately bill drugs based upon the type of
drug, whether it is eligible for new technology add-on payment and the
status of the patient, and that many hospitals currently do not bill
some new technology add-on payment-eligible drugs due to the cumbersome
process and amount of the anticipated reimbursement, which the
commenter stated could lead to inadvertent billing errors or omissions
when a business decision is made that the anticipated payment will be
less than the cost to remediate IT systems and maintain these complex
billing rules. The commenter further stated that inaccurate data could
lead to erroneous future rate-setting by CMS when data is missing from
claims. The commenter recommended that CMS instead consider that new
technology add-on payment-eligible drugs be billed on inpatient claims
with the same instructions as currently used to report hemophilia
products, with HCPCS codes and billing units by DOS. The commenter
explained that having one way to bill drugs on inpatient and outpatient
claims would reduce IT programming expense and reduce errors with
increased standardization. The commenter requested that the CMS HCPCS
Working Group assign HCPCS codes to items eligible for new technology
add-on payment, even if they normally would not be assigned a HCPCS
code. The commenter stated that as HCPCS codes are assigned quarterly,
this would eliminate the need for special notification if new NDCs are
marketed after the implementation of the new technology add-on payment
status and before the next rule-making cycle. The commenter further
recommended that if CMS were to finalize its proposal to use NDCs, CMS
should work with the National Uniform Billing Committee (NUBC) to
clarify how 5010 HIPAA transaction standard units of measure and
billing quantities should be calculated and reported. The commenter
also recommended that CMS work with NUBC to require all payers to
accept NDCs on inpatient claims to avoid payer-specific instructions,
which require complex and expensive IT programming.
This commenter and several other commenters also requested CMS
provide additional information in rulemaking on how NDCs would be
utilized: if a NDC may be reported on multiple DOS, or if multi-day
therapies must be combined into a single line; whether units of
measures and quantities would be required to be reported; if this
policy would apply specifically for therapeutic agents eligible for new
technology add-on payment or for all therapeutic agents used in
Medicare; how a drug product with multiple NDCs would be handled; and
how CMS would publish available NDCs for analysis by interested parties
and update NDCs if the codes were changed by FDA post-rulemaking.
Several commenters also emphasized the complexity of information
transfer from the 10-digit FDA-assigned NDC number format to the 5010
HIPAA transaction standard required 11-digit NDC number format used for
billing on claims, especially when trying to reconstitute the NDC back
to its FDA standard. Other commenters noted future concerns with
potential changes in FDA assignment of NDC numbers from 10-digits to a
new 16-digit format, as well as the modifications needed to the 837I/
UB-04 forms to accommodate this change.
In addition, commenters highlighted issues regarding a lack of
national standards for correctly coding drugs using NDCs, as well as a
lack of acceptance of NDCs by all payers, on inpatient claims. A
commenter further stated that without specific guidance, current NDC
reporting is often inaccurate, resulting in increasing claim rejections
for an invalid NDC number. A couple of commenters explained that
currently, Form Locator 43 (FL43) on the UB-04 form is not unique to
only the NDC number. A commenter stated that they believed that the
proposed usage of this field may not be allowed because FL43 is
intended for the reporting of NDCs for Medicaid drug rebates, but not
for the new technology add-on payment. Some commenters also stated that
there was a potential for claim line limits to be reached if multiple
NDCs were reported on one claim. These commenters believed that this
policy change should be considered as part of broader inpatient claims
reporting improvements, with another commenter further stating that
grouping together necessary changes to 837I/UB-04 claim forms,
alongside updated instructions on NDC reporting for inpatients, would
minimize short-term burden as well as data inaccuracies.
Due to these concerns, a few commenters suggested that CMS further
[[Page 48986]]
study the feasibility of this proposed policy change though a Technical
Advisory Group (TAG), consisting of industry experts, before finalizing
and implementing this policy. A commenter further recommended that
other suggestions noted by CMS, such as the 3E0 Administration Table
within ICD-10-PCS code set and RxNorm, along with other options, such
as the HCPCS code set or a revision to the process that allows the ICD-
10-PCS code to be pending assignment until the finalization of the new
technology add-on payment determination, should be explored by the TAG
and presented in an upcoming proposed rule. Another commenter
recommended that CMS address alignment with timing for U.S.
implementation of ICD-11 codes.
Response: We appreciate the input from commenters on our proposed
use of NDCs to identify cases involving use of therapeutic agents
approved for new technology add-on payments. We acknowledge that
interested parties have continued to share concerns regarding our
current use of the ICD-10-PCS classification system to identify
therapeutic agents eligible for new technology add-on payments. As
discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28353
through 28355), we had anticipated that our proposal to use the NDC,
with its previously established use as an alternative code set for the
purposes of administering the new technology add-on payment, would
reduce work for hospital coding professionals in becoming familiar with
newly created ICD-10-PCS Section X codes to describe the administration
of therapeutic agents. We had also expected that this proposed change
would address concerns regarding the creation of duplicative codes
within the ICD-10-PCS procedure coding system, which would also reduce
the need for vendors to incorporate additional procedure codes into
their coding products; for educators to provide training on these
codes; and for programmers to maintain codes that may be seldom
reported on inpatient claims but for the purposes of the new technology
add-on payment in their databases.
However, as previously summarized, commenters have shared concerns
that our proposed use of NDCs for this purpose may impose new
administrative burdens to hospitals. For example, commenters indicated
that hospital pharmacy and billing IT systems that are not currently
required to use NDCs for billing on inpatient Medicare claims may need
to use manual processes to report NDCs for the purposes of new
technology add-on payments, because they may not have existing
automated systems in place.
Furthermore, based on review of comments, it is unclear to us the
extent to which hospitals and health care providers would utilize NDCs
during a transition period in FY 2023, especially if they believe
adding these manual processes may result in inadvertent billing errors
for therapeutic agents eligible for new technology add-on payments,
which commenters state may be further compounded by staffing shortages
due to the COVID-19 pandemic. This may limit our ability to obtain
comprehensive feedback from interested parties during the transition
period, as suggested by commenters, or perform an analysis of claims
data to assess if NDCs are being used, prior to fully transitioning to
using NDCs for this purpose.
Therefore, after careful consideration of the concerns raised by
commenters, we are not finalizing this proposed policy, and will
instead reassess this policy proposal in future rulemaking. We believe
that this will allow for adequate time to evaluate and consider the
issues raised by commenters. We understand that commenters would be
interested in further details on how NDCs would be operationalized for
the purposes of any such policy change, along with a process to educate
hospitals on these changes to ensure accurate billing throughout a
transition period. We appreciate that commenters have raised a number
of important questions on our proposal, and we will continue to engage
the public in these conversations.
9. Proposal to Publicly Post New Technology Add-On Payment Applications
As noted in section II.F.1.f. of the preamble of this final rule,
applicants for new technology add-on payments for new medical services
or technologies must submit a formal request, including a full
description of the clinical applications of the medical service or
technology and the results of any clinical evaluations demonstrating
that the new medical service or technology represents a substantial
clinical improvement (unless the application is under one of the
alternative pathways), along with a significant sample of data to
demonstrate the new medical service or technology meets the high-cost
threshold (OMB-0938-1347). See section II.F.1.f. of the preamble of
this final rule for further details on the data and evidence that can
be submitted. We post complete application information and final
deadlines for submitting a full application on the CMS website at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech. We also post on the same website tracking
forms completed by each applicant, which include the name of each
applicant, name of the technology, and a brief description so that
interested parties can identify the new medical services or
technologies under review before the annual proposed rule.
Additionally, section 1886(d)(5)(K)(viii) of the Act provides for a
mechanism for public input before the publication of a proposed rule
regarding whether a medical service or technology represents a
substantial clinical improvement. Consistent with the Act, we hold an
annual Town Hall meeting, typically in December following notice of the
meeting in the Federal Register.
As set forth in 42 CFR 412.87(e)(1), CMS considers whether a
technology meets the criteria for the new technology add-on payment and
announces the results as part of its annual updates and changes to the
IPPS. Accordingly, in drafting the proposed rule, CMS reviews each new
technology add-on payment application it receives under the pathway
specified by the applicant at the time of application submission, along
with supplemental information\209\ obtained from the applicant,
information provided at the Town Hall meeting, and comments received in
response to the Town Hall meeting. In the proposed rule, CMS summarizes
the information contained in the application, including the applicant's
explanation of what the technology does, background on the disease
process, information about the FDA approval/clearance, and the
applicant's assertions and supporting data on how the technology meets
the new technology add-on payment criteria under Sec. 412.87. In
summarizing this information for inclusion in the proposed rule, CMS
restates or paraphrases information contained in the application and
attempts to avoid misrepresenting or omitting any of an applicant's
claims. CMS also tries to ensure that sufficient information is
provided in the proposed rule to facilitate public comments on whether
the medical service or technology meets the new technology add-on
payment criteria. Currently, however, CMS does not make the
applications themselves, as completed by the applicants, publicly
available. In addition, CMS generally
[[Page 48987]]
does not take into consideration information that is marked as
confidential when determining whether a technology meets the criteria
for new technology add-on payments.
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\209\ For the FY 2023 new technology add-on payment
applications, the supplemental information deadline to guarantee
inclusion in the IPPS proposed rule was December 17, 2021.
---------------------------------------------------------------------------
We note that in the past, CMS has received requests from the public
to access and review the new technology add-on payment applications to
further facilitate comment on whether a technology meets the new
technology add-on payment criteria. In consideration of this issue, we
stated in the proposed rule that we agree that review of the original
source information from the applications for new technology add-on
payments may help to inform public comment. Further, making this
information publicly available may foster greater input from experts in
the stakeholder community based on their review of the completed
application forms and related materials. Accordingly, as we discuss
further in this section of the proposed rule and this final rule, we
stated that we believe that providing additional information to the
public by publicly posting the applications and certain related
materials online may help to further engage the public and foster
greater input and insights on the various new medical services and
technologies presented annually for consideration for new technology
add-on payments.
We stated that we also believe that posting the applications online
would reduce the risk that we may inadvertently omit or misrepresent
relevant information submitted by applicants, or are perceived as
misrepresenting such information, in our summaries in the rules. It
also would streamline our evaluation process, including the
identification of critical questions in the proposed rule, particularly
as the number and complexity of the applications have been increasing
over time. That is, by making the applications available to the public
online, we would afford more time for CMS to process and analyze the
supporting data and evidence rather than reiterate parts of the
application in the rule.
Therefore, to increase transparency, enable increased stakeholder
engagement, and further improve and streamline our evaluation process,
we proposed in the FY 2023 IPPS/LTCH PPS proposed rule to publicly post
online future applications for new technology add-on payments.
Specifically, beginning with the FY 2024 application cycle, we proposed
to post online the completed application forms and certain related
materials (for example, attachments, uploaded supportive materials)
that we receive from applicants. Additionally, we proposed to post
information acquired subsequent to the application submission (for
example, comments received after the New Technology Town Hall, updated
application information, additional clinical studies, etc.). We
proposed that we would not post the cost and volume information the
applicant provides in the application form itself or as attached
materials, or any material included with the application that the
applicant indicates is not releasable to the public because the
applicant does not own the copyright or the applicant does not have the
appropriate license to make the material available to the public, as
further described in the next paragraph. We proposed that we would
publicly post the completed application forms and related materials no
later than the issuance of the proposed rule, which would afford the
public the full public comment period to review the information
provided by the applicant in its application.
With respect to copyrighted materials, we proposed that on the
application form itself, the applicant would be asked to provide a
representation that the applicant owns the copyright or otherwise has
the appropriate license to make all the copyrighted material included
with its application public with the exception of those materials
identified by the applicant as not releasable to the public, as
applicable. For any material included with the application that the
applicant indicates as copyrighted and/or not otherwise releasable to
the public, we proposed that the applicant must either provide a link
to where the material can be accessed or provide an abstract or summary
of the material that CMS can make public, and CMS will then post that
link or abstract or summary online, along with the other posted
application materials. We invited comments on this proposal.
Under our current practice, we include in the final rule
information on the cost of each technology that is approved for the new
technology add-on payment for the purposes of calculating the maximum
add-on payment, and information on the anticipated volume of the
technology for purposes of the impact analysis. For the proposed rule,
specifically for applications submitted under the alternative pathway,
our current practice is to propose whether or not to approve the
application based on the eligibility criteria for the alternative
pathway under 42 CFR 412.87(c) or (d) and, where cost information is
available from the applicant, to use this information in proposing a
maximum add-on payment amount. Where cost information is not yet
available, we note our expectation is that the applicant will submit
cost information prior to the final rule, and indicate that we will
provide an update regarding the new technology add-on payment amount
for the technology, if approved, in the final rule. We noted that we
would continue this same approach with respect to including cost and
volume information in the proposed and final rules. However, as noted,
under our proposal to post online the new technology add-on payment
applications, we would not include cost and volume information for
either traditional or alternative pathway applications as part of the
application materials that would be posted online.
We noted that at times an applicant may furnish information marked
as proprietary or trade secret information along with its application
for new technology add-on payments. Currently, the application
specifies that data provided in the application or tracking form may be
subject to disclosure and instructs the applicant to mark any
proprietary or trade secret information so that CMS can attempt, to the
extent allowed under Federal law, to keep the information protected
from public view.\210\ We further stated that this instruction would
change under our proposal such that information included in the
application, other than cost and volume information, would be made
publicly available online through posting of the application. We
emphasized that the applicant should not submit as part of its
application any such proprietary or trade secret information that it
does not want to be made publicly available online. As noted, under our
existing practice we stated that we generally do not consider
information that is marked as confidential, proprietary, or trade
secret when determining whether a technology meets the criteria for new
technology add-on payments.
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\210\ See new technology add-on payment application included in
the FY 2023 New Technology Application Packet, available at: https://www.cms.gov/files/zip/fy-2023-new-technology-application-packet.zip; and FY 2023 Tracking Forms, available at: https://www.cms.gov/files/document/fy-2023-tracking-forms-applicants.pdf.
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We also stated that this proposal would not change the current
timeline or evaluation process for new technology add-on payments, the
criteria used to assess applications, or the deadlines for various data
submissions. Additionally, we stated that we do not expect added
burdens on prospective applicants as a result of this
[[Page 48988]]
proposal since we did not propose to fundamentally change the
information collected in the application itself or the supplemental
information that would be furnished to support the application. As
noted, the aim of the proposed policy change is to increase accuracy,
transparency, and efficiency for both CMS and stakeholders.
In connection with the proposal to post the new technology
applications online, we stated that we expect we would also make
changes to the summaries that appear in the annual proposed and final
rules, given that the public would have access to the submitted
applications themselves (excluding certain information and materials as
described previously), while also continuing to provide sufficient
information in the rules to facilitate public comments on whether a
medical service or technology meets the new technology add-on payment
criteria. Specifically, we stated that we do not anticipate summarizing
each entire application in the Federal Register as we have in the past,
given the expanded and public access to the applications under the
proposal. In some instances, such as the discussion of the substantial
clinical improvement criterion, we stated that we expect to provide a
more concise summary of the evidence or a more targeted discussion of
the applicant's claims about how that criterion is met based on the
evidence and supporting data (although this may vary depending on the
application, new medical service or technology, and the nature of
supporting materials provided). We expect that we would continue to
generally include, at a high-level, the following information in the
proposed and final rules: the technology and applicant name; a
description of what the technology does; background on the disease
process; the FDA approval/clearance status; and a summary of the
applicant's assertions. We also noted we expect to provide more
succinct information as part of the summaries in the proposed and final
rules regarding the applicant's assertions as to how the medical
service or technology meets the newness, cost, and substantial clinical
improvement criteria. For example, we would provide a list of the
applicant's assertions for whether the technology meets the three sub-
criteria under the substantial clinical improvement criterion \211\ and
a list of the sources of data submitted in support of the assertions,
along with references to the application in support of these lists. In
the proposed rule, we stated we would also continue to provide
discussion of the concerns or issues we identified with respect to
applications submitted under the traditional pathway, and for an
alternative pathway application, we intend to continue to propose
whether to approve or disapprove the application, including noting any
concerns we have identified, and, as applicable, the maximum add-on
payment amount, where cost information is available. In the final rule,
we would continue to provide an explanation of our determination of
whether a medical service or technology meets the applicable new
technology add-on payment criteria and, for approved technologies, the
final add-on payment amounts. We stated that as noted, we believe the
proposal to post online the completed application forms and other
information described previously would afford greater transparency
during the annual rulemaking, for purposes of determining whether a
medical service or technology is eligible for new technology add-on
payments.
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\211\ Sub-criteria referenced are those listed in Question 36 of
the new technology add-on payment application, specifically
Questions 36a-36c.
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We sought public comment on our proposal to publicly post online
the completed application forms and certain related materials and
updated application information submitted subsequent to the initial
application submission for new technology add-on payments, beginning
with applications for FY 2024.
Comment: We received many public comments regarding this policy
proposal. Overall, commenters appreciated the agency's aims in making
the proposal of fostering greater transparency and public input, while
mitigating increased burdens and workloads associated with the rising
complexity and number of new technology add-on payment applications
submitted annually. A few commenters were fully supportive of our
proposal, while a majority of the remaining commenters supported the
proposal, while suggesting modifications to address concerns about the
disclosure of certain information. In particular, these commenters were
encouraged by CMS' proposal not to include cost and volume information
as part of the application materials that would be posted online, but
stated that the proposal did not go far enough to protect potentially
confidential, commercially sensitive information (for example,
biologics license applications (BLA) or nonpublic studies), and
recommended that CMS modify the proposal, offering suggestions for
ensuring that such information not be posted online.
Some commenters requested that CMS bifurcate the application to
allow a section for information that would not be posted online, afford
applicants the opportunity to submit a separate file of confidential
information, or allow information in the application to be redacted.
Other commenters requested that CMS continue the practice of allowing
the applicant to mark sensitive proprietary or trade secret information
as confidential and not for posting online. Commenters stated that if
the full application were posted online, applicants may refrain from
submitting certain information necessary to support the application and
meet the new technology add-on payment criteria (for example, clinical
information cited but not yet in the public domain and prior to FDA
approval and information concerning newness, such as engineering
specifics), resulting in applications that are less complete or robust,
and therefore, would compromise the goals of the new technology add-on
payment process. Absent protection of this information, commenters
stated that applicants could apply only after FDA approval, creating
significant delays in new technology add-on payment approvals and
subsequent beneficiary access.
Commenters also acknowledged that CMS generally does not consider
confidential or proprietary information in making a determination
whether a new technology meets the new technology add-on payment
criteria, but believed there could be circumstances where such
information could contribute to the agency's overall understanding of a
technology, therapeutic area, or other relevant question that arises
during its review (for example, pre-publication study results, which
are kept from public release pending their publication in peer-reviewed
scientific publications). Another commenter asserted that such data can
help CMS better understand the technology and make a more informed
decision about the application. The commenters also stated that,
without protection of such information, companies would no longer be
able to submit such studies until after publication. Commenters also
stated that the proposed policy puts the onus on the applicant to not
submit this type of information without recognizing that a
comprehensive application might require such information.
Additionally, commenters were generally supportive of our proposal
regarding copyrighted material.
[[Page 48989]]
Response: We appreciate the support for our proposal and our
efforts toward greater transparency, public input, and streamlining of
the new technology add-on application process. In making our proposal,
we indicated that applicants should not submit proprietary or trade
secret information with the application, to avoid such information
being posted online as part of the application. Moreover, we proposed
not to continue our practice of allowing applicants to mark such
information to be withheld from disclosure given that our general
policy is not to consider information that is marked confidential,
proprietary, or trade secret when determining whether a technology
meets the criteria for new technology add-on payments and given the
need for the public to understand the information we are relying on in
making such decisions. However, in consideration of public comments, we
will provide a mechanism for applicants to submit confidential
information, including proprietary or trade secret information, that
will not be posted online. We anticipate providing a section on the
application where applicants can submit confidential information
separately from non-confidential information, or otherwise marking
sections or questions in the application for which we will not post the
information online. Applicants would still be required to submit cost
and volume information in the application since this information is
necessary; however, we will indicate in the application that cost and
volume information will not be publicly posted but certain cost and
volume information may still be summarized and discussed in the
proposed rule, as is consistent with our current practice. Applicants
should expect that, unless otherwise noted in the application that
certain information will not be posted publicly (for example, contact
information), everything else may be posted publicly. We emphasize that
it is the applicant's responsibility to put confidential information
only in the areas of the application designated for confidential
information and not elsewhere in the application. However, as
previously noted, applicants should consider what they include in a
confidential section of the application given that we generally do not
consider any information that cannot be made public when determining
whether a technology meets the new technology add-on payment criteria.
With respect to copyrighted information, we are finalizing our proposal
without modification.
Additionally, we note that in the past we have received
applications in which all the data and information in an application
are marked as proprietary or confidential, or where certain information
provided in support of the applicant's assertions regarding eligibility
for the new technology add-on payment, for example a claim of
substantial clinical improvement, is marked as such. In such cases, we
reiterate that we generally will not be able to consider that data and
information when determining whether a technology meets the criteria
for new technology add-on payments. Our process provides for public
input, so it is important that we provide the information needed for
the public to meaningfully comment on the new technology add-on payment
applications, including the applicants' assertions as to why a
technology meets the new technology add-on payment criteria.
Comment: A commenter suggested that CMS further study ways to
improve and streamline the annual review process. Another commenter
requested that CMS defer a decision until the FY 2025 application
cycle, allowing more time for interested parties and the agency to more
thoroughly consider the implications and potential options to improve
the efficiency and capacity of the review process.
Response: As we stated in the proposed rule, we proposed to
publicly post online applications for new technology add-on payments to
increase transparency, enable increased engagement with interested
parties, and improve and streamline our evaluation process. Through
this policy, we also are attempting to address some of the downsides
and challenges of our current practice of summarizing the contents of
the applications by restating or paraphrasing information, ensuring
that sufficient information is provided in the proposed rule, and
avoiding misrepresenting or omitting any of the applicants' claims.
Posting the application and certain related materials online, subject
to certain exceptions as discussed in this section, is a
straightforward solution and strikes a balance between affording
greater transparency and streamlining the application process. Given
the reasons we have noted previously, the overall support for the
proposal, and after considering the other feedback and suggestions by
commenters, we are finalizing our proposal to post applications online,
but as previously discussed, we will provide a mechanism for applicants
to submit confidential information that would not be included as part
of the application materials posted online. We also continue to welcome
feedback on the application and review process, including potential
options for improving the efficiency and capacity of this process, and
we will continue to consider this issue.
Comment: A few commenters raised concerns about the timing of when
applications would be posted online. A commenter questioned whether the
agency planned to post all applications and related materials online at
the same time, or on a rolling basis as they are received and deemed
complete, noting that the specific timing of online posting would be
highly relevant to applicants given that under the current process,
applicants have the opportunity to amend or withdraw an application
prior to presentation at the New Technology Town Hall or issuance of
the proposed rule. The commenter believed that any new online posting
process should preserve an applicant's ability to withdraw an
application prior to posting, noting that many applicants submit
materials before certainty that the technology meets the criteria for a
new technology add-on payment, and with an intent to either supplement
or withdraw the application during the cycle, because the annual
application cycle often requires a submission well in advance of market
introduction. Another commenter noted the fluidity and frequent updates
of the data collection process in these applications, which may occur
more quickly than the public notice and comment period and therefore,
the information made available by CMS may not be current when it is
released.
Response: We agree with the commenter that additional information
related to the application may be submitted up until the release of the
proposed rule and understand that posting the complete application and
supplemental information all at once is preferable to continually
updating the application information online. Accordingly, we are
clarifying that under the final policy we are adopting, we will
publicly post the application and any additional information received
(with the exception of certain confidential, cost and volume, or
copyrighted information as explained previously) at the time the
proposed rule is published and no sooner. With regard to the
commenter's concern about an applicant's ability to withdraw
applications during the application process, we clarify that the policy
we are finalizing would not change an applicant's ability to withdraw
its application prior to the proposed rule being published and, in such
cases, we
[[Page 48990]]
would not post those applications online or address them in the
proposed rule. In instances, however, where the applicant withdraws its
application from consideration after the proposed rule is issued, the
application would remain posted online (that is, corresponding to the
published discussion of the application in the proposed rule).
After considering the comments, and for the reasons discussed, we
are finalizing our proposal to publicly post online new technology add-
on payment applications, including the completed application forms,
certain related materials (as described previously), and any additional
updated application information submitted subsequent to the initial
application submission (except certain volume, cost and other
information identified by the applicant as confidential), beginning
with the application cycle for FY 2024, at the time the proposed rule
is published. We are finalizing as proposed our proposal with respect
to the treatment of copyrighted information. We are finalizing a
modification to our proposal to provide a mechanism for applicants to
submit confidential information that would not be posted online, such
as in a separate section of the application, or by identifying
particular questions for which the information submitted would not be
publicly posted. We will not publicly post cost and volume information;
however, consistent with our current practice, we will continue to
summarize and discuss certain cost and volume information for the
proposed rule and will indicate as such in the application. With the
exception of information included in a confidential information section
of the application, cost and volume information, and materials
identified by the applicant as copyrighted and/or not otherwise
releasable to the public, the contents of the application and related
materials may be posted publicly. We further clarify that we will post
these application materials at the time of the proposed rule and no
sooner, and that we will not post applications that are withdrawn prior
to publication of the proposed rule.
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
1. Legislative Authority
Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary adjust the standardized amounts for area differences in
hospital wage levels by a factor (established by the Secretary)
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level. We
currently define hospital labor market areas based on the delineations
of statistical areas established by the Office of Management and Budget
(OMB). A discussion of the FY 2023 hospital wage index based on the
statistical areas appears under section III.A.2. of the preamble of
this final rule.
Section 1886(d)(3)(E) of the Act requires the Secretary to update
the wage index annually and to base the update on a survey of wages and
wage-related costs of short-term, acute care hospitals. CMS collects
these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-
3, Parts II, III, IV. The OMB control number for this information
collection request is 0938-0050, which expired on March 31, 2022. A 30-
day Federal Register notice published on June 22, 2022 (87 FR 37338)
for the reinstatement of the information collection request. The
comment period closed July 22, 2022. Section 1886(d)(3)(E) of the Act
also requires that any updates or adjustments to the wage index be made
in a manner that ensures that aggregate payments to hospitals are not
affected by the change in the wage index. The adjustment for FY 2023 is
discussed in section II.B. of the Addendum to this final rule.
As discussed in section III.I. of the preamble of this final rule,
we also take into account the geographic reclassification of hospitals
in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act
when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of
the Act, the Secretary is required to adjust the standardized amounts
so as to ensure that aggregate payments under the IPPS after
implementation of the provisions of sections 1886(d)(8)(B),
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate
prospective payments that would have been made absent these provisions.
The budget neutrality adjustment for FY 2023 is discussed in section
II.A.4.b. of the Addendum to this final rule.
Section 1886(d)(3)(E) of the Act also provides for the collection
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in
order to construct an occupational mix adjustment to the wage index.
(The OMB control number for approved collection of this information is
0938-0907, which expires on October 31, 2022. An extension of the
information collection request is currently being developed. The public
will have an opportunity to review and submit comments regarding the
extension of this PRA package through a public notice and comment
period separate from this rulemaking.) A discussion of the occupational
mix adjustment that we are applying to the FY 2023 wage index appears
under sections III.E. and F. of the preamble of this final rule.
2. Core-Based Statistical Areas (CBSAs) for the FY 2023 Hospital Wage
Index
The wage index is calculated and assigned to hospitals on the basis
of the labor market area in which the hospital is located. Under
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate
hospital labor market areas based on OMB-established Core-Based
Statistical Areas (CBSAs). The current statistical areas (which were
implemented beginning with FY 2015) are based on revised OMB
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01.
OMB Bulletin No. 13-01 established revised delineations for
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and
Combined Statistical Areas in the United States and Puerto Rico based
on the 2010 Census, and provided guidance on the use of the
delineations of these statistical areas using standards published in
the June 28, 2010, Federal Register (75 FR 37246 through 37252). We
refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951
through 49963 and 49973 through 49982)) for a full discussion of our
implementation of the OMB statistical area delineations beginning with
the FY 2015 wage index.
Generally, OMB issues major revisions to statistical areas every 10
years, based on the results of the decennial census. However, OMB
occasionally issues minor updates and revisions to statistical areas in
the years between the decennial censuses through OMB Bulletins. On July
15, 2015, OMB issued OMB Bulletin No. 15-01, which provided updates to
and superseded OMB Bulletin No. 13-01 that was issued on February 28,
2013. The attachment to OMB Bulletin No. 15-01 provided detailed
information on the update to statistical areas since February 28, 2013.
The updates provided in OMB Bulletin No. 15-01 were based on the
application of the 2010 Standards for Delineating Metropolitan and
Micropolitan Statistical Areas to Census Bureau population estimates
for July 1, 2012, and July 1, 2013. In the FY 2017 IPPS/LTCH PPS final
rule (81 FR 56913), we adopted the updates set forth in OMB Bulletin
No. 15-01 effective
[[Page 48991]]
October 1, 2016, beginning with the FY 2017 wage index. For a complete
discussion of the adoption of the updates set forth in OMB Bulletin No.
15-01, we refer readers to the FY 2017 IPPS/LTCH PPS final rule. In the
FY 2018 IPPS/LTCH PPS final rule (82 FR 38130), we continued to use the
OMB delineations that were adopted beginning with FY 2015 to calculate
the area wage indexes, with updates as reflected in OMB Bulletin No.
15-01 specified in the FY 2017 IPPS/LTCH PPS final rule.
On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which
provided updates to and superseded OMB Bulletin No. 15-01 that was
issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01
provided detailed information on the update to statistical areas since
July 15, 2015, and were based on the application of the 2010 Standards
for Delineating Metropolitan and Micropolitan Statistical Areas to
Census Bureau population estimates for July 1, 2014 and July 1, 2015.
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41362 through 41363), we
adopted the updates set forth in OMB Bulletin No. 17-01 effective
October 1, 2018, beginning with the FY 2019 wage index. For a complete
discussion of the adoption of the updates set forth in OMB Bulletin No.
17-01, we refer readers to the FY 2019 IPPS/LTCH PPS final rule. In the
FY 2020 IPPS/LTCH PPS final rule (84 FR 42300 through 42301), we
continued to use the OMB delineations that were adopted beginning with
FY 2015 (based on the revised delineations issued in OMB Bulletin No.
13-01) to calculate the area wage indexes, with updates as reflected in
OMB Bulletin Nos. 15-01 and 17-01.
On April 10, 2018 OMB issued OMB Bulletin No. 18-03 which
superseded the August 15, 2017, OMB Bulletin No. 17-01. On September
14, 2018, OMB issued OMB Bulletin No. 18-04 which superseded the April
10, 2018 OMB Bulletin No. 18-03. Historically OMB bulletins issued
between decennial censuses have only contained minor modifications to
CBSA delineations based on changes in population counts. However, OMB's
2010 Standards for Delineating Metropolitan and Micropolitan
Statistical Areas to Census Bureau population estimates created a
larger mid-decade redelineation that takes into account commuting data
from the American Commuting Survey. As a result, the September 14,
2018, OMB Bulletin No. 18-04 included more modifications to the CBSAs
than are typical for OMB bulletins issued between decennial censuses.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58743 through 58755)
we adopted the updates set forth in OMB Bulletin No. 18-04 effective
October 1, 2020, beginning with the FY 2021 wage index. For a complete
discussion of the adoption of the updates set forth in OMB Bulletin No.
18-04, we refer readers to the FY 2021 IPPS/LTCH PPS final rule.
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. 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. While we adopted the updates set
forth in OMB Bulletin No. 20-01 in the FY 2022 IPPS/LTCH PPS final rule
(86 FR 45163 through 45164) consistent with our general policy of
adopting OMB delineation updates, we also noted that specific wage
index updates would not be necessary for FY 2022 as a result of
adopting these updates. In other words, the updates set forth in OMB
Bulletin No. 20-01 would not affect any hospital's geographic area for
purposes of the wage index calculation for FY 2022. For a complete
discussion of the adoption of the updates set forth in OMB Bulletin No.
20-01, we refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR
45163 through 45164).
For FY 2023, we are continuing to use the OMB delineations that
were adopted beginning with FY 2015 (based on the revised delineations
issued in OMB Bulletin No. 13-01) to calculate the area wage indexes,
with updates as reflected in OMB Bulletin Nos. 15-01, 17-01, 18-04 and
20-01.
In connection with our adoption in FY 2021 of the updates in OMB
Bulletin 18-04, we adopted a policy to place a 5-percent cap, for FY
2021, on any decrease in a hospital's wage index from the hospital's
final wage index in FY 2020 so that a hospital's final wage index for
FY 2021 would not be less than 95 percent of its final wage index for
FY 2020. We refer the reader to the FY 2021 IPPS/LTCH PPS final rule
(85 FR 58753 through 58755) for a complete discussion of this
transition. As finalized in the FY 2021 IPPS/LTCH PPS final rule, this
transition was set to expire at the end of FY 2021. However, given the
unprecedented nature of the ongoing COVID-19 public health emergency
(PHE), we adopted a policy in the FY 2022 IPPS/LTCH PPS final rule to
apply an extended transition to the FY 2022 wage index for hospitals
that received the transition in FY 2021. Specifically, we continued a
wage index transition for FY 2022 (for hospitals that received the
transition in FY 2021) under which we applied a 5 percent cap on any
decrease in the hospital's wage index compared to its wage index for FY
2021 to mitigate significant negative impacts of, and provide
additional time for hospitals to adapt to, the CMS decision to adopt
the revised OMB delineations. We also applied a budget neutrality
adjustment to the standardized amount so that our transition in FY 2022
was implemented in a budget neutral manner under our authority in
section 1886(d)(5)(I) of the Act. We refer the reader to the FY 2022
IPPS/LTCH PPS final rule (85 FR 45164 through 45165) for a complete
discussion of this transition. We also refer readers to section III.N.
of the preamble of this final rule which discusses our permanent policy
to apply a 5-percent cap on any decrease in a hospital's wage index
compared to its wage index from the prior fiscal year.
3. Codes for Constituent Counties in CBSAs
CBSAs are made up of one or more constituent counties. Each CBSA
and constituent county has its own unique identifying codes. There are
two different lists of codes associated with counties: Social Security
Administration (SSA) codes and Federal Information Processing Standard
(FIPS) codes. Historically, CMS has listed and used SSA and FIPS county
codes to identify and crosswalk counties to CBSA codes for purposes of
the hospital wage index. As we discussed in the FY 2018 IPPS/LTCH PPS
final rule (82 FR 38129 through 38130), we have learned that SSA county
codes are no longer being maintained and updated. However, the FIPS
codes continue to be maintained by the U.S. Census Bureau. We believe
that using the latest FIPS codes will allow us to maintain a more
accurate and up-to-date payment system that reflects the reality of
population shifts and labor market conditions.
The Census Bureau's most current statistical area information is
derived from ongoing census data received since 2010; the most recent
data are from 2020. The Census Bureau maintains a complete list of
changes to counties or county equivalent entities on the
[[Page 48992]]
website at https://www.census.gov/programs-surveys/geography/technical-documentation/county-changes.html. We believe that it is important to
use the latest counties or county equivalent entities in order to
properly crosswalk hospitals from a county to a CBSA for purposes of
the hospital wage index used under the IPPS.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through
38130), we adopted a policy to discontinue the use of the SSA county
codes and began using only the FIPS county codes for purposes of cross
walking counties to CBSAs. In addition, in the same rule, we
implemented the latest FIPS code updates, which were effective October
1, 2017, beginning with the FY 2018 wage indexes. These updates have
been used to calculate the wage indexes in a manner generally
consistent with the CBSA-based methodologies finalized in the FY 2005
IPPS final rule and the FY 2015 IPPS/LTCH PPS final rule. We refer the
reader to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through
38130) for a complete discussion of our adoption of FIPS county codes.
Based on the latest information included in the Census Bureau's
website at https://www.census.gov/programs-surveys/geography/technical-documentation/county-changes.2010.html, the Census Bureau has made the
following updates to the FIPS codes for counties or county equivalent
entities:
Chugach Census Area, AK (FIPS State County Code 02-063)
and Copper River Census Area, AK (FIPS State County Code 02-066), were
created from former Valdez-Cordova Census Area (02-261) which was
located in CBSA 02. The CBSA code for these two new county equivalents
remains 02.
We believe that it is important to use the latest counties or
county equivalent entities in order to properly crosswalk hospitals
from a county to a CBSA for purposes of the hospital wage index used
under the IPPS. In addition, we believe that using the latest FIPS
codes allows us to maintain a more accurate and up-to-date payment
system that reflects the reality of population shifts and labor market
conditions. Therefore, in the FY 2023 IPPS/LTCH PPS proposed rule (87
FR 28359), we proposed to implement these FIPS code updates listed
previously, effective October 1, 2022, beginning with the FY 2023 wage
indexes. We proposed to use these update changes to calculate area wage
indexes in a manner that is generally consistent with the CBSA-based
methodologies finalized in the FY 2005 IPPS final rule (69 FR 49026
through 49034) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951
through 49963). We note that while the county update changes listed
previously changed the county names, the CBSAs to which these counties
map did not change from the prior counties. Therefore, we stated that
there would be no impact or change to hospitals in these counties for
purposes of the hospital wage index as a result of our implementation
of these FIPS code updates. We invited public comments on our
proposals.
We did not receive any public comments on our proposals. Therefore,
for the reasons discussed earlier, we are finalizing our proposal,
without modification, to implement the FIPS code updates listed
previously, effective October 1, 2022, beginning with the FY 2023 wage
indexes. As we proposed, we will use these update changes to calculate
the area wage indexes in a manner that is generally consistent with the
CBSA-based methodologies finalized in the FY 2005 IPPS final rule and
the FY 2015 IPPS/LTCH PPS final rule. For FY 2023, Tables 2 and 3
associated with this final rule and the County to CBSA Crosswalk File
and Urban CBSAs and Constituent Counties for Acute Care Hospitals File
posted on the CMS website reflect these FIPS code updates.
B. Worksheet S-3 Wage Data for the FY 2023 Wage Index
The FY 2023 wage index values are based on the data collected from
the Medicare cost reports submitted by hospitals for cost reporting
periods beginning in FY 2019 (the FY 2022 wage indexes were based on
data from cost reporting periods beginning during FY 2018).
1. Included Categories of Costs
The FY 2023 wage index includes all of the following categories of
data associated with costs paid under the IPPS (as well as outpatient
costs):
Salaries and hours from short-term, acute care hospitals
(including paid lunch hours and hours associated with military leave
and jury duty).
Home office costs and hours.
Certain contract labor costs and hours, which include
direct patient care, certain top management, pharmacy, laboratory, and
nonteaching physician Part A services, and certain contract indirect
patient care services (as discussed in the FY 2008 final rule with
comment period (72 FR 47315 through 47317)).
Wage-related costs, including pension costs (based on
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586
through 51590) and modified in the FY 2016 IPPS/LTCH PPS final rule (80
FR 49505 through 49508)) and other deferred compensation costs.
2. Excluded Categories of Costs
Consistent with the wage index methodology for FY 2022, the wage
index for FY 2023 also excludes the direct and overhead salaries and
hours for services not subject to IPPS payment, such as skilled nursing
facility (SNF) services, home health services, costs related to GME
(teaching physicians and residents) and certified registered nurse
anesthetists (CRNAs), and other subprovider components that are not
paid under the IPPS. The FY 2023 wage index also excludes the salaries,
hours, and wage-related costs of hospital-based rural health clinics
(RHCs), and Federally Qualified Health Centers (FQHCs) because Medicare
pays for these costs outside of the IPPS (68 FR 45395). In addition,
salaries, hours, and wage-related costs of CAHs are excluded from the
wage index for the reasons explained in the FY 2004 IPPS final rule (68
FR 45397 through 45398). For FY 2020 and subsequent years, other wage-
related costs are also excluded from the calculation of the wage index.
As discussed in the FY 2019 IPPS/LTCH final rule (83 FR 41365 through
41369), other wage-related costs reported on Worksheet S-3, Part II,
Line 18 and Worksheet S-3, Part IV, Line 25 and subscripts, as well as
all other wage-related costs, such as contract labor costs, are
excluded from the calculation of the wage index.
3. Use of Wage Index Data by Suppliers and Providers Other Than Acute
Care Hospitals Under the IPPS
Data collected for the IPPS wage index also are currently used to
calculate wage indexes applicable to suppliers and other providers,
such as SNFs, home health agencies (HHAs), ambulatory surgical centers
(ASCs), and hospices. In addition, they are used for prospective
payments to IRFs, IPFs, and LTCHs, and for hospital outpatient
services. We note that, in the IPPS rules, we do not address comments
pertaining to the wage indexes of any supplier or provider except IPPS
providers and LTCHs. Such comments should be made in response to
separate proposed rules for those suppliers and providers. We did not
receive any comments on the discussion in this section.
C. Verification of Worksheet S-3 Wage Data
The wage data for the FY 2023 wage index were obtained from
Worksheet S-
[[Page 48993]]
3, Parts II, III and IV of the Medicare cost report, CMS Form 2552-10
for cost reporting periods beginning on or after October 1, 2018, and
before October 1, 2019. (As noted in section III.A.1 of the preamble of
this final rule, the OMB control number for this information collection
request is 0938-0050, which expired on March 31, 2022. A 30-day Federal
Register notice published on June 22, 2022 (87 FR 37338) for the
reinstatement of the information collection request. The comment period
closed July 22, 2022). For wage index purposes, we refer to cost
reports beginning on or after October 1, 2018, and before October 1,
2019 as the ``FY 2019 cost report,'' the ``FY 2019 wage data,'' or the
``FY 2019 data.'' Instructions for completing the wage index sections
of Worksheet S-3 are included in the Provider Reimbursement Manual
(PRM), Part 2 (Pub. 15-2), Chapter 40, Sections 4005.2 through 4005.4.
The data file used to construct the FY 2023 wage index includes FY 2019
data submitted to us as of the end of June 2022. As in past years, we
performed an extensive review of the wage data, mostly through the use
of edits designed to identify aberrant data.
Consistent with the IPPS and LTCH PPS ratesettings, our policy
principles with regard to the wage index include generally using the
most current data and information available which is usually data on a
4-year lag (for example, for the FY 2022 wage index we used cost report
data from FY 2018) . In section I.F. of the preamble of this final
rule, we discuss our analysis of the best available data for use in the
development of this FY 2023 IPPS/LTCH PPS final rule given the
potential impact of the public health emergency (PHE) for the
Coronavirus Disease (COVID-19). For the FY 2023 wage index, the best
available data typically would be from the FY 2019 wage data. Our
review and analysis of the FY 2019 wage data shows that the data is not
significantly impacted by COVID-19 PHE. A comparison of providers shows
similar trends in those with cost reports ending during the PHE as
compared to providers without cost reports ending during the PHE. The
data also shows that changes in the average hourly wage (AHW) for
providers were consistent between providers with cost reports ending
during the PHE as compared to providers without cost reports ending
during the PHE. It appears that the overall impact of the COVID-19 PHE
on the FY 2019 wage data has been minimal. Additionally, the changes in
the wage data from FY 2018 to FY 2019 show similar trends in the change
of the data from FY 2017 to FY 2018. Therefore, we proposed to use the
FY 2019 wage data for the FY 2023 wage index.
Comment: A commenter expressed concern that the review and analysis
of the FY 2019 wage data with regard to the impact by COVID-19 PHE was
unclear. The commenter noted that the proposed rule did not reference
tables or files for the public to review to confirm the agency's
conclusion. The commenter also stated that it is confusing why CMS
stated that the FY 2019 wage data was not impacted by the PHE given
that the PHE did not begin until March 2020. The commenter encouraged
CMS to share source information so stakeholders can better understand
the agency's position, particularly given the review of data suggests
that the cost of staffing has increased substantially.
Response: With regard to the commenter that stated that the PHE did
not begin until March 2020, we note that the PHE was declared on
January 31, 2020 in response to COVID-19. We also note that in March
2020, the World Health Organization declared the COVID-19 outbreak a
pandemic.
As previously stated, our review and analysis of the FY 2019 wage
data shows that the data is not significantly impacted by COVID-19 PHE.
We use the latest audited data to calculate the wage index. The latest
audited data as of the FY 2023 rulemaking cycle is cost reports with a
begin date during FY 2019. Because we use audited cost report data with
a begin date in FY 2019 (on or after Oct 1, 2018 through on or before
September 30, 2019), the latest cost report with a begin date in FY
2019 would be September 30, 2019 which would end typically 12 months
later on September 30, 2020 (which would include some months in the
PHE). The earlier the cost report begin date the less months of data
are included in the period of the PHE. As noted in this section of this
rule, there are 3,136 providers included in the wage index for FY 2023.
Approximately 1,300 hospitals have cost report data from FY 2019
that has some months of data touching the PHE in the period of January
31, 2020 through September 30, 2020. We note, while the PHE was
declared January 31, 2020, the impact of the PHE began to be felt by
hospitals beginning in March 2020 (which is re-enforced by the
commenter that stated its belief that the PHE began in March 2020). Of
these 1,300 hospitals:
Approximately 80 hospitals have a cost reporting period of
04/01/2019 through 03/30/2020 (one month of data in the period between
March 2020 through September 2020).
Approximately 1,000 hospitals have a cost reporting period
of 07/01/2019 through 06/30/2020 (four months of data in the period
between March 2020 through September 2020).
Approximately 85 hospitals have a cost reporting period of
09/01/2019 through 08/30/2020 (six months of data in the period between
April 2020 through September 2020).
Based on the previous, approximately 37 percent of hospitals
include data from the period of March 2020 through September 2020. The
majority of these hospitals (1,000) have a cost report begin date of
July 1, 2019 which accounts for approximately 32 percent of all
hospitals cost report data; also, the majority of the cost report data
for these hospitals (8 months) is not impacted by the PHE. Therefore,
the overwhelming majority of hospitals data has no data from the period
of March 2020 through September 2020. While some cost reports included
some months of data from the period of March 2020 through September
2020, as previously stated, the data shows that changes in the average
hourly wage (AHW) for providers were consistent between providers with
cost reports ending during the PHE as compared to providers without
cost reports ending during the PHE. Additionally, the changes in the
wage data from FY 2018 to FY 2019 show similar trends in the change of
the data from FY 2017 to FY 2018. We also note, AHW data by provider
and CBSA is readily available in our Public Use Files released with
each proposed and final rule each fiscal year. Therefore, any
comparisons that CMS made within the current year data and prior year
data can easily be replicated by the public. We did not receive any
comments questioning whether certain providers or CBSAs AHW were
grossly affected by the PHE. Therefore, we continue to believe that the
data shows that changes in the average hourly wage (AHW) for providers
were consistent between providers with cost reports ending during the
PHE as compared to providers without cost reports ending during the
PHE.
We also note, in section G.2.c. of Appendix A of the FY 2023 IPPS/
LTCH proposed rule (87 FR 28709), we provided a table showing the
projected impact of proposed changes in the area wage index values for
urban and rural hospitals. Specifically, the table compares the shifts
in wage index values for hospitals due to proposed changes in the
average hourly wage data
[[Page 48994]]
for FY 2023 relative to FY 2022. We refer the commenter to this table
as well as a similar table that is published in section G.2.c. of
Appendix A in this final rule.
Finally, CMS will be looking at the differential effects of the
COVID-19 PHE on the audited wage data in future fiscal years. We plan
to review the audited wage data, and the impacts of the COVID-19 PHE on
such data and evaluate these data for future rulemaking.
We requested that our MACs revise or verify data elements that
result in specific edit failures. For the proposed FY 2023 wage index,
we identified and excluded 86 providers with aberrant data that should
not be included in the wage index. However, we stated that if data
elements for some of these providers are corrected, we intended to
include data from those providers in the final FY 2023 wage index. We
also adjusted certain aberrant data and included these data in the wage
index. For example, in situations where a hospital did not have
documentable salaries, wages, and hours for housekeeping and dietary
services, we imputed estimates, in accordance with policies established
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). We
instructed MACs to complete their data verification of questionable
data elements and to transmit any changes to the wage data no later
than March 19, 2022. For the final FY 2023 wage index, we restored the
data of 23 hospitals to the wage index because their data was either
verified or improved, and removed the data of 0 hospitals for the first
time after the proposed rule due to its data being aberrant. We also
restored the data of one provider that we inadvertently excluded from
the proposed rule that was not on the delete list in the proposed rule
public use file. Thus, 63 hospitals with aberrant data remain excluded
from the FY 2023 wage index (86-23 = 63).
In constructing the proposed FY 2023 wage index, we included the
wage data for facilities that were IPPS hospitals in FY 2019, inclusive
of those facilities that have since terminated their participation in
the program as hospitals, as long as those data did not fail any of our
edits for reasonableness. We stated in the proposed rule (87 FR 28630
through 28632) that we believe that including the wage data for these
hospitals is, in general, appropriate to reflect the economic
conditions in the various labor market areas during the relevant past
period and to ensure that the current wage index represents the labor
market area's current wages as compared to the national average of
wages. However, we excluded the wage data for CAHs as discussed in the
FY 2004 IPPS final rule (68 FR 45397 through 45398); that is, any
hospital that is designated as a CAH by 7 days prior to the publication
of the preliminary wage index public use file (PUF) is excluded from
the calculation of the wage index. For the proposed FY 2023 wage index,
we removed 3 hospitals that converted to CAH status on or after January
24, 2021, the cut-off date for CAH exclusion from the FY 2022 wage
index, and through and including January 21, 2022, the cut-off date for
CAH exclusion from the FY 2023 wage index. Since the proposed rule, we
learned of 0 more hospitals that converted to CAH status on or after
January 24, 2021, and through and including January 21, 2022, the cut-
off date for CAH exclusion from the FY 2023 wage index, for a total of
3 hospitals that were removed from the FY 2023 wage index due to
conversion to CAH status. In summary, we calculated the FY 2023 wage
index using the Worksheet S-3, Parts II and III wage data of 3,136
hospitals.
For the FY 2023 wage index, we allotted the wages and hours data
for a multicampus hospital among the different labor market areas where
its campuses are located using campus full-time equivalent (FTE)
percentages as originally finalized in the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51591). Table 2, which contains the FY 2023 wage index
associated with this final rule (available via the internet on the CMS
website), includes separate wage data for the campuses of 26
multicampus hospitals. The following chart lists the multicampus
hospitals by CSA certification number (CCN) and the FTE percentages on
which the wages and hours of each campus were allotted to their
respective labor market areas:
BILLING CODE 4120-01-P
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[GRAPHIC] [TIFF OMITTED] TR10AU22.110
[[Page 48996]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.111
BILLING CODE 4120-01-C
We noted that, in past years, in Table 2, we have placed a ``B'' to
designate the subordinate campus in the fourth position of the hospital
CCN. However, for the FY 2019 IPPS/LTCH PPS proposed and final rules
and subsequent rules, we have moved the ``B'' to the third position of
the CCN. Because all IPPS hospitals have a ``0'' in the third position
of the CCN, we believe that placement of the ``B'' in this third
position, instead of the ``0'' for the subordinate campus, is the most
efficient method of identification and interferes the least with the
other, variable, digits in the CCN.
Comment: Commenters opposed the exclusion of hospitals' wage data.
These commenters stated that excluding accurate and verified data is
inconsistent with the extensive process established by CMS to ensure
the accuracy and reliability of hospital wage index data. Commenters
also raised concerns about the lawfulness of excluding wage data for
these hospitals, stating that section 1886(d)(3)(E) of the Act does not
provide the authority for CMS to delete accurately-reported wage data,
and doing so is arbitrary and capricious.
Specifically, a commenter opposed the exclusion of hospitals' wage
data where hospitals timely submitted corrections or appeals. The
commenter stated that where hospitals have available timely-submitted,
corrected and verifiable data CMS is obligated to use such data in the
wage index calculation. The commenter also stated that there is no
statute or regulation authorizing CMS to exclude hospital data based on
a unilateral determination that the data is aberrant.
Response: We responded to similar comments in the FY 2016 IPPS/LTCH
PPS final rule (80 FR 49490 through 49491) and the FY 2022 IPPS/LTCH
PPS final rule (86 FR 45168 through 45169). Section 1886(d)(3)(E) of
the Act requires the Secretary to adjust the proportion of hospitals'
costs attributable to wages and wage-related costs for area differences
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level. As
previously stated in those final rules in response to similar comments,
we believe that, under this section of the
[[Page 48997]]
Act, we have discretion to exclude aberrant hospital data from the wage
index PUFs to help ensure that the costs attributable to wages and
wage-related costs in fact reflect the relative hospital wage level in
the hospitals' geographic area. We refer commenters to our previous
responses to comments at the Federal Register pages cited earlier in
this response with regard to the exclusion of hospitals' wage data from
the wage index.
Comment: Some commenters urged CMS to lessen the lag of four years
in hospitals' cost report data used for the wage index (for example, FY
2019 cost report data used for the FY 2023 wage index) and to consider
alternate methods to collect more accurate data.
Another commenter stated that CMS should offer short[hyphen]term
assistance to the hospital community, considering inflationary updates
to the wage index as necessary to preserve current service levels,
which the commenter believes is a particular risk point for underserved
populations. The commenter recommended a more time[hyphen]sensitive and
layered approach to wage index updates to account for excess labor
costs driven by increased contract labor and reimbursement rates to
preserve our critical national hospital system infrastructure. The
commenter stated that CMS could accomplish this by leveraging current
Medicare cost report surveys to develop a wage adjustment until the
labor market stabilizes. This approach would account for regional
disparities and impact, use known and accepted survey data, create a
standardized and auditable system, and support hospitals without
disrupting the baseline Medicare wage index.
Response: CMS used the most recent audited surveys and data to
develop the FY 2023 wage index. We are unclear what alternative data or
which current surveys and reporting the commenters are referring to. We
note, audited cost report data from FY 2020 will be used for FY 2024
and is not available at the time of this final rule. Therefore, we are
unable to account for regional differences without audited data. Also,
as previously noted, section 1886(d)(3)(E) of the Act requires that, as
part of the methodology for determining prospective payments to
hospitals, the Secretary adjust the standardized amounts for area
differences in hospital wage levels by a factor (established by the
Secretary) reflecting the relative hospital wage level in the
geographic area of the hospital compared to the national average
hospital wage level. Uniformly adjusting the salaries and hours for all
areas (which is used to calculate an areas AHW) would lead to a
commensurate change to the national AHW and not the wage index itself.
This is because the wage index is required to be a relative measure.
Further, we refer the commenter to the discussion on the market basket
in section V. A. 1. of the preamble of this final rule for which we now
have an updated forecast of the price proxies underlying the market
basket that incorporates more recent historical data and reflects a
revised outlook regarding the U.S. economy (including the more recent
historical CPI growth, impacts of the Russia/Ukraine war, current
expectations regarding changes to Federal Reserve interest rates, and
tight labor markets). Additionally, we note that section
1886(d)(3)(E)(i) of the Act requires us to make any updates or
adjustments to the wage index in a manner that ensures that aggregate
payments under section 1886(d) are not affected by the change in the
wage index. Section 1886(d)(3)(E)(i) of the Act requires that we
implement the wage index adjustment in a budget neutral manner.
Therefore, since the wage index is subject to budget neutrality, any
increases or decreases as a result of the data from one FY to the next
FY would be implemented in a budget neutral manner.
D. Method for Computing the FY 2023 Unadjusted Wage Index
As stated in the proposed rule (87 FR 28362 through 28365), the
method used to compute the FY 2023 wage index without an occupational
mix adjustment follows the same methodology that we used to compute the
wage indexes without an occupational mix adjustment in the FY 2021
IPPS/LTCH PPS final rule (see 85 FR 58758 through 58761, September 18,
2020), and we did not propose any changes to this methodology. We have
restated our methodology in this section of this final rule.
Step 1.--We gathered data from each of the non-Federal, short-term,
acute care hospitals for which data were reported on the Worksheet S-3,
Parts II and III of the Medicare cost report for the hospital's cost
reporting period relevant to the wage index (in this case, for FY 2023,
these were data from cost reports for cost reporting periods beginning
on or after October 1, 2018, and before October 1, 2019). In addition,
we included data from some hospitals that had cost reporting periods
beginning before October 2018 and reported a cost reporting period
covering all of FY 2019. These data were included because no other data
from these hospitals would be available for the cost reporting period
as previously described, and because particular labor market areas
might be affected due to the omission of these hospitals. However, we
generally describe these wage data as FY 2019 data. We note that, if a
hospital had more than one cost reporting period beginning during FY
2019 (for example, a hospital had two short cost reporting periods
beginning on or after October 1, 2018, and before October 1, 2019), we
include wage data from only one of the cost reporting periods, the
longer, in the wage index calculation. If there was more than one cost
reporting period and the periods were equal in length, we included the
wage data from the later period in the wage index calculation.
Step 2.--Salaries.--The method used to compute a hospital's average
hourly wage excludes certain costs that are not paid under the IPPS.
(We note that, beginning with FY 2008 (72 FR 47315), we included what
were then Lines 22.01, 26.01, and 27.01 of Worksheet S-3, Part II of
CMS Form 2552-96 for overhead services in the wage index. Currently,
these lines are lines 28, 33, and 35 on CMS Form 2552-10. However, we
note that the wages and hours on these lines are not incorporated into
Line 101, Column 1 of Worksheet A, which, through the electronic cost
reporting software, flows directly to Line 1 of Worksheet S-3, Part II.
Therefore, the first step in the wage index calculation is to compute a
``revised'' Line 1, by adding to the Line 1 on Worksheet S-3, Part II
(for wages and hours respectively) the amounts on Lines 28, 33, and
35.) In calculating a hospital's Net Salaries (we note that we
previously used the term ``average'' salaries in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51592), but we now use the term ``net'' salaries)
plus wage-related costs, we first compute the following: Subtract from
Line 1 (total salaries) the GME and CRNA costs reported on CMS Form
2552-10, Lines 2, 4.01, 7, and 7.01, the Part B salaries reported on
Lines 3, 5 and 6, home office salaries reported on Line 8, and exclude
salaries reported on Lines 9 and 10 (that is, direct salaries
attributable to SNF services, home health services, and other
subprovider components not subject to the IPPS). We also subtract from
Line 1 the salaries for which no hours were reported. Therefore, the
formula for Net Salaries (from Worksheet S-3, Part II) is the
following:
((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line
4.01 + Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line
10)).
[[Page 48998]]
To determine Total Salaries plus Wage-Related Costs, we add to the
Net Salaries the costs of contract labor for direct patient care,
certain top management, pharmacy, laboratory, and nonteaching physician
Part A services (Lines 11, 12 and 13), home office salaries and wage-
related costs reported by the hospital on Lines 14.01, 14.02, and 15,
and nonexcluded area wage-related costs (Lines 17, 22, 25.50, 25.51,
and 25.52). We note that contract labor and home office salaries for
which no corresponding hours are reported are not included. In
addition, wage-related costs for nonteaching physician Part A employees
(Line 22) are excluded if no corresponding salaries are reported for
those employees on Line 4. The formula for Total Salaries plus Wage-
Related Costs (from Worksheet S-3, Part II) is the following: ((Line 1
+ Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 + Line 5 +
Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) + (Line 11 +
Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15) + (Line 17 + Line 22
+ 25.50 + 25.51 + 25.52).
Step 3.--Hours.--With the exception of wage-related costs, for
which there are no associated hours, we compute total hours using the
same methods as described for salaries in Step 2. The formula for Total
Hours (from Worksheet S-3, Part II) is the following:
((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line
4.01 + Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line
10)) + (Line 11 + Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15).
Step 4.--For each hospital reporting both total overhead salaries
and total overhead hours greater than zero, we then allocate overhead
costs to areas of the hospital excluded from the wage index
calculation. First, we determine the ``excluded rate'', which is the
ratio of excluded area hours to Revised Total Hours (from Worksheet S-
3, Part II) with the following formula: (Line 9 + Line 10)/(Line 1 +
Line 28 + Line 33 + Line 35)--(Lines 2, 3, 4.01, 5, 6, 7, 7.01, and 8
and Lines 26 through 43). We then compute the amounts of overhead
salaries and hours to be allocated to the excluded areas by multiplying
the previously discussed ratio by the total overhead salaries and hours
reported on Lines 26 through 43 of Worksheet S-3, Part II. Next, we
compute the amounts of overhead wage-related costs to be allocated to
the excluded areas using three steps:
We determine the ``overhead rate'' (from Worksheet S-3,
Part II), which is the ratio of overhead hours (Lines 26 through 43
minus the sum of Lines 28, 33, and 35) to revised hours excluding the
sum of lines 28, 33, and 35 (Line 1 minus the sum of Lines 2, 3, 4.01,
5, 6, 7, 7.01, 8, 9, 10, 28, 33, and 35). We note that, for the FY 2008
and subsequent wage index calculations, we have been excluding the
overhead contract labor (Lines 28, 33, and 35) from the determination
of the ratio of overhead hours to revised hours because hospitals
typically do not provide fringe benefits (wage-related costs) to
contract personnel. Therefore, it is not necessary for the wage index
calculation to exclude overhead wage-related costs for contract
personnel. Further, if a hospital does contribute to wage-related costs
for contracted personnel, the instructions for Lines 28, 33, and 35
require that associated wage-related costs be combined with wages on
the respective contract labor lines. The formula for the Overhead Rate
(from Worksheet S-3, Part II) is the following: (Lines 26 through 43--
Lines 28, 33 and 35)/((((Line 1 + Lines 28, 33, 35)-(Lines 2, 3, 4.01,
5, 6, 7, 7.01, 8, and 26 through 43))-(Lines 9 and 10)) + (Lines 26
through 43-Lines 28, 33, and 35)).
We compute overhead wage-related costs by multiplying the
overhead hours ratio by wage-related costs reported on Part II, Lines
17, 22, 25.50, 25.51, and 25.52.
We multiply the computed overhead wage-related costs by
the previously described excluded area hours ratio.
Finally, we subtract the computed overhead salaries, wage-related
costs, and hours associated with excluded areas from the total salaries
(plus wage-related costs) and hours derived in Steps 2 and 3.
Step 5.--For each hospital, we adjust the total salaries plus wage-
related costs to a common period to determine total adjusted salaries
plus wage-related costs. To make the wage adjustment, we estimate the
percentage change in the employment cost index (ECI) for compensation
for each 30-day increment from October 14, 2018, through April 15,
2020, for private industry hospital workers from the Bureau of Labor
Statistics' (BLS') Compensation and Working Conditions. We use the ECI
because it reflects the price increase associated with total
compensation (salaries plus fringes) rather than just the increase in
salaries. In addition, the ECI includes managers as well as other
hospital workers. This methodology to compute the monthly update
factors uses actual quarterly ECI data and assures that the update
factors match the actual quarterly and annual percent changes. We also
note that, since April 2006 with the publication of March 2006 data,
the BLS' ECI uses a different classification system, the North American
Industrial Classification System (NAICS), instead of the Standard
Industrial Codes (SICs), which no longer exist. We have consistently
used the ECI as the data source for our wages and salaries and other
price proxies in the IPPS market basket, and we did not propose to make
any changes to the usage of the ECI for FY 2023. The factors used to
adjust the hospital's data are based on the midpoint of the cost
reporting period, as indicated in this rule.
Step 6.--Each hospital is assigned to its appropriate urban or
rural labor market area before any reclassifications under section
1886(d)(8)(B), 1886(d)(8)(E), or 1886(d)(10) of the Act. Within each
urban or rural labor market area, we add the total adjusted salaries
plus wage-related costs obtained in Step 5 for all hospitals in that
area to determine the total adjusted salaries plus wage-related costs
for the labor market area.
Step 7.--We divide the total adjusted salaries plus wage-related
costs obtained under Step 6 by the sum of the corresponding total hours
(from Step 4) for all hospitals in each labor market area to determine
an average hourly wage for the area.
Step 8.--We add the total adjusted salaries plus wage-related costs
obtained in Step 5 for all hospitals in the Nation and then divide the
sum by the national sum of total hours from Step 4 to arrive at a
national average hourly wage.
Step 9.--For each urban or rural labor market area, we calculate
the hospital wage index value, unadjusted for occupational mix, by
dividing the area average hourly wage obtained in Step 7 by the
national average hourly wage computed in Step 8.
Step 10.--For each urban labor market area for which we do not have
any hospital wage data (either because there are no IPPS hospitals in
that labor market area, or there are IPPS hospitals in that area but
their data are either too new to be reflected in the current year's
wage index calculation, or their data are aberrant and are deleted from
the wage index), we finalized in the FY 2020 IPPS/LTCH PPS final rule
(84 FR 42305) that, for FY 2020 and subsequent years' wage index
calculations, such CBSA's wage index would be equal to total urban
salaries plus wage-related costs (from Step 5) in the State, divided by
the total urban hours (from Step 4) in the State, divided by the
national average hourly wage from Step 8 (see 84 FR 42305 and 42306,
August 16, 2019). We stated that we believe that, in the absence of
wage data for an urban labor market area, it is reasonable to use a
[[Page 48999]]
statewide urban average, which is based on actual, acceptable wage data
of hospitals in that State, rather than impute some other type of value
using a different methodology. For calculation of the FY 2023 wage
index, we note there is one urban CBSA for which we do not have IPPS
hospital wage data. In Table 3 (which is available via the internet on
the CMS website) which contains the area wage indexes, we include a
footnote to indicate to which CBSAs this policy applies. These CBSAs'
wage indexes would be equal to total urban salaries plus wage-related
costs (from Step 5) in the respective State, divided by the total urban
hours (from Step 4) in the respective State, divided by the national
average hourly wage (from Step 8) (see 84 FR 42305 and 42306, August
16, 2019). Under this step, we also apply our policy with regard to how
dollar amounts, hours, and other numerical values in the wage index
calculations are rounded, as discussed in this section of this rule.
We refer readers to section II. of the Appendix of the final rule
for the policy regarding rural areas that do not have IPPS hospitals.
Step 11.--Section 4410 of Public Law 105-33 provides that, for
discharges on or after October 1, 1997, the area wage index applicable
to any hospital that is located in an urban area of a State may not be
less than the area wage index applicable to hospitals located in rural
areas in that State. The areas affected by this provision are
identified in Table 2 listed in section VI. of the Addendum to the
final rule and available via the internet on the CMS website.
Following is our policy with regard to rounding of the wage data
(dollar amounts, hours, and other numerical values) in the calculation
of the unadjusted and adjusted wage index, as finalized in the FY 2020
IPPS/LTCH final rule (84 FR 42306, August 16, 2019). For data that we
consider to be ``raw data,'' such as the cost report data on Worksheets
S-3, Parts II and III, and the occupational mix survey data, we use
such data ``as is,'' and do not round any of the individual line items
or fields. However, for any dollar amounts within the wage index
calculations, including any type of summed wage amount, average hourly
wages, and the national average hourly wage (both the unadjusted and
adjusted for occupational mix), we round the dollar amounts to 2
decimals. For any hour amounts within the wage index calculations, we
round such hour amounts to the nearest whole number. For any numbers
not expressed as dollars or hours within the wage index calculations,
which could include ratios, percentages, or inflation factors, we round
such numbers to 5 decimals. However, we continue rounding the actual
unadjusted and adjusted wage indexes to 4 decimals, as we have done
historically.
As discussed in the FY 2012 IPPS/LTCH PPS final rule, in ``Step
5,'' for each hospital, we adjust the total salaries plus wage-related
costs to a common period to determine total adjusted salaries plus
wage-related costs. To make the wage adjustment, we estimate the
percentage change in the employment cost index (ECI) for compensation
for each 30-day increment from October 14, 2018, through April 15,
2020, for private industry hospital workers from the BLS' Compensation
and Working Conditions. We have consistently used the ECI as the data
source for our wages and salaries and other price proxies in the IPPS
market basket, and we did not propose any changes to the usage of the
ECI for FY 2023. The factors used to adjust the hospital's data were
based on the midpoint of the cost reporting period, as indicated in the
following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.112
[[Page 49000]]
For example, the midpoint of a cost reporting period beginning
January 1, 2019, and ending December 31, 2019, is June 30, 2019. An
adjustment factor of 1.01630 was applied to the wages of a hospital
with such a cost reporting period.
Previously, we also would provide a Puerto Rico overall average
hourly wage. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81
FR 56915), prior to January 1, 2016, Puerto Rico hospitals were paid
based on 75 percent of the national standardized amount and 25 percent
of the Puerto Rico-specific standardized amount. As a result, we
calculated a Puerto Rico specific wage index that was applied to the
labor-related share of the Puerto Rico-specific standardized amount.
Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-
113) amended section 1886(d)(9)(E) of the Act to specify that the
payment calculation with respect to operating costs of inpatient
hospital services of a subsection (d) Puerto Rico hospital for
inpatient hospital discharges on or after January 1, 2016, shall use
100 percent of the national standardized amount. As we stated in the FY
2017 IPPS/LTCH PPS final rule (81 FR 56915 through 56916), because
Puerto Rico hospitals are no longer paid with a Puerto Rico specific
standardized amount as of January 1, 2016, under section 1886(d)(9)(E)
of the Act, as amended by section 601 of the Consolidated
Appropriations Act, 2016, there is no longer a need to calculate a
Puerto Rico specific average hourly wage and wage index. Hospitals in
Puerto Rico are now paid 100 percent of the national standardized
amount and, therefore, are subject to the national average hourly wage
(unadjusted for occupational mix) and the national wage index, which is
applied to the national labor-related share of the national
standardized amount. Therefore, for FY 2023, there is no Puerto Rico-
specific overall average hourly wage or wage index.
Based on the methodology, as previously discussed, we stated in the
proposed rule (87 FR 28365) that the proposed FY 2023 unadjusted
national average hourly wage was $47.77.
We did not receive any comments regarding the discussion of our
method for computing the FY 2023 unadjusted wage index. Based on the
previously described methodology, the final FY 2023 unadjusted national
average hourly wage is the following:
[GRAPHIC] [TIFF OMITTED] TR10AU22.113
E. Occupational Mix Adjustment to the FY 2023 Wage Index
As stated earlier, section 1886(d)(3)(E) of the Act provides for
the collection of data every 3 years on the occupational mix of
employees for each short-term, acute care hospital participating in the
Medicare program, in order to construct an occupational mix adjustment
to the wage index, for application beginning October 1, 2004 (the FY
2005 wage index). The purpose of the occupational mix adjustment is to
control for the effect of hospitals' employment choices on the wage
index. For example, hospitals may choose to employ different
combinations of registered nurses, licensed practical nurses, nursing
aides, and medical assistants for the purpose of providing nursing care
to their patients. The varying labor costs associated with these
choices reflect hospital management decisions rather than geographic
differences in the costs of labor.
1. Use of 2019 Medicare Wage Index Occupational Mix Survey for the FY
2023 Wage Index
Section 304(c) of the Consolidated Appropriations Act, 2001 (Pub.
L. 106- 554) amended section 1886(d)(3)(E) of the Act to require CMS to
collect data every 3 years on the occupational mix of employees for
each short-term, acute care hospital participating in the Medicare
program. As discussed in the FY 2022 IPPS/LTCH PPS proposed rule (86 FR
25402 through 25403) and final rule (86 FR 45173), we collected data in
2019 to compute the occupational mix adjustment for the FY 2022, FY
2023, and FY 2024 wage indexes. The FY 2023 occupational mix adjustment
is based on the calendar year (CY) 2019 survey. Hospitals were required
to submit their completed 2019 surveys (Form CMS-10079, OMB Number
0938-0907, expiration date October 31, 2022) to their MACs by September
3, 2020. It should be noted that this collection of information was
approved under OMB control number 0938-0907 with an expiration date of
October 31, 2022. An extension of the information collection request is
currently being developed. The public will have an opportunity to
review and submit comments regarding the extension of this PRA package
through a public notice and comment period separate from this
rulemaking. The preliminary, unaudited CY 2019 survey data were posted
on the CMS website on September 8, 2020. As with the Worksheet S-3,
Parts II and III cost report wage data, as part of the FY 2023 desk
review process, the MACs revised or verified data elements in
hospitals' occupational mix surveys that resulted in certain edit
failures.
2. Calculation of the Occupational Mix Adjustment for FY 2023
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28366), for FY
2023, we proposed to calculate the occupational mix adjustment factor
using the same methodology that we have used since the FY 2012 wage
index (76 FR 51582 through 51586) and to apply the occupational mix
adjustment to 100 percent of the FY 2023 wage index. In the FY 2020
IPPS/LTCH PPS final rule (84 FR 42308), we modified our methodology
with regard to how dollar amounts, hours, and other numerical values in
the unadjusted and adjusted wage index calculation are rounded, in
order to ensure consistency in the calculation. According to the policy
finalized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308 and
42309), for data that we consider to be ``raw data,'' such as the cost
report data on Worksheets S-3, Parts II and III, and the occupational
mix survey data, we continue to use these data ``as is'', and not round
any of the individual line items or fields. However, for any dollar
amounts within the wage index calculations, including any type of
summed wage amount, average hourly wages, and the national average
hourly wage (both the unadjusted and adjusted for occupational mix), we
round such dollar amounts to 2 decimals. We round any hour amounts
within the wage index calculations to the nearest whole number. We
round any numbers not expressed as dollars or hours in the wage index
calculations, which could include ratios, percentages, or inflation
factors, to 5 decimals. However, we continue rounding the actual
unadjusted and adjusted wage indexes to 4 decimals, as we have done
historically.
Similar to the method we use for the calculation of the wage index
without occupational mix, salaries and hours for a multicampus hospital
are allotted among the different labor market areas where its campuses
are located. Table 2
[[Page 49001]]
associated with this final rule (which is available via the internet on
the CMS website), which contains the final FY 2023 occupational mix
adjusted wage index, includes separate wage data for the campuses of
multicampus hospitals. We refer readers to section III.C. of the
preamble of this final rule for a chart listing the multicampus
hospitals and the FTE percentages used to allot their occupational mix
data.
Because the statute requires that the Secretary measure the
earnings and paid hours of employment by occupational category not less
than once every 3 years, all hospitals that are subject to payments
under the IPPS, or any hospital that would be subject to the IPPS if
not granted a waiver, must complete the occupational mix survey, unless
the hospital has no associated cost report wage data that are included
in the FY 2023 wage index. For the proposed FY 2023 wage index, we used
the Worksheet S-3, Parts II and III wage data of 3,112 hospitals, and
we used the occupational mix surveys of 3,010 hospitals for which we
also had Worksheet S-3 wage data, which represented a ``response'' rate
of 97 percent (3,010/3,112). For the proposed FY 2023 wage index, we
applied proxy data for noncompliant hospitals, new hospitals, or
hospitals that submitted erroneous or aberrant data in the same manner
that we applied proxy data for such hospitals in the FY 2012 wage index
occupational mix adjustment (76 FR 51586). As a result of applying this
methodology, the proposed FY 2023 occupational mix adjusted national
average hourly wage was $47.71.
We did not receive any comments on our proposed calculation of the
occupational mix adjustment to the FY 2023 wage index. Thus, for the
reasons discussed in this final rule and in the FY 2023 IPPS/LTCH PPS
proposed rule, we are finalizing our proposal, without modification to
calculate the occupational mix adjustment factor using the same
methodology that we have used since the FY 2012 wage index and to apply
the occupational mix adjustment to 100 percent of the FY 2023 wage
index.
For the final FY 2023 wage index, we are using the Worksheet S3,
Parts II and III wage data of 3,136 hospitals, and we are using the
occupational mix surveys of 3,035 hospitals for which we also have
Worksheet S-3 wage data, which is a ``response'' rate of 97 percent
(3,035/3,136). For the final FY 2023 wage index, we are applying proxy
data for noncompliant hospitals, new hospitals, or hospitals that
submitted erroneous or aberrant data in the same manner that we applied
proxy data for such hospitals in the FY 2012 wage index occupational
mix adjustment (76 FR 51586). As a result of applying this methodology,
the final FY-2023 occupational mix adjusted national average hourly
wage is the following:
[GRAPHIC] [TIFF OMITTED] TR10AU22.114
F. Analysis and Implementation of the Proposed Occupational Mix
Adjustment and the FY 2023 Occupational Mix Adjusted Wage Index
As discussed in section III.E. of the preamble of this final rule,
for FY 2023, we are applying the occupational mix adjustment to 100
percent of the FY 2023 wage index. We calculated the occupational mix
adjustment using data from the 2019 occupational mix survey data, using
the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76
FR 51582 through 51586).
The FY 2023 national average hourly wages for each occupational mix
nursing subcategory as calculated in Step 2 of the occupational mix
calculation are as follows:
[GRAPHIC] [TIFF OMITTED] TR10AU22.115
The national average hourly wage for the entire nurse category is
computed in Step 5 of the occupational mix calculation. Hospitals with
a nurse category average hourly wage (as calculated in Step 4) of
greater than the national nurse category average hourly wage receive an
occupational mix adjustment factor (as calculated in Step 6) of less
than 1.0. Hospitals with a nurse category average hourly wage (as
calculated in Step 4) of less than the national nurse category average
hourly wage receive an occupational mix adjustment factor (as
calculated in Step 6) of greater than 1.0.
Based on the 2019 occupational mix survey data, we determined (in
Step 7 of the occupational mix calculation) the following:
[GRAPHIC] [TIFF OMITTED] TR10AU22.116
[[Page 49002]]
We compared the FY 2023 occupational mix adjusted wage indexes for
each CBSA to the unadjusted wage indexes for each CBSA. Applying the
occupational mix adjustment to the wage data resulted in the following:
[GRAPHIC] [TIFF OMITTED] TR10AU22.117
These results indicate that a smaller percentage of urban areas
(53.6 percent) would benefit from the occupational mix adjustment than
would rural areas (57.4 percent).
G. Application of the Rural Floor, Application of the Imputed Floor,
Application of the State Frontier Floor, Continuation of the Low Wage
Index Hospital Policy, and Budget Neutrality Adjustment
1. Rural Floor
Section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33)
provides that, for discharges on or after October 1, 1997, the area
wage index applicable to any hospital that is located in an urban area
of a State may not be less than the area wage index applicable to
hospitals located in rural areas in that State. This provision is
referred to as the rural floor. Section 3141 of the Patient Protection
and Affordable Care Act (Pub. L. 111-148) also requires that a national
budget neutrality adjustment be applied in implementing the rural
floor.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332 through
42336), we removed urban to rural reclassifications from the
calculation of the rural floor to prevent inappropriate payment
increases under the rural floor due to rural reclassifications, such
that, beginning in FY 2020, the rural floor was calculated without
including the wage data of hospitals that have reclassified as rural
under section 1886(d)(8)(E) of the Act (as implemented in the
regulations at Sec. 412.103). For FY 2023, we proposed to continue to
calculate the rural floor without the wage data of hospitals that have
reclassified as rural under Sec. 412.103 (87 FR 28367-28368). Also,
for the purposes of applying the provisions of section
1886(d)(8)(C)(iii) of the Act, effective beginning in FY 2020, we
removed the data of hospitals reclassified from urban to rural under
section 1886(d)(8)(E) of the Act (as implemented in the regulations at
Sec. 412.103) from the calculation of ``the wage index for rural areas
in the State in which the county is located'' as referred to in section
1886(d)(8)(C)(iii) of the Act (84 FR 42333). In the IPPS/LTCH PPS
proposed rule (87 FR 28367 and 28368), we proposed to continue to apply
this policy for FY 2023.
We noted in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28368)
that the FY 2020 rural floor policy and the related budget neutrality
adjustment were the subject of pending litigation, including in Citrus
HMA, LLC, d/b/a Seven Rivers Regional Medical Center v. Becerra, No.
1:20-cv-00707 (D.D.C.) (hereafter referred to as Citrus). On April 8,
2022, the district court in Citrus granted in part the plaintiff
hospitals' motion for summary judgment and denied the Secretary's
cross-motion for summary judgment. The court found that the Secretary
did not have authority under section 4410(a) of the Balanced Budget Act
of 1997 to establish a rural floor lower than the rural wage index for
a state. We stated that while Citrus involves only FY 2020, the court's
decision--which is subject to potential appeal--may have implications
for FY 2023 payment rates. We stated that we were continuing to
evaluate the court's decision, and although we proposed for the rural
floor wage index policy (and the related budget neutrality adjustment)
to continue for FY 2023, we stated we may decide to take a different
approach in the final rule, depending on public comments or
developments in the court proceedings.
Comments: Several commenters supported CMS's policy established
beginning in FY 2020 to exclude the wage data of Sec. 412.103
hospitals from the rural floor calculation. Some commenters
specifically stated that this policy restores fairness in the wage
index by preventing certain states from manipulating the wage index
system to artificially inflate the wage indexes of hospitals in the
state at the expense of all other states, due to the rural floor
national budget neutrality adjustment required by section 3141 of
Public Law 111-148.
Many commenters urged CMS to acquiesce to the district court's
decision in Citrus, discontinue the policy of excluding the wage data
of Sec. 412.103 hospitals from the rural floor calculation, and revert
to the policy that existed prior to FY 2020. The commenters stated
their belief that the court's analysis was thorough and that continuing
the rural floor policy would
[[Page 49003]]
only increase the agency's exposure to future lawsuits. Commenters
asserted that the plain language of the statute does not provide for a
free-floating rural floor that is not linked to the rural wage index.
One of the commenters advocating for CMS to revert to the policy that
applied prior to FY 2020 requested that if CMS does choose to continue
its current rural floor policy in FY 2023, it should do so in a non-
budget neutral manner.
Other commenters also suggested that along with including the wage
data of Sec. 412.103 hospitals in the rural floor calculation, CMS
should include the wage data of Sec. 412.103 hospitals for purposes of
the calculation required by Sec. 1886(d)(8)(C)(ii) of the Act. Two
commenters specifically asserted that CMS should include the wage data
of Sec. 412.103 hospitals that also have an Medicare Geographic
Classification Review Board (MGCRB) reclassification for purposes of
the calculation required by Sec. 1886(d)(8)(C)(ii) of the Act.
Specifically, these commenters stated that when a geographically rural
hospital has an active MGCRB reclassification to another area, CMS
includes the wage data of the hospital in calculating the rural wage
index of the state in which that hospital is located, if not doing so
would reduce the wage index for that rural area, as described in Sec.
1886(d)(8)(C)(ii) of the Act. However, the commenters stated that CMS
does not treat the wage data of hospitals with a Sec. 412.103
reclassification in addition to an MGCRB reclassification in the same
manner as geographically rural hospitals with an MGCRB
reclassification. A commenter stated that treating hospitals with dual
Sec. 412.103 and MGCRB reclassifications in the same manner as other
rural hospitals for the calculation required by Sec. 1886(d)(8)(C)(ii)
would help address rural floor manipulation by mitigating the impact
that one or two Sec. 412.103 hospitals remaining rural for wage index
purposes would have on the rural wage index and rural floor.
Response: We appreciate the commenters' input. In response to the
comments supporting our proposal to continue our policy of excluding
the wage data of Sec. 412.103 hospitals from the rural floor
calculation for FY 2023, we appreciate the concern regarding wage index
manipulation, particularly arising from high wage hospitals in certain
states reclassifying as rural under Sec. 412.103 to inflate the rural
wage index. However, as noted by a commenter, a national budget
neutrality adjustment is required by section 3141 of Public Law 111-
148. As stated in response to comments in the FY 2022 IPPS/LTCH PPS
final rule (86 FR 45175 through 45176) and in the FY 2017 IPPS/LTCH PPS
final rule (81 FR 56920), section 3141 requires that budget neutrality
for the rural floor be applied ``through a uniform, national adjustment
to the area wage index'' instead of within each State beginning in FY
2011 (75 FR 50160). Accordingly, we do not have the authority to
calculate rural floor budget neutrality in a State-specific manner.
With regard to the comments concerning the district court's
decision in Citrus, prior to FY 2020, it was our policy to have the
rural wage index set the rural floor, resulting in identical wage index
values for a state's rural area and rural floor. We changed that policy
in the FY 2020 IPPS/LTCH PPS final rule to prevent inappropriate
payment increases under the rural floor due to rural reclassifications
under Sec. 412.103 (84 FR 42332 through 42336). We explained that
rather than raising the payment of some urban hospitals to the level of
the average rural hospital in their State, as we believed was the
intent of the rural floor policy, the rural floor calculation prior to
FY 2020 enabled urban hospitals to have their payments raised to the
relatively high level of one or more geographically urban hospitals
reclassified as rural (84 FR 42334). This policy change beginning in FY
2020 to exclude Sec. 412.103 hospitals from the rural floor
calculation created a rural area wage index separate from the rural
floor, with the rural floor for the state typically lower than the
rural wage index.
We understand that our policy of setting a rural floor lower than
the rural wage index for a state is inconsistent with the district
court's decision in Citrus. Following our review of that decision and
the comments we received on the proposed rule, we are finalizing a
policy that calculates the rural floor as it was calculated before FY
2020. Specifically, for FY 2023 and subsequent years, we are finalizing
a policy to include the wage data of hospitals that have reclassified
from urban to rural under section 1886(d)(8)(E) of the Act (as
implemented in the regulations at Sec. 412.103) and have no additional
form of reclassification (MGCRB or Lugar) in the calculation of the
rural floor, and to include the wage data of such hospitals in the
calculation of ``the wage index for rural areas in the State in which
the county is located'' as referred to in section 1886(d)(8)(C)(iii) of
the Act.
With regard to the application of the hold harmless policy that the
commenters referenced at Sec. 1886(d)(8)(C)(ii), the statute requires
that a rural area be held harmless from the effects of hospitals
reclassifying under Lugar or the MGCRB. Specifically, Sec.
1886(d)(8)(C)(ii) states: ``If the application of subparagraph (B) or a
decision of the Medicare Geographic Classification Review Board or the
Secretary under paragraph (10), by treating hospitals located in a
rural county or counties as not being located in the rural area in a
State, reduces the wage index for that rural area (as applied under
this subsection), the Secretary shall calculate and apply such wage
index under this subsection as if the hospitals so treated had not been
excluded from calculation of the wage index for that rural area.''
The commenters suggest that CMS should include the wage data of
Sec. 412.103 hospitals that also have a MGCRB reclassification for
purposes of the calculation required by Sec. 1886(d)(8)(C)(ii),
thereby treating hospitals with dual Sec. 412.103 and MGCRB
reclassifications no differently than geographically rural hospitals
with MGCRB reclassifications for the hold-harmless comparison at Sec.
1886(d)(8)(C)(ii). Specifically, this would involve calculating the
rural area wage index including the data of all Sec. 412.103
hospitals, and then comparing it to a wage index with the effect of
MGCRB reclassifications and Lugar hospital statuses applied, in order
to possibly hold the rural area harmless from the effect of MGCRB
reclassifications and Lugar hospital statuses.
As we explained in response to a similar comment in the FY 2022
IPPS/LTCH PPS final rule (86 FR 45181), CMS continues to treat Sec.
412.103 hospitals as rural as required by the statute even if such
hospitals have an additional MGCRB reclassification by affording the
hospital the benefits of rural status, such as 340B program and RRC
eligibility. However, in developing our policies for how hospitals with
dual reclassifications would be treated in wage index calculations
following our April 21, 2016 IFC (81 FR 23428 through 23438), CMS
discussed the effect of simultaneous Sec. 412.103 and MGCRB
reclassifications. We stated that when there is both a Sec. 412.103
reclassification and an MGCRB reclassification, the MGCRB
reclassification would control for wage index calculation and payment
purposes. We explained that ``In these circumstances, we believe it is
appropriate to rely on the urban MGCRB reclassification to include the
hospital's wage data in the calculation of the urban CBSA wage index.
Further, we believe it is appropriate to rely on the
[[Page 49004]]
urban MGCRB reclassification to ensure that the hospital be paid based
on its urban MGCRB wage index. While rural reclassification confers
other rural benefits besides the wage index under section 1886(d) of
the Act, a hospital that chooses to pursue reclassification under the
MGCRB (while also maintaining a rural reclassification under Sec.
412.103) would do so solely for wage index payment purposes.'' (81 FR
23434). We continue to believe that policy, developed through
rulemaking, is appropriate, since MGCRB reclassifications are solely
for wage index payment purposes. Furthermore, the approach the
commenters suggest would constitute a significant change to our current
policy for Sec. 412.103 hospitals that also have a MGCRB
reclassification, and would create numerous downstream effects across
IPPS ratesetting that might not be favorable to hospitals, contrary to
the commenters' intent. For example, some states would experience a
decline in their rural wage index if we were to treat hospitals with
dual Sec. 412.103 and MGCRB reclassifications no differently than
geographically rural hospitals with MGCRB reclassifications. In
response to the commenters' assertion that such treatment would address
rural floor manipulation, we note that the commenters' suggested
treatment of hospitals with dual Sec. 412.103 and MGCRB
reclassifications would potentially allow for other forms of wage index
manipulation. For example, high-wage hospitals could obtain Sec.
412.103 status, reclassify back to their home area under the MGCRB, in
order to have their Sec. 412.103 rural reclassifications raise the
rural wage index via the hold harmless provision at Sec.
1886(d)(8)(C)(ii), without lowering the hospitals' own wage index. We
did not propose the policy the commenters suggest, and it would
constitute a significant change with numerous effects on the IPPS wage
index. We do not think it would be appropriate to adopt such a policy
without describing it in a proposed rule and obtaining public comments
from all interested parties. Therefore, in this final rule we are not
adopting the policy the commenters suggest.
Based on the district court's decision in Citrus and the comments
we received, we are not finalizing our rural floor wage index policy as
proposed, which would have excluded Sec. 412.103 hospitals from the
calculation of the rural floor and from the calculation of ``the wage
index for rural areas in the State in which the county is located'' as
referred to in section 1886(d)(8)(C)(iii) of the Act. Rather, we are
finalizing a policy that calculates the rural floor as it was
calculated before FY 2020. This decision follows our review of the
decision in Citrus and the comments received, including comments urging
us to revert to our pre-2020 policy. For FY 2023 and subsequent years,
we are finalizing a policy to include the wage data of hospitals that
have reclassified from urban to rural under section 1886(d)(8)(E) of
the Act (as implemented in the regulations at Sec. 412.103) and have
no additional form of reclassification (MGCRB or Lugar) in the
calculation of the rural floor, and to include the wage data of such
hospitals in the calculation of ``the wage index for rural areas in the
State in which the county is located'' as referred to in section
1886(d)(8)(C)(iii) of the Act. We will apply the same policy as prior
to the FY 2020 final rule for calculating the rural floor, in which the
rural wage index sets the rural floor. Based on the FY 2023 wage index
associated with this final rule (which is available via the internet on
the CMS website) and based on the calculation of the rural floor
including the wage data of hospitals that have reclassified as rural
under Sec. 412.103, we estimate that 275 hospitals would receive an
increase in their FY 2023 wage index due to the application of the
rural floor.
2. Imputed Floor
In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we
adopted the imputed floor policy as a temporary 3-year regulatory
measure to address concerns from hospitals in all urban States that
have stated that they are disadvantaged by the absence of rural
hospitals to set a wage index floor for those States. We extended the
imputed floor policy eight times since its initial implementation, the
last of which was adopted in the FY 2018 IPPS/LTCH PPS final rule and
expired on September 30, 2018. (We refer readers to further discussions
of the imputed floor in the IPPS/LTCH PPS final rules from FYs 2014
through 2019 (78 FR 50589 through 50590, 79 FR 49969 through 49971, 80
FR 49497 through 49498, 81 FR 56921 through 56922, 82 FR 38138 through
38142, and 83 FR 41376 through 41380, respectively) and to the
regulations at 42 CFR 412.64(h)(4).) For FYs 2019, 2020, and 2021,
hospitals in all-urban states received a wage index that was calculated
without applying an imputed floor, and we no longer included the
imputed floor as a factor in the national budget neutrality adjustment.
In computing the imputed floor for an all-urban State under the
original methodology established beginning in FY 2005, we calculated
the ratio of the lowest-to-highest CBSA wage index for each all-urban
State as well as the average of the ratios of lowest-to-highest CBSA
wage indexes of those all-urban States. We then compared the State's
own ratio to the average ratio for all-urban States and whichever was
higher was multiplied by the highest CBSA wage index value in the
State--the product of which established the imputed floor for the
State. We adopted a second, alternative methodology beginning in FY
2013 (77 FR 53368 through 53369) to address the concern that the
original imputed floor methodology guaranteed a benefit for one all-
urban State with multiple wage indexes (New Jersey) but could not
benefit another all-urban State, Rhode Island, which had only one CBSA.
Under the alternative methodology, we first determined the average
percentage difference between the post reclassified, pre-floor area
wage index and the post-reclassified, rural floor wage index (without
rural floor budget neutrality applied) for all CBSAs receiving the
rural floor. The lowest post reclassified wage index assigned to a
hospital in an all-urban State having a range of such values then was
increased by this factor, the result of which established the State's
alternative imputed floor. Under the updated OMB labor market area
delineations adopted by CMS beginning in FY 2015, Delaware became an
all-urban State, along with New Jersey and Rhode Island, and was
subject to an imputed floor as well. In addition, we adopted a policy,
as reflected at Sec. 412.64(h)(4)(vi), that, for discharges on or
after October 1, 2012, and before October 1, 2018, the minimum wage
index value for a State is the higher of the value determined under the
original methodology or the value determined under the alternative
methodology. The regulations implementing the imputed floor wage index,
both the original methodology and the alternative methodology, were set
forth at Sec. 412.64(h)(4).
Section 9831 of the American Rescue Plan Act of 2021 (Pub. L. 117-
2) enacted on March 11, 2021, amended section 1886(d)(3)(E)(i) of the
Act (42 U.S.C. 1395ww(d)(3)(E)(i)) and added section 1886(d)(3)(E)(iv)
of the Act to establish a minimum area wage index for hospitals in all-
urban States for discharges occurring on or after October 1, 2021.
Specifically, section 1886(d)(3)(E)(iv)(I) and (II) of the Act provides
that for discharges occurring on or after October 1, 2021, the area
wage index applicable to any hospital in
[[Page 49005]]
an all-urban State may not be less than the minimum area wage index for
the fiscal year for hospitals in that State established using the
methodology described in Sec. 412.64(h)(4)(vi) as in effect for FY
2018. Thus, effective beginning October 1, 2021 (FY 2022), section
1886(d)(3)(E)(iv) of the Act reinstates the imputed floor wage index
policy for all-urban States, with no expiration date, using the
methodology described in 42 CFR 412.64(h)(4)(vi) as in effect for FY
2018. As discussed previously, under Sec. 412.64(h)(4)(vi), the
minimum wage index value for hospitals in an all-urban State is the
higher of the value determined using the original methodology (as set
forth at Sec. 412.64(h)(4)(i) through (v)) or the value determined
using alternative methodology (as set forth at Sec.
412.64(h)(4)(vi)(A) and (B)) for calculating an imputed floor.
Therefore, as provided in Sec. 412.64(h)(4)(vi), we apply the higher
of the value determined under the original or alternative methodology
for calculating a minimum wage index, or imputed floor, for all-urban
States effective beginning with FY 2022. We note that the rural floor
values used in the alternative methodology at Sec. 412.64(h)(4)(vi)(A)
and (B) would now include the wage data of hospitals reclassified under
Sec. 412.103 that have no additional form of reclassification (MGCRB
or Lugar), according to the rural floor wage index policy finalized in
this final rule in which we calculate the rural floor for FY 2023
including the wage data of such hospitals.
Unlike the imputed floor that was in effect from FYs 2005 through
2018, section 1886(d)(3)(E)(iv)(III) of the Act provides that the
imputed floor wage index shall not be applied in a budget neutral
manner. Specifically, section 9831(b) of Public Law 117-2 amends
section 1886(d)(3)(E)(i) of the Act to exclude the imputed floor from
the budget neutrality requirement under section 1886(d)(3)(E)(i) of the
Act. In other words, the budget neutrality requirement under section
1886(d)(3)(E)(i) of the Act, as amended, must be applied without taking
into account the imputed floor adjustment under section
1886(d)(3)(E)(iv) of the Act. When the imputed floor was in effect from
FY 2005 through FY 2018, to budget neutralize the increase in payments
resulting from application of the imputed floor, we calculated the
increase in payments resulting from the imputed floor together with the
increase in payments resulting from the rural floor and applied an
adjustment to reduce the wage index. By contrast, for FY 2022 and
subsequent years, we apply the imputed floor after the application of
the rural floor and apply no reductions to the standardized amount or
to the wage index to fund the increase in payments to hospitals in all-
urban States resulting from the application of the imputed floor
required under section 1886(d)(3)(E)(iv) of the Act.
The imputed floor under section 1886(d)(3)(E)(iv) of the Act
applies to all-urban States, as defined in new subclause (IV). Section
1886(d)(3)(E)(iv)(IV) provides that, for purposes of the imputed floor
wage index under clause (iv), the term all-urban State means a State in
which there are no rural areas (as defined in section 1886(d)(2)(D) of
the Act) or a State in which there are no hospitals classified as rural
under section 1886 of the Act. Under this definition, given that it
applies for purposes of the imputed floor wage index, we consider a
hospital to be classified as rural under section 1886 of the Act if it
is assigned the State's rural area wage index value. Therefore, under
the definition at section 1886(d)(3)(E)(iv)(IV) of the Act, ``a State
in which there are no hospitals classified as rural under this
section'' includes a State that has a rural area but no hospitals that
receive the rural area wage index under section 1886(d) of the Act. For
purposes of this definition, hospitals redesignated as rural under
section 1886(d)(8)(E) of the Act (412.103 rural reclassifications) are
considered classified as rural if they receive the rural wage index;
however, hospitals that are deemed urban under section 1886(d)(8)(B) of
the Act (in Lugar counties), or are reclassified to an urban area under
section 1886(d)(10) of the Act (MGCRB reclassifications) are not
considered classified as rural because they do not receive the rural
wage index. In contrast, we note that in the imputed floor policy in
effect from FY 2005 through FY 2018, we did not consider a State to
qualify for ``all urban status'' if there were one or more hospitals
geographically located in the rural area of the State, even if all such
hospitals subsequently reclassified to receive an urban area wage
index. There is one State, Connecticut, that would be eligible for the
imputed floor because there are currently no hospitals in Connecticut
that are classified as rural under section 1886(d) for purposes of the
wage index--in other words, there are no hospitals that receive the
rural wage index. There is currently one rural county in Connecticut.
All hospitals in this county are either deemed urban under section
1886(d)(8)(B) of the Act or receive an MGCRB reclassification under
section 1886(d)(10) of the Act. While several Connecticut hospitals
were approved for rural reclassification under section 1886(d)(8)(E) of
the Act, at this point all have received a subsequent urban
reclassification under section 1886(d)(10) of the Act.
Additionally, under section 1861(x) of the Act, the term State has
the meaning given to it in section 210(h) of the Act. Because section
210(h) of the Act defines the word State to also include the District
of Columbia and the Commonwealth of Puerto Rico, Washington, DC and
Puerto Rico may also qualify as all-urban States for purposes of the
imputed floor if the requirements of section 1886(d)(3)(E)(iv)(IV) of
the Act are met. Based on data available for this final rule, the
following States would be all-urban States as defined in section
1886(d)(3)(E)(iv)(IV) of the Act, and thus hospitals in such States
would be eligible to receive an increase in their wage index due to
application of the imputed floor for FY 2023: New Jersey, Rhode Island,
Delaware, Connecticut, and Washington, DC.
In the FY 2022 IPPS/LTCH PPS final rule, we revised the regulations
at Sec. 412.64(e)(1) and (4) and (h)(4) and (5) to implement the
imputed floor required by section 1886(d)(3)(E)(iv) of the Act for
discharges occurring on or after October 1, 2021. The imputed floor
will be applied for FY 2023 in accordance with the policies adopted in
the FY 2022 IPPS/LTCH PPS final rule. For more information regarding
our implementation of the imputed floor required by section
1886(d)(3)(E)(iv) of the Act, we refer readers to the discussion in the
FY 2022 IPPS/LTCH PPS final rule (86 FR 45176 through 45178).
Comment: Several commenters supported the application of the
imputed floor wage index policy, including the policy's definition of
all-urban states as well as its non-budget neutral application as
required by section 9831 of the American Rescue Plan Act of 2021. A
commenter opposed the imputed floor policy, stating that it unfairly
manipulates the wage index to benefit a handful of only-urban states
and territories, but acknowledged that the imputed floor policy is
derived from legislation enacted by Congress.
Response: We appreciate the commenters' support of our application
of the statutory imputed floor policy. Responding to the commenter
opposed to this policy, we underscore that, as the commenter pointed
out, the imputed floor was established by section 9831 of the American
Rescue Plan Act of 2021.
[[Page 49006]]
Accordingly, CMS does not have discretion to not apply the imputed
floor.
After consideration of the public comments, we will apply the
imputed floor required by section 1886(d)(3)(E)(iv) of the Act for
discharges occurring on or after October 1, 2022 in accordance with our
existing policies.
3. State Frontier Floor for FY 2023
Section 10324 of Public Law 111-148 requires that hospitals in
frontier States cannot be assigned a wage index of less than 1.0000.
(We refer readers to the regulations at 42 CFR 412.64(m) and to a
discussion of the implementation of this provision in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50160 through 50161).) In the FY 2023 IPPS/
LTCH PPS proposed rule, we did not propose any changes to the frontier
floor policy for FY 2023. In the proposed rule we stated that 44
hospitals would receive the frontier floor value of 1.0000 for their FY
2023 proposed wage index. These hospitals are located in Montana, North
Dakota, South Dakota, and Wyoming.
We did not receive any public comments on the application of the
State frontier floor for FY 2023. In this final rule, 44 hospitals will
receive the frontier floor value of 1.0000 for their FY 2023 wage
index. These hospitals are located in Montana, North Dakota, South
Dakota, and Wyoming. We note that while Nevada meets the criteria of a
frontier State, all hospitals within the State currently receive a wage
index value greater than 1.0000. The areas affected by the rural and
frontier floor policies for the final FY 2023 wage index are identified
in Table 2 associated with this final rule, which is available via the
internet on the CMS website.
4. Continuation of the Low Wage Index Hospital Policy; Budget
Neutrality Adjustment
To help mitigate wage index disparities, including those resulting
from the inclusion of hospitals with rural reclassifications under 42
CFR 412.103 in the rural floor, in the FY 2020 IPPS/LTCH PPS final rule
(84 FR 42325 through 42339), we finalized policies to reduce the
disparity between high and low wage index hospitals by increasing the
wage index values for certain hospitals with low wage index values and
doing so in a budget neutral manner through an adjustment applied to
the standardized amounts for all hospitals, as well as by changing the
calculation of the rural floor. We also provided for a transition in FY
2020 for hospitals experiencing significant decreases in their wage
index values as compared to their final FY 2019 wage index, and made
these changes in a budget neutral manner.
We increase the wage index for hospitals with a wage index value
below the 25th percentile wage index value for a fiscal year by half
the difference between the otherwise applicable final wage index value
for a year for that hospital and the 25th percentile wage index value
for that year across all hospitals (the low wage index hospital
policy). We stated in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326
through 42328) our intention that this policy will be effective for at
least 4 years, beginning in FY 2020, in order to allow employee
compensation increases implemented by these hospitals sufficient time
to be reflected in the wage index calculation. We noted in the FY 2023
IPPS/LTCH PPS proposed rule (87 FR 28369) that the FY 2020 low wage
index hospital policy and the related budget neutrality adjustment are
the subject of pending litigation, including in Bridgeport Hospital, et
al., v. Becerra, No. 1:20-cv-01574 (D.D.C.) (hereafter referred to as
Bridgeport). On March 2, 2022, the district court in Bridgeport granted
in part the plaintiff hospitals' motion for summary judgment and denied
the Secretary's cross-motion for summary judgment. The court found that
the Secretary did not have authority under section 1886(d)(3)(E) or
1886(d)(5)(I)(i) of the Act to adopt the low wage index hospital policy
and ordered additional briefing on the appropriate remedy. We stated
that while Bridgeport involves only FY 2020, the court's decision--
which is not final at this time and is also subject to potential
appeal--may have implications for FY 2023 payment rates. We stated that
we were continuing to evaluate the court's decision, and although we
proposed the low wage index hospital policy (and the related budget
neutrality adjustment, discussed in this section of this rule) to
continue for FY 2023, we stated that we may decide to take a different
approach in the final rule, depending on public comments or
developments in the court proceedings. In order to offset the estimated
increase in IPPS payments to hospitals with wage index values below the
25th percentile wage index value, for FY 2023 and for subsequent fiscal
years during which the low wage index hospital policy is in effect, we
proposed to apply a budget neutrality adjustment in the same manner as
we applied it in FYs 2020, 2021, and 2022, as a uniform budget
neutrality factor applied to the standardized amount. We refer readers
to section II.A.4.f. of the addendum to this final rule for further
discussion of the budget neutrality adjustment for FY 2023. For
purposes of the low wage index hospital policy, based on the data for
this final rule, the table displays the 25th percentile wage index
value across all hospitals for FY 2023. FY 2023 25th Percentile Wage
Index Value 0.8427.
Comment: Many commenters supported the low wage index hospital
policy. Commenters praised the low wage index hospital policy for
already beginning to reduce wage index disparities and urged the agency
to continue with the policy for FY 2023 as proposed. Commenters
described dire consequences of the policy ending, with a commenter
specifically stating that Medicare payments to hospitals in Puerto Rico
could fall drastically. Numerous commenters representing hospitals in a
state with relatively low wages indicated that they have used the
increased payments resulting from the low wage index hospital policy as
CMS intended, by raising compensation for their workers. However, these
commenters stated that the national average hourly wage increased at an
even higher rate due to COVID-19, indicating that additional time for
the policy and continued efforts on behalf of low wage hospitals are
required. A commenter requested that CMS consider the effects of COVID-
19 as CMS decides how it will appropriately evaluate the effectiveness
of its policy to raise low wage hospitals' wage indexes in the near
future, and another commenter specifically requested that CMS extend
the policy for at least four additional years due to COVID-19. A
commenter stated that CMS should maintain the policy until CMS can
verify that increased hospital compensation under the policy has led to
increased wage indexes, consistent with original intent of the policy.
Response: We appreciate the many comments received in support of
our low wage index hospital policy and the feedback regarding
achievement of the intended policy goal. We appreciate the commenters'
requests to consider the impacts of COVID-19, to extend this policy
beyond four years due to COVID-19, and to extend the policy until the
intended goals of the policy are reached. We appreciate commenters'
suggestions on how we might evaluate the effectiveness of the policy
and may consider those suggestions in future rulemaking.
Comment: Many commenters supported increasing the wage index values
of low-wage hospitals, but urged CMS to do so in a non-budget-neutral
[[Page 49007]]
manner. Commenters stated that implementing the policy with a budget
neutrality adjustment merely shifts funds from one group to another.
Commenters urged CMS to consider wage index reforms that lift low wage
hospitals' wage indexes without reducing the standardized operating
rate for all hospitals, which commenters indicated already receive
Medicare reimbursement at rates that are less than the actual cost of
care. A commenter stated that for hospitals between the 22nd and 25th
percentile, the reduction due to the budget neutrality adjustment is
greater than the benefit received from the quartile adjustment. This
commenter suggested holding hospitals under the 25th percentile
harmless by slightly reducing the labor-related share for those
hospitals that have a wage index greater than 1, or via a graduated
reduction to the standardized rate based on wage index percentile.
Other alternative methodologies and data suggested by commenters
included: reducing the wage indexes of hospitals with wage index values
above the 75th percentile through a budget neutrality adjustment;
verifying local labor prices with wage data audits; working with
Congress to create a new designated pool of funding; working with
Congress to minimize wage index cliffs; shortening the lag in hospital
wage data used to construct the wage index; and setting a national wage
index floor of 1.000.
Response: We disagree with the commenters that the low wage index
hospital policy should be implemented in a non-budget neutral manner.
As we stated in response to similar comments in the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42331 and 42332) and the FY 2022 IPPS/LTCH PPS
final rule (86 FR 45180), under section 1886(d)(3)(E) of the Act, the
wage index adjustment is required to be implemented in a budget neutral
manner. However, even if the wage index were not required to be budget
neutral under section 1886(d)(3)(E) of the Act, we would consider it
inappropriate to use the wage index to increase or decrease overall
IPPS spending. As we stated in the FY 2020 IPPS/LTCH PPS final rule (84
FR 42331), the wage index is not a policy tool but rather a technical
adjustment designed to be a relative measure of the wages and wage-
related costs of subsection (d) hospitals. As a result, as we explained
in the FY 2020 IPPS/LTCH PPS final rule, if it were determined that
section 1886(d)(3)(E) of the Act does not require the wage index to be
budget neutral, we invoke our authority at section 1886(d)(5)(I) of the
Act in support of such a budget neutrality adjustment.
With regard to the commenter's assertion about a possible reduction
to overall payment if the amount of benefit received from the wage
index boost is less than the reduction to the standardized amount, we
believe we have applied both the quartile policy and the budget
neutrality policy appropriately, as we explained in response to
comments in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45180). The
quartile adjustment is applied to the wage index, which resulted in an
increase to the wage index for hospitals below the 25th percentile. The
budget neutrality adjustment is applied to the standardized amount in
order to ensure that the low wage index hospital policy is implemented
in a budget neutral manner. Thus, consistent with our current
methodology for implementing wage index budget neutrality under section
1886(d)(3)(E) of the Act and with how we implemented budget neutrality
for the low wage index hospital policy in FY 2020, we believe it is
appropriate to continue to apply a budget neutrality adjustment to the
national standardized amount for all hospitals so that the low wage
index hospital policy is implemented in a budget neutral manner for FY
2023.
We appreciate the commenters' range of suggested alternatives.
Because we did not propose alternatives with regard to the low wage
index hospital policy, we consider these comments to be outside the
scope of the FY 2023 IPPS/LTCH PPS proposed rule. We are not addressing
them in this final rule but may consider them in future rulemaking.
Comment: Several commenters opposed the low wage index hospital
policy, stating that it is inappropriately redistributive, ineffective,
and outside the agency's statutory authority under section
1886(d)(3)(E) of the Act. Specifically, a commenter stated that
although the policy is intended to help rural hospitals, rural
hospitals in certain states do not benefit from this policy.
Furthermore, the commenter stated that the policy undermines the intent
of the wage index by not recognizing real differences in labor costs.
Response: In response to comments opposing the low wage index
hospital policy, we believe we addressed the stated concerns in our
responses to comments when we first finalized the policy and the
related budget neutrality adjustment in the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42325 through 42332). Concerning the policy's
redistributive effect, we refer readers to our response to the comments
above about budget neutrality. With regard to the policy's
effectiveness, we believe the comments in support of the policy,
specifically comments from relatively low-wage hospitals stating that
the increased payments under the policy have allowed them to raise
compensation for their workers, indicate that many low wage hospitals
are benefiting from this policy. Furthermore, we stated in the FY 2020
IPPS/LTCH PPS final rule (84 FR 42326 through 42328) our intention that
this policy will be effective for at least 4 years, until the policy's
effects could be reflected in the wage index data. In response to the
comment stating that although the policy is intended to help rural
hospitals, rural hospitals in certain states do not benefit from this
policy, we refer readers to our response to a similar comment in the FY
2020 IPPS/LTCH PPS final rule (84 FR 42328) regarding the policy's
effect on rural hospitals.
In response to comments stating the policy exceeds CMS's statutory
authority, we refer the commenters to our prior discussion of the
authority for the policy in the FY 2020 IPPS/LTCH PPS final rule (84 FR
42326 through 42332).
In response to the commenter who asserted that the low wage index
hospital policy does not recognize real differences in labor costs, we
continue to believe, for the reasons stated in the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42327-42328), that by preserving the rank order
in wage index values, our policy continues to reflect meaningful
distinctions between the employee compensation costs faced by hospitals
in different geographic areas. Thus, under the low wage index hospital
policy, we believe the wage index for low wage index hospitals
appropriately reflects the relative hospital wage level in those areas
compared to the national average hospital wage level.
Comment: Many commenters noted that the low wage index hospital
policy is currently the subject of pending litigation in Bridgeport. A
few commenters urged CMS not to finalize the policy for FY 2023, or to
wait until a final court decision is reached. One such commenter
suggested CMS should eliminate the budget neutrality adjustments for
FYs 2020, 2021, and 2022 in light of Bridgeport. Many commenters urged
CMS to appeal the district court's decision in Bridgeport. These
commenters stated that the consequences of halting the policy would be
dire, and that CMS has broad authority under section 1886(d)(3)(E) to
make policy adjustments, such as the
[[Page 49008]]
imputed floor policy implemented in 2005 that was implemented by CMS as
a policy measure to address concerns from hospitals in all-urban
states. These commenters further stated that this step towards
achieving health equity is justified, and that CMS implemented the low
wage index hospital policy via notice-and-comment rulemaking.
Response: We appreciate the commenters' input. As we stated in the
proposed rule, the FY 2020 low wage index hospital policy and the
related budget neutrality adjustment are the subject of pending
litigation, including in Bridgeport. As Bridgeport is pending
litigation, we are unable to provide further information at this time.
We disagree with the district court's conclusion that the Social
Security Act does not authorize the Secretary to adopt the low wage
index hospital policy, and we note that its decision remains subject to
potential appeal. We also note that plaintiffs in Bridgeport only
challenged the low wage index hospital and associated budget neutrality
adjustment policies for FY 2020.
After consideration of the comments we received, and for the
reasons stated above and in the proposed rule, we are finalizing as
proposed to continue the low wage index hospital policy and the related
budget neutrality adjustment for FY 2023.
H. FY 2023 Wage Index Tables
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49498 and 49807
through 49808), we finalized a proposal to streamline and consolidate
the wage index tables associated with the IPPS proposed and final rules
for FY 2016 and subsequent fiscal years. Effective beginning FY 2016,
with the exception of Table 4E, we streamlined and consolidated 11
tables (Tables 2, 3A, 3B, 4A, 4B, 4C, 4D, 4F, 4J, 9A, and 9C) into 2
tables (Tables 2 and 3). In this FY 2023 IPPS/LTCH PPS final rule, as
provided beginning with the FY 2021 IPPS/LTCH PPS final rule, we have
included Table 4A which is titled ``List of Counties Eligible for the
Out-Migration Adjustment under Section 1886(d)(13) of the Act'' and
Table 4B titled ``Counties redesignated under section 1886(d)(8)(B) of
the Act (Lugar Counties).'' We refer readers to section VI. of the
Addendum to this final rule for a discussion of the wage index tables
for FY 2023.
I. Revisions to the Wage Index Based on Hospital Redesignations and
Reclassifications
1. General Policies and Effects of Reclassification and Redesignation
Under section 1886(d)(10) of the Act, the Medicare Geographic
Classification Review Board (MGCRB) considers applications by hospitals
for geographic reclassification for purposes of payment under the IPPS.
Hospitals must apply to the MGCRB to reclassify not later than 13
months prior to the start of the fiscal year for which reclassification
is sought (usually by September 1). Generally, hospitals must be
proximate to the labor market area to which they are seeking
reclassification and must demonstrate characteristics similar to
hospitals located in that area. The MGCRB issues its decisions by the
end of February for reclassifications that become effective for the
following fiscal year (beginning October 1). The regulations applicable
to reclassifications by the MGCRB are located in 42 CFR 412.230 through
412.280. (We refer readers to a discussion in the FY 2002 IPPS final
rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage
for purposes of the proximity requirements.) The general policies for
reclassifications and redesignations and the policies for the effects
of hospitals' reclassifications and redesignations on the wage index
are discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012
final wage index (76 FR 51595 and 51596). We note that rural hospitals
reclassifying under the MGCRB to another State's rural area are not
eligible for the rural floor, because the rural floor may apply only to
urban, not rural, hospitals.
In addition, in the FY 2012 IPPS/LTCH PPS final rule, we discussed
the effects on the wage index of urban hospitals reclassifying to rural
areas under 42 CFR 412.103. In the FY 2020 IPPS/LTCH PPS final rule (84
FR 42332 through 42336), we finalized a policy to exclude the wage data
of urban hospitals reclassifying to rural areas under 42 CFR 412.103
from the calculation of the rural floor. In section III.G.1 of this
final rule, for FY 2023 and subsequent years, we are finalizing a
policy that calculates the rural floor as it was calculated before FY
2020. Hospitals that are geographically located in States without any
rural areas are ineligible to apply for rural reclassification in
accordance with the provisions of 42 CFR 412.103.
On April 21, 2016, we published an interim final rule with comment
period (IFC) in the Federal Register (81 FR 23428 through 23438) that
included provisions amending our regulations to allow hospitals
nationwide to have simultaneous Sec. 412.103 and MGCRB
reclassifications. For reclassifications effective beginning FY 2018, a
hospital may acquire rural status under Sec. 412.103 and subsequently
apply for a reclassification under the MGCRB using distance and average
hourly wage criteria designated for rural hospitals. In addition, we
provided that a hospital that has an active MGCRB reclassification and
is then approved for redesignation under Sec. 412.103 will not lose
its MGCRB reclassification; such a hospital receives a reclassified
urban wage index during the years of its active MGCRB reclassification
and is still considered rural under section 1886(d) of the Act and for
other purposes.
We discussed that when there is both a Sec. 412.103 redesignation
and an MGCRB reclassification, the MGCRB reclassification controls for
wage index calculation and payment purposes. We exclude hospitals with
Sec. 412.103 redesignations from the calculation of the reclassified
rural wage index if they also have an active MGCRB reclassification to
another area. That is, if an application for urban reclassification
through the MGCRB is approved, and is not withdrawn or terminated by
the hospital within the established timelines, we consider the
hospital's geographic CBSA and the urban CBSA to which the hospital is
reclassified under the MGCRB for the wage index calculation. We refer
readers to the April 21, 2016 IFC (81 FR 23428 through 23438) and the
FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through 56930), in which
we finalized the April 21, 2016 IFC, for a full discussion of the
effect of simultaneous reclassifications under both the Sec. 412.103
and the MGCRB processes on wage index calculations. For a discussion on
the effects of reclassifications under Sec. 412.103 on the rural area
wage index and the calculation of the rural floor for FY 2020 through
FY 2022, we refer readers to the FY 2020 IPPS/LTCH PPS final rule (84
FR 42332 through 42336). For a discussion of the effects of
reclassifications under Sec. 412.103 on the rural area wage index and
the calculation of the rural floor for FY 2023 and subsequent years, we
refer readers to section III.G.1 of this final rule.
On May 10, 2021, we published an IFC in the Federal Register (86 FR
24735 through 24739) that included provisions amending our regulations
to allow hospitals with a rural redesignation to reclassify through the
MGCRB using the rural reclassified area as the geographic area in which
the
[[Page 49009]]
hospital is located. We revised our regulation so that the redesignated
rural area, and not the hospital's geographic urban area, is considered
the area a Sec. 412.103 hospital is located in for purposes of meeting
MGCRB reclassification criteria, including the average hourly wage
comparisons required by Sec. 412.230(a)(5)(i) and (d)(1)(iii)(C).
Similarly, we revised the regulations to consider the redesignated
rural area, and not the geographic urban area, as the area a Sec.
412.103 hospital is located in for the prohibition at Sec.
412.230(a)(5)(i) on reclassifying to an area with a pre-reclassified
average hourly wage lower than the prereclassified average hourly wage
for the area in which the hospital is located. Effective for
reclassification applications due to the MGCRB for reclassification
beginning in FY 2023, a Sec. 412.103 hospital could apply for a
reclassification under the MGCRB using the State's rural area as the
area in which the hospital is located. We refer readers to the May 10,
2021 IFC (86 FR 24735 through 24739) and the FY 2022 IPPS/LTCH PPS
final rule (86 FR 45187 through 45190), in which we finalized the May
10, 2021 IFC, for a full discussion of these policies.
2. MGCRB Reclassification and Redesignation Issues for FY 2023
a. FY 2023 Reclassification Application Requirements and Approvals
As previously stated, under section 1886(d)(10) of the Act, the
MGCRB considers applications by hospitals for geographic
reclassification for purposes of payment under the IPPS. The specific
procedures and rules that apply to the geographic reclassification
process are outlined in regulations under 42 CFR 412.230 through
412.280. At the time this final rule was drafted, the MGCRB had
completed its review of FY 2023 reclassification requests. Based on
such reviews, there are 383 hospitals approved for wage index
reclassifications by the MGCRB starting in FY 2023. Because MGCRB wage
index reclassifications are effective for 3 years, for FY 2023,
hospitals reclassified beginning in FY 2021 or FY 2022 are eligible to
continue to be reclassified to a particular labor market area based on
such prior reclassifications for the remainder of their 3-year period.
There were 311 hospitals approved for wage index reclassifications in
FY 2021 that will continue for FY 2023, and 315 hospitals approved for
wage index reclassifications in FY 2022 that will continue for FY 2023.
Of all the hospitals approved for reclassification for FY 2021, FY 2022
and FY 2023, based upon the review at the time of the final rule, 1,009
hospitals are in a MGCRB reclassification status for FY 2023 (with 166
of these hospitals reclassified back to their geographic location).
Under the regulations at 42 CFR 412.273, hospitals that have been
reclassified by the MGCRB are permitted to withdraw their applications
if the request for withdrawal is received by the MGCRB any time before
the MGCRB issues a decision on the application, or after the MGCRB
issues a decision, provided the request for withdrawal is received by
the MGCRB within 45 days of the date that CMS' annual notice of
proposed rulemaking is issued in the Federal Register concerning
changes to the inpatient hospital prospective payment system and
proposed payment rates for the fiscal year for which the application
has been filed. For information about withdrawing, terminating, or
canceling a previous withdrawal or termination of a 3-year
reclassification for wage index purposes, we refer readers to Sec.
412.273, as well as the FY 2002 IPPS final rule (66 FR 39887 through
39888) and the FY 2003 IPPS final rule (67 FR 50065 through 50066).
Additional discussion on withdrawals and terminations, and
clarifications regarding reinstating reclassifications and ``fallback''
reclassifications were included in the FY 2008 IPPS final rule (72 FR
47333) and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148 through
38150).
We note that in the FY 2021 IPPS/LTCH final rule (85 FR 58771
through 58778), CMS finalized an assignment policy for hospitals
reclassified to CBSAs from which one or more counties moved to a new or
different urban CBSA under the revised OMB delineations based on OMB
Bulletin 18-04. We provided a table in that rule (85 FR 58777 and
58778) which described the assigned CBSA for all the MGCRB cases
subject to this policy. For such reclassifications that continue to be
active or are reinstated for FY 2023, the CBSAs assigned in the FY 2021
IPPS/LTCH final rule continue to be in effect.
Applications for FY 2024 reclassifications are due to the MGCRB by
September 1, 2022. We note that this is also the deadline for canceling
a previous wage index reclassification withdrawal or termination under
42 CFR 412.273(d). Applications and other information about MGCRB
reclassifications may be obtained beginning in mid-July 2022, via the
internet on the CMS website at https://www.cms.gov/Regulations-andGuidance/Review-Boards/MGCRB/index.html, or by calling the MGCRB at
(410) 786-1174. This collection of information was previously approved
under OMB Control Number 0938-0573 which expired on January 31, 2021. A
reinstatement of this PRA package is currently being developed. The
public will have an opportunity to review and submit comments regarding
the reinstatement of this PRA package through a public notice and
comment period separate from this rulemaking.
Comment: A commenter requested that in light of potential actions
taken by CMS in response to the Bridgeport or Citrus decisions, CMS
should allow an additional 45-day withdrawal/termination period after
the publication of this final rule to allow hospitals to select the
wage index that would apply for FY 2023. As an alternative, citing a FY
2005 policy exception, the commenter suggested that CMS can assign
hospitals to the geographic area that is most advantageous to them.
Response: As previously discussed, in section III.G.4 of this final
rule, CMS is finalizing as proposed to continue the low wage index
hospital policy and the related budget neutrality adjustment for FY
2023 and is not implementing any changes at this time due to
Bridgeport. As previously discussed, in section III.G.1. of the
preamble of this final rule, we are modifying for FY 2023 and
subsequent years the calculation of the rural floor and ``the wage
index for rural areas in the State in which the county is located'' as
referred to in section 1886(d)(8)(C)(iii) of the Act, based on the
Citrus decision. Presumably, the commenter is requesting that we
provide an additional 45 days for hospitals with MGCRB
reclassifications to submit MGCRB withdrawal or termination requests,
or rescind such a request that was already approved. As previously
discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49973) and the
FY 2021 IPPS/LTCH PPS final rule (85 FR 58769--58770), we maintain that
information provided in the proposed rule constitutes the best
available data to assist hospitals in making reclassification
decisions. In the proposed rule, we acknowledged the district court
decisions in Bridgeport and Citrus, and we stated that we may decide to
take a different approach to our policies in the final rule, depending
on public comments or developments in the court proceedings. We believe
hospitals had the ability to make informed decisions weighing potential
outcomes based on the proposed rule.
In particular, we note that the state rural wage index published in
Table 3 of the FY 2023 IPPS/LTCH PPS proposed rule would be the rural
floor if we included 412.103 hospitals in the
[[Page 49010]]
calculation of the rural floor. Therefore, information with regard to
what the rural floor would have been if we modified our policy was
available in the proposed rule. Further, looking at the states and
territories in Table 3 of the proposed rule, 40 states/territories in
the proposed rule had a rural floor that equals the rural wage index
(which includes Puerto Rico). Four states in the proposed rule are not
eligible for the rural floor since they are all urban states and
receive the imputed floor instead. Using data from Table 3 of the
proposed rule, this leaves the 8 states listed in the table that
follows with a difference between the state rural floor and state rural
wage index. As demonstrated in the table that follows, hospitals should
be able to make these MGCRB decisions based on the data in the proposed
rule as usual as an overwhelming majority of the states/territories
show no difference between the state rural wage index and state rural
floor, and those that do show a difference show a minimal variance.
Therefore, we do not believe the data justifies an additional 45 days
for hospitals with MGCRB reclassifications to submit MGCRB withdrawal
or termination requests or to rescind such a request that was already
approved.
[GRAPHIC] [TIFF OMITTED] TR10AU22.118
In addition, as we discussed in the FY 2021 IPPS/LTCH PPS final
rule (85 FR 58769--58770), section 1886(d)(8)(D) of the Act requires
the Secretary to adjust the standardized amounts to ensure that the
application of certain provisions of the statute, including a decision
of the MGCRB or the Secretary under section 1886(d)(10), do not result
in aggregate payments under section 1886 that are greater or less than
those that would otherwise be made. If hospitals were to withdraw or
terminate reclassification statuses after the publication of the final
rule, as the commenter suggested CMS permit, any resulting changes in
the wage index would not have been taken into account when calculating
the IPPS standardized amounts in the final rule in accordance with the
statutory budget neutrality requirement. Therefore, it is necessary
that the values published in the final rule represent the final wage
index values reflective of reclassification decisions.
With regard to the FY 2005 exception referenced by the commenter,
CMS did provide an exception to the withdrawal and termination deadline
due to the implementation of special reclassifications under section
508 of Pub. L. 108-173 and general concerns regarding the
implementation of revised OMB labor market delineations based on the
2000 decennial census (69 FR 49060 and 49061). CMS inferred certain
wage index selections for section 508 hospitals where the preferred
option (depending on the finalization of proposed wage index policies)
was clear and obvious, and hospitals were granted a 30 day window after
the final rule to withdraw their reclassification request or to rescind
their previous withdrawal or termination request. With the relatively
few number of reclassified hospitals in FY 2005, it was plausible for
CMS to impute or infer the optimal reclassification status in certain
limited circumstances, and potentially allow for an additional window
of opportunity for hospitals to review their options to withdraw or
terminate MGCRB status. However, when factoring the large number of
currently reclassified hospitals and the iterative and compounding
impacts of various forms of wage index reclassification policy, various
wage index floor policies, and other adjustment policies; it does not
support the premise that additional opportunities to modify MGCRB
reclassification status would be feasible or would result in more
accurate or consistent results.
Comment: A commenter noted that the MGCRB issued determinations for
FY 2023 on January 24, 2022. The commenter stated that this was earlier
than in the past, when the MGCRB typically issued determinations mid-
February, to meet the statutory requirement for decisions to be issued
by the end of February. The commenter requested that CMS limit the
MGCRB from issuing decisions prior to the first week of February to
allow hospitals ample time to submit documentation of rural
reclassification, SCH and RRC status to the Board or to submit a
request to withdraw an application based on review of the January PUF.
The commenter stated that without a more definitive timeline, hospitals
face uncertainty if their documentation will be accepted by the MGCRB
and could be adversely affected by an early decision being issued by
the Board.
Response: We disagree with the commenter that hospitals are
disadvantaged by earlier issuance of MGCRB decisions. First, we believe
hospitals should submit applications complete with supporting
documentation at the time MGCRB applications are due. Hospitals taking
advantage of the MGCRB's practice of accepting supporting documentation
to supplement applications until the date of the MGCRB's review are
aware that the review is not held on the same date annually.
Furthermore, rural reclassification may be obtained at any time, and
hospitals seeking benefits of rural status for MGCRB reclassification
[[Page 49011]]
should plan accordingly. Finally, we note that hospitals dissatisfied
with the MGCRB's decision may request the Administrator's review under
Sec. 412.278. With regard to hospitals requesting to withdraw a
pending reclassification application following review of the January
PUF, hospitals may withdraw a reclassification after the MGCRB has
issued decisions, within 45 days of the date that CMS' annual notice of
proposed rulemaking is issued in the Federal Register, per the
regulations at Sec. 412.273. Therefore, we do not believe hospitals
are disadvantaged by the earlier timing of MGCRB decisions because they
can submit supporting documentation timely, obtain a rural
reclassification in advance, request the Administrator's review of an
MGCRB decision, and withdraw an unwanted reclassification.
Comment: A commenter requested that CMS change the special rule for
RRCs applying for reclassification at the MGCRB to afford hospitals the
same reclassification opportunities as similar hospitals competing in
the same labor market area. The commenter specifically suggested that
CMS revise its regulations to state that if a hospital is located
within five miles of another acute care hospital in the same CBSA with
a lower average hourly wage, the hospital may reclassify to the same
area as the lower wage hospital, if the applicable average hourly wage
requirements are met, rather than to the area that is closest to the
hospital.
Response: We appreciate the commenter's input. We did not propose
any changes to the regulation referenced by the commenter, Sec.
412.230(a)(3), the special rules for sole community hospitals and rural
referral centers. We are not finalizing any changes to the special rule
for RRCs applying for reclassification at the MGCRB in this final rule.
b. Clarification of Method for Submission Under Sec. 412.273
The regulations at 42 CFR 412.273 set forth the procedures for
withdrawing an MGCRB application, terminating an approved 3-year
reclassification, or canceling a previous withdrawal or termination
(also referred to as a reinstatement). The timing of such requests is
specified at Sec. 412.273(c) for terminations and withdrawals and at
paragraph (d)(2) for canceling a previous withdrawal or termination.
However, the method of submission is not clearly specified in the
regulations, other than the requirement that a request to cancel a
previous withdrawal or termination (a reinstatement), or to withdraw an
application or terminate an approved reclassification, be in writing
according to Sec. 412.273(d)(2) and (e). It has come to our attention
that this may be a source of confusion for hospital representatives
seeking to submit such requests. It is possible that hospital
representatives would attempt to send such requests to the MGCRB via
mail, email, or fax, rather than in the manner that the MGCRB can most
efficiently track and process.
Beginning with applications from hospitals to reclassify for FY
2020, the MGCRB requires applications, supporting documents, and
subsequent correspondence to be filed electronically through the MGCRB
module of the Office of Hearings Case and Document Management System
(``OH CDMS''). The MGCRB issues all of its notices and decisions via
email and these documents are accessible electronically through OH
CDMS. Registration instructions and the system user manual are
available at https://www.cms.gov/Regulations-and-Guidance/ReviewBoards/MGCRB/Electronic-Filing.html.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42313), we revised
the regulations at Sec. 412.256(a)(1) to require applications for
reclassification to be submitted to the MGCRB according to the method
prescribed by the MGCRB. However, the regulations at Sec. 412.273 for
withdrawals, terminations, or cancelations of a previous withdrawal or
termination (reinstatement) do not similarly specify a required manner
of submission. Therefore, to eliminate potential confusion about how to
submit withdrawal, termination, or cancelation (reinstatement)
requests, we proposed to align the regulations at Sec. 412.273 for
withdrawal, termination, or cancelation (reinstatement) requests with
the regulations at Sec. 412.256 for new applications by specifying
that withdrawal, termination, or cancelation (reinstatement) requests
also must be submitted to the MGCRB according to the method prescribed
by the MGCRB.
Specifically, we proposed to revise Sec. 412.273(d)(2) for timing
and process of cancellation requests and Sec. 412.273(e) for
withdrawal and termination requests. We proposed to revise Sec.
412.273(d)(2) to state that cancellation requests must be submitted in
writing to the MGCRB according to the method prescribed by the MGCRB no
later than the deadline for submitting reclassification applications
for the following fiscal year, as specified in Sec. 412.256(a)(2). We
also proposed to revise Sec. 412.273(e) by adding that requests to
withdraw an application or terminate an approved reclassification must
be submitted in writing to the MGCRB according to the method prescribed
by the MGCRB. We stated that we believe these proposed revisions to the
regulations would eliminate potential confusion; align our policy for
withdrawals, terminations, and cancelations (reinstatements) with our
policy for applications; and ensure requests are submitted to the MGCRB
through the method for submission that they can most efficiently
process.
Comment: A commenter supported the proposed changes to Sec.
412.273. The commenter stated that these changes will eliminate
potential confusion, align withdrawals, terminations, and cancellations
with the MGCRB application process, and ensure submissions can be
processed more efficiently by the MGCRB.
Response: We thank the commenter for supporting the proposed
changes. After consideration of the public comment we received, we are
finalizing as proposed without modification our changes to the
regulations at Sec. 412.273(d)(2) and (e).
3. Redesignations Under Section 1886(d)(8)(B) of the Act (Lugar Status
Determinations)
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through
51600), we adopted the policy that, beginning with FY 2012, an eligible
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status
and, thus, is rural for all purposes under the IPPS effective for the
fiscal year in which the hospital receives the outmigration adjustment.
In addition, in that rule, we adopted a minor procedural change that
would allow a Lugar hospital that qualifies for and accepts the out-
migration adjustment (through written notification to CMS within 45
days from the publication of the proposed rule) to waive its urban
status for the full 3-year period for which its out-migration
adjustment is effective. By doing so, such a Lugar hospital would no
longer be required during the second and third years of eligibility for
the out-migration adjustment to advise us annually that it prefers to
continue being treated as rural and receive the out-migration
adjustment. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56930), we
further clarified that if a hospital wishes to reinstate its urban
status for any fiscal year within this 3-year period, it must send a
request to CMS within 45 days of publication of the proposed rule for
that particular fiscal year. We indicated that such reinstatement
requests may be sent electronically to [email protected]. In the FY
2018 IPPS/LTCH
[[Page 49012]]
PPS final rule (82 FR 38147 through 38148), we finalized a policy
revision to require a Lugar hospital that qualifies for and accepts the
out-migration adjustment, or that no longer wishes to accept the out-
migration adjustment and instead elects to return to its deemed urban
status, to notify CMS within 45 days from the date of public display of
the proposed rule at the Office of the Federal Register. These revised
notification timeframes were effective beginning October 1, 2017. In
addition, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148), we
clarified that both requests to waive and to reinstate ``Lugar'' status
may be sent to [email protected]. To ensure proper accounting, we
requested that hospitals include their CCN, and either ``waive Lugar''
or ``reinstate Lugar'', in the subject line of these requests.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42314 and 42315), we
clarified that in circumstances where an eligible hospital elects to
receive the outmigration adjustment within 45 days of the public
display date of the proposed rule at the Office of the Federal Register
in lieu of its Lugar wage index reclassification, and the county in
which the hospital is located would no longer qualify for an out-
migration adjustment when the final rule (or a subsequent correction
notice) wage index calculations are completed, the hospital's request
to accept the outmigration adjustment would be denied, and the hospital
would be automatically assigned to its deemed urban status under
section 1886(d)(8)(B) of the Act. We stated that final rule wage index
values would be recalculated to reflect this reclassification, and in
some instances, after taking into account this reclassification, the
out-migration adjustment for the county in question could be restored
in the final rule. However, as the hospital is assigned a Lugar
reclassification under section 1886(d)(8)(B) of the Act, it would be
ineligible to receive the county outmigration adjustment under section
1886(d)(13)(G) of the Act.
We did not receive any requests to waive or reinstate an eligible
hospital's deemed urban status under section 1886(d)(8)(B) of the Act.
We did not receive any public comments on this policy for FY 2023.
J. Out-Migration Adjustment Based on Commuting Patterns of Hospital
Employees
In accordance with section 1886(d)(13) of the Act, as added by
section 505 of Public Law 108-173, beginning with FY 2005, we
established a process to make adjustments to the hospital wage index
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment). The process, outlined in the FY 2005 IPPS
final rule (69 FR 49061), provides for an increase in the wage index
for hospitals located in certain counties that have a relatively high
percentage of hospital employees who reside in the county but work in a
different county (or counties) with a higher wage index.
Section 1886(d)(13)(B) of the Act requires the Secretary to use
data the Secretary determines to be appropriate to establish the
qualifying counties. When the provision of section 1886(d)(13) of the
Act was implemented for the FY 2005 wage index, we analyzed commuting
data compiled by the U.S. Census Bureau that were derived from a
special tabulation of the 2000 Census journey-to-work data for all
industries (CMS extracted data applicable to hospitals). These data
were compiled from responses to the ``long-form'' survey, which the
Census Bureau used at that time and which contained questions on where
residents in each county worked (69 FR 49062). However, the 2010 Census
was ``short form'' only; information on where residents in each county
worked was not collected as part of the 2010 Census. The Census Bureau
worked with CMS to provide an alternative dataset based on the latest
available data on where residents in each county worked in 2010, for
use in developing a new outmigration adjustment based on new commuting
patterns developed from the 2010 Census data beginning with FY 2016.
To determine the out-migration adjustments and applicable counties
for FY 2016, we analyzed commuting data compiled by the Census Bureau
that were derived from a custom tabulation of the American Community
Survey (ACS), an official Census Bureau survey, utilizing 2008 through
2012 (5-year) Microdata. The data were compiled from responses to the
ACS questions regarding the county where workers reside and the county
to which workers commute. As we discussed in prior IPPS/LTCH PPS final
rules, most recently in the FY 2022 IPPS/LTCH PPS final rule (86 FR
45184), we have applied the same policies, procedures, and computations
since FY 2012. We proposed to use them again for FY 2023, as we believe
they continue to be appropriate. We refer readers to the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49500 through 49502) for a full explanation
of the revised data source.
For FY 2023, the out-migration adjustment will continue to be based
on the data derived from the custom tabulation of the ACS utilizing
2008 through 2012 (5-year) Microdata. For future fiscal years, we may
consider determining out-migration adjustments based on data from the
next Census or other available data, as appropriate. For FY 2023, we
did not propose any changes to the methodology or data source that we
used for FY 2016 (81 FR 25071). (We refer readers to a full discussion
of the out-migration adjustment, including rules on deeming hospitals
reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act
to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51601 through 51602).)
We did not receive any public comments on this proposed policy for
FY 2023. Therefore, for the reasons set forth in this final rule and in
the FY 2023 IPPS/LTCH PPS proposed rule, for FY 2023, we are finalizing
our proposal, without modification, to continue using the same
policies, procedures, and computations that were used for the FY 2012
outmigration adjustment and that were applicable for FYs 2016 through
2022.
Table 2 associated with this final rule (which is available via the
internet on the CMS website) includes the out-migration adjustments for
the FY 2023 wage index. In addition, Table 4A associated with this
final rule, ``List of Counties Eligible for the Out-Migration
Adjustment under Section 1886(d)(13) of the Act'' (also available via
the internet on the CMS website) consists of the following: A list of
counties that are eligible for the out-migration adjustment for FY 2023
identified by FIPS county code, the final FY 2023 out-migration
adjustment, and the number of years the adjustment will be in effect.
K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of
the Act Implemented at 42 CFR 412.103
Under section 1886(d)(8)(E) of the Act, a qualifying prospective
payment hospital located in an urban area may apply for rural status
for payment purposes separate from reclassification through the MGCRB.
Specifically, section 1886(d)(8)(E) of the Act provides that, not later
than 60 days after the receipt of an application (in a form and manner
determined by the Secretary) from a subsection (d) hospital that
satisfies certain criteria, the Secretary shall treat the hospital as
being located in the rural area (as defined in paragraph (2)(D)) of the
State in which the hospital is located. We refer readers
[[Page 49013]]
to the regulations at 42 CFR 412.103 for the general criteria and
application requirements for a subsection (d) hospital to reclassify
from urban to rural status in accordance with section 1886(d)(8)(E) of
the Act. The FY 2012 IPPS/LTCH PPS final rule (76 FR 51595 through
51596) includes our policies regarding the effect of wage data from
reclassified or redesignated hospitals. We refer readers to the FY 2020
IPPS/LTCH PPS final rule (84 FR 42332 through 42336) for a discussion
of our policy to calculate the rural floor without the wage data of
urban hospitals reclassifying to rural areas under 42 CFR 412.103, and
to section III.G.1 of this final rule for a discussion of our decision,
for FY 2023 and subsequent years, to calculate the rural floor as it
was calculated before FY 2020 by including the wage data of 412.103
hospitals.
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41369 through
41374), we codified certain policies regarding multicampus hospitals in
the regulations at 42 CFR 412.92, 412.96, 412.103, and 412.108. We
stated that reclassifications from urban to rural under 42 CFR 412.103
apply to the entire hospital (that is, the main campus and its remote
location(s)). We also stated that a main campus of a hospital cannot
obtain an SCH, RRC, or MDH status, or rural reclassification under 42
CFR 412.103, independently or separately from its remote location(s),
and vice versa. However, we are aware that some urban hospitals operate
one or more remote location(s) in a State's rural area. In light of
this scenario, we wish to clarify that rural reclassification under 42
CFR 412.103 applies to the main campus and any remote location located
in an urban area. Under section 1886(d)(8)(E) of the Act, rural
reclassification is available only to a hospital that is located in an
urban area and satisfies the criteria specified in the statute. Thus, a
remote location that is located in a rural area would not qualify for
rural reclassification under section 1886(d)(8)(E) of the Act, as
implemented under 42 CFR 412.103. We proposed to add 42 CFR
412.103(a)(8) to clarify that for a multicampus hospital, approved
rural reclassification status applies to the main campus and any remote
location located in an urban area, including a main campus or any
remote location deemed urban under section 1886(d)(8)(B) of the Act.
We are also aware that CMS has not consistently reflected the
412.103 rural reclassification status in Table 2 of the annual IPPS/
LTCH PPS rulemaking for certain remote locations of hospitals that are
located in a different CBSA than the main campus. If a remote location
of a hospital is located in a different CBSA than the main campus of
the hospital, it is CMS's longstanding policy to assign that remote
location a wage index based on its own geographic area in order to
comply with the statutory requirement to adjust for geographic
differences in hospital wage levels (section 1886(d)(3)(E) of the Act).
Hospitals are required to identify and allocate wages and hours based
on FTEs for remote locations located in different CBSA on Worksheet S-
2, Part I, Lines 165 and 166 of form CMS-2552-10. In calculating wage
index values, CMS identifies the allocated wage data for these remote
locations in Table 2 with a ``B'' in the third position of the CCN.
As discussed previously, for a multicampus hospital, rural
reclassification under 42 CFR 412.103 applies to the main campus and
any remote location located in an urban area. The wage index
implications of this policy are that, barring another form of wage
index reclassification (for example, MGCRB reclassification), a main
campus or remote location with approved 412.103 rural reclassification
status would be assigned the rural wage index of its State. For FY
2023, we will list the 412.103 rural reclassification status for remote
locations (a remote location is listed with a ``B'' in the third digit
of the CCN) in Table 2 of the appendix to the final rule. We note that,
as of the date this final rule is issued, only one ``B'' location
(36B020) would be assigned its State's rural wage index in FY 2023 due
to the Sec. 412.103 rural reclassification status of the main provider
(360020). This location appears to have ceased inpatient activities, so
we do not expect a negative financial impact for FY 2023. However,
hospitals with Sec. 412.103 rural reclassification status and a remote
location in a different CBSA should evaluate potential wage index
outcomes for its remote location(s) when withdrawing or terminating
MGCRB reclassification, or canceling 412.103 rural reclassification
status. For example, if a hospital with 412.103 rural reclassification
status withdraws a separate active MGCRB reclassification for a remote
location, that remote location may be assigned the State's rural wage
index value, effective for FY 2023.
Comment: A commenter supported our proposal to clarify that
approved rural reclassification applies to a main campus and any remote
locations in an urban area. The commenter stated that this policy
allows for uniform treatment of all departments and campuses of the
same hospital.
Response: We appreciate the commenter's support. Consistent with
our clarification regarding multicampus hospitals, we are finalizing as
proposed without modification our addition to the regulations at 42 CFR
412.103(a)(8) to clarify that for a multicampus hospital, approved
rural reclassification status applies to the main campus and any remote
location located in an urban area, including a main campus or any
remote location deemed urban under section 1886(d)(8)(B) of the Act.
Table 2 associated with this FY 2023 IPPS/LTCH PPS final rule will
reflect the 412.103 rural reclassification status for remote locations
of hospitals that are located in a different CBSA than the main campus.
L. Process for Requests for Wage Index Data Corrections
1. Process for Hospitals To Request Wage Index Data Corrections
The preliminary, unaudited Worksheet S-3 wage data files and the CY
2019 occupational mix data files for the proposed FY 2023 wage index
were made available on May 24, 2021 through the internet on the CMS
website at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/fy2023-wage-index-home-page.
On January 28, 2022, we posted a public use file (PUF) at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/fy2023-wage-index-home-page containing FY 2023 wage index
data available as of January 28, 2022. This PUF contains a tab with the
Worksheet S-3 wage data (which includes Worksheet S-3, Parts II and III
wage data from cost reporting periods beginning on or after October 1,
2018 through September 30, 2019; that is, FY 2019 wage data), a tab
with the occupational mix data (which includes data from the CY 2019
occupational mix survey, Form CMS-10079), a tab containing the
Worksheet S-3 wage data of hospitals deleted from the January 28, 2022
wage data PUF, and a tab containing the CY 2019 occupational mix data
of the hospitals deleted from the January 28, 2022 occupational mix
PUF. In a memorandum dated January 20, 2022, we instructed all MACs to
inform the IPPS hospitals that they service of the availability of the
January 28, 2022 wage index data PUFs, and the process and timeframe
for requesting revisions in accordance with the FY 2023 Hospital Wage
Index Development Time Table available at https://www.cms.gov/files/document/fy2023-wi-time-table.pdf.
[[Page 49014]]
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post an additional PUF on the
CMS website that reflects the actual data that are used in computing
the proposed wage index. The release of this file does not alter the
current wage index process or schedule. We notify the hospital
community of the availability of these data as we do with the current
public use wage data files through our Hospital Open Door Forum. We
encourage hospitals to sign up for automatic notifications of
information about hospital issues and about the dates of the Hospital
Open Door Forums at the CMS website at https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums.
In a memorandum dated May 11, 2021, we instructed all MACs to
inform the IPPS hospitals that they service of the availability of the
preliminary wage index data files and the CY 2019 occupational mix
survey data files posted on May 24, 2021, and the process and timeframe
for requesting revisions.
If a hospital wished to request a change to its data as shown in
the May 24, 2021, preliminary wage data files and occupational mix data
files, the hospital had to submit corrections along with complete,
detailed supporting documentation to its MAC so that the MAC received
them by September 2, 2021. Hospitals were notified of these deadlines
and of all other deadlines and requirements, including the requirement
to review and verify their data as posted in the preliminary wage index
data files on the internet, through the letters sent to them by their
MACs. We note, CMS issued a waiver due to Hurricane Ida and modified
the September 2, 2021, deadline specified in the FY 2023 Hospital Wage
Index Development Time Table for certain hospitals. Specifically, CMS
granted an extension until October 4, 2021, for hospitals in the States
of Louisiana and Mississippi to request revisions to and provide
documentation for their FY 2019 Worksheet S-3 wage data and CY 2019
occupational mix data as included in the May 24, 2021 preliminary
Public Use Files (PUFs), respectively. According to the waiver, MACs
must receive the revision requests and supporting documentation by
October 4, 2021. If hospitals encountered difficulty meeting the
extended deadline, hospitals were to communicate their concerns to CMS
via their MAC for CMS to consider an additional extension if CMS
determined it was warranted. Details regarding this waiver are
available on the CMS website at https://www.cms.gov/current-non-covid-emergencies, Additional IPPS Hospital Blanket Waivers (https://www.cms.gov/files/document/hurrican-ida-additional-ipps-hospital-blanket-waivers.pdf). November 15, 2021, was the deadline for MACs to
complete all desk reviews for hospital wage and occupational mix data
and transmit revised Worksheet S-3 wage data and occupational mix data
to CMS.
November 4, 2021, was the date by when MACs notified State hospital
associations regarding hospitals that failed to respond to issues
raised during the desk reviews. Additional revisions made by the MACs
were transmitted to CMS throughout January 2022. CMS published the wage
index PUFs that included hospitals' revised wage index data on January
28, 2022. Hospitals had until February 15, 2022, to submit requests to
the MACs to correct errors in the January 28, 2022 PUF due to CMS or
MAC mishandling of the wage index data, or to revise desk review
adjustments to their wage index data as included in the January 28,
2022, PUF. Hospitals also were required to submit sufficient
documentation to support their requests. Hospitals' requests and
supporting documentation must be received by the MAC by the February
deadline (that is, by February 15, 2022, for the FY 2023 wage index).
After reviewing requested changes submitted by hospitals, MACs were
required to transmit to CMS any additional revisions resulting from the
hospitals' reconsideration requests by March 18, 2022. Under our
current policy as adopted in the FY 2018 IPPS/LTCH PPS final rule (82
FR 38153), the deadline for a hospital to request CMS intervention in
cases where a hospital disagreed with a MAC's handling of wage data on
any basis (including a policy, factual, or other dispute) was April 1,
2022. Data that were incorrect in the preliminary or January 28, 2022
wage index data PUFs, but for which no correction request was received
by the February 15, 2022 deadline, are not considered for correction at
this stage. In addition, April 1, 2022, was the deadline for hospitals
to dispute data corrections made by CMS of which the hospital was
notified after the January 28, 2022, PUF and at least 14 calendar days
prior to April 1, 2022 (that is, March 18, 2022), that do not arise
from a hospital's request for revisions. The hospital's request and
supporting documentation must be received by CMS (and a copy received
by the MAC) by the April deadline (that is, by April 1, 2022, for the
FY 2023 wage index). We refer readers to the FY 2023 Hospital Wage
Index Development Time Table for complete details.
Hospitals were given the opportunity to examine Table 2 associated
with the proposed rule, which is listed in section VI. of the Addendum
to the proposed rule and available via the internet on the CMS website
at https://www.cms.gov/medicare/acute-inpatient-pps/fy-2023-ipps-proposed-rule-home-page. Table 2 associated with the proposed rule
contained each hospital's proposed adjusted average hourly wage used to
construct the wage index values for the past 3 years, including the
proposed FY 2023 wage index which was constructed from FY 2019 data. We
noted in the proposed rule that the proposed hospital average hourly
wages shown in Table 2 only reflected changes made to a hospital's data
that were transmitted to CMS by early February 2022.
We posted the final wage index data PUFs on April 29, 2022 on the
CMS website at https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/fy2023-wage-index-home-page.
The April 2022 PUFs are made available solely for the limited purpose
of identifying any potential errors made by CMS or the MAC in the entry
of the final wage index data that resulted from the correction process
previously described (the process for disputing revisions submitted to
CMS by the MACs by March 18, 2022, and the process for disputing data
corrections made by CMS that did not arise from a hospital's request
for wage data revisions as discussed earlier).
After the release of the April 2022 wage index data PUFs, changes
to the wage and occupational mix data can only be made in those very
limited situations involving an error by the MAC or CMS that the
hospital could not have known about before its review of the final wage
index data files. Specifically, neither the MAC nor CMS will approve
the following types of requests:
Requests for wage index data corrections that were
submitted too late to be included in the data transmitted to CMS by the
MACs on or before March 18, 2022.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the January 28,
2022, wage index PUFs.
Requests to revisit factual determinations or policy
interpretations made by the MAC or CMS during the wage index data
correction process.
If, after reviewing the April 2022 final wage index data PUFs, a
hospital believes that its wage or occupational mix data are incorrect
due to a MAC or CMS error in the entry or tabulation of the final data,
the hospital was given the opportunity to notify both its MAC and
[[Page 49015]]
CMS regarding why the hospital believes an error exists and provide all
supporting information, including relevant dates (for example, when it
first became aware of the error). The hospital was required to send its
request to CMS and to the MAC so that it was received no later than May
27, 2022. May 27, 2022, was also the deadline for hospitals to dispute
data corrections made by CMS of which the hospital is notified on or
after 13 calendar days prior to April 1, 2022 (that is, March 19,
2022), and at least 14 calendar days prior to May 27, 2022 (that is,
May 13, 2022), that do not arise from a hospital's request for
revisions. (Data corrections made by CMS of which a hospital was
notified on or after 13 calendar days prior to May 27, 2022 (that is,
May 14, 2022), may be appealed to the Provider Reimbursement Review
Board (PRRB)). In accordance with the FY 2023 Hospital Wage Index
Development Time Table posted on the CMS website at https://www.cms.gov/files/document/fy2023-wi-time-table.pdf, the May appeals
were required to be sent via mail and email to CMS and the MACs. We
refer readers to the FY 2023 Hospital Wage Index Development Time Table
for complete details.
Verified corrections to the wage index data received timely (that
is, by May 27, 2022) by CMS and the MACs were incorporated into the
final FY 2023 wage index, which will be effective October 1, 2022.
We created the processes previously described to resolve all
substantive wage index data correction disputes before we finalize the
wage and occupational mix data for the FY 2023 payment rates.
Accordingly, hospitals that do not meet the procedural deadlines set
forth earlier will not be afforded a later opportunity to submit wage
index data corrections or to dispute the MAC's decision with respect to
requested changes. Specifically, our policy is that hospitals that do
not meet the procedural deadlines as previously set forth (requiring
requests to MACs by the specified date in February and, where such
requests are unsuccessful, requests for intervention by CMS by the
specified date in April) will not be permitted to challenge later,
before the PRRB, the failure of CMS to make a requested data revision.
We refer readers also to the FY 2000 IPPS final rule (64 FR 41513) for
a discussion of the parameters for appeals to the PRRB for wage index
data corrections. As finalized in the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38154 through 38156), this policy also applies to a hospital
disputing corrections made by CMS that do not arise from a hospital's
request for a wage index data revision. That is, a hospital disputing
an adjustment made by CMS that did not arise from a hospital's request
for a wage index data revision is required to request a correction by
the first applicable deadline. Hospitals that do not meet the
procedural deadlines set forth earlier will not be afforded a later
opportunity to submit wage index data corrections or to dispute CMS'
decision with respect to changes.
Again, we believe the wage index data correction process described
earlier provides hospitals with sufficient opportunity to bring errors
in their wage and occupational mix data to the MAC's attention.
Moreover, because hospitals had access to the final wage index data
PUFs by late April 2022, they have an opportunity to detect any data
entry or tabulation errors made by the MAC or CMS before the
development and publication of the final FY 2023 wage index by August
2022, and the implementation of the FY 2023 wage index on October 1,
2022. Given these processes, the wage index implemented on October 1
should be accurate. Nevertheless, in the event that errors are
identified by hospitals and brought to our attention after May 27,
2022, we retain the right to make midyear changes to the wage index
under very limited circumstances.
Specifically, in accordance with 42 CFR 412.64(k)(1) of our
regulations, we make midyear corrections to the wage index for an area
only if a hospital can show that: (1) The MAC or CMS made an error in
tabulating its data; and (2) the requesting hospital could not have
known about the error or did not have an opportunity to correct the
error, before the beginning of the fiscal year. For purposes of this
provision, ``before the beginning of the fiscal year'' means by the May
deadline for making corrections to the wage data for the following
fiscal year's wage index (for example, May 27, 2022, for the FY 2023
wage index). This provision is not available to a hospital seeking to
revise another hospital's data that may be affecting the requesting
hospital's wage index for the labor market area. As indicated earlier,
because CMS makes the wage index data available to hospitals on the CMS
website prior to publishing both the proposed and final IPPS rules, and
the MACs notify hospitals directly of any wage index data changes after
completing their desk reviews, we do not expect that midyear
corrections will be necessary. However, under our current policy, if
the correction of a data error changes the wage index value for an
area, the revised wage index value will be effective prospectively from
the date the correction is made.
In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and
47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on
October 1, 2005, that is, beginning with the FY 2006 wage index, a
change to the wage index can be made retroactive to the beginning of
the Federal fiscal year only when CMS determines all of the following:
(1) The MAC or CMS made an error in tabulating data used for the wage
index calculation; (2) the hospital knew about the error and requested
that the MAC and CMS correct the error using the established process
and within the established schedule for requesting corrections to the
wage index data, before the beginning of the fiscal year for the
applicable IPPS update (that is, by the May 27, 2022, deadline for the
FY 2023 wage index); and (3) CMS agreed before October 1 that the MAC
or CMS made an error in tabulating the hospital's wage index data and
the wage index should be corrected.
In those circumstances where a hospital requested a correction to
its wage index data before CMS calculated the final wage index (that
is, by the May 27, 2022 deadline for the FY 2023 wage index), and CMS
acknowledges that the error in the hospital's wage index data was
caused by CMS' or the MAC's mishandling of the data, we believe that
the hospital should not be penalized by our delay in publishing or
implementing the correction. As with our current policy, we indicated
that the provision is not available to a hospital seeking to revise
another hospital's data. In addition, the provision cannot be used to
correct prior years' wage index data; it can only be used for the
current Federal fiscal year. In situations where our policies would
allow midyear corrections other than those specified in 42 CFR
412.64(k)(2)(ii), we continue to believe that it is appropriate to make
prospective-only corrections to the wage index.
We note that, as with prospective changes to the wage index, the
final retroactive correction will be made irrespective of whether the
change increases or decreases a hospital's payment rate. In addition,
we note that the policy of retroactive adjustment will still apply in
those instances where a final judicial decision reverses a CMS denial
of a hospital's wage index data revision request.
2. Process for Data Corrections by CMS After the January 28 Public Use
File (PUF)
The process set forth with the wage index time table discussed in
section
[[Page 49016]]
III.L.1. of the preamble of this final rule allows hospitals to request
corrections to their wage index data within prescribed timeframes. In
addition to hospitals' opportunity to request corrections of wage index
data errors or MACs' mishandling of data, CMS has the authority under
section 1886(d)(3)(E) of the Act to make corrections to hospital wage
index and occupational mix data in order to ensure the accuracy of the
wage index. As we explained in the FY 2016 IPPS/LTCH PPS final rule (80
FR 49490 through 49491) and the FY 2017 IPPS/LTCH PPS final rule (81 FR
56914), section 1886(d)(3)(E) of the Act requires the Secretary to
adjust the proportion of hospitals' costs attributable to wages and
wage-related costs for area differences reflecting the relative
hospital wage level in the geographic areas of the hospital compared to
the national average hospital wage level. We believe that, under
section 1886(d)(3)(E) of the Act, we have discretion to make
corrections to hospitals' data to help ensure that the costs
attributable to wages and wage-related costs in fact accurately reflect
the relative hospital wage level in the hospitals' geographic areas.
We have an established multistep, 15-month process for the review
and correction of the hospital wage data that is used to create the
IPPS wage index for the upcoming fiscal year. Since the origin of the
IPPS, the wage index has been subject to its own annual review process,
first by the MACs, and then by CMS. As a standard practice, after each
annual desk review, CMS reviews the results of the MACs' desk reviews
and focuses on items flagged during the desk review, requiring that, if
necessary, hospitals provide additional documentation, adjustments, or
corrections to the data. This ongoing communication with hospitals
about their wage data may result in the discovery by CMS of additional
items that were reported incorrectly or other data errors, even after
the posting of the January 28 PUF, and throughout the remainder of the
wage index development process. In addition, the fact that CMS analyzes
the data from a regional and even national level, unlike the review
performed by the MACs that review a limited subset of hospitals, can
facilitate additional editing of the data that may not be readily
apparent to the MACs. In these occasional instances, an error may be of
sufficient magnitude that the wage index of an entire CBSA is affected.
Accordingly, CMS uses its authority to ensure that the wage index
accurately reflects the relative hospital wage level in the geographic
area of the hospital compared to the national average hospital wage
level, by continuing to make corrections to hospital wage data upon
discovering incorrect wage data, distinct from instances in which
hospitals request data revisions.
We note that CMS corrects errors to hospital wage data as
appropriate, regardless of whether that correction will raise or lower
a hospital's average hourly wage. For example, as discussed in section
III.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR
41364), in situations where a hospital did not have documentable
salaries, wages, and hours for housekeeping and dietary services, we
imputed estimates, in accordance with policies established in the FY
2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). Furthermore,
if CMS discovers after conclusion of the desk review, for example, that
a MAC inadvertently failed to incorporate positive adjustments
resulting from a prior year's wage index appeal of a hospital's wage-
related costs such as pension, CMS would correct that data error and
the hospital's average hourly wage would likely increase as a result.
While we maintain CMS' authority to conduct additional review and
make resulting corrections at any time during the wage index
development process, in accordance with the policy finalized in the FY
2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156) and as first
implemented with the FY 2019 wage index (83 FR 41389), hospitals are
able to request further review of a correction made by CMS that did not
arise from a hospital's request for a wage index data correction.
Instances where CMS makes a correction to a hospital's data after the
January 28 PUF based on a different understanding than the hospital
about certain reported costs, for example, could potentially be
resolved using this process before the final wage index is calculated.
We believe this process and the timeline for requesting review of such
corrections (as described earlier and in the FY 2018 IPPS/LTCH PPS
final rule) promote additional transparency to instances where CMS
makes data corrections after the January 28 PUF, and provide
opportunities for hospitals to request further review of CMS changes in
time for the most accurate data to be reflected in the final wage index
calculations. These additional appeals opportunities are described
earlier and in the FY 2023 Hospital Wage Index Development Time Table,
as well as in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through
38156).
M. Labor-Related Share for the FY 2023 Wage Index
Section 1886(d)(3)(E) of the Act directs the Secretary to adjust
the proportion of the national prospective payment system base payment
rates that are attributable to wages and wage related costs by a factor
that reflects the relative differences in labor costs among geographic
areas. It also directs the Secretary to estimate from time to time the
proportion of hospital costs that are labor-related and to adjust the
proportion (as estimated by the Secretary from time to time) of
hospitals' costs that are attributable to wages and wage-related costs
of the DRG prospective payment rates. We refer to the portion of
hospital costs attributable to wages and wage-related costs as the
labor-related share. The labor-related share of the prospective payment
rate is adjusted by an index of relative labor costs, which is referred
to as the wage index.
Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of
the Act to provide that the Secretary must employ 62 percent as the
labor-related share unless this would result in lower payments to a
hospital than would otherwise be made. However, this provision of
Public Law 108-173 did not change the legal requirement that the
Secretary estimate from time to time the proportion of hospitals' costs
that are attributable to wages and wage-related costs. Thus, hospitals
receive payment based on either a 62-percent labor-related share, or
the labor-related share estimated from time to time by the Secretary,
depending on which labor-related share resulted in a higher payment.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through
45208), we rebased and revised the hospital market basket. We
established a 2018-based IPPS hospital market basket to replace the
2014-based IPPS hospital market basket, effective October 1, 2021.
Using the 2018-based IPPS market basket, we finalized a labor-related
share of 67.6 percent for discharges occurring on or after October 1,
2021. In addition, in FY 2022, we implemented this revised and rebased
labor-related share in a budget neutral manner (86 FR 45529-45530).
However, consistent with section 1886(d)(3)(E) of the Act, we did not
take into account the additional payments that would be made as a
result of hospitals with a wage index less than or equal to 1.0000
being paid using a labor-related share lower than the labor-related
share of hospitals with a wage index greater than 1.0000.
[[Page 49017]]
The labor-related share is used to determine the proportion of the
national IPPS base payment rate to which the area wage index is
applied. We include a cost category in the labor related share if the
costs are labor intensive and vary with the local labor market. In the
FY 2022 IPPS/LTCH PPS final rule (86 FR 45204 through 45207), we
included in the labor-related share the national average proportion of
operating costs that are attributable to the following cost categories
in the 2018-based IPPS market basket: Wages and Salaries; Employee
Benefits; Professional Fees: Labor-Related; Administrative and
Facilities Support Services; Installation, Maintenance, and Repair
Services; and All Other: Labor-related Services. In the proposed rule,
for FY 2023, we did not propose to make any further changes to the
labor-related share. For FY 2023, we proposed to continue to use a
labor-related share of 67.6 percent for discharges occurring on or
after October 1, 2022.
As discussed in section V.A. of the preamble of this final rule,
prior to January 1, 2016, Puerto Rico hospitals were paid based on 75
percent of the national standardized amount and 25 percent of the
Puerto Rico-specific standardized amount. As a result, we applied the
Puerto Rico-specific labor-related share percentage and nonlabor-
related share percentage to the Puerto Rico-specific standardized
amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub.
L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that
the payment calculation with respect to operating costs of inpatient
hospital services of a subsection (d) Puerto Rico hospital for
inpatient hospital discharges on or after January 1, 2016, shall use
100 percent of the national standardized amount. Because Puerto Rico
hospitals are no longer paid with a Puerto Rico-specific standardized
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as
amended by section 601 of the Consolidated Appropriations Act, 2016,
there is no longer a need for us to calculate a Puerto Rico-specific
labor-related share percentage and nonlabor-related share percentage
for application to the Puerto Rico-specific standardized amount.
Hospitals in Puerto Rico are now paid 100 percent of the national
standardized amount and, therefore, are subject to the national labor-
related share and nonlabor related share percentages that are applied
to the national standardized amount. Accordingly, for FY 2023, we did
not propose a Puerto Rico-specific labor-related share percentage or a
nonlabor-related share percentage.
Comment: Some commenters stated that an analysis comparing
hospitals' average hourly wages calculated from data reported on
schedule S-3 of their FY 2019 to their 2020 cost reports shows that the
average hourly wage rose 4.14 percent among hospitals with a wage index
greater than 1.0. The commenters stated that this wage growth occurred
at the same time that hospital utilization was decreasing due to the
effects of the pandemic, resulting in a considerable increase in the
portion of overall hospital costs represented by labor.
In addition to requesting that CMS update the labor share, the
commenters requested that CMS modify its methodology to review only the
labor costs of hospitals in areas with a wage index greater than 1.0
because hospitals in areas with a wage index lower than 1.0 receive a
statutorily defined labor-related share of 62 percent. The commenters
stated that changes of the labor share are budget-neutral but updating
the share would ensure that a more appropriate amount of funds go to
hospitals in areas with a wage index greater than 1.0, where the
greatest increases in labor costs have been experienced. The commenters
explained that the same comparison of 2019 and 2020 average hourly
wages shows that hospitals with a wage index of 1.0 or less experienced
an increase of only 2.38 percent during that same period.
For the reasons above, the commenters requested that CMS consider
raising the labor-related share for hospitals with wage indexes greater
than 1.0 for FY 2023.
A commenter stated that it strongly supports continuing to utilize
a labor-related share of 67.6 percent for discharges. The commenter
also stated that given the extreme increases in labor costs industry-
wide due to the pandemic over the last three years, the commenter urged
CMS to re-base again for FY 2023 to reflect a more accurate labor-
related share.
A commenter stated that it experienced an exponential increase in
the cost of labor as a result of the COVID-19 pandemic and labor
shortages. The commenter requested that CMS evaluate the impact of
rising labor costs on wage indices.
Response: We appreciate the commenters' concerns regarding how
operating expenses for hospitals may have been impacted by the PHE.
However, we disagree with the commenters' suggestion to update the
labor related share for FY 2023. As published in the FY 2006 IPPS final
rule (70 FR 47403), in accordance with section 404 of Public Law 108-
173, CMS determined a new frequency for rebasing the hospital market
basket, including the labor-related share, of every four years.
Therefore, in the FY 2022 IPPS/LTCH final rule, we finalized to update
the labor related share to reflect the rebased and revised IPPS market
basket, which is based on 2018 data. The labor-related share is equal
to the national average proportion of operating costs that are
attributable to the following cost categories in the 2018-based IPPS
market basket: Wages and Salaries, Employee Benefits, Professional
Fees: Labor-Related, Administrative and Facilities Support Services,
Installation, Maintenance, and Repair Services, and All Other: Labor-
Related Services.
CMS did not propose to rebase and revise the IPPS market basket,
including the labor-related share, in the FY 2023 IPPS/LTCH proposed
rule. However, we did review the most recent Medicare cost report data
available for IPPS hospitals submitted as of March 2022, which includes
data for 2019-2020. The Medicare cost report data showed slight
decreases in the compensation cost weight (reflecting wages and
salaries, employee benefits, and direct patient care contract labor
costs as a percent of operating costs) in 2019 and 2020 resulting in a
compensation cost weight that is roughly 1 percentage point less than
the 2018-based IPPS market basket cost weight. The compensation cost
weight accounts for 53.0 percentage points of the 67.6 percentage point
labor-related share based on the 2018-based IPPS market basket.
We plan to review the 2021 Medicare cost report data as soon as
complete information is available and evaluate these data for future
rulemaking. We thank the commenters for their comments and will
consider the comments regarding the methodology for deriving the labor-
related share for future rulemaking. After consideration of the public
comments we received, for the reasons set forth above and in this final
rule and in the FY 2022 IPPS/LTCH PPS final rule, we are finalizing our
proposals, without modification, to continue to use a labor-related
share of 67.6 percent for discharges occurring on or after October 1,
2022 for all hospitals (including Puerto Rico hospitals) whose wage
indexes are greater than 1.0000.
Tables 1A and 1B, which are published in section VI. of the
Addendum to this FY 2023 IPPS/LTCH PPS final rule and available via the
internet on the CMS website, reflect the national labor-related share.
Table 1C, in section VI. of the Addendum to this
[[Page 49018]]
FY 2023 IPPS/LTCH PPS final rule and available via the internet on the
CMS website, reflects the national labor-related share for hospitals
located in Puerto Rico. For FY 2023, for all IPPS hospitals (including
Puerto Rico hospitals) whose wage indexes are less than or equal to
1.0000, we are applying the wage index to a labor-related share of 62
percent of the national standardized amount. For all IPPS hospitals
(including Puerto Rico hospitals) whose wage indexes are greater than
1.000, for FY 2023, we are applying the wage index to a labor-related
share of 67.6 percent of the national standardized amount.
N. Permanent Cap on Wage Index Decreases
1. Permanent Cap Policy for the Wage Index
In the FY 2020 IPPS/LTCH PPS final rule, CMS implemented a
transition policy for FY 2020 to place a 5 percent cap on any decrease
in a hospital's wage index from the hospital's final wage index in FY
2019 so that a hospital's final wage index for FY 2020 will not be less
than 95 percent of its final wage index for FY 2019 (84 FR 42336
through 42337). We implemented this transition due to the combined
effect of the policy changes for the FY 2020 wage index (including
policies to address wage index disparities between high and low wage
index hospitals), which we believed could lead to significant decreases
in the wage index values for some hospitals. We stated that this
transition would allow the effects of our policies to be phased in over
2 years with no estimated reduction in the wage index of more than 5
percent in FY 2020 (that is, no cap would be applied the second year).
We also stated that we believed 5 percent is a reasonable level for the
cap because it would effectively mitigate any significant decreases in
the wage index for FY 2020. We applied a budget neutrality adjustment
factor to the FY 2020 standardized amount for all hospitals to achieve
budget neutrality for the transition policy (84 FR 42337 through
42338).
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58753 through
58755), to mitigate the effect of our adoption of the revised OMB
delineations in OMB Bulletin 18-04, we implemented for FY 2021 the same
5 percent cap transition policy that we had implemented for FY 2020.
Specifically, we placed a 5 percent cap on any decrease in a hospital's
wage index from the hospital's final wage index in FY 2020 so that a
hospital's final wage index for FY 2021 will not be less than 95
percent of its final wage index for FY 2020. We stated that for FY
2021, we did not believe it was necessary to implement the multifaceted
transitions (including a 1-year blended wage index) we established in
FY 2015 for the adoption of the new OMB delineations based on the new
decennial census data. The 5 percent cap transition policy resulted in
some hospitals receiving a transition adjustment that were not directly
affected by the adoption of the revised OMB delineations (85 FR 58754).
We applied a budget neutrality adjustment to the FY 2021 standardized
amount to achieve budget neutrality for the transition policy (85 FR
58755).
In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25397), given the
unprecedented nature of the ongoing COVID-19 PHE, we solicited comments
on whether it would be appropriate to continue to apply a transition to
the FY 2022 wage index for hospitals negatively impacted by our
adoption of the updates in OMB Bulletin 18-04. We received several
comments strongly recommending CMS extend a transition policy similar
to that implemented in FY 2020 and FY 2021. Commenters also recommended
CMS consider making a permanent 5 percent maximum reduction policy to
protect hospitals from large year-to-year variations in wage index
values as a means to reduce overall volatility. While we did not adopt
the commenters' suggestion for a permanent 5 percent cap policy, we did
finalize a transition policy for FY 2022 in the FY 2022 IPPS/LTCH PPS
final rule (86 FR 45164). Specifically, for hospitals that received the
transition in FY 2021, we continued a wage index transition for FY 2022
under which we apply a 5 percent cap on any decrease in the hospital's
wage index compared to its wage index for FY 2021 to mitigate
significant negative impacts of, and provide additional time for
hospitals to adapt to, the CMS decision to adopt the revised OMB
delineations. We applied a budget neutrality adjustment to the FY 2022
standardized amount so that the transition is implemented in a budget
neutral manner (86 FR 45165).
For FY 2023 and subsequent years, we further considered the
comments we received during the FY 2022 rulemaking recommending a
permanent 5 percent cap policy to prevent large year-to-year variations
in wage index values as a means to reduce overall volatility for
hospitals. In the past, we have established temporary transition
policies (as described above) when there have been significant changes
to wage index policy, and we have limited the duration of each
transition in order to phase in the effects of those policy changes. In
taking this temporary approach in the past, we have sought to mitigate
short-term instability and fluctuations that can negatively impact
hospitals. We also recognize that, absent any specific change in wage
index policy, significant year-to-year fluctuations in an area's wage
index can occur due to external factors beyond a hospital's control,
such as the COVID-19 PHE. For an individual hospital, these
fluctuations can be difficult to predict. We recognize that
predictability in Medicare payments is important to enable hospitals to
budget and plan their operations.
In light of these considerations, in the FY 2023 IPPS/LTCH PPS
proposed rule, we proposed a permanent approach to smooth year-to-year
decreases in hospitals' wage indexes (87 FR 28377 through 28380). We
proposed a policy that we believe increases the predictability of IPPS
payments for hospitals and mitigates instability and significant
negative impacts to hospitals resulting from changes to the wage index.
We stated that we also believe our proposed permanent policy would
eliminate the need for temporary and potentially uncertain transition
adjustments to the wage index in the future due to specific policy
changes or circumstances outside hospitals' control (for example, in
the event we adopt any future OMB revisions to the CBSA delineations).
As a result of this proposed policy, an otherwise rare but relatively
large year-to-year decrease in the wage index value for an individual
hospital would be phased in, providing the hospital with additional
time to plan appropriately and explore potential reclassification
options, if applicable. For example, if a change in OMB delineations
resulted in a hospital's wage index decreasing by more than 10 percent
in any given year, this proposed policy could provide at least one
additional year to phase in the decrease beyond a single ``transition''
year methodology, such as the transition policy finalized in the FY
2015 IPPS/LTCH PPS final rule (79 FR 49957 through 49962).
Typical year-to-year variation in the wage index has historically
been within 5 percent, and we stated in the proposed rule that we
expect this will continue to be the case in future years. Because
hospitals are usually experienced with this level of wage index
fluctuation, we stated that 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 IPPS payments due
to any significant wage index decreases that may affect hospitals in a
year. In
[[Page 49019]]
addition, we stated that we believe that the predictability resulting
from a 5 percent cap on all wage index decreases would enable hospitals
to more effectively budget and plan their operations. 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 stated
that we believe it would ensure the wage index is a relative measure of
the value of labor in prescribed labor market areas. In the proposed
rule, we estimated that applying a 5-percent cap on all wage index
decreases would have a very small effect on the budget neutrality
factor associated with the cap applied to the standardized amount for
FY 2023 (discussed in section III.N.2 of the preamble of the proposed
rule). 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 stated that we anticipate that in the absence
of policy changes most hospitals will not experience year-to-year wage
index declines greater than 5 percent in any given year. Therefore, we
stated that we anticipate that the impact to the budget neutrality
factor associated with the cap in future years would continue to be
minimal. We stated that we also believe that when the 5-percent cap
would be applied under this proposal, in general it is likely that it
would be applied similarly to all hospitals 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 in certain circumstances this policy may result in
some hospitals in a CBSA receiving a higher wage index than others in
the same area, we stated that we believe the impact would be temporary.
For the reasons discussed in the proposed rule, we stated that we
believe a 5-percent cap on wage index decreases would be appropriate
for the IPPS. Therefore, for FY 2023 and subsequent years, we proposed
to apply a 5-percent cap on any decrease to a hospital's wage index
from its wage index in the prior FY, regardless of the circumstances
causing the decline. That is, we proposed that a hospital's wage index
for FY 2023 would not be less than 95 percent of its final wage index
for FY 2022, and that for subsequent years, a hospital's wage index
would not be less than 95 percent of its final wage index for the prior
FY. This also means that if a hospital'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 hospital's
capped wage index in the prior FY. For example, if a hospital'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. We stated that we would reflect
the proposed wage index cap policy at 42 CFR 412.64(h). Specifically,
we proposed to add a new paragraph at 42 CFR 412.64(h)(7) to state that
beginning with fiscal year 2023, if CMS determines that a hospital's
wage index value for a fiscal year would decrease by more than 5
percent as compared to the hospital's wage index value for the prior
fiscal year, CMS limits the decrease to 5 percent for the fiscal year.
We stated that we have authority to implement the proposed wage
index cap policy and the associated proposed budget neutrality
adjustment (discussed in section III.N.2. of the preamble of the
proposed rule) under section 1886(d)(3)(E) of the Act, which gives the
Secretary broad authority to adjust for area differences in hospital
wage levels by a factor (established by the Secretary) reflecting the
relative hospital wage level in the geographic area of the hospital
compared to the national average hospital wage level, and requires
those adjustments to be budget neutral. We also stated that in
addition, we have authority to implement the proposed wage index cap
policy and the associated proposed budget neutrality adjustment
(discussed in section III.N.2. of the preamble of the proposed rule) as
an adjustment under section 1886(d)(5)(I)(i) of the Act, which
similarly gives the Secretary broad authority to provide by regulation
for such other exceptions and adjustments to such payment amounts under
subsection (d) as the Secretary deems appropriate.
We proposed to apply the wage index cap policy described above for
a FY using the final wage index applicable to the hospital on the last
day of the prior FY (except for newly opened hospitals, as discussed
below). In general, the final wage index applicable to the hospital on
the last day of the prior FY would be the wage index value listed for
the hospital in Table 2 of the IPPS/LTCH PPS final rule for that prior
FY (including any correction notices, if applicable). We stated that in
rulemaking for a FY, we intend to relist the wage index values from
Table 2 of the IPPS/LTCH PPS final rule for the prior FY, with updates
as described below. Under the proposed wage index cap policy described
above, we would use these values to determine a hospital's wage index
for a FY by capping it at 95 percent of the final wage index applicable
to the hospital on the last day of the prior FY (in general, the wage
index value listed for the hospital in Table 2 of the IPPS/LTCH PPS
final rule for the prior FY). We noted in the proposed rule that,
consistent with our past application of the 5 percent cap transition
policy (see the FY 2020 IPPS/LTCH PPS final rule (84 FR 42337)), the
proposed wage index cap policy described above would apply to hospitals
whose wage index is reduced by obtaining a urban to rural
reclassification under 42 CFR 412.103. Specifically, a hospital that
obtains a rural reclassification under 42 CFR 412.103 may be assigned
its State's rural wage index.\212\ While other forms of wage index
reclassification are effective with the start of a Federal fiscal year,
pursuant to 42 CFR 412.103(d)(1), the effective date of an approved
rural reclassification is the filing date of the application.
Therefore, the wage index values for hospitals that obtain rural
reclassification under 42 CFR 412.103 may change in the middle of a
Federal fiscal year and thus may not be reflected in Table 2 of the
IPPS/LTCH PPS final rule for that year. For example, if a hospital was
assigned its geographic wage index of 1.0001 in Table 2 of the FY 2022
IPPS/LTCH PPS final rule, but obtained a rural reclassification on
December 1, 2021 and was assigned its state's rural wage index of
0.9600 for the remainder of FY 2022; the FY 2023 cap would be based on
the 0.9600 value, not the 1.0001 value listed in Table 2 of the FY 2022
IPPS/LTCH PPS final rule. We stated that as in previous years, we would
instruct hospitals that obtain a rural reclassification under 42 CFR
412.103 to contact their MAC to ensure that their assigned wage index
does not result in a greater than 5 percent decrease from the
hospital's prior year wage index value (see the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42337) and the FY 2021 IPPS/LTCH PPS final rule (85
FR 58754)).
---------------------------------------------------------------------------
\212\ As discussed in the FY 2016 IFC (81 FR 23428 through
23438), hospitals with simultaneous reclassifications under 412.103
and either Lugar or MGCRB reclassification process are not assigned
their State's rural wage index.
---------------------------------------------------------------------------
In Table 2 associated with this final rule, which is available via
the internet on the CMS website, we list the FY 2022 final wage index
value for all hospitals in column C. For additional clarity, we have
identified hospitals that have obtained rural reclassification after
the FY 2022 lock-in date, as described in 42 CFR 412.103(b)(6), and
that were assigned a different wage index than what was listed in Table
2 associated
[[Page 49020]]
with the FY 2022 IPPS/LTCH PPS correction notice (available on the
internet at https://www.cms.gov/files/zip/fy-2022-ipps-frtables-2-3-4a-4b.zip). In Table 2 associated with this final rule, the FY 2022 wage
index column for these hospitals will not use the values listed in
Table 2 associated with the FY 2022 IPPS/LTCH PPS correction notice
(available on the internet at https://www.cms.gov/files/zip/fy2022-ipps-fr-tables-2-3-4a-4b.zip), but will instead be updated with the
wage index value that is currently assigned to the hospitals. Under our
proposal described above, we would apply the wage index cap using the
actual final wage index value assigned to the hospital on the last day
of the prior Federal fiscal year rather than the value listed in Table
2 of the prior FY final rule. In the proposed rule, we identified in
Table 2 (posted on the FY 2023 proposed rule web page at https://
www.cms.gov/medicare/medicare-fee-for-service-payment/
acuteinpatientpps) all hospitals that obtained rural reclassification
under 42 CFR 412.103 after the FY 2022 lock-in date and that have no
other form of wage index reclassification applicable to them at this
time. This column in Table 2 has been revised for this final rule
(posted on the FY 2023 final rule web page at https://www.cms.gov/
medicare/medicare-fee-for-service-payment/acuteinpatientpps) to add
additional hospitals without another form of reclassification that
obtain rural reclassification under 42 CFR 412.103 before the FY 2023
lock-in date as described in 42 CFR 412.103(b)(6).
We stated in the proposed rule that hospitals that obtain rural
reclassification after the FY 2023 lock-in date will not be listed as
being reclassified as rural in the FY 2023 IPPS/LTCH PPS final rule. We
stated that if we finalize the proposed wage index cap policy described
above, these hospitals should contact their MAC to ensure that the
assigned rural wage index value is not less than 95 percent of their
final wage index value for FY 2022 (that is, the wage index assigned to
the hospital as of September 30, 2022).
For newly opened hospitals, we proposed to apply the proposed wage
index cap policy for a FY using the wage index value the hospital was
assigned for the prior FY. A new hospital would be paid the wage index
for the area in which it is geographically located for its first full
or partial fiscal year, and it would not receive a cap for that first
year because it would not have been assigned a wage index in the prior
year. Also, it is possible a new hospital may not be listed in Table 2
for several years since the hospitals listed in Table 2 are based on
historical data. We stated in the proposed rule that if we finalize the
proposed wage index cap policy described above, a new hospital may
contact their MAC to ensure that their assigned wage index value for
the upcoming FY is not less than 95 percent of the value assigned to
them for the prior Federal fiscal year. For example, if a hospital
begins operations on July 1, 2022, and is assigned its area wage index
of 0.9000 for the remainder of FY 2022, its FY 2023 wage index would be
capped at 95 percent of that value, and could not be lower than 0.8550
(0.95 x 0.9000) regardless of whether it was listed in Table 2 in the
FY 2022 IPPS/LTCH PPS final rule. A hospital that opens on December 1,
2022 would not be eligible for a capped wage index in FY 2023, as it
was not assigned a wage index during FY 2022.
In the proposed rule, we noted that if we adopt these proposals as
final policy, we would examine the effects of the policy on an ongoing
basis in the future in order to assess whether it effectively and
appropriately accomplishes the goal of increasing predictability and
stability in IPPS payments.
We received comments on our proposals and summarize and respond to
these comments in section III.N.2. below where we discuss the proposed
budget neutrality adjustment associated with the proposed wage index
cap policy. As we note below, we are finalizing our proposals regarding
the wage index cap policy without modification.
2. Permanent Cap Budget Neutrality
We proposed to implement the proposed wage index cap policy
(discussed above in section III.N.1 of the preamble of this final rule)
in a budget neutral manner through a national adjustment to the
standardized amount each fiscal year as we have implemented similar
past transition policies involving a cap on wage index decreases (for
example, see the FY 2021 IPPS/LTCH PPS final rule (85 FR 58755) and the
FY 2022 IPPS/LTCH PPS final rule (86 FR 45164 through 45165)). We
stated that we believe application of the proposed wage index cap
policy should not increase estimated aggregate Medicare payments beyond
the payments that would be made had we never applied the cap.
Specifically, we proposed to apply a budget neutrality adjustment
to ensure that estimated aggregate payments under our proposed wage
index cap policy for hospitals that would have a decrease in their wage
indexes for the upcoming fiscal year of more than 5 percent would equal
what estimated aggregate payments would have been without the proposed
wage index cap policy. To determine the proposed associated budget
neutrality factor, we stated that we would compare estimated aggregate
IPPS payments with and without the proposed wage index cap policy. As
discussed above in section III.N.1 of the preamble of this final rule,
in the propose rule, we stated that we have authority to implement this
budget neutrality adjustment under sections 1886(d)(3)(E) and
(d)(5)(I)(i) of the Act.
Comment: Commenters were generally supportive of CMS's proposal to
limit any decrease in a hospital's wage index value to be no greater
than 5 percent as compared to the hospital's wage index value for the
prior fiscal year. Commenters supported CMS's goal of increasing the
stability and predictability of payments under the IPPS. However,
several commenters contend that contrary to CMS's past statements, the
statute neither authorizes nor requires budget neutrality to offset
adjustments made under section 1886(d)(5)(I)(i). Some commenters
suggested that CMS should apply the cap in a manner that would not
reduce the wage indexes of other hospitals, contending this would lead
to less volatility in wage index values. Several commenters request CMS
review and seek alternatives to the proposed national budget neutrality
adjustment.
Response: We appreciate commenters' support of the proposed
permanent cap on wage index decreases. As discussed above in section
III.N.1 of the preamble of this final rule, we have authority to
implement the proposed budget neutrality adjustment associated with the
proposed cap under sections 1886(d)(3)(E) and (d)(5)(I)(i) of the Act.
Section 1886(d)(3)(E) gives the Secretary broad authority to adjust for
area differences in hospital wage levels by a factor (established by
the Secretary) reflecting the relative hospital wage level in the
geographic area of the hospital compared to the national average
hospital wage level, and requires those adjustments to be applied in a
budget neutral manner. However, even if the wage index were not
required to be budget neutral under section 1886(d)(3)(E) of the Act,
we would not consider it an appropriate alternative to use the wage
index and the proposed permanent cap on wage index decreases to
increase or decrease overall IPPS spending. The wage index is not a
policy tool but rather a technical adjustment designed to be a relative
measure of the wages and wage-related
[[Page 49021]]
costs of subsection (d) hospitals in the United States. Contrary to the
commenters' assertion, we also have authority to implement the proposed
budget neutrality adjustment associated with the proposed cap as an
adjustment under section 1886(d)(5)(I)(i) of the Act, which similarly
gives the Secretary broad authority to provide by regulation for such
other exceptions and adjustments to such payment amounts under
subsection (d) as the Secretary deems appropriate. Furthermore, our
past transition policies involving a 5 percent cap on wage index
decreases implemented in a budget neutral manner did not result in wage
index volatility, and we expect the same for the overall budget
neutrality adjustments associated with the permanent cap policy.
Comment: MedPAC supported the proposal to cap wage index decreases
at 5 percent, but suggested also applying a cap to increases of more
than 5 percent.
Response: We appreciate MedPAC's suggestion that the cap on wage
index changes of more than 5 percent should also be applied to
increases in the wage index. However, as we discussed in the proposed
rule, one purpose of the proposed policy is to help mitigate the
significant negative impacts of certain wage index changes. As we
discussed in the proposed rule, we believe applying a 5-percent cap on
all wage index decreases would support increased predictability about
IPPS payments for hospitals in the upcoming fiscal year, enabling them
to more effectively budget and plan their operations. That is, we
proposed to cap decreases because we believe that a hospital would be
able to more effectively budget and plan when there is predictability
about its expected minimum level of IPPS payments in the upcoming
fiscal year. We did not propose to limit wage index increases because
we do not believe such a policy is needed to enable hospitals to more
effectively budget and plan their operations. Therefore, we believe it
is appropriate for hospitals that experience an increase in their wage
index value to receive that wage index value.
Comment: A commenter suggested that if CMS discontinues the low
wage index hospital policy, hospitals that benefitted in the prior year
from that policy should not be subject to a 5 percent cap on any
decreases.
Response: We appreciate the commenter's suggestion. As discussed in
section III. G. 4 of this final rule, CMS is continuing the low wage
index hospital policy for FY 2023.
Comment: A commenter did not support CMS's proposed policy approach
to the wage index cap policy with regard to newly opened hospitals.
While the commenter stated they understand the rationale for CMS's
policy approach, they expressed concerns that it will create inequity
in Medicare payments for hospitals within the same market. The
commenter encouraged CMS to apply the same area wage index value for
new and existing hospitals under this policy.
Response: We understand the commenter's concern, but we do not
believe the scenario they are alluding to (that is, a labor market
where existing hospitals are receiving the cap, and new hospitals are
not) would neither be common nor require additional consideration. We
believe that on an ongoing basis, relatively few hospitals would
receive the cap, and even fewer would receive the cap in consecutive
years. As of this final rule, there will be 126 hospitals receiving the
cap in FY 2023, and only 12 that will receive a cap increase of greater
than 5 percent. Therefore, any potential difference in the wage index
value hospitals in the same labor market area receive would likely be
minimal and temporary. We proposed to examine the effects of this
policy on an ongoing basis to assess whether it effectively and
appropriately accomplishes the goal of increasing predictability and
stability in IPPS payments, and may reevaluate this issue in the
future. However, at this time, we do not believe that creating a policy
modification for hospitals that were not assigned a wage index in the
prior year is necessary.
After consideration of the public comments we received, for the
reasons discussed in this final rule and in the proposed rule, we are
finalizing as proposed, without modification, our wage index cap policy
and the associated budget neutrality adjustment. We will apply a 5-
percent cap on any decrease to a hospital's wage index from its wage
index in the prior FY, regardless of the circumstances causing the
decline. A hospital's wage index for FY 2023 will not be less than 95
percent of its final wage index for FY 2022, and for subsequent years,
a hospital's wage index will not be less than 95 percent of its final
wage index for the prior FY. For example, a hospital that received a
wage index of 1.0000 on September 30, 2022 could not receive a wage
index of less than 0.9500 for FY 2023. If a hospital's prior FY wage
index is calculated with the application of the 5-percent cap, the
following year's wage index will not be less than 95 percent of the
hospital's capped wage index in the prior FY. Except for newly opened
hospitals, we will apply the cap for a FY using the final wage index
applicable to the hospital on the last day of the prior FY. A newly
opened hospital would be paid the wage index for the area in which it
is geographically located for its first full or partial fiscal year,
and it would not receive a cap for that first year because it would not
have been assigned a wage index in the prior year.
We are adding a new paragraph at 42 CFR 412.64(h)(7) to state that
beginning with fiscal year 2023, if CMS determines that a hospital's
wage index value for a fiscal year would decrease by more than 5
percent as compared to the hospital's wage index value for the prior
fiscal year, CMS limits the decrease to 5 percent for the fiscal year.
We will apply the cap in a budget neutral manner through a national
adjustment to the standardized amount each fiscal year. Specifically,
we will apply a budget neutrality adjustment to ensure that estimated
aggregate payments under our wage index cap policy for hospitals that
would have a decrease in their wage indexes for the upcoming fiscal
year of more than 5 percent would equal what estimated aggregate
payments would have been without the wage index cap policy. We note
that the budget neutrality adjustment has been updated based on the
final rule data. We refer readers to the Addendum of this final rule
for further information regarding the budget neutrality calculations.
IV. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) for FY 2023 (Sec. 412.106)
A. General Discussion
Section 1886(d)(5)(F) of the Act provides for additional Medicare
payments to subsection (d) hospitals that serve a significantly
disproportionate number of low-income patients. The Act specifies two
methods by which a hospital may qualify for the Medicare
disproportionate share hospital (DSH) adjustment. Under the first
method, hospitals that are located in an urban area and have 100 or
more beds may receive a Medicare DSH payment adjustment if the hospital
can demonstrate that, during its cost reporting period, more than 30
percent of its net inpatient care revenues are derived from State and
local government payments for care furnished to patients with low
incomes. This method is commonly referred to as the ``Pickle method.''
The second method for qualifying for the DSH payment adjustment, which
is the most common, is based on a complex statutory formula under which
the DSH payment adjustment is based on the hospital's
[[Page 49022]]
geographic designation, the number of beds in the hospital, and the
level of the hospital's disproportionate patient percentage (DPP). A
hospital's DPP is the sum of two fractions: the ``Medicare fraction''
and the ``Medicaid fraction.'' The Medicare fraction (also known as the
``SSI fraction'' or ``SSI ratio'') is computed by dividing the number
of the hospital's inpatient days that are furnished to patients who
were entitled to both Medicare Part A and Supplemental Security Income
(SSI) benefits by the hospital's total number of patient days furnished
to patients entitled to benefits under Medicare Part A. The Medicaid
fraction is computed by dividing the hospital's number of inpatient
days furnished to patients who, for such days, were eligible for
Medicaid, but were not entitled to benefits under Medicare Part A, by
the hospital's total number of inpatient days in the same period.
[GRAPHIC] [TIFF OMITTED] TR10AU22.119
Because the DSH payment adjustment is part of the IPPS, the
statutory references to ``days'' in section 1886(d)(5)(F) of the Act
have been interpreted to apply only to hospital acute care inpatient
days. Regulations located at 42 CFR 412.106 govern the Medicare DSH
payment adjustment and specify how the DPP is calculated as well as how
beds and patient days are counted in determining the Medicare DSH
payment adjustment. Under Sec. 412.106(a)(1)(i), the number of beds
for the Medicare DSH payment adjustment is determined in accordance
with bed counting rules for the IME adjustment under Sec. 412.105(b).
Section 3133 of the Patient Protection and Affordable Care Act, as
amended by section 10316 of the same Act and section 1104 of the Health
Care and Education Reconciliation Act (Pub. L. 111-152), added a
section 1886(r) to the Act that modifies the methodology for computing
the Medicare DSH payment adjustment. (For purposes of this final rule,
we refer to these provisions collectively as section 3133 of the
Affordable Care Act.) Beginning with discharges in FY 2014, hospitals
that qualify for Medicare DSH payments under section 1886(d)(5)(F) of
the Act receive 25 percent of the amount they previously would have
received under the statutory formula for Medicare DSH payments. This
provision applies equally to hospitals that qualify for DSH payments
under section 1886(d)(5)(F)(i)(I) of the Act and those hospitals that
qualify under the Pickle method under section 1886(d)(5)(F)(i)(II) of
the Act.
The remaining amount, equal to an estimate of 75 percent of what
otherwise would have been paid as Medicare DSH payments, reduced to
reflect changes in the percentage of individuals who are uninsured, is
available to make additional payments to each hospital that qualifies
for Medicare DSH payments and that has uncompensated care. The payments
to each hospital for a fiscal year are based on the hospital's amount
of uncompensated care for a given time period relative to the total
amount of uncompensated care for that same time period reported by all
hospitals that receive Medicare DSH payments for that fiscal year.
Since FY 2014, section 1886(r) of the Act has required that
hospitals that are eligible for DSH payments under section
1886(d)(5)(F) of the Act receive 2 separately calculated payments:
[GRAPHIC] [TIFF OMITTED] TR10AU22.120
[[Page 49023]]
Specifically, section 1886(r)(1) of the Act provides that the
Secretary shall pay to such subsection (d) hospital (including a Pickle
hospital) 25 percent of the amount the hospital would have received
under section 1886(d)(5)(F) of the Act for DSH payments, which
represents the empirically justified amount for such payment, as
determined by the MedPAC in its March 2007 Report to Congress. We refer
to this payment as the ``empirically justified Medicare DSH payment.''
In addition to this empirically justified Medicare DSH payment,
section 1886(r)(2) of the Act provides that, for FY 2014 and each
subsequent fiscal year, the Secretary shall pay to such subsection (d)
hospital an additional amount equal to the product of three factors.
The first factor is the difference between the aggregate amount of
payments that would be made to subsection (d) hospitals under section
1886(d)(5)(F) of the Act if subsection (r) did not apply and the
aggregate amount of payments that are made to subsection (d) hospitals
under section 1886(r)(1) of the Act for such fiscal year. Therefore,
this factor amounts to 75 percent of the payments that would otherwise
be made under section 1886(d)(5)(F) of the Act.
The second factor is, for FY 2018 and subsequent fiscal years, 1
minus the percent change in the percent of individuals who are
uninsured, as determined by comparing the percent of individuals who
were uninsured in 2013 (as estimated by the Secretary, based on data
from the Census Bureau or other sources the Secretary determines
appropriate, and certified by the Chief Actuary of CMS), and the
percent of individuals who were uninsured in the most recent period for
which data are available (as so estimated and certified), minus a
statutory adjustment of 0.2 percentage point for FYs 2018 and 2019.
The third factor is a percent that, for each subsection (d)
hospital, represents the quotient of the amount of uncompensated care
for such hospital for a period selected by the Secretary (as estimated
by the Secretary, based on appropriate data), including the use of
alternative data where the Secretary determines that alternative data
are available which are a better proxy for the costs of subsection (d)
hospitals for treating the uninsured, and the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under section 1886(r) of the Act. Therefore, this third factor
represents a hospital's uncompensated care amount for a given time
period relative to the uncompensated care amount for that same time
period for all hospitals that receive Medicare DSH payments in the
applicable fiscal year, expressed as a percent.
For each hospital, the product of these three factors represents
its additional payment for uncompensated care for the applicable fiscal
year. We refer to the additional payment determined by these factors as
the ``uncompensated care payment.'' In brief, the uncompensated care
payment for an individual hospital is determined as the product of the
following 3 factors:
[GRAPHIC] [TIFF OMITTED] TR10AU22.121
Section 1886(r) of the Act applies to FY 2014 and each subsequent
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620
through 50647) and the FY 2014 IPPS interim final rule with comment
period (78 FR 61191 through 61197), we set forth our policies for
implementing the required changes to the Medicare DSH payment
methodology made by section 3133 of the Affordable Care Act for FY
2014. In those rules, we noted that, because section 1886(r) of the Act
modifies the payment required under section 1886(d)(5)(F) of the Act,
it affects only the DSH payment under the operating IPPS. It does not
revise or replace the capital IPPS DSH payment provided under the
regulations at 42 CFR part 412, subpart M, which was established
through the exercise of the Secretary's discretion in implementing the
capital IPPS under section 1886(g)(1)(A) of the Act.
Finally, section 1886(r)(3) of the Act provides that there shall be
no administrative or judicial review under section 1869, section 1878,
or otherwise of any estimate of the Secretary for purposes of
determining the factors described in section 1886(r)(2) of the Act or
of any period selected by the Secretary for the purpose of determining
those factors. Therefore, there is no administrative or judicial review
of the estimates developed for purposes of applying the three factors
used to determine uncompensated care payments, or the periods selected
in order to develop such estimates.
B. Eligibility for Empirically Justified Medicare DSH Payments and
Uncompensated Care Payments
As explained earlier, the payment methodology under section 3133 of
the Affordable Care Act applies to ``subsection (d) hospitals'' that
would otherwise receive a DSH payment made under section 1886(d)(5)(F)
of the Act. Therefore, hospitals must receive empirically justified
Medicare DSH payments in a fiscal year in order to receive an
additional Medicare uncompensated care payment for that year.
Specifically, section 1886(r)(2) of the Act states that, in addition to
the payment made to a subsection (d) hospital under section 1886(r)(1)
of the Act, the Secretary shall pay to such subsection (d) hospitals an
additional amount. Because section 1886(r)(1) of the Act refers to
empirically justified Medicare DSH payments, the additional payment
under section 1886(r)(2) of the Act is limited to hospitals that
receive empirically justified Medicare DSH payments in accordance with
section
[[Page 49024]]
1886(r)(1) of the Act for the applicable fiscal year.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY
2014 IPPS interim final rule with comment period (78 FR 61193), we
provided that hospitals that are not eligible to receive empirically
justified Medicare DSH payments in a fiscal year will not receive
uncompensated care payments for that year. We also specified that we
would make a determination concerning eligibility for interim
uncompensated care payments based on each hospital's estimated DSH
status for the applicable fiscal year (using the most recent data that
are available). For the proposed rule, we estimated DSH status for all
hospitals using the most recent available SSI ratios and information
from the most recent available Provider Specific File. We noted FY 2019
SSI ratios available on the CMS website were the most recent available
SSI ratios at the time of developing the proposed rule. If more recent
data on DSH eligibility become available before the final rule, we
stated that we would use such data in the final rule. For this FY 2023
IPPS/LTCH PPS final rule, the FY 2020 SSI ratios were available at the
time of developing this final rule. Our final determination of a
hospital's eligibility for uncompensated care payments will be based on
the hospital's actual DSH status at cost report settlement for FY 2023.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and in the
rulemaking for subsequent fiscal years, we have specified our policies
for several specific classes of hospitals within the scope of section
1886(r) of the Act. In the FY 2023 IPPS/LTCH PPS proposed rule, we
discussed our specific policies regarding eligibility to receive
empirically justified Medicare DSH payments and uncompensated care
payments for FY 2023 with respect to the following hospitals.
Eligible hospitals include the following:
Subsection (d) Puerto Rico hospitals that are eligible for
DSH payments also are eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments under section
1886(r) of the Act (78 FR 50623 and 79 FR 50006).
SCHs that are paid under the IPPS Federal rate receive
interim payments based on what we estimate and project their DSH status
to be prior to the beginning of the Federal fiscal year (based on the
best available data at that time) subject to settlement through the
cost report, and if they receive interim empirically justified Medicare
DSH payments in a fiscal year, they also will receive interim
uncompensated care payments for that fiscal year on a per discharge
basis, subject as well to settlement through the cost report. Final
eligibility determinations will be made at the end of the cost
reporting period at settlement, and both interim empirically justified
Medicare DSH payments and uncompensated care payments will be adjusted
accordingly (78 FR 50624 and 79 FR 50007).
Medicare-dependent, small rural hospitals (MDHs) are paid
based on the IPPS Federal rate or, if higher, the IPPS Federal rate
plus 75 percent of the amount by which the Federal rate is exceeded by
the updated hospital-specific rate from certain specified base years
(76 FR 51684). The IPPS Federal rate that is used in the MDH payment
methodology is the same IPPS Federal rate that is used in the SCH
payment methodology. Because MDHs are paid based on the IPPS Federal
rate, they continue to be eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments if their DPP is
at least 15 percent, and we apply the same process to determine MDHs'
eligibility for interim empirically justified Medicare DSH and interim
uncompensated care payments as we do for all other IPPS hospitals.
Section 50205 of the Bipartisan Budget Act of 2018 (Pub. L. 115-
123), enacted on February 9, 2018, extended the MDH program for
discharges on or after October 1, 2017, through September 30, 2022. We
note that there has not been legislation at the time of development of
this final rule that would extend the MDH program beyond September 30,
2022. However, if the MDH program were to be extended beyond its
current expiration date, similar to how it was extended under the
Bipartisan Budget Act of 2018, we would continue to make a
determination concerning an MDH's eligibility for interim uncompensated
care payments based on the hospital's estimated DSH status for the
applicable fiscal year.
IPPS hospitals that elect to participate in the Bundled
Payments for Care Improvement Advanced (BPCI Advanced) model starting
October 1, 2018, will continue to be paid under the IPPS and,
therefore, are eligible to receive empirically justified Medicare DSH
payments and uncompensated care payments. The BPCI Advanced Model's
final performance year will end on December 31, 2023. For further
information regarding the BPCI Advanced model, we refer readers to the
CMS website at https://innovation.cms.gov/initiatives/bpci-advanced/.
IPPS hospitals that participate in the Comprehensive Care
for Joint Replacement Model (80 FR 73300) continue to be paid under the
IPPS and, therefore, are eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments. We refer the
reader to the interim final rule with request for comments that
appeared in the November 6, 2020, Federal Register for a discussion of
the Model (85 FR 71167 through 71173). In that interim final rule, we
extended the Model's Performance Year 5 to September 30, 2021. In a
subsequent final rule that appeared in the May 3, 2021 Federal Register
(86 FR 23496), we further extended the Model for an additional three
performance years. The Model's Performance Year 8 will end on December
31, 2024.
Ineligible hospitals include the following:
Maryland hospitals are not eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments under
the payment methodology of section 1886(r) of the Act because they are
not paid under the IPPS. As discussed in the FY 2019 IPPS/LTCH PPS
final rule (83 FR 41402 through 41403), CMS and the State have entered
into an agreement to govern payments to Maryland hospitals under a new
payment model, the Maryland Total Cost of Care (TCOC) Model, which
began on January 1, 2019. Under the Maryland TCOC Model, Maryland
hospitals will not be paid under the IPPS in FY 2023, and will be
ineligible to receive empirically justified Medicare DSH payments and
uncompensated care payments under section 1886(r) of the Act.
Sole community hospitals (SCHs) that are paid under their
hospital-specific rate are not eligible for Medicare DSH payments.
Hospitals participating in the Rural Community Hospital
Demonstration Program are not eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments under section
1886(r) of the Act because they are not paid under the IPPS (78 FR
50625 and 79 FR 50008). The Rural Community Hospital Demonstration
Program was originally authorized for a 5-year period by section 410A
of the Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA) (Pub. L. 108-173), and extended for another 5-year period
by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 114-
255). The period of performance for this 5-
[[Page 49025]]
year extension period ended December 31, 2016. Section 15003 of the
21st Century Cures Act (Pub. L. 114-255), enacted December 13, 2016,
again amended section 410A of Public Law 108-173 to require a 10-year
extension period (in place of the 5-year extension required by the
Affordable Care Act), therefore requiring an additional 5-year
participation period for the demonstration program. Section 15003 of
Public Law 114-255 also required a solicitation for applications for
additional hospitals to participate in the demonstration program. The
period of performance for this 5-year extension period ended December
31, 2021. The Consolidated Appropriations Act, 2021 (Pub. L. 116-260)
amended section 410A of Public Law 108-173 to extend the Rural
Community Hospital Demonstration Program for an additional 5-year
period. The period of participation for the last hospital in the
demonstration under this most recent legislative authorization would
extend until June 30, 2028, as outlined in section V.K. of the preamble
of this final rule. Under the payment methodology that applies during
the third 5-year extension period for the demonstration program,
participating hospitals do not receive empirically justified Medicare
DSH payments, and they are also excluded from receiving interim and
final uncompensated care payments. At the time of development of this
final rule, we believe 26 hospitals may participate in the
demonstration program at the start of FY 2023.
We received no comments on our policy of using the best available
data regarding a hospital's estimated DSH status for purposes of
determining eligibility for interim uncompensated care payments for FY
2023. Our final determination of a hospital's eligibility for
uncompensated care payments for FY 2023 will continue to be based on
the hospital's actual DSH status at cost report settlement for the
payment year.
C. Empirically Justified Medicare DSH Payments
As we have discussed earlier, section 1886(r)(1) of the Act
requires the Secretary to pay 25 percent of the amount of the Medicare
DSH payment that would otherwise be made under section 1886(d)(5)(F) of
the Act to a subsection (d) hospital. Because section 1886(r)(1) of the
Act merely requires the program to pay a designated percentage of these
payments, without revising the criteria governing eligibility for DSH
payments or the underlying payment methodology, we stated in the FY
2014 IPPS/LTCH PPS final rule that we did not believe that it was
necessary to develop any new operational mechanisms for making such
payments. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50626), we implemented this provision by advising Medicare
Administrative Contractors (MACs) to simply adjust the interim claim
payments to the requisite 25 percent of what would have otherwise been
paid. We also made corresponding changes to the hospital cost report so
that these empirically justified Medicare DSH payments can be settled
at the appropriate level at the time of cost report settlement. We
provided more detailed operational instructions and cost report
instructions following issuance of the FY 2014 IPPS/LTCH PPS final rule
that are available on the CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.
We received public comments that were outside the scope of this
proposed rule. Many of these comments related to structural changes to
the DSH program. For example, a commenter recommended creating new
Conditions of Participation and Conditions of Coverage related to the
DSH program. Because we consider these public comments to be outside
the scope of the proposed rule, we are not addressing them in this
final rule.
D. Uncompensated Care Payments
As we discussed earlier, section 1886(r)(2) of the Act provides
that, for each eligible hospital in FY 2014 and subsequent years, the
uncompensated care payment is the product of three factors. These three
factors represent our estimate of 75 percent of the amount of Medicare
DSH payments that would otherwise have been paid, an adjustment to this
amount for the percent change in the national rate of uninsurance
compared to the rate of uninsurance in 2013, and each eligible
hospital's estimated uncompensated care amount relative to the
estimated uncompensated care amount for all eligible hospitals. In this
section of this final rule, we discuss the data sources and
methodologies for computing each of these factors, our final policies
for FYs 2014 through 2022, and our final policies for FY 2023.
1. Calculation of Factor 1 for FY 2023
Section 1886(r)(2)(A) of the Act establishes Factor 1 in the
calculation of the uncompensated care payment. Section 1886(r)(2)(A) of
the Act states that this factor is equal to the difference between: (1)
the aggregate amount of payments that would be made to subsection (d)
hospitals under section 1886(d)(5)(F) of the Act if section 1886(r) of
the Act did not apply for such fiscal year (as estimated by the
Secretary); and (2) the aggregate amount of payments that are made to
subsection (d) hospitals under section 1886(r)(1) of the Act for such
fiscal year (as so estimated).
Therefore, section 1886(r)(2)(A)(i) of the Act represents the
estimated Medicare DSH payments that would have been made under section
1886(d)(5)(F) of the Act if section 1886(r) of the Act did not apply
for such fiscal year. Under a prospective payment system, we would not
know the precise aggregate Medicare DSH payment amount that would be
paid for a Federal fiscal year until cost report settlement for all
IPPS hospitals is completed, which occurs several years after the end
of the Federal fiscal year. Therefore, section 1886(r)(2)(A)(i) of the
Act provides authority to estimate this amount, by specifying that, for
each fiscal year to which the provision applies, such amount is to be
estimated by the Secretary. Similarly, section 1886(r)(2)(A)(ii) of the
Act represents the estimated empirically justified Medicare DSH
payments to be made in a fiscal year, as prescribed under section
1886(r)(1) of the Act. Again, section 1886(r)(2)(A)(ii) of the Act
provides authority to estimate this amount. Therefore, Factor 1 is the
difference between our estimates of: (1) the amount that would have
been paid in Medicare DSH payments for the fiscal year, in the absence
of the new payment provision; and (2) the amount of empirically
justified Medicare DSH payments that are made for the fiscal year,
which takes into account the requirement to pay 25 percent of what
would have otherwise been paid under section 1886(d)(5)(F) of the Act.
In other words, this factor represents our estimate of 75 percent (100
percent minus 25 percent) of our estimate of Medicare DSH payments that
would otherwise be made, in the absence of section 1886(r) of the Act,
for the fiscal year.
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28383 through
28385), in order to determine Factor 1 in the uncompensated care
payment formula for FY 2023, we proposed to continue the policy
established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628
through 50630) and in the FY 2014 IPPS interim final rule with comment
period (78 FR 61194) of determining Factor 1 by developing estimates of
both the aggregate amount of Medicare DSH payments that would be made
in the absence of section 1886(r)(1) of the Act and the aggregate
amount of empirically justified
[[Page 49026]]
Medicare DSH payments to hospitals under section 1886(r)(1) of the Act.
Consistent with the policy that has applied in previous years, we
proposed that these estimates would not be revised or updated
subsequent to the publication of our final projections in this FY 2023
IPPS/LTCH PPS final rule.
Therefore, in order to determine the two elements of proposed
Factor 1 for FY 2023 (Medicare DSH payments prior to the application of
section 1886(r)(1) of the Act, and empirically justified Medicare DSH
payments after application of section 1886(r)(1) of the Act), for this
final rule, we used the most recently available projections of Medicare
DSH payments for the fiscal year, as calculated by CMS' Office of the
Actuary (OACT) using the most recently filed Medicare hospital cost
reports with Medicare DSH payment information and the most recent
Medicare DSH patient percentages and Medicare DSH payment adjustments
provided in the IPPS Impact File. The determination of the amount of
DSH payments is partially based on OACT's Part A benefits projection
model. One of the results of this model is inpatient hospital spending.
Projections of DSH payments require projections for expected increases
in utilization and case-mix. The assumptions that were used in making
these projections and the resulting estimates of DSH payments for FY
2020 through FY 2023 were discussed in the proposed rule in the table
titled ``Factors Applied for FY 2020 through FY 2023 to Estimate
Medicare DSH Expenditures Using FY 2019 Baseline'' (87 FR 28384).
For purposes of calculating the proposed Factor 1 and modeling the
impact of the FY 2023 IPPS/LTCH PPS proposed rule, we used the Office
of the Actuary's January 2022 Medicare DSH estimates, which were based
on data from the September 2021 update of the Medicare Hospital Cost
Report Information System (HCRIS) and the FY 2022 IPPS/LTCH PPS final
rule IPPS Impact File, published in conjunction with the publication of
the FY 2022 IPPS/LTCH PPS final rule. Because SCHs that are projected
to be paid under their hospital-specific rate are excluded from the
application of section 1886(r) of the Act, these hospitals also were
excluded from the January 2022 Medicare DSH estimates. Furthermore,
because section 1886(r) of the Act specifies that the uncompensated
care payment is in addition to the empirically justified Medicare DSH
payment (25 percent of DSH payments that would be made without regard
to section 1886(r) of the Act), Maryland hospitals, which are not
eligible to receive DSH payments, were also excluded from the Office of
the Actuary's January 2022 Medicare DSH estimates. The 26 hospitals
that are anticipated to participate in the Rural Community Hospital
Demonstration Program in FY 2023 were also excluded from these
estimates, because under the payment methodology that applies during
the third 5-year extension period, these hospitals are not eligible to
receive empirically justified Medicare DSH payments or uncompensated
care payments.
For the proposed rule, using the data sources as previously
discussed, the Office of the Actuary's January 2022 estimate of
Medicare DSH payments for FY 2023 without regard to the application of
section 1886(r)(1) of the Act, was approximately $13.266 billion.
Therefore, also based on the January 2022 estimate, the estimate of
empirically justified Medicare DSH payments for FY 2023, with the
application of section 1886(r)(1) of the Act, was approximately $3.316
billion (or 25 percent of the total amount of estimated Medicare DSH
payments for FY 2023). Under Sec. 412.106(g)(1)(i) of the regulations,
Factor 1 is the difference between these two OACT estimates. Therefore,
in the proposed rule, we proposed that Factor 1 for FY 2023 would be
$9,949,258,556.56, which was equal to 75 percent of the total amount of
estimated Medicare DSH payments for FY 2023 ($13,266 million minus
$3,316 million). In the FY 2023 IPPS/LTCH PPS proposed rule, we noted
that consistent with our approach in previous rulemakings, OACT
intended to use more recent data that may become available for purposes
of projecting the final Factor 1 estimates for this FY 2023 IPPS/LTCH
PPS final rule.
As we noted in the FY 2023 IPPS/LTCH PPS proposed rule, the Factor
1 estimates for proposed rules are generally consistent with the
economic assumptions and actuarial analysis used to develop the
President's Budget estimates under current law, and the Factor 1
estimates for the final rules are generally consistent with those used
for the Midsession Review of the President's Budget. As we have in the
past, for additional information on the development of the President's
Budget, we refer readers to the Office of Management and Budget website
at https://www.whitehouse.gov/omb/budget. Consistent with historical
practice, we indicated that we expected that the Midsession Review
would have updated economic assumptions and actuarial analysis, which
would be used for the development of Factor 1 estimates in the final
rule.
For a general overview of the principal steps involved in
projecting future inpatient costs and utilization, we refer readers to
the ``2021 Annual Report of the Boards of Trustees of the Federal
Hospital Insurance and Federal Supplementary Medical Insurance Trust
Funds'' available on the CMS website at https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/reportstrustfunds under ``Downloads.'' We note that the annual reports
of the Medicare Boards of Trustees to Congress represent the Federal
Government's official evaluation of the financial status of the
Medicare Program. The actuarial projections contained in these reports
are based on numerous assumptions regarding future trends in program
enrollment, utilization and costs of health care services covered by
Medicare, as well as other factors affecting program expenditures. In
addition, although the methods used to estimate future costs based on
these assumptions are complex, they are subject to periodic review by
independent experts to ensure their validity and reasonableness.
We also refer readers to the 2018 Actuarial Report on the Financial
Outlook for Medicaid for a discussion of general issues regarding
Medicaid projections (available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport).
Comment: As in previous years, a concern and/or request expressed
by some commenters was the need for greater transparency in the
methodology used by CMS and OACT to calculate Factor 1. Several
commenters specifically requested that a detailed description of the
methodology and the data behind the assumptions be made public.
Commenters requested that this information be provided in advance of
the publication of the final rule and in the IPPS proposed rule each
year going forward, so that the data is available to replicate CMS' DSH
calculation and comment sufficiently in future years.
In particular, commenters requested further explanation regarding
the estimate of the ``Other'' factor used to estimate Medicare DSH
payments. Commenters noted that the rule did not discuss why the
``Other'' factor varies so much over successive rule making cycles.
Additionally, a commenter asserted that the lack of opportunity
afforded to hospitals to review the data used in rulemaking is in
violation of the Administrative Procedure Act and
[[Page 49027]]
expressed concerns about the lack of transparency in how Factor 1 is
calculated, arguing that hospitals cannot meaningfully comment on the
methodology given the lack of details. In particular, this commenter
asserted that the proposed rule neither provided sufficient details nor
an explanation of the treatment of Medicaid expansions in the
calculation for Factor 1.
Response: We thank the commenters for their input. We disagree with
commenters' assertion regarding the lack of transparency with respect
to the methodology and assumptions used in the calculation of Factor 1.
As explained in the FY 2023 IPPS/LTCH PPS proposed rule and in this
section of this final rule, we have been and continue to be transparent
about the methodology and data used to estimate Factor 1. Regarding the
commenters who reference the Administrative Procedure Act, we note
that, under the Administrative Procedure Act, a proposed rule is
required to include either the terms or substance of the proposed rule
or a description of the subjects and issues involved. In this case, the
FY 2023 IPPS/LTCH PPS proposed rule did include a detailed discussion
of our proposed Factor 1 methodology and the data sources that would be
used in making our final estimate. Accordingly, we believe interested
parties were able to meaningfully comment on our proposed estimate of
Factor 1.
To provide context, we note that Factor 1 is not estimated in
isolation from other projections made by OACT. The Factor 1 estimates
for the proposed rules are generally consistent with the economic
assumptions and actuarial analyses used to develop the President's
Budget estimates under current law, and the Factor 1 estimates for the
final rule are generally consistent with those used for the Midsession
Review of the President's Budget. As we have in the past, for
additional information on the development of the President's Budget, we
refer readers to the Office of Management and Budget website at:
https://www.whitehouse.gov/omb/budget. For additional information on
the specific economic assumptions used in the Midsession Review of the
President's FY 2023 Budget, we refer readers to the ``Midsession Review
of the President's FY 2023 Budget'' also available on the Office of
Management and Budget website at: https://www.whitehouse.gov/omb/budget. We recognize that our reliance on the economic assumptions and
actuarial analyses used to develop the President's Budget and the
Midsession Review of the President's Budget in estimating Factor 1 has
an impact on hospitals, health systems, and other impacted parties who
wish to replicate the Factor 1 calculation, such as modeling the
relevant Medicare Part A portion of the budget. Yet, we believe
commenters are able to meaningfully comment on our proposed estimate of
Factor 1 without replicating the budget.
For a general overview of the principal steps involved in
projecting future inpatient costs and utilization, we refer readers to
the ``2022 Annual Report of the Boards of Trustees of the Federal
Hospital Insurance and Federal Supplementary Medical Insurance Trust
Funds'' available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html under ``Downloads.'' We note that the
annual reports of the Medicare Boards of Trustees to Congress represent
the Federal Government's official evaluation of the financial status of
the Medicare Program. The actuarial projections contained in these
reports are based on numerous assumptions regarding future trends in
program enrollment, utilization and costs of health care services
covered by Medicare, as well as other factors affecting program
expenditures. In addition, although the methods used to estimate future
costs based on these assumptions are complex, they are subject to
periodic review by independent experts to ensure their validity and
reasonableness.
We also refer readers to the 2018 Actuarial Report on the Financial
Outlook for Medicaid which is available on the CMS website at: https://www.cms.gov/files/document/2018-report.pdf for a discussion of general
issues regarding Medicaid projections. Additionally, as described in
more detail later in this section, in the FY 2023 IPPS/LTCH PPS
proposed rule, we included information regarding the data sources,
methods, and assumptions employed by the actuaries in determining the
OACT's estimate of Factor 1. In summary, we indicated the historical
HCRIS data update OACT used to identify Medicare DSH payments. We
explained that the most recent Medicare DSH payment adjustments
provided in the IPPS Impact File were used, and we provided the
components of all update factors that were applied to the historical
data to estimate the Medicare DSH payments for the upcoming fiscal
year, along with the associated rationale and assumptions. This
discussion also included a description of the ``Other'' and
``Discharges'' assumptions, as well as additional information regarding
how we address Medicaid and CHIP expansion.
For further information on our assumptions regarding Medicaid
expansion in the Factor 1 calculation, we provide a discussion of more
recent estimates and assumptions regarding the Medicaid expansion as
part of the discussion of the final Factor 1 for FY 2023. This
discussion also incorporates the estimated impact of the COVID-19
public health emergency (PHE.)
Comment: Many commenters questioned the proposed rule's estimate of
the ``Discharge'' component of the Factor 1 calculation. Commenters
requested clarity on the Factor 1 calculations, which assume small
increases in discharge volume for FY 2022 and FY 2023.
Commenters noted that they are seeing trends that indicate that FY
2022 and FY 2023 discharge volumes, even though lower than pre-PHE
levels, will continue to increase substantially. Some commenters urged
CMS to reflect the same assumptions that the agency described in the
``April 2022 Announcement of CY 2023 Medicare Advantage Capitation
Rates and Part C and Part D Payment Policies,'' where the agency made
assumptions that Medicare ``utilization will begin to rebound.'' Other
commenters referenced a Kaufman Hall study, and stated that adjusted
national patient volume has increased by 18 percent from February 2022
to March 2022. A commenter referred to their own analysis of Medicare-
Fee-For-service (FFS) claims data from the Chronic Condition Warehouse
(CCW), which indicated that non-COVID-19 inpatient hospital discharge
volume increased 22 percent from February to March 2022. Other
commenters provided anecdotal data from their own hospitals and service
regions that show continued sustained volumes in 2022. These commenters
urged CMS to carefully monitor changes in discharge volume when
estimating Factor 1.
Commenters also urged CMS to use a later update to the claims data
to capture more of the increases in utilization that are anticipated
for FY 2022. Commenters noted that the ``Discharge'' factor used by the
OACT in estimating DSH expenditures was based on the December 2021
update of the MedPAR file, which includes data impacted by the PHE from
FY 2021 and the first three months of FY 2022. Some commenters
requested that CMS adjust the data used in the Factor 1 calculation for
COVID-19 PHE impacts while others suggested that CMS exclude data from
the latter parts of CY 2021 and early CY
[[Page 49028]]
2022. Other commenters urged CMS to consider excluding FY 2020 and FY
2021 discharges from the FY 2023 Factor 1 calculation, as data from
those years include atypical trends in Medicare discharges due to the
COVID-19 PHE.
Commenters pointed out that omitting FY 2020 and FY 2021 data would
be consistent with CMS' exclusion of FY 2020 data in setting FY 2022
payment rates and the agency's proposal to exclude FY 2020 data from
the per-discharge calculation in the FY 2023 IPPS/LTCH PPS proposed
rule. Further, some commenters noted that the completion factor CMS
used to estimate discharge volumes for FY 2021 and FY 2022 may not
fully account for discharges due to billing delays as a result of PHE-
related staffing shortages.
Finally, two commenters requested that for the FY 2024 IPPS/LTCH
PPS proposed rule, CMS consider using the latest available data for the
factors used to estimate Medicare DSH expenditures for purposes of
calculating Factor 1 to avoid as much change in the estimate of Factor
1 between the proposed and final rules for FY 2024.
Some commenters also raised concerns about the ``Case Mix'' update
factor used in the proposed FY 2023 Factor 1 calculation. Commenters
stated that the proposed ``Case Mix'' update factor underestimates the
complexity of patients returning to seek care following postponement or
deferral of care during the COVID-19 PHE. Commenters also stated that
CMS was using assumptions that are inconsistent with those that were
used to develop the 2023 Medicare Advantage capitation payments, where
the agency indicated an expectation that utilization will rebound in
2022 and finalized a risk score increase of 3.5 percentage points with
the underlying assumption that patients put off seeking medical care
throughout the PHE. Other commenters cited data from Kaufman Hall that
indicate that hospitals are beginning to see more complex patients as
shown by a nearly 5 percent increase in the average hospital length of
stay in 2022 as compared to 2021.
Response: We thank the commenters for their input on the impact of
the COVID-19 PHE on the factors used to estimate DSH payments for FY
2023. In updating our estimate of Factor 1 for this final rule, we
considered, as appropriate, the same set of factors that we used in the
proposed rule, which reflects the impact of the COVID-19 PHE. We then
updated estimates for the ``Discharges'' and ``Case Mix'' factors to
incorporate the latest available data. We provide further details on
the updated Factor 1 estimate and data sources as part of the
discussion of the final Factor 1 estimate for FY 2023 in this section
of the rule.
Regarding the comments requesting that we exclude and/or mitigate
the impacts of the COVID-19 PHE when estimating Factor 1 for FY 2023,
we note that the statute specifies that Factor 1 is based on the amount
of disproportionate share payments that would otherwise be made to
subsection (d) hospitals for the fiscal year. As discussed further in
this section, OACT's estimates of Medicare DSH payments used in the
development of Factor 1, reflect the estimated impact of the COVID-19
PHE on DSH payments during FY 2023.
We also note that, with regard to the commenters' questions and
concerns about the use of completion factors to adjust preliminary
data, OACT assumed a discharge completion factor of 0 percent for FY
2020 and 0 percent for FY 2021. We believe these assumptions are
consistent with historical patterns of completion factors that have
been determined for discharges and appropriately account for incomplete
claims data. We do not believe that excluding data from certain periods
is necessary to estimate DSH payments during FY 2023 for purposes of
the Factor 1 calculation, as required by the statute.
Regarding the comments requesting that CMS apply the same
assumptions the agency made when setting Medicare Advantage payment
rates, we note that Medicare Advantage and Medicare FFS are distinct
programs. Accordingly, the estimates for the ``Discharges'' and ``Case
Mix'' factors used to estimate Medicare DSH expenditures incorporate
OACT's analyses of ``Discharges'' and ``Case Mix'' using only claims
from the Medicare FFS program rather than claims from the Medicare
Advantage program.
In response to commenters' request that CMS use the latest
available estimates of historical data to avoid as much change in the
DSH Factor 1 estimate between the proposed and final rules for FY 2024,
we believe that the use of the most recent available data at the time
of the proposed and final rulemaking is appropriate to calculate Factor
1 and consistent with our approach in previous rulemakings. In this
final rule, OACT has updated the estimate of Factor 1 with more recent
economic assumptions and actuarial analyses.
Comment: Commenters expressed concern regarding the proposed $800
million reduction in the amount available to make uncompensated care
payments in FY 2023 compared to FY 2022. Commenters stated that this
reduction does not align with CMS' objective to reduce healthcare
inequities as the reduction disproportionately impacts safety-net
hospitals, which primarily serve low income and vulnerable populations.
Response: The statute specifies that Factor 1 is based on the
amount of disproportionate share payments that would otherwise be made
to subsection (d) hospitals for the fiscal year. Because our estimate
of Factor 1 is based on the best available data regarding the amount of
DSH payments that would otherwise be made during FY 2023, we believe it
is appropriate and consistent with the requirements of the statute.
After consideration of the public comments we received, we are
finalizing, as proposed, the methodology for calculating Factor 1 for
FY 2023. We discuss the resulting Factor 1 amount for FY 2023 in this
section. For this final rule, OACT used the most recently submitted
Medicare cost report data from the March 31, 2022, update of HCRIS to
identify Medicare DSH payments and the most recent Medicare DSH payment
adjustments provided in the Impact File published in conjunction with
the publication of the FY 2023 IPPS/LTCH PPS final rule and applied
update factors and assumptions for future changes in utilization and
case-mix to estimate Medicare DSH payments for the upcoming fiscal
year.
The June 2022 OACT estimate for Medicare DSH payments for FY 2023,
without regard to the application of section 1886(r)(1) of the Act, was
approximately $13.949 billion. This estimate excluded Maryland
hospitals participating in the Maryland All-Payer Model, hospitals
participating in the Rural Community Hospital Demonstration, and SCHs
paid under their hospital-specific payment rate. Therefore, based on
this June 2022 estimate, the estimate of empirically justified Medicare
DSH payments for FY 2023, with the application of section 1886(r)(1) of
the Act, was approximately $3.487 billion (or 25 percent of the total
amount of estimated Medicare DSH payments for FY 2023). Under Sec.
412.106(g)(1)(i) of the regulations, Factor 1 is the difference between
these two OACT estimates. Therefore, the final Factor 1 for FY 2023 is
$10,461,731,029.40, which is equal to 75 percent of the total amount of
estimated Medicare DSH payments for FY 2023 ($13,948,974,705.87 minus
$3,487,243,676.47).
The Office of the Actuary's estimates of DSH expenditures for FY
2023 for this final rule began with a baseline of $13.814 billion in
Medicare DSH
[[Page 49029]]
expenditures for FY 2019. The following table shows the factors applied
to update this baseline through the current estimate for FY 2023:
[GRAPHIC] [TIFF OMITTED] TR10AU22.122
In this table, the discharges column shows the changes in the
number of Medicare fee-for-service (FFS) inpatient hospital discharges.
The discharge figures for FY 2020 and FY 2021 are based on Medicare
claims data that have been adjusted by a completion factor to account
for incomplete claims data. We note that these claims data reflect the
impact of the pandemic. The discharge figure for FY 2022 is based on
preliminary data. The discharge figure for FY 2023 is an assumption
based on recent trends recovering back to the long-term trend and
assumptions related to how many beneficiaries will be enrolled in
Medicare Advantage (MA) plans. The discharge figures for FY 2020 to FY
2023 incorporate the actual impact and estimated future impact of the
COVID-19 pandemic. The case-mix column shows the estimated change in
case-mix for IPPS hospitals. The case-mix figures for FY 2020 and FY
2021 are based on actual claims data adjusted by a completion factor.
We note that these claims data reflect the impact of the pandemic. The
case-mix figure for FY 2022 is based on preliminary data and the case-
mix figure for FY 2023 is an assumption based on recent trends
recovering back to the long-term trend. The case-mix factor figures for
FY 2020 to FY 2023 incorporate the actual impact and estimated future
impact of the COVID-19 pandemic. The ``Other'' column shows the
increase in other factors that contribute to the Medicare DSH
estimates. These factors include the difference between the total
inpatient hospital discharges and the IPPS discharges, and various
adjustments to the payment rates that have been included over the years
but are not reflected in the other columns (such as the change in rates
for the 2-midnight stay policy and the 20 percent add-on for COVID-19
discharges). In addition, the ``Other'' column includes a factor for
the estimated changes in Medicaid enrollment. We note that this factor
also includes the estimated impacts on Medicaid enrollment from the
COVID-19 pandemic. We note that, based on the most recent available
data, Medicaid enrollment is estimated to change as follows: 2.0
percent in FY 2020, 9.5 percent in FY 2021, 4.2 percent in FY 2022, and
-5.7 percent in FY 2023. In the future, the assumptions regarding
Medicaid enrollment may change based on actual enrollment in the
States.
For a discussion of general issues regarding Medicaid projections,
we refer readers to the 2018 Actuarial Report on the Financial Outlook
for Medicaid, which is available on the CMS website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport. We note that, in developing their
estimates of the effect of Medicaid enrollment increases on Medicare
DSH expenditures, our actuaries have assumed that the increases in the
number of Medicaid enrollees result in increases in Medicare DSH
expenditures at the same rate as historical relationships have shown.
In the future, the assumption about the average per-capita expenditures
of Medicaid beneficiaries who enrolled due to the COVID-19 pandemic may
change, given that the pandemic is still ongoing.
The following table shows the factors that are included in the
``Update'' column of the previous table:
[GRAPHIC] [TIFF OMITTED] TR10AU22.123
[[Page 49030]]
2. Calculation of Factor 2 for FY 2023
(a) Background
Section 1886(r)(2)(B) of the Act establishes Factor 2 in the
calculation of the uncompensated care payment. Section
1886(r)(2)(B)(ii) of the Act provides that, for FY 2018 and subsequent
fiscal years, the second factor is 1 minus the percent change in the
percent of individuals who are uninsured, as determined by comparing
the percent of individuals who were uninsured in 2013 (as estimated by
the Secretary, based on data from the Census Bureau or other sources
the Secretary determines appropriate, and certified by the Chief
Actuary of CMS) and the percent of individuals who were uninsured in
the most recent period for which data are available (as so estimated
and certified), minus 0.2 percentage point for FYs 2018 and 2019. In FY
2020 and subsequent fiscal years, there is no longer a reduction. We
note that, unlike section 1886(r)(2)(B)(i) of the Act, which governed
the calculation of Factor 2 for FYs 2014, 2015, 2016, and 2017, section
1886(r)(2)(B)(ii) of the Act permits the use of a data source other
than the CBO estimates to determine the percent change in the rate of
uninsurance beginning in FY 2018. In addition, for FY 2018 and
subsequent years, the statute does not require that the estimate of the
percent of individuals who are uninsured be limited to individuals who
are under 65 years of age. We proposed to use a methodology similar to
the one that was used in FY 2018 through FY 2022 to determine Factor 2
for FY 2023.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198), we
explained that we determined the data source for the rate of
uninsurance that, on balance, best meets all of our considerations and
is consistent with the statutory requirement that the estimate of the
rate of uninsurance be based on data from the Census Bureau or other
sources the Secretary determines appropriate, is the uninsured
estimates produced by OACT as part of the development of the National
Health Expenditure Accounts (NHEA). The NHEA represents the
government's official estimates of economic activity (spending) within
the health sector. The information contained in the NHEA has been used
to study numerous topics related to the health care sector, including,
but not limited to, changes in the amount and cost of health services
purchased and the payers or programs that provide or purchase these
services; the economic causal factors at work in the health sector; the
impact of policy changes, including major health reform; and
comparisons to other countries' health spending. Of relevance to the
determination of Factor 2 is that the comprehensive and integrated
structure of the NHEA creates an ideal tool for evaluating changes to
the health care system, such as the mix of the insured and uninsured,
because this information is integral to the well-established NHEA
methodology. A full description of the methodology used to develop the
NHEA is available on the CMS website at https://www.cms.gov/files/document/definitions-sources-and-methods.pdf. We note that the NHEA
estimates of uninsurance are for the total resident-based U.S.
population, including all people who usually reside in the 50 States or
the District of Columbia, but excluding individuals living in Puerto
Rico and areas under U.S. sovereignty, members of the U.S. Armed Forces
overseas, and U.S. citizens whose usual place of residence is outside
the U.S., plus a small (typically less that 0.2 percent of population)
adjustment to reflect Census undercounts. Thus, the NHEA estimates of
uninsurance are for U.S. residents of all ages and are not limited to a
specific age cohort, such as the population under the age of 65. As we
explained in the FY 2018 IPPS/LTCH PPS proposed and final rules, we
believe it is appropriate to use an estimate that reflects the rate of
uninsurance in the U.S. across all age groups. In addition, we continue
to believe that a resident-based population estimate more fully
reflects the levels of uninsurance in the U.S. that influence
uncompensated care for hospitals than an estimate that reflects only
legal residents.
The NHEA includes comprehensive enrollment estimates for total
private health insurance (PHI) (including direct and employer-sponsored
plans), Medicare, Medicaid, the Children's Health Insurance Program
(CHIP), and other public programs, and estimates of the number of
individuals who are uninsured. Estimates of total PHI enrollment are
available for 1960 through 2020, estimates of Medicaid, Medicare, and
CHIP enrollment are available for the length of the respective
programs, and all other estimates (including the more detailed
estimates of direct-purchased and employer-sponsored insurance) are
available for 1987 through 2020. The NHEA data are publicly available
on the CMS website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html.
In order to compute Factor 2, the first metric that is needed is
the proportion of the total U.S. population that was uninsured in 2013.
In developing the estimates for the NHEA, OACT's methodology included
using the number of uninsured individuals for 1987 through 2009 based
on the enhanced Current Population Survey (CPS) from the State Health
Access Data Assistance Center (SHADAC). The CPS, sponsored jointly by
the U.S. Census Bureau and the U.S. Bureau of Labor Statistics (BLS),
is the primary source of labor force statistics for the population of
the United States. (We refer readers to the website at https://www.census.gov/programs-surveys/cps.html.) The enhanced CPS, available
from SHADAC (available at http://datacenter.shadac.org) accounts for
changes in the CPS methodology over time. OACT further adjusts the
enhanced CPS for an estimated undercount of Medicaid enrollees (a
population that is often not fully captured in surveys that include
Medicaid enrollees due to a perceived stigma associated with being
enrolled in the Medicaid program or confusion about the source of their
health insurance).
To estimate the number of uninsured individuals for 2010 through
2018, OACT extrapolates from the 2009 CPS data through 2018 using data
from the National Health Interview Survey (NHIS). The NHIS is one of
the major data collection programs of the National Center for Health
Statistics (NCHS), which is part of the Centers for Disease Control and
Prevention (CDC). The 2019 estimate was extrapolated using the 2019/
2018 trend from the American Community Survey (ACS). The 2020 estimate
was extrapolated using the 2020/2018 trend from the CPS as published by
the Census Bureau. The U.S. Census Bureau is the data collection agent
for the NHIS, the ACS, and the CPS. The results from these data sources
have been instrumental over the years in providing data to track health
status, health care access, and progress toward achieving national
health objectives. For further information regarding the NHIS, we refer
readers to the CDC website at https://www.cdc.gov/nchs/nhis/index.htm.
For further information regarding the ACS, we refer readers to the
Census Bureau's website at https://www.census.gov/programs-surveys/acs/
. For information regarding the data collection issues regarding the
2020 ACS, we refer readers to the Census Bureau's website at https://www.census.gov/newsroom/blogs/random-samplings/2021/10/pandemic-impact-on-2020-acs-1-year-data.html. Since the 2020 ACS data
[[Page 49031]]
were not available, the ACS data were not used for purposes of
estimating the number of uninsured individuals for 2020.
The next metrics needed to compute Factor 2 for FY 2023 are
projections of the rate of uninsurance in both CY 2022 and CY 2023. On
an annual basis, OACT projects enrollment and spending trends for the
coming 10-year period. The most recent projections are for 2021 through
2030. Those projections use the latest NHEA historical data, available
at the time of their construction. The NHEA projection methodology
accounts for expected changes in enrollment across all of the
categories of insurance coverage previously listed. The projected
growth rates in enrollment for Medicare, Medicaid, and CHIP are
developed to be consistent with the 2021 Medicare Trustees Report,
updated where possible with more recent data. Projected rates of growth
in enrollment for private health insurance and the uninsured are based
largely on OACT's econometric models, which rely on a set of
macroeconomic assumptions that are generally based on the 2021 Medicare
Trustees Report. Greater detail can be found in OACT's report titled
``Projections of National Health Expenditure: Methodology and Model
Specification,'' which is available on the CMS website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
(b) Factor 2 for FY 2023
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule, using
these data sources and the previously described methodologies, OACT
estimated that the uninsured rate for the historical, baseline year of
2013 was 14 percent and for CYs 2022 and 2023 is 8.9 percent and 9.3
percent, respectively. As required by section 1886(r)(2)(B)(ii) of the
Act, the Chief Actuary of CMS has certified these estimates. We refer
readers to OACT's Memorandum on Certification of Rates of Uninsured
prepared for the FY 2023 IPPS/LTCH PPS proposed rule for further
details on the methodology and assumptions that were used in the
projection of these rates of uninsurance.\213\
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\213\ OACT Memorandum on Certification of Rates of Uninsured.
March 28, 2022. Available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInPatientPPS/dsh.html.
---------------------------------------------------------------------------
As with the CBO estimates on which we based Factor 2 for fiscal
years before FY 2018, the NHEA estimates are for a calendar year. Under
the approach originally adopted in the FY 2014 IPPS/LTCH PPS final
rule, we have used a weighted average approach to project the rate of
uninsurance for each fiscal year. We continue to believe that, in order
to estimate the rate of uninsurance during a fiscal year accurately,
Factor 2 should reflect the estimated rate of uninsurance that
hospitals will experience during the fiscal year, rather than the rate
of uninsurance during only one of the calendar years that the fiscal
year spans. Accordingly, we proposed to continue to apply the weighted
average approach used in past fiscal years in order to estimate the
rate of uninsurance for FY 2023.
The OACT certified the estimate of the rate of uninsurance for FY
2023 determined using this weighted average approach to be reasonable
and appropriate for purposes of section 1886(r)(2)(B)(ii) of the Act.
In the FY 2023 IPPS/LTCH PPS proposed rule, we noted that we might also
consider the use of more recent data that might become available for
purposes of estimating the rates of uninsurance used in the calculation
of the final Factor 2 for FY 2023. In the proposed rule, we outlined
the calculation of the proposed Factor 2 for FY 2023 as follows:
Percent of individuals without insurance for CY 2013: 14 percent.
Percent of individuals without insurance for CY 2022: 8.9 percent.
Percent of individuals without insurance for CY 2023: 9.3 percent.
Percent of individuals without insurance for FY 2023 (0.25 times
0.089) + (0.75 times 0.093): 9.2 percent.
1- [verbar]((0.092-0.14)/0.14)[verbar] = 1-0.3429 = 0.6571 (65.71
percent).
For FY 2020 and subsequent fiscal years, section 1886(r)(2)(B)(ii)
of the Act no longer includes any reduction to the previous calculation
in order to determine Factor 2. Therefore, we proposed that Factor 2
for FY 2023 would be 65.71 percent.
The proposed FY 2023 uncompensated care amount was
$9,949,258,556.56 * 0.6571 = $6,537,657,797.52.
[GRAPHIC] [TIFF OMITTED] TR10AU22.124
In addition, we stated that it had recently come to our attention
that the provision of the regulations that addresses Factor 2
inadvertently omits any reference to the statutory methodology in
section 1886(r)(2)(B)(ii) of the Act for determining Factor 2 for FY
2018 and subsequent fiscal years. Accordingly, we proposed a technical
change to the regulation at Sec. 412.106 to update paragraph
(g)(1)(ii) to reflect the statutory requirements governing the
determination of Factor 2 for FY 2018 and subsequent fiscal years. We
explained that we have determined Factor 2 for FY 2018 through FY 2022
consistent with the plain language of section 1886(r)(2)(B)(ii) of the
Act; therefore, this proposed technical change is intended merely to
update our regulations to reflect the methodology for determining
Factor 2 that has applied since FY 2018 and will continue to apply for
FY 2023 and subsequent fiscal years.
We invited public comments on our proposed Factor 2 for FY 2023 and
on the proposed technical change to the regulation at Sec.
412.106(g)(1)(ii).
Comment: The majority of commenters discussed Factor 2 in the
context of the impact of the temporary COVID-19 PHE provisions, such as
the Families First Coronavirus Response Act's Medicaid continuous
coverage requirement and the American Rescue Plan's Marketplace
enhanced premium tax credits, on the uninsured rate for FY 2023.
Commenters questioned CMS' estimates for the FY 2023 uninsured rate and
urged the Office of the Actuary (OACT) to update its estimate of Factor
2 to account for the projected increases in the number of uninsured as
the COVID-19 PHE provisions expire. Many commenters questioned CMS'
estimated decrease in the uninsured rate from 9.6 percent in the FY
2022 IPPS/LTCH PPS final rule to 9.2 percent in FY 2023 IPPS/LTCH PPS
proposed rule and stated that they expect increases in the uninsured
rates in their communities. Further, many commenters noted that the
proposed decrease of $800 million in uncompensated care payments from
the level in FY 2022 was likely, in part, driven by the projected
uninsured rate. To that end, commenters cited CMS'
[[Page 49032]]
statement in the proposed rule that the agency might consider more
recent data that may have become available for the calculation of
Factor 2 in FY 2023 and urged CMS to use more recent data sources to
account for the anticipated increase in the uninsured rate. One
commenter requested that CMS consider temporarily changing its
methodology for calculating Factor 2 to better account for individuals
who may lose their healthcare coverage when various PHE provisions
expire and noted that CMS has taken similar approaches in other
Medicare payment areas affected by the COVID-19 PHE.
Many commenters referenced various data sources and analyses, such
as the Kaiser Family Foundation, the Urban Institute, and HHS'
Assistant Secretary for Planning and Evaluation (ASPE) which project 5
to 16 million individuals will lose their Medicaid coverage and another
3 million additional individuals will lose their marketplace insurance
in FY 2023. Accordingly, these commenters requested that CMS increase
Factor 2 to reflect the anticipated increase in the uninsured
population as suggested by these sources. In addition, one commenter
requested that CMS exclude FY 2020 and FY 2021 data when calculating
the uninsured rate to eliminate any irregularities due to the COVID-19
PHE.
Response: We thank the commenters for their input regarding the
estimate of Factor 2 for FY 2023 included in the proposed rule. In
response to commenters who requested that we update the estimate of the
FY 2023 uninsured rate to fully consider any changes due to the
anticipated expirations of the PHE and the Marketplace premium tax
credits, we note that the rate of uninsurance used for the calculation
of Factor 2 for the proposed rule, as well as for this final rule,
reflects CMS' latest analyses and projections. The projected enrollment
trends across all insurance types, as well as for the uninsured, take
into account the expected impacts of current law including the
termination of the Families First Coronavirus Response Act's continuous
coverage provision for Medicaid (assumed to expire when the PHE ends in
2022 and to be accompanied by a one-year transition of disenrollments
from the program for those no longer eligible) and the conclusion of
the enhanced Marketplace premium tax credits. We believe that this NHEA
projection, on balance, best meets all of our considerations for
ensuring that the data source that underlies the Factor 2 calculation
of the uninsured rate meets the statutory requirement that the estimate
be based on data sources that the Secretary determines to be
appropriate, is certified by CMS' Chief Actuary, and provides a
reasonable estimate for the rate of uninsurance that is available in
conjunction with the IPPS rulemaking cycle. We refer readers to OACT's
memorandum ``Certification of Rates of Uninsured'' and OACT's report
titled ``Projections of National Health Expenditure: Methodology and
Model Specification'' for further details on the methodology and
updated assumptions used in the calculation of the projected uninsured
rate.
We disagree with comments' suggestions that we exclude FY 2020 and
FY 2021 data, or any data from the COVID-19 PHE period, for purposes of
calculating the uninsured rate for FY 2023. The projections that
underlie the FY 2023 Factor 2 calculation should take into
consideration, and include, those elements that are expected to
influence health insurance enrollment trends during FY 2023, and the
resulting rate of uninsured, including the unique circumstance
associated with the COVID-19 pandemic.
Comment: Some commenters suggested that CMS use a different
estimate of the uninsured rate to calculate Factor 2 for FY 2023, while
acknowledging that OACT accounted for the expiration of the COVID-19
PHE provisions in its uninsurance estimates. These commenters indicated
that because the uninsured percent change serves as a proxy for the
change in the amount of uncompensated care that hospitals provide, it
would be appropriate for CMS to apply a case-mix adjuster to the
uninsured rate for FY 2023 to account for the rise in resources that
will be used by hospitals to provide care to uninsured individuals who
may have delayed their care during the COVID-19 PHE.
A few commenters requested that CMS maintain the same level of
uncompensated care funding as in FY 2022 ($7.2 billion) while another
commenter requested that CMS consider delaying any proposed changes to
the uncompensated care payment calculations until analyses can be
performed to determine the actual uninsured rate and related costs
following the end of the COVID-19 PHE. Other commenters urged CMS to be
transparent in its calculation of Factor 2 and how it accounts for
Medicaid expansion populations, while others urged CMS to be
transparent regarding the data sources used for calculating Factor 2
and the assumptions behind the uninsured rate.
Response: Regarding the commenters that requested modifications to
the uninsured rate, such as multiplying by a case-mix factor, we note
that these recommendations would not be consistent with the statutory
requirements in section 1886(r)(2)(B)(ii). The statute explicitly
specifies that Factor 2 be based on 1 minus the percent change in the
percent of individuals who are uninsured, as determined by comparing
the percent of individuals who were uninsured in 2013 and the percent
of individuals who were uninsured in the most recent period for which
data are available.
Regarding the comments recommending that CMS maintain total
uncompensated care payments at the FY 2022 level or delay any changes
to the amount available to make uncompensated care payments, we believe
estimating Factor 2 based on the best available data regarding the
expected rate of uninsurance in FY 2023 is appropriate and consistent
with the statute.
In response to the comments concerning transparency, we reiterate
that we have been and continue to be transparent with respect to the
methodology and data used to estimate Factor 2. The FY 2023 IPPS/LTCH
PPS proposed rule included a detailed discussion of our proposed Factor
2 methodology, as well as the data sources that would be used in making
our final estimate. For purposes of this final rule, we are using
projected rates of uninsurance for CY 2022 and CY 2023, which account
for the effects of the COVID-19 PHE and any legislative impacts arising
from the end of the COVID-19 PHE on insurance coverage. Section
1886(r)(2)(B)(ii) of the Act permits us to use a data source other than
CBO estimates to determine the percent change in the rate of
uninsurance beginning in FY 2018. We continue to believe that the NHEA
data and methodology used to estimate Factor 2 are transparent and best
meet all of our considerations for ensuring reasonable estimates for
the rate of uninsurance that are available in conjunction with the IPPS
rulemaking cycle. Accordingly, we continue to believe that it is
appropriate to calculate Factor 2 based on the NHEA-based projection of
the FY 2023 rate of uninsurance as we proposed.
After consideration of the public comments we received, we are
finalizing, as proposed, the Factor 2 calculation for FY 2023. The
estimates of the percent of uninsured individuals were produced and
certified by OACT for purposes of the FY 2023 IPPS proposed rule. Those
published CY and
[[Page 49033]]
estimated FY rates continue to be the latest available projections.
The calculation of the final Factor 2 for FY 2023 using a weighted
average of OACT's certified estimates is as follows:
Percent of individuals without insurance for CY 2013: 14 percent.
Percent of individuals without insurance for CY 2022: 8.9 percent.
Percent of individuals without insurance for CY 2023: 9.3 percent.
Percent of individuals without insurance for FY 2023 (0.25 times
0.089) + (0.75 times 0.093): 9.2 percent.
1- [verbar]((0.092-0.14)/0.14)[verbar] = 1-0.3429 = 0.6571 (65.71
percent).
Therefore, the final Factor 2 for FY 2023 is 65.71 percent. The
final FY 2023 uncompensated care amount is $10,461,731,029.40* 0.6571 =
$6,874,403,459.42.
[GRAPHIC] [TIFF OMITTED] TR10AU22.125
We did not receive any comments on our proposed technical change to
the regulation governing the calculation of Factor 2. We are finalizing
the update to Sec. 412.106(g)(1)(ii), as proposed.
3. Calculation of Proposed Factor 3 for FY 2023
(a) General Background
Section 1886(r)(2)(C) of the Act defines Factor 3 in the
calculation of the uncompensated care payment. As we have discussed
earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal
to the percent, for each subsection (d) hospital, that represents the
quotient of: (1) the amount of uncompensated care for such hospital for
a period selected by the Secretary (as estimated by the Secretary,
based on appropriate data (including, in the case where the Secretary
determines alternative data are available that are a better proxy for
the costs of subsection (d) hospitals for treating the uninsured, the
use of such alternative data)); and (2) the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under section 1886(r) of the Act for such period (as so
estimated, based on such data).
Therefore, Factor 3 is a hospital-specific value that expresses the
proportion of the estimated uncompensated care amount for each
subsection (d) hospital and each subsection (d) Puerto Rico hospital
with the potential to receive Medicare DSH payments relative to the
estimated uncompensated care amount for all hospitals estimated to
receive Medicare DSH payments in the fiscal year for which the
uncompensated care payment is to be made. Factor 3 is applied to the
product of Factor 1 and Factor 2 to determine the amount of the
uncompensated care payment that each eligible hospital will receive for
FY 2014 and subsequent fiscal years. In order to implement the
statutory requirements for this factor of the uncompensated care
payment formula, it was necessary to determine: (1) the definition of
uncompensated care or, in other words, the specific items that are to
be included in the numerator (that is, the estimated uncompensated care
amount for an individual hospital) and the denominator (that is, the
estimated uncompensated care amount for all hospitals estimated to
receive Medicare DSH payments in the applicable fiscal year); (2) the
data source(s) for the estimated uncompensated care amount; and (3) the
timing and manner of computing the quotient for each hospital estimated
to receive Medicare DSH payments. The statute instructs the Secretary
to estimate the amounts of uncompensated care for a period based on
appropriate data. In addition, we note that the statute permits the
Secretary to use alternative data in the case where the Secretary
determines that such alternative data are available that are a better
proxy for the costs of subsection (d) hospitals for treating
individuals who are uninsured.
In the course of considering how to determine Factor 3 during the
rulemaking process for FY 2014, the first year for which section
1886(r) of the Act was in effect, we considered defining the amount of
uncompensated care for a hospital as the uncompensated care costs of
that hospital and determined that Worksheet S-10 of the Medicare cost
report would potentially provide the most complete data regarding
uncompensated care costs for Medicare hospitals. However, because of
concerns regarding variations in the data reported on Worksheet S-10
and the completeness of these data, we did not use Worksheet S-10 data
to determine Factor 3 for FY 2014, or for FYs 2015, 2016, or 2017.
Instead, we used alternative data on the utilization of insured low-
income patients, as measured by patient days, which we believed would
be a better proxy for the costs of hospitals in treating the uninsured
and therefore appropriate to use in calculating Factor 3 for these
years. Of particular importance in our decision to use proxy data was
the relative newness of Worksheet S-10, which went into effect on May
1, 2010. At the time of the rulemaking for FY 2014, the most recent
available cost reports would have been from FYs 2010 and 2011 and
submitted on or after May 1, 2010, when the new Worksheet S-10 went
into effect. However, we indicated our belief that Worksheet S-10 could
ultimately serve as an appropriate source of more direct data regarding
uncompensated care costs for purposes of determining Factor 3 once
hospitals were submitting more accurate and consistent data through
this reporting mechanism.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38202), we stated
that we could no longer conclude that alternative data to the Worksheet
S-10 are available for FY 2014 that are a better proxy for the costs of
subsection (d) hospitals for treating individuals who are uninsured.
Hospitals were on notice as of FY 2014 that Worksheet S-10 could
eventually become the data source for CMS to calculate uncompensated
care payments. Furthermore, hospitals' cost reports from FY 2014 had
been publicly available for some time, and CMS had analyses of
Worksheet S-10, conducted both internally and by stakeholders,
demonstrating that Worksheet S-10 accuracy had improved over time. We
refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38201
through 38203) for a complete discussion of these analyses.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38206), we
recognized commenters' concerns that, in continuing to use Medicaid
days as part of the proxy for uncompensated care, it would be possible
for hospitals in States that choose to expand Medicaid to receive
higher uncompensated care payments because they may have more Medicaid
patient days than hospitals in a State that does not choose to expand
Medicaid. In the FY 2018 IPPS/LTCH PPS final rule, we finalized a
methodology under which we calculated Factor 3 for all eligible
hospitals, with the exception of Puerto Rico hospitals and Indian
Health Service (IHS) and Tribal hospitals, using Worksheet S-10 data
from FY 2014 cost
[[Page 49034]]
reports in conjunction with low-income insured days proxy data based on
Medicaid days and SSI days. The time period for the Medicaid days data
was FY 2012 and FY 2013 cost reports, which reflected the most recent
available information regarding these hospitals' low-income insured
days before any expansion of Medicaid (82 FR 38208 through 38212).
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41414), we stated
that with the additional steps we had taken to ensure the accuracy and
consistency of the data reported on Worksheet S-10 since the
publication of the FY 2018 IPPS/LTCH PPS final rule, we continued to
believe that we could no longer conclude that alternative data to the
Worksheet S-10 were currently available for FY 2014 or FY 2015 that
would be a better proxy for the costs of subsection (d) hospitals for
treating individuals who are uninsured. In the FY 2019 IPPS/LTCH PPS
final rule (83 FR 41428), we advanced the time period of the data used
in the calculation of Factor 3 forward by 1 year and used Worksheet S-
10 data from FY 2014 and FY 2015 cost reports in combination with the
low income insured days proxy for FY 2013 to determine Factor 3 for FY
2019. We note that, as discussed in the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42366), the use of 3 years of data to determine Factor 3
for FY 2018 and FY 2019 had the effect of smoothing the transition from
the use of low-income insured days to the use of Worksheet S-10 data.
As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41424),
we received overwhelming feedback from commenters emphasizing the
importance of audits in ensuring the accuracy and consistency of data
reported on the Worksheet S-10. We began auditing the Worksheet S-10
data for selected hospitals in the Fall of 2018 so that the audited
uncompensated care data from these hospitals would be available in time
for use in the FY 2020 IPPS/LTCH PPS proposed rule.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42368), we finalized
our proposal to use a single year of audited Worksheet S-10 cost report
data from FY 2015 in the methodology for determining Factor 3 for FY
2020. Although some commenters expressed support for the alternative
policy of using the more recent FY 2017 Worksheet S-10 data to
determine each hospital's share of uncompensated care costs in FY 2020,
given the feedback from commenters in response to both the FY 2019 and
FY 2020 IPPS/LTCH PPS proposed rules, emphasizing the importance of
audits in ensuring the accuracy and consistency of data reported on the
Worksheet S-10, we concluded that the FY 2015 Worksheet S-10 data were
the best available audited data to be used in determining Factor 3 for
FY 2020. We also noted that we had begun auditing the FY 2017 data in
July 2019, with the goal of having the FY 2017 audited data available
for future rulemaking.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58823 through
58825), we finalized our proposal to use the most recent available
single year of audited Worksheet S-10 data to determine Factor 3 for FY
2021 and subsequent fiscal years. We explained our belief that using
the most recent audited data available before the applicable Federal
fiscal year, will more accurately reflect a hospital's uncompensated
care costs, as opposed to averaging multiple years of data. We
explained that mixing audited and unaudited data for individual
hospitals by averaging multiple years of data could potentially lead to
a less smooth result. We also noted that if a hospital has relatively
different data between cost report years, we potentially would be
diluting the effect of our considerable auditing efforts and
introducing unnecessary variability into the calculation if we were to
use multiple years of data to calculate Factor 3. Therefore, we also
believed using a single year of audited cost report data would be an
appropriate methodology to determine Factor 3 for FY 2021 and
subsequent years, except for IHS and Tribal hospitals and hospitals
located in Puerto Rico. For IHS and Tribal hospitals and Puerto Rico
hospitals, we finalized the use of a low-income insured days proxy to
determine Factor 3 for FY 2021. We did not finalize a methodology to
determine Factor 3 for IHS and Tribal hospitals and Puerto Rico
hospitals for FY 2022 and subsequent years because we believed further
consideration and review of these hospitals' Worksheet S-10 data was
necessary (85 FR 58825).
In the FY 2021 IPPS/LTCH PPS final rule, we finalized the
definition of ``uncompensated care'' for FY 2021 and subsequent fiscal
years, for purposes of determining uncompensated care costs and
calculating Factor 3 (85 FR 58825 through 58828). Specifically,
``uncompensated care'' is defined as the amount on Line 30 of Worksheet
S-10, which is the cost of charity care (Line 23) and the cost of non-
Medicare bad debt and non-reimbursable Medicare bad debt (Line 29).
This is the same definition that we initially adopted in the FY 2018
IPPS/LTCH PPS final rule. We refer readers to the FY 2021 IPPS/LTCH PPS
rule (85 FR 58825 through 58828) for a discussion of additional topics
related to the definition of uncompensated care. We noted in the FY
2021 IPPS/LTCH PPS final rule that the Paper Reduction Act (PRA)
package for Form CMS-2552-10 would offer an additional opportunity to
comment on the cost reporting instructions. A PRA package with comment
period appeared in the November 10, 2020, Federal Register (85 FR
71653). We thank stakeholders for their comments on the PRA package.
For further information, we refer the readers to the following website.
https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202206-0938-017.
(b) Background on the Methodology Used To Calculate Factor 3 for FY
2022
Section 1886(r)(2)(C) of the Act governs both the selection of the
data to be used in calculating Factor 3, and also allows the Secretary
the discretion to determine the time periods from which we will derive
the data to estimate the numerator and the denominator of the Factor 3
quotient. Specifically, section 1886(r)(2)(C)(i) of the Act defines the
numerator of the quotient as the amount of uncompensated care for a
subsection (d) hospital for a period selected by the Secretary. Section
1886(r)(2)(C)(ii) of the Act defines the denominator as the aggregate
amount of uncompensated care for all subsection (d) hospitals that
receive a payment under section 1886(r) of the Act for such period. In
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), we adopted a
process of making interim payments with final cost report settlement
for both the empirically justified Medicare DSH payments and the
uncompensated care payments required by section 3133 of the Affordable
Care Act. Consistent with that process, we also determined the time
period from which to calculate the numerator and denominator of the
Factor 3 quotient in a way that would be consistent with making interim
and final payments. Specifically, we must have Factor 3 values
available for hospitals that we estimate will qualify for Medicare DSH
payments and for those hospitals that we do not estimate will qualify
for Medicare DSH payments but that may ultimately qualify for Medicare
DSH payments at the time of cost report settlement.
In the FY 2022 IPPS/LTCH PPS final rule, we continued to apply the
following policies as part of the Factor 3 methodology: (1) the policy
regarding newly merged hospitals that was initially adopted in the FY
2015 IPPS/LTCH PPS final rule; (2) the policies regarding annualization
and long cost reports that were adopted in the FY
[[Page 49035]]
2018 and FY 2019 IPPS/LTCH PPS final rules, including a modified policy
for the rare cases where a provider has no cost report for the fiscal
year that is used in the Factor 3 methodology because the cost report
for the previous fiscal year spans both years; (3) the modified new
hospital policy that was finalized in the FY 2020 IPPS/LTCH PPS final
rule; (4) the new merger policy adopted in the FY 2021 IPPS/LTCH PPS
final rule that accounts for the merger effective date; and (5) the
policies regarding the application of statistical trim methodologies to
potentially aberrant CCRs and potentially aberrant uncompensated care
costs reported on the Worksheet S-10. We discuss these policies in
greater detail in this section.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45244), we continued
to treat hospitals that merge after the development of the final rule
for the applicable fiscal year similar to new hospitals. As explained
in the FY 2015 IPPS/LTCH PPS final rule, for these newly merged
hospitals, we do not have data currently available to calculate a
Factor 3 amount that accounts for the merged hospital's uncompensated
care burden (79 FR 50021). In the FY 2015 IPPS/LTCH PPS final rule, we
finalized a policy under which Factor 3 for hospitals that we do not
identify as undergoing a merger until after the public comment period
and additional review period following the publication of the final
rule or that undergo a merger during the fiscal year would be
recalculated similar to new hospitals (79 FR 50021 and 50022).
Consistent with past policy, interim uncompensated care payments for
newly merged hospitals are based only on the data for the surviving
hospital's CCN available at the time of the development of the final
rule. However, at cost report settlement, we will determine the newly
merged hospital's final uncompensated care payment based on the
uncompensated care costs reported on its cost report for the applicable
fiscal year. That is, for FY 2022, we will revise the numerator of
Factor 3 for a newly merged hospital to reflect the uncompensated care
costs reported on the newly merged hospital's FY 2022 cost report.
In FY 2022 IPPS/LTCH PPS final rule, we continued the policy that
was finalized in the FY 2018 IPPS/LTCH PPS final rule of annualizing
uncompensated care cost data reported on the Worksheet S-10 if a
hospital's cost report does not equal 12 months of data, except in the
case of mergers, which would be subject to the modified merger policy
originally adopted in FY 2021. In addition, we continued the policies
that were finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR
41415) regarding the use of the longest cost report available within
the Federal fiscal year. We also applied the modified policy that was
adopted in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58829) for those
rare situations where a hospital has a cost report that starts in one
fiscal year but spans the entirety of the following fiscal year such
that the hospital has no cost report starting in that subsequent fiscal
year. Under this modified policy, we use the cost report that spans
both fiscal years for purposes of calculating Factor 3 when data from
the latter fiscal year are used in the Factor 3 methodology.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 25454), we continued
the modified new hospital policy for new hospitals that do not have
data for the cost reporting period(s) used in the Factor 3 calculation
(that is, the most recent cost reporting year for which audits have
been conducted). Under the modified policy originally adopted for FY
2020, new hospitals that have a preliminary projection of being
eligible for Medicare DSH based on their most recent available
disproportionate patient percentages may receive interim empirically
justified DSH payments during the fiscal year. However, because these
hospitals do not have a cost report for the cost reporting period used
in the Factor 3 calculation and the projection of eligibility for DSH
payments is still preliminary, we are unable to calculate a prospective
Factor 3 for these hospitals and they do not receive interim
uncompensated care payments. The MAC will make a final determination
concerning whether the hospital is eligible to receive Medicare DSH
payments for the fiscal year at cost report settlement. Thus, for FY
2022, if a new hospital is ultimately determined to be eligible for
Medicare DSH payments for FY 2022, the hospital will receive an
uncompensated care payment calculated using a Factor 3, where the
numerator is the uncompensated care costs reported on Worksheet S-10 of
the hospital's FY 2022 cost report, and the denominator is the same
denominator that was used in the prospective Factor 3 calculation for
FY 2022 (that is, the sum of the uncompensated care costs reported on
Worksheet S-10 of the FY 2018 cost reports for all DSH-eligible
hospitals).
In the FY 2022 IPPS/LTCH PPS final rule, we continued the new
merger policy that accounts for the merger effective date, that was
originally adopted in FY 2021. To more accurately estimate
uncompensated care costs (UCC) for the hospitals involved in a merger
when the merger effective date occurs partway through the surviving
hospital's cost reporting period, we apply a policy of not annualizing
the acquired hospital's data. Under this policy, we use only the
portion of the acquired hospital's unannualized UCC data that reflects
the UCC incurred prior to the merger effective date, but after the
start of the surviving hospital's current cost reporting period. To do
this, we calculate a multiplier to be applied to the acquired
hospital's UCC. This multiplier represents the portion of the UCC data
from the acquired hospital that should be incorporated with the
surviving hospital's data to determine UCC for purposes of determining
Factor 3 for the surviving hospital. This multiplier is obtained by
calculating the number of days between the start of the applicable cost
reporting period for the surviving hospital and the merger effective
date, and then dividing this result by the total number of days in the
reporting period of the acquired hospital. Applying this multiplier to
the acquired hospital's unannualized UCC data will determine the final
portion of the acquired hospital's UCC that should be added to the UCC
of the surviving hospital for purposes of determining Factor 3 for the
merged hospital.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 25454 and 25455), we
continued to apply a CCR trim methodology similar to the CCR trim
methodology policy that has been used for purposes of determining
uncompensated care payments since FY 2018. This CCR trim methodology is
consistent with the approach used in the outlier payment methodology
under Sec. 412.84(h)(3)(ii), which states that the Medicare contractor
may use a statewide average CCR for hospitals whose operating or
capital CCR is in excess of 3 standard deviations above the
corresponding national geometric mean. We refer readers to the
discussion in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58831) for a
detailed description of the steps used to determine the applicable CCR.
In addition, we continued the UCC data trim methodology for rare
situations where a hospital has potentially aberrant data that are
unrelated to its CCR (86 FR 45245). However, because we audit the
Worksheet S-10 data for a number of hospitals, we no longer believe it
is necessary to apply the trim methodology for hospitals whose cost
report has been audited. Accordingly, for FY 2022, we continued the
policy adopted in FY 2021 under which we exclude hospitals that were
part of the audits for the fiscal year used in the Factor 3 calculation
from the trim
[[Page 49036]]
methodology for potentially aberrant UCC. We also continued to apply a
modified trim methodology for all-inclusive rate providers (AIRPs) with
potentially aberrant UCC (86 FR 45235). Under this modified trim
methodology, when an AIRP's total UCC are greater than 50 percent of
its total operating costs when calculated using the CCR included on its
cost report for the most recent cost reporting year for which audits
have been conducted, we recalculate the AIRP's UCC using the CCR
reported on Worksheet S-10, line 1 of the hospital's most recent
available prior year cost report that does not result in UCC of over 50
percent of total operating costs.
In addition, in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45245
and 452456), we finalized an alternative trim specific to hospitals
that are not projected to be DSH-eligible and that do not have audited
FY 2018 Worksheet S-10 data for use in determining Factor 3. We
explained that we believe this new alternative trim more appropriately
addresses potentially aberrant insured patient charity care costs
compared to the existing trim, because the existing trim is based
solely on the ratio of total uncompensated care costs to total
operating costs and does not consider the level of insured patients'
charity care costs. Specifically, we finalized that, for the hospitals
that would be subject to the trim, if the hospital is ultimately
determined to be DSH-eligible at cost report settlement, then the MAC
would calculate a Factor 3 after reviewing the uncompensated care
information reported on Worksheet S-10 of the hospital's FY 2022 cost
report. We stated that we believe if a hospital subject to this trim is
ultimately determined to be DSH-eligible at cost report settlement, its
uncompensated care payment should be calculated only after the
hospital's reporting of insured charity care costs on its FY 2022
Worksheet S-10 has been reviewed. We noted that this approach is
comparable to the policy for new hospitals for which we cannot
calculate a prospective Factor 3 because they do not have Worksheet S-
10 data for the relevant fiscal year.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45242 and 45243), we
continued the policy we first adopted for FY 2018 of substituting data
regarding FY 2013 low-income insured days for the Worksheet S-10 data
when determining Factor 3 for IHS and Tribal hospitals and subsection
(d) Puerto Rico hospitals that have a FY 2013 cost report. We stated
our belief that this approach was appropriate as the FY 2013 data
reflect the most recent available information regarding these
hospitals' low-income insured days before any expansion of Medicaid. In
addition, because we continued to use 1 year of insured low income
patient days as a proxy for uncompensated care for Puerto Rico
hospitals and residents of Puerto Rico are not eligible for SSI
benefits, we continued to use a proxy for SSI days for Puerto Rico
hospitals consisting of 14 percent of the hospital's Medicaid days, as
finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56953 through
56956).
We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR
45236) for a discussion of the approach that we continued to apply in
FY 2022 to determine Factor 3 for new Puerto Rico hospitals. In brief,
Puerto Rico hospitals that do not have a FY 2013 cost report were
considered new hospitals and subject to the new hospital policy, as
discussed previously. Specifically, the numerator of the Factor 3
calculation will be the uncompensated care costs reported on Worksheet
S-10 of the hospital's cost report for the applicable fiscal year and
the denominator is the same denominator that is determined
prospectively for purposes of determining Factor 3 for all DSH-eligible
hospitals.
Consistent with the policy adopted in the FY 2021 IPPS/LTCH PPS
final rule and codified in the regulations at Sec. 412.106(g)(8) for
subsequent fiscal years, in the FY 2022 IPPS/LTCH PPS final rule we
used a single year of Worksheet S-10 data from FY 2018 cost reports to
calculate Factor 3 for FY 2022 for all eligible hospitals with the
exception of IHS and Tribal hospitals and Puerto Rico hospitals that
have a cost report for 2013.
Therefore, for FY 2022, we applied the following methodology to
compute Factor 3 for each hospital:
Step 1: Select the provider's longest cost report from its Federal
fiscal year (FFY) 2018 cost reports. (Alternatively, in the rare case
when the provider has no FFY 2018 cost report because the cost report
for the previous Federal fiscal year spanned the FFY 2018 time period,
the previous Federal fiscal year cost report will be used in this
step.)
Step 2: Annualize the uncompensated care costs (UCC) from Worksheet
S-10 Line 30, if the cost report is more than or less than 12 months.
(If applicable, use the statewide average CCR (urban or rural) to
calculate uncompensated care costs.)
Step 3: Combine adjusted and/or annualized uncompensated care costs
for hospitals that merged using the merger policy.
Step 4: Calculate Factor 3 for IHS and Tribal hospitals and Puerto
Rico hospitals that have a cost report for 2013 using the low-income
insured days proxy based on FY 2013 cost report data and the most
recent available SSI ratio (or, for Puerto Rico hospitals, 14 percent
of the hospital's FY 2013 Medicaid days). The denominator is calculated
using the low-income insured days proxy data from all DSH eligible
hospitals.
Step 5: Calculate Factor 3 for the remaining DSH eligible hospitals
using annualized uncompensated care costs (Worksheet S-10 Line 30)
based on FY 2018 cost report data (from Step 1, 2 or 3). New hospitals
and the hospitals for which Factor 3 was calculated in Step 4 are
excluded from this calculation.
In the FY 2022 IPPS/LTCH PPS final rule, we amended the regulation
at Sec. 412.106 by adding a new paragraph (g)(1)(iii)(C)(9) to reflect
the methodology for computing Factor 3 for FY 2022 for IHS and Tribal
hospitals and for Puerto Rico hospitals that have a 2013 cost report.
We also finalized a conforming change to limit the reference to Puerto
Rico hospitals in Sec. 412.106(g)(1)(iii)(C)(8) to those Puerto Rico
hospitals that have a cost report for 2013.
(c) Changes to the Methodology for Calculating Factor 3 for FY 2023 and
Subsequent Fiscal Years
As described in the FY 2022 IPPS/LTCH PPS final rule, commenters
expressed concerns that the use of only 1 year of data to determine
Factor 3 would lead to significant variations in year-to-year
uncompensated care payments. Some stakeholders recommended the use of 2
years of historical Worksheet S-10 data (86 FR 45237). In the FY 2022
IPPS/LTCH PPS final rule, we stated that we would consider using
multiple years of data when the vast majority of providers have been
audited for more than 1 fiscal year under the revised reporting
instructions. The audits of FY 2019 cost reports began in 2021 and
those audited reports were available in time for the development of the
FY 2023 IPPS/LTCH PPS proposed rule. Feedback from previous audits and
lessons learned were incorporated into the audit process for the FY
2019 reports.
In consideration of the comments discussed in the FY 2022 IPPS/LTCH
PPS final rule, in the FY 2023 IPPS/LTCH PPS proposed rule, we proposed
to determine Factor 3 for FY 2023 using the average of the audited FY
2018 and audited FY 2019 reports. We stated our belief that this
proposal would address concerns from stakeholders regarding
[[Page 49037]]
year-to-year fluctuations in uncompensated care payments. In addition,
taking into consideration the comments recommending that CMS transition
to the use of 3 years of audited data, we indicated that we expect FY
2024 will be the first year that 3 years of audited data will be
available at the time of rulemaking. Accordingly, for FY 2024 and
subsequent fiscal years, we proposed to use a 3-year average of the
uncompensated care data from the 3 most recent fiscal years for which
audited data are available to determine Factor 3. Specifically, for FY
2024, we would expect to use data from FY 2018, FY 2019, and FY 2020
reports to calculate uncompensated care payments. In other words, for
each of the 3 most recent fiscal years for which audited data are
available at the time of rulemaking for the applicable fiscal year, we
would divide a hospital's uncompensated care costs for the fiscal year
by the estimated total uncompensated care costs of all DSH hospitals
for that fiscal year. Then, we would calculate an average of those
proportions to determine the hospital's Factor 3 for the applicable
Federal fiscal year. We explained that we believe the proposed approach
is generally consistent with our past practice of using the most recent
single year of audited data from the Worksheet S-10, while also
addressing commenters' concerns regarding year-to-year fluctuations in
uncompensated care payments. Consistent with the approach that we
followed when multiple years of data were previously used in the Factor
3 methodology, we proposed that if a hospital does not have data for
all 3 years used in the Factor 3 calculation, we would determine Factor
3 based on an average of the hospital's available data.
We invited public comments on our proposed methodology for
calculating Factor 3 for FY 2023 and subsequent fiscal years,
including, but not limited to, our proposal to use the most recent
audited Worksheet S-10 data from FY 2018 and FY 2019 cost reports to
determine Factor 3 for FY 2023, and our proposal to begin using the 3
most recent years of audited Worksheet S-10 data starting in FY 2024.
Comment: Commenters expressed continued support for the general use
of Worksheet S-10 data to calculate each hospital's share of
uncompensated care costs in FY 2023 and future years. Some commenters
also noted their long-standing support for using audited Worksheet S-10
data to promote an accurate and consistent calculation of uncompensated
care costs. One commenter, who supported using Worksheet S-10 data,
stressed the importance of ongoing refinements to the audit process to
ensure data accuracy, while another recommended that CMS regularly
assess and identify unusual or irregular trends in the data.
Response: We appreciate the support for our proposal to use
Worksheet S-10 data to calculate Factor 3 for FY 2023 and future years.
Regarding those comments that noted the importance of ongoing
refinements to the Worksheet S-10 audit process, we reiterate our
commitment to continue working with the MACs and providers on audit
improvements, including changes to increase the efficiency of the audit
process and build on the lessons learned in previous audit years. As
noted in the FY 2023 IPPS/LTCH PPS proposed rule, we believe that, on
balance, Worksheet S-10 data are the best available data to use for
calculating Factor 3 for FY 2023 and subsequent fiscal years.
Comment: An overwhelming majority of commenters expressed support
for CMS' proposal to calculate Factor 3 for FY 2023 based on a two-year
average of audited FY 2018 and FY 2019 Worksheet S-10 data. These
commenters also expressed support for the proposal to transition to use
of a three-year average of the most recent available audited Worksheet
S-10 data for FY 2024 and subsequent fiscal years. Some commenters
explicitly stated that they agreed with CMS that the use of only one
year of data could lead to undue fluctuations in year-to-year
uncompensated care payments. Supporters of these proposals also
specified several benefits from the use of a multi-year average of
Worksheet S-10 data, such as minimizing year-to-year volatility,
ensuring stability in future uncompensated care payments, and
mitigating the effect of irregular trends and data anomalies, like the
COVID-19 PHE. One commenter suggested that CMS consider working with
hospitals in future years to ensure that Worksheet S-10 data from the
COVID-19 PHE period is reported appropriately, given the PHE's
significant impact on the utilization of healthcare services. To this
end, one commenter recommended that CMS consider incorporating FY 2020
Worksheet S-10 data into the multi-year average for FY 2023 once the
data has been audited, as this approach would be more reflective of
current healthcare costs.
In contrast, only a handful of commenters expressed opposition to
using a two-year average of audited FY 2018 and FY 2019 Worksheet S-10
data for FY 2023 and a three-year average of Worksheet S-10 data to
calculate uncompensated care payments moving forward. One commenter
indicated that using a three-year average to calculate FY 2024
uncompensated care payments would dilute the impact of the COVID-19 PHE
on the FY 2020 Worksheet S-10 data. This commenter asserted that using
a multi-year average would benefit hospitals that received the highest
amount of Health Resources & Services Administration (HRSA) subsidies
and hospitals with lower uncompensated care costs, while harming
hospitals with higher uncompensated care cost data in FY 2020. The
commenter also requested that CMS provide expedited procedures for
reopening and correcting Worksheet S-10 data for the cost reporting
periods that will be used to calculate uncompensated care payments in
FY 2024 and future years.
Another commenter noted that the FY 2022 methodology based on one
year of audited Worksheet S-10 data was adequate and should not be
modified to a multi-year average, indicating that inconsistencies in
the methodology used to calculate Factor 3 from year to year add a
further burden to hospitals' ability to understand and predict their
uncompensated care payments. This commenter also urged CMS to reexamine
the continued use of FY 2018 Worksheet S-10 data to determine payments
for FY 2022, FY 2023, and FY 2024, as it may benefit hospitals that
provided elevated levels of uncompensated care in FY 2018, and
negatively impact those that provided less uncompensated care.
Finally, some commenters suggested alternative approaches to
calculating Factor 3 of the uncompensated care payment calculation that
went beyond the blending of historical Worksheet S-10 data for multiple
fiscal years.
Response: We thank commenters who expressed their support for our
proposal to use a two-year average of audited FY 2018 and FY 2019
Worksheet S-10 data to determine each hospital's share of uncompensated
care costs in FY 2023 and to use of a 3-year average of audited
Worksheet S-10 data starting in FY 2024. As explained in the FY 2023
IPPS/LTCH PPS proposed rule, we believe that using a multi-year average
of Worksheet S-10 data will provide assurance that hospitals'
uncompensated care payments remain stable and predictable and will not
be subject to unpredictable swings and anomalies in a hospital's
uncompensated care costs.
We also believe that our proposal to use multiple years of data is
responsive to past commenters' requests for the use of multiple years
of audited data. We disagree with the commenter who stated
[[Page 49038]]
that modifying the uncompensated care payment methodology to use
multiple years of data would put undue burden on a hospital's ability
to understand, budget, and forecast as we believe that our proposal to
use a multi-year average of Worksheet S-10 data to determine Factor 3
for FY 2023 and subsequent fiscal years is responsive to past
recommendations for smoothing fluctuations.
In relation to the commenter who noted that the multi-year average
will benefit hospitals that received the highest amount of HRSA
subsidies and hospitals with lower uncompensated care costs, we note
that cost reporting data from the COVID-19 PHE time period is not yet
available to be analyzed. We believe it would be premature to attempt,
in this rulemaking, to modify the methodology for determining
uncompensated care payments for a future year, specifically to address
the potential impact of the PHE-related subsidies.
In response to the request that we provide expedited procedures for
reopening and correcting Worksheet S-10 data that will be used in the
Factor 3 calculation, we note that we do not intend to establish fixed
timelines for reopenings across MACs, so we can retain the flexibility
to use our limited audit resources to address and prioritize audit
needs across all CMS programs each year. However, we note that MACs
work closely with hospitals regarding reopenings.
Regarding commenters' suggestions for alternative approaches to
calculating Factor 3 beyond the previously considered methodological
concepts for the blending of historical Worksheet S-10 data, we
appreciate commenters' input and note that we may consider these
suggestions in future rulemaking.
After consideration of the comments received, we are finalizing our
proposal to use a two-year average of audited FY 2018 and FY 2019
Worksheet S-10 data to calculate Factor 3 in FY 2023 and a three-year
average of audited data from the most recent fiscal years for which
audited data are available to determine Factor 3 in subsequent years.
We also note that the number of audited hospitals continues to increase
year to year and, as a result, we believe data from Worksheet S-10 will
improve in reliability over time. However, we will continue to audit
additional years of the Worksheet S-10 data and monitor the stability
of uncompensated care payments as we move forward with using a multi-
year average of audited Worksheet S-10 data for Factor 3 calculations.
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule, we have
determined Factor 3 for IHS and Tribal hospitals and Puerto Rico
hospitals, based on the low-income insured days proxy for uncompensated
care costs. In the FY 2022 IPPS/LTCH PPS final rule, we discussed
comments we had received from IHS/Tribal hospitals and Puerto Rico
hospitals about the significant challenges they face in relation to
uncompensated care reporting (86 FR 45242 and 45243). For example, a
commenter stated that the information technology systems used by IHS
and Tribal hospitals are not equipped to collect the necessary data for
the Worksheet S-10, noting that while IHS recently received funding to
upgrade its information technology system, it will take some time,
potentially years, before it is fully functional (86 FR 45242). Another
commenter expressed concerns that Puerto Rico hospitals were
understating the components of uncompensated care costs, and indicated
that technical education is needed to address the challenges Puerto
Rico hospitals have regarding charity care and bad debt reporting,
which the commenter stated would take years to address (86 FR 45243).
In the FY 2023 IPPS/LTCH PPS proposed rule, we acknowledged that to
the extent commenters have identified specific challenges for IHS/
Tribal hospitals and Puerto Rico hospitals in reporting uncompensated
care costs on Worksheet S-10, it is possible that after a sufficient
number of years these reporting challenges could be addressed. However,
despite the reporting challenges described by commenters, we expressed
our concern that the historical 2013-based data on low-income insured
days, which has been used as an alternative to data on uncompensated
care costs from the Worksheet S-10 to determine Factor 3 for IHS/Tribal
hospitals and Puerto Rico hospitals, is no longer a good proxy for the
costs of these hospitals in treating the uninsured, given the time that
has elapsed since 2013. In 2023, this data will be 10 years old and
there is no obvious way to update the information given our stated
concerns surrounding the differential impact of state Medicaid
expansions after 2013. In light of these concerns, we stated that we
could no longer conclude that alternative data to the data on
uncompensated care costs reported on Worksheet S-10 are currently
available for IHS/Tribal hospitals and Puerto Rico hospitals that are a
better proxy for the costs of these hospitals in treating the
uninsured. Accordingly, for FY 2023 and subsequent fiscal years, we
proposed to discontinue the use of low-income insured days as a proxy
for the uncompensated care costs of these hospitals and proposed to use
the same data to determine Factor 3 for IHS and Tribal hospitals and
Puerto Rico hospitals as for other hospitals. Specifically, for FY
2023, we would determine Factor 3 for IHS and Tribal hospitals and
Puerto Rico hospitals based on the average of the uncompensated care
data reported on Worksheet S-10 of their FY 2018 and FY 2019 cost
reports. However, we sought comments on alternatives both to our
proposal to use data on uncompensated care costs from the Worksheet S-
10 to determine Factor 3 for IHS/Tribal hospitals and Puerto Rico
hospitals and to the continued use of low-income insured days as a
proxy for the uncompensated care costs of these hospitals. We also
sought comments on how to best measure and define the uncompensated
care costs associated with these hospitals that might not otherwise be
captured in Factor 3 calculations based on Worksheet S-10 data. Because
we recognized that our proposal to discontinue the use of the low-
income insured days proxy and to rely solely on Worksheet S-10 data to
calculate Factor 3 of the uncompensated care payment methodology for
IHS/Tribal hospitals and Puerto Rico hospitals could result in a
significant financial disruption for these hospitals, we also proposed
to establish a new supplemental payment for IHS/Tribal hospitals and
Puerto Rico hospitals, beginning in FY 2023. We refer readers to
section IV.E. of the preamble of this final rule for a complete
discussion of this proposed new supplemental payment.
Prior to the proposed rulemaking for FY 2023, CMS consulted with
IHS and Tribes regarding our policies for determining uncompensated
care payments. They expressed that uncompensated care payments are
critical to the providers and should be maintained at their current
levels, at a minimum. As we explained in the FY 2023 IPPS/LTCH PPS
proposed rule, we considered this recent input along with previous
input from stakeholders in the development of our proposed policies. We
also welcomed additional input from stakeholders regarding the unique
circumstances of IHS/Tribal hospitals and Puerto Rico hospitals and/or
any mitigating factors, and noted that this input would inform our
considerations about our proposal to determine Factor 3 for these
hospitals using data from
[[Page 49039]]
Worksheet S-10 and the related proposal to establish a new supplemental
payment for IHS/Tribal hospitals and Puerto Rico hospitals.
We received comments on our proposal to discontinue the use of the
low-income insured days proxy and to rely solely on Worksheet S-10 data
to calculate Factor 3 of the uncompensated care payment methodology for
IHS/Tribal hospitals and Puerto Rico hospitals. Due to the close
interrelationship between this proposal and our proposal to establish a
new supplemental payment for IHS/Tribal hospitals and Puerto Rico
hospitals, we discuss those comments, along with the comments received
on the proposed new supplemental payment, and set forth our final
policies in Section IV.E of this final rule.
For purposes of the FY 2023 proposed rule, we used the December
2021 HCRIS extract to calculate Factor 3. We noted that we intended to
use the March 2022 update of HCRIS to calculate Factor 3 for the FY
2023 IPPS/LTCH PPS final rule. However, we stated that we may consider
the use of more recent data that may become available after March 2022,
but prior to the development of the final rule, if appropriate, for
purposes of calculating the final Factor 3 for this FY 2023 IPPS/LTCH
PPS final rule.
We received comments regarding the uncompensated care costs
definition and Worksheet S-10 cost report instructions.
Comment: With regard to the definition of uncompensated care,
several commenters urged CMS to include unreimbursed costs (shortfalls)
from Medicaid in the definition of uncompensated care. Specifically,
some commenters urged CMS to account for Medicaid shortfalls and
incorporate Line 31 of Worksheet S-10 along with already-utilized Line
30. In contrast, one commenter agreed with CMS that Medicaid
shortfalls, as currently reported on Worksheet S-10, should not be
included in the estimation of uncompensated care costs. Instead, the
commenter recommended that the agency revise Worksheet S-10 so data on
Medicaid shortfalls better resemble actual shortfalls incurred by
hospitals. The commenter further noted that such data will be
increasingly useful for informational purposes as previously uninsured
individuals gain access to Medicaid. Other commenters proposed
incorporating social determinants of health methodologies into
uncompensated care costs by including variables that describe
socioeconomic disadvantage such as accounting for costs incurred by
hospitals to improve access to healthy foods, transportation, health
screenings, technology assistance, and similar community needs.
Notably, another commenter suggested that CMS redefine uncompensated
care to align with the definitions used to determine community benefit
spending under the Internal Revenue Code.
Response: We appreciate commenters' suggestions for revisions and/
or modifications to Worksheet S-10. We will consider the concerns
raised by commenters as part of future cost report clarifications and
will make modifications as necessary to further improve and refine the
information that is reported on Worksheet S-10 to support collection of
the information necessary to implement section 1886(r)(2) of the Act.
With regard to the comments requesting that payment shortfalls from
Medicaid be included in uncompensated care cost calculations, we
continue to believe there are compelling arguments for excluding such
shortfalls from the definition of uncompensated care. First, we note
that we did not propose any changes to the definition of uncompensated
care costs, which was first adopted in the FY 2018 IPPS/LTCH PPS final
rule (82 FR 38215 through 38217) as the amount on Line 30 of Worksheet
S-10, which is the cost of charity care (Line 23) and the cost of non-
Medicare bad debt and non-reimbursable Medicare bad debt (Line 29).
Additionally, key interested parties (including MedPAC) do not consider
Medicaid shortfalls in their definition of uncompensated care.
Furthermore, we continue to believe that it is most consistent with
section 1886(r)(2) of the Act for Medicare uncompensated care payments
to target hospitals that incur a disproportionate share of
uncompensated care for patients with no insurance coverage. We also
note that even if we agreed that it would be appropriate to adjust the
definition of uncompensated care to include Medicaid shortfalls, this
would not be a feasible option at this time due to computational
limitations. Specifically, computing such shortfalls is operationally
problematic because Medicaid pays hospitals a single DSH payment that,
in part, covers the hospital's costs for providing care to the
uninsured and in part covers estimates of the Medicaid ``shortfalls.''
Therefore, it is not clear how CMS would determine how much of the
``shortfall'' is left after the Medicaid DSH payment is made. In
addition, in some States, hospitals return a portion of their Medicaid
revenues to the State via provider taxes and receive supplemental
payments in return (along with the federal match), making the
computation of ``shortfalls'' even more complex.
Regarding the request that we include costs incurred by hospitals
to address social determinants of health in the definition of
uncompensated care costs, we have consistently stated in past final
rules (85 FR 58826 and 86 FR 45239) in response to similar comments
that we believe the purpose of uncompensated care payments is to
provide additional payment to hospitals for treating the uninsured, not
for other costs incurred, including costs associated with addressing
social determinants of health, as commenters have suggested.
Accordingly, we do not believe changing the calculation of
uncompensated care costs is appropriate, at this time.
Comment: Commenters requested that CMS include all patient care
costs when calculating the cost-to-charge ratio (CCR) used in Worksheet
S-10 and urged CMS to include costs incurred for graduate medical
education (GME), costs of paying provider taxes associated with
Medicaid revenue, and costs of providing physician and other
professional services when calculating the CCR used to determine
uncompensated care costs on Worksheet S-10 in order to improve the
accuracy of that CCR.
Response: As we have stated in past rules (84 FR 42378, 85 FR
58826, and 86 FR 45239) in response to similar requests that we modify
the CCR used on Worksheet S-10, we continue to believe the CCR
calculation that is used in Worksheet S-10 is appropriate. Regarding
the request that we include GME costs, costs of paying provider taxes
associated with Medicaid revenue, and costs of providing physician and
other professional service when calculating CCR used in Worksheet S-10,
we note that because the CCR on Line 1 of Worksheet S-10 is obtained
from Worksheet C, Part I, and is also used in other IPPS rate setting
contexts (such as high-cost outliers and the calculation of the MS-DRG
relative weights) from which it is appropriate to exclude the costs
associated with supporting GME costs and the costs of physician and
professional services and costs of paying provider taxes, we remain
reluctant to adjust CCRs in the narrower context of calculating
uncompensated care costs. Therefore, as stated in past final rules, we
continue to believe that it is not appropriate, at this time, to modify
the calculation of the CCR on Line 1 of Worksheet S-10 to include any
additional costs in the numerator of the CCR calculation.
Comment: One commenter stated that large teaching hospitals (with
100+
[[Page 49040]]
residents) would experience an even larger uncompensated care payment
reduction, resulting in underserved and vulnerable populations having
less access to transplant programs (as these programs are often
operated by large teaching institutions). Another commenter expressed
concern that hospitals in Medicaid non-expansion states depend greatly
on uncompensated care payments for financial support, and this
commenter urged CMS to work with providers and patient advocates in
non-expansion states to screen patients for eligibility under either
financial assistance policies or premium support under the Affordable
Care Act before classifying the case as uncompensated care. The same
commenter noted that the equal weighting of bad debt and charity care
on the Worksheet S-10 disincentivizes hospitals from ensuring that
eligible patients receive charity care, as obtaining the qualification
for charity care entails long administrative processes.
Response: We thank commenters for their continued concern regarding
the distribution of uncompensated care payments and the impact of
reductions in uncompensated care payments on teaching hospitals.
However, as stated previously, the purpose of uncompensated care
payments is to provide additional payment to hospitals for treating the
uninsured. Uncompensated payments are not intended to provide support
for other activities that hospitals may undertake. We also note that
CMS does not set charity care criteria for hospitals, and within
reason, hospitals can establish their own criteria of what constitutes
charity care in their financial assistance policies.
Comment: With regard to Worksheet S-10 instructions and guidance, a
few commenters commended CMS for its efforts to provide clearer
instructions for Worksheet S-10. A few commenters requested that CMS
clarify inconsistent Worksheet S-10 instructions so that non-Medicare
bad debt is not multiplied by the CCR. These commenters noted that CMS'
revised instructions indicate that non-reimbursed Medicare bad debt is
not reduced by the CCR, but that CMS' September 2017 transmittal states
that non-Medicare bad debt should be multiplied by the CCR. One
commenter indicated that such practice is inconsistent with the way
non-reimbursable Medicare bad debt is treated.
Response: We appreciate commenters' concerns regarding the need for
clarification of the Worksheet S-10 instructions, as well as their
suggestions for revisions to improve reporting. We reiterate our
commitment to continuing to work with impacted parties to address their
concerns regarding Worksheet S-10 instructions and reporting through
provider education and further refinement of the instructions as
appropriate. We also encourage providers to share with their respective
MAC any questions regarding clarifications of instructions, reporting,
and submission deadlines.
We continue to believe that, as noted by a commenter, our efforts
to refine the instructions and guidance have improved provider
understanding of the Worksheet S-10 and added clarity to the
instructions. We also recognize that there are continuing opportunities
to further improve the accuracy and consistency of the information that
is reported on the Worksheet S-10, and to the extent that commenters
have raised new questions and concerns regarding the reporting
requirements, we will attempt to address them through future rulemaking
and/or sub-regulatory guidance and provider outreach. However, as
stated in previous rules, we continue to believe that the Worksheet S-
10 instructions are now sufficiently clear and allow hospitals to
accurately complete Worksheet S-10s.
Regarding the commenters' request that CMS clarify whether non-
Medicare bad debt is multiplied by CCR, we believe that the Worksheet
S-10 instructions are clear and indicate that the CCR is multiplied by
the non-Medicare bad debt amount on line 28.
Regarding the comments requesting specific structural changes to
Worksheet S-10 and/or further clarification of the reporting
instructions, we note that these comments fall outside the scope of
this final rule. We note that a recent PRA package for hospital cost
report is available at: https://www.cms.gov/regulations-and-guidancelegislationpaperworkreductionactof1995pra-listing/cms-2552-10.
We received comments regarding Worksheet S-10 data and audits.
Comment: In relation to the accuracy of the Worksheet S-10 data,
one commenter urged CMS to refine the instructions for reporting of
uncompensated care costs. The commenter's recommendations included that
CMS should mitigate the effect of anomalies in the cost data for the
COVID-19 PHE period and that CMS should consider the redistributive
effects of the COVID-19 PHE for purposes of determining uncompensated
care payments in future rulemaking. One commenter recommended that CMS
work with impacted providers in upcoming years to ensure that the data
from the COVID-19 PHE period is properly understood and correctly
reported. Another commenter urged CMS to account for the
unpredictability of the COVID-19 PHE, including the emergence of new
variants, in determining uncompensated care payments for future years.
Response: In regard to requests for CMS to mitigate the effect of
anomalies in FY 2020 through FY 2022 cost report data and account for
the unpredictability of the COVID-19 PHE in determining uncompensated
care payments for future years, we note that we are finalizing the
proposal to use a three-year average of the most recently audited cost
report data for FY 2024 and subsequent years. Using the three-year
average will smooth the variation in year-to-year uncompensated care
payments and lessen the impacts of COVID-19 PHE and future unforeseen
events. We also note that the calculations for Factor 1 and Factor 2
reflect the estimated impact of the COVID-19 PHE on DSH payments.
Further, we anticipate that there will be less fluctuation in cost
report data as the PHE disruptions on healthcare utilization fade. We
will continue to monitor the impacts of the PHE and will consider this
issue further in future rulemaking, as appropriate.
Comment: Some commenters commended CMS for the agency's efforts to
develop and improve the audit process for Worksheet S-10 data.
Specifically, one commenter commended CMS for its efforts to audit all
hospitals rather than only a portion, while another commenter
recommended that CMS expend all the necessary resources to continue to
audit Worksheet S-10 data for all DSH eligible hospitals.
Echoing concerns expressed in previous years, commenters encouraged
CMS to work with MACs to make the audit process clearer, more
consistent, and more complete. The same commenters provided several
recommendations, including that CMS establish a standardized process
across auditors, develop uniform standards regarding information
submission and acceptable documentation to meet audit requirements,
develop a transparent timeframe with sufficient lead time, target
specific data aspects for the audit, and develop a process for timely
appeals. Specifically, one commenter recommended that all hospitals be
audited using the same protocols and that having only some hospitals
subject to desk reviews is inequitable. A few commenters cited the
Medicare wage index audit as a model that CMS could use for Worksheet
S-10 audits. One commenter suggested that CMS ensure
[[Page 49041]]
that Worksheet S-10 audits impose minimal burden and are equitable and
uniform across hospitals. The same commenter also suggested that CMS
consider making the audit process more transparent by disclosing
criteria used to identify hospitals for audits and publishing audit
protocols in advance to allow hospitals time and opportunity to respond
to audits and address findings. Other recommendations from this
commenter included that CMS should conduct audits in advance of using
data for payment rate setting such that data are accurate and final,
select hospitals for audits in an equitable and systematic way, and
review audit findings to ensure that MACs and subcontractors are
consistently performing audits according to protocols.
Response: We thank commenters for their feedback on the audits of
the FY 2019 Worksheet S-10 data and their recommendations for future
audits. As we have stated previously in response to comments regarding
audit protocols, these are provided to the MACs in advance of the audit
so as to assure consistency and timeliness in the audit process. We
began auditing the FY 2019 Worksheet S-10 data for selected hospitals
last year so that the audited uncompensated care data for these
hospitals would be available in time for use in the FY 2023 IPPS/LTCH
PPS proposed rule. We chose to focus the audit on the FY 2019 cost
reports in order to maximize the available audit resources. Similarly,
as discussed in the FY 2022 IPPS/LTCH PPS final rule, we chose to focus
the audits on the FY 2018 cost reports in order to maximize the
available audit resources prior to the FY 2022 rulemaking. In response
to the consistent feedback from commenters emphasizing the importance
of audits in ensuring the accuracy and consistency of data reported on
the Worksheet S-10, we have also started the process of auditing FY
2020 Worksheet S-10 data.
We appreciate all commenters' input and recommendations on how to
improve our audit process and reiterate our commitment to continue
working with the MACs and providers on audit improvements, which
include making changes to increase the efficiency of the audit process,
building on the lessons learned in previous audit years. We will take
these recommendations into consideration for future rulemaking.
Regarding commenters' requests for a standard audit timeline, we do not
intend to establish a fixed timeline for audits across MACs at this
time such that we can retain the flexibility to use our limited audit
resources to address and prioritize audit needs across all CMS programs
each year. We note that MACs collaborate with providers regarding
scheduling dates during the Worksheet S-10 audit process. We also note
that MACs work closely with providers to balance the time needed to
complete the Worksheet S-10 audits and to minimize the burden on
providers and will continue to do so.
Regarding commenters' requests that we make public the audit
instructions and criteria, as we previously stated in the FY 2022 IPPS/
LTCH final rule and in prior rules, we do not make review protocols
public as CMS desk review and audit protocols are confidential and are
for CMS and MAC use only. We note that there is no requirement under
either the Administrative Procedure Act or the Medicare statute that
CMS establish audit protocols through notice and comment rulemaking.
Rather, it is sufficient that we provide impacted parties with notice
of our proposed methodology and the data sources that will be used, so
that they may have a meaningful opportunity to submit their views on
the proposed methodology and the adequacy of the data for the intended
purpose. Similarly, there is no requirement that we provide an
opportunity for comment on the actual findings or audit disallowances
determined for each hospital as these results are confidential to each
hospital.
Concerning commenters' recommendations that we establish a timely
review and appeals process for the Worksheet S-10 audits, we do not
plan to introduce such a process at this time in order to maximize
limited audit resources. However, we will continue to work with
impacted parties to address their concerns regarding the accuracy and
consistency of data reported on Worksheet S-10. We will also continue
to work to further improve reporting through revised instructions, and
will also work with MACs to ensure a more consistent audit process
across providers and MACs.
Regarding commenters' recommendations that we establish a similar
process to that of the wage index audits, at this point we do not plan
to introduce an audit process with such a structure in order to
maximize limited audit resources.
As discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28392), for purposes of determining Factor 3 for FY 2023 and subsequent
fiscal years, we are continuing to apply the following policies: (1)
the merger policies that were initially adopted in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50021), as modified in the FY 2021 IPPS/LTCH
PPS final rule (85 FR 58828 and 58829) to incorporate the use of a
multiplier to account for merger effective date; (2) the policy for
hospitals with multiple cost reports, beginning in the same fiscal
year, of using the longest cost report and annualizing uncompensated
care data if a hospital's cost report does not equal 12 months of data;
(3) the policy, as modified in the FY 2021 IPPS/LTCH PPS final rule (85
FR 58829) and as further modified as proposed in the FY 2023 IPPS/LTCH
PPS proposed rule, for the rare case where a hospital has a cost report
that starts in one fiscal year and spans the entirety of the following
fiscal year, such that the hospital has no cost report for that
subsequent fiscal year, of using the cost report that spans both fiscal
years for the latter fiscal year; (4) the new hospital policy, as
modified in the FY 2020 IPPS/LTCH PPS final rule and as further
modified as proposed in this section; (5) the newly merged hospital
policy, with the modifications proposed in the FY 2023 IPPS/LTCH PPS
proposed rule; and (6) the policies regarding the application of
statistical trim methodologies to potentially aberrant CCRs and
potentially aberrant uncompensated care costs reported on the Worksheet
S-10, as modified as proposed in the FY 2023 IPPS/LTCH PPS proposed
rule.
Because we proposed to use multiple years of cost reports to
determine Factor 3 starting in FY 2023, we determined that it would
also be necessary to make a further modification to the policy
regarding cost reports that start in one fiscal year and span the
entirety of the following fiscal year. Specifically, in the rare cases
when we use a cost report that starts in one fiscal year and spans the
entirety of the subsequent Federal fiscal year to determine
uncompensated care costs for the subsequent Federal fiscal year, we
would not use the same cost report to determine the hospital's
uncompensated care costs for the earlier fiscal year. We explained that
using the same cost report to determine uncompensated care costs for
both fiscal years would not be consistent with our intent to smooth
year-to-year variation in uncompensated care costs. As an alternative,
we proposed to use the hospital's most recent prior cost report, if
that cost report spans the applicable period. In other words, in
determining Factor 3 for FY 2023, we would not use the same cost report
to determine the hospital's uncompensated care costs for both FY 2018
and FY 2019. Rather, we would use the cost report that spans the
entirety of FY 2019 to determine uncompensated care costs for FY 2019
and we would use the hospital's most recent prior cost report to
determine its uncompensated care costs for FY 2018,
[[Page 49042]]
provided that cost report spans some portion of Federal fiscal year
2018.
We did not receive comments on this proposed modification. We are
finalizing as proposed.
Scaling Factor
To address the effects of the calculating Factor 3 using data from
multiple fiscal years, in the FY 2023 IPPS/LTCH PPS proposed rule (87
FR 28392) we proposed to apply a scaling factor to the Factor 3 values
calculated for all DSH eligible hospitals so that total uncompensated
care payments to hospitals that are projected to be eligible for DSH
for a fiscal year will be consistent with the estimated amount
available to make uncompensated care payments for that fiscal year.
Specifically, we proposed to adopt a policy under which we divide 1
(the expected sum of all DSH-eligible hospitals' Factor 3 values) by
the actual sum of all DSH eligible hospitals' Factor 3 values and then
multiply the quotient by the uncompensated care payment determined for
each DSH eligible hospital to obtain a scaled uncompensated care
payment amount for each hospital. This process is designed to ensure
that the sum of the scaled uncompensated care payments for all
hospitals that are projected to be DSH eligible is consistent with the
estimate of the total amount available to make uncompensated care
payments for the applicable fiscal year. In the proposed rule, we noted
that a similar scaling factor methodology was previously used in both
FY 2018 (82 FR 38214 and 38215) and FY 2019 (83 FR 41414), when the
Factor 3 calculation also included multiple years of data.
We did not receive comments on this proposed scaling factor policy.
We are finalizing as proposed.
Modifications to New Hospital Policy for Purposes of Factor 3
We proposed to modify the new hospital policy that was initially
adopted in the FY 2020 IPPS/LTCH PPS final rule to determine Factor 3
for new hospitals. Consistent with our proposal to use multiple years
of cost reports to determine Factor 3, we proposed to define new
hospitals as hospitals that do not have cost report data for the most
recent year of data being used in the Factor 3 calculation. In other
words, the cut-off date for the new hospital policy would be the
beginning of the Federal fiscal year after the most recent year for
which audits of the Worksheet S-10 data have been conducted. For FY
2023, the FY 2019 cost reports are the most recent year of cost reports
for which audits of Worksheet S-10 data have been conducted. Thus,
hospitals with CCNs established on or after October 1, 2019, would be
subject to the new hospital policy in FY 2023.
Under the proposed modification to the new hospital policy, we
would continue the policy established in the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42370) that if a new hospital has a preliminary
projection of being eligible for DSH payments based on its most recent
available disproportionate patient percentage, it may receive interim
empirically justified DSH payments. However, new hospitals would not
receive interim uncompensated care payments during FY 2023 because we
would have no FY 2018 or FY 2019 uncompensated care data on which to
determine what those interim payments should be. The MAC will make a
final determination concerning whether the hospital is eligible to
receive Medicare DSH payments at cost report settlement based on its FY
2023 cost report.
We also proposed to modify the methodology used to calculate Factor
3 for new hospitals. Specifically, we proposed to determine Factor 3
for new hospitals using a denominator based solely on uncompensated
care costs from cost reports for the most recent fiscal year for which
audits have been conducted. For example, if a new hospital is
ultimately determined to be eligible for Medicare DSH payments for FY
2023, the hospital will receive an uncompensated care payment
calculated using a Factor 3, where the numerator is the uncompensated
care costs reported on Worksheet S-10 of the hospital's FY 2023 cost
report, and the denominator is the sum of the uncompensated care costs
reported on Worksheet S-10 of the FY 2019 cost reports for all DSH-
eligible hospitals. In addition, we proposed to apply a scaling factor,
as discussed previously, to the Factor 3 calculation for a new
hospital. We explained that we believe applying the scaling factor is
appropriate for purposes of calculating Factor 3 for all hospitals,
including new hospitals and hospitals that are treated as new
hospitals, in order to improve consistency and predictability across
all hospitals.
Modifications to the Newly Merged Hospital Policy
In the FY 2023 IPPS/LTCH PPS rule, we stated that we will continue
to treat hospitals that merge after the development of the final rule
for the applicable fiscal year similar to new hospitals. As explained
in the FY 2015 IPPS/LTCH PPS final rule, for these newly merged
hospitals, we do not have data currently available to calculate a
Factor 3 amount that accounts for the merged hospital's uncompensated
care burden (79 FR 50021). In the FY 2015 IPPS/LTCH PPS final rule, we
finalized a policy under which Factor 3 for hospitals that we do not
identify as undergoing a merger until after the public comment period
and additional review period following the publication of the final
rule or that undergo a merger during the fiscal year will be
recalculated similar to new hospitals (79 FR 50021 and 50022).
Consistent with the policy adopted in the FY 2015 IPPS/LTCH PPS final
rule, we will continue to treat newly merged hospitals in a similar
manner to new hospitals, such that the newly merged hospital's final
uncompensated care payment will be determined at cost report settlement
where the numerator of the newly merged hospital's Factor 3 will be
based on the cost report of only the surviving hospital (that is, the
newly merged hospital's cost report) for the current fiscal year.
However, if the hospital's cost reporting period includes less than 12
months of data, the data from the newly merged hospital's cost report
will be annualized for purposes of the Factor 3 calculation. Consistent
with the proposed modification to the methodology used to determine
Factor 3 for new hospitals described previously, we proposed to
determine Factor 3 for newly merged hospitals using a denominator that
is the sum of the uncompensated care costs for all DSH-eligible
hospitals, as reported on Worksheet S-10 of their cost reports for the
most recent fiscal year for which audits have been conducted. In
addition, we would apply a scaling factor, as discussed previously, to
the Factor 3 calculation for a newly merged hospital. We stated our
belief that applying the scaling factor is appropriate for purposes of
calculating Factor 3 for all hospitals, including new hospitals and
hospitals that are treated as new hospitals, in order to improve
consistency and predictability across all hospitals.
We also explained that consistent with past policy, interim
uncompensated care payments for the newly merged hospital will be based
only on the data for the surviving hospital's CCN available at the time
of the development of the final rule. In other words, for FY 2023, the
eligibility of a newly merged hospital to receive interim uncompensated
care payments and the amount of any interim uncompensated care
payments, would be based on the uncompensated care costs from the FY
2018 and FY 2019 cost reports available for the surviving
[[Page 49043]]
CCN at the time the final rule is developed. However, at cost report
settlement, we would determine the newly merged hospital's final
uncompensated care payment based on the uncompensated care costs
reported on its FY 2023 cost report. That is, we would revise the
numerator of Factor 3 for the newly merged hospital to reflect the
uncompensated care costs reported on the newly merged hospital's FY
2023 cost report. The denominator would be the sum of the uncompensated
care costs reported on Worksheet S-10 of the FY 2019 cost reports for
all DSH-eligible hospitals, which is the most recent fiscal year for
which audits have been conducted.
Comment: A couple of commenters expressed support for the policy
currently in place for newly merged hospitals under which interim
uncompensated care payments are based on the data for the surviving
hospital's CCN available at the time of development of the final rule.
These commenters also indicated support for continuing the policy in
place for new hospitals, under which new hospitals with a CCN
established on or after October 2019 with a preliminary projection of
being eligible for DSH payments would receive interim empirically
justified DSH payments. MACs would then make the final determination
concerning whether a new hospital is eligible to receive DSH payments
at cost report settlement based on the new hospital's FY 2023 cost
report. One commenter requested that CMS provide clarification
regarding which cost report would be used in the numerator of the
Factor 3 calculation for a newly merged hospital or new hospital, and
whether the cost report beginning or ending in FY 2023 would be used.
Response: We appreciate the support for our current policies for
new and newly merged hospitals. In response to the comment asking for
clarification on whether a newly merged hospital or new hospital would
use its cost report beginning or ending in FY 2023, we note that the
new hospital policy and the newly merged hospital policy are based on
the start date of the hospital's cost reporting period. Specifically,
the Factor 3 calculation for a new hospital will be based on the
hospital's FY 2023 cost report (that is, a cost report with a start
date on or after October 1, 2022, and on or before September 30, 2023).
The numerator of the hospital's Factor 3 will be the hospital's total
uncompensated care costs from the Worksheet S-10 Line 30 of its FY 2023
cost report (annualized, if necessary). The denominator will be the
total national uncompensated care costs from the FY 2019 cost reports
as calculated in this FY 2023 IPPS/LTCH PPS final rule. In the case of
a new hospital or a newly merged hospital that has a cost report that
spans multiple Federal fiscal years, if the cost report is a FY 2023
cost report, there is only one denominator in the Factor 3 calculation.
In addition, the pro rata calculation (i.e., the hospital's cost
reporting period spans different Federal fiscal years) for a new
hospital or a newly merged hospital is calculated using only the FY2023
total uncompensated care amount (that is, the Factor 3 is multiplied by
the FY 2023 total uncompensated care amount, as finalized in this final
rule.).
After consideration of the comments received, we are finalizing the
proposed modifications to the new hospital and newly merged policies.
CCR Trim Methodology
The calculation of a hospital's total uncompensated care costs on
Worksheet S-10 requires the use of the hospital's cost to charge ratio
(CCR). Consistent with the process for trimming CCRs used in the FY
2021 IPPS/LTCH PPS final rule (85 FR 58831 and 58832), we explained in
the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28393) that we will
apply the following steps to determine the applicable CCR for FY 2018
reports and FY 2019 reports separately:
Step 1: Remove Maryland hospitals. In addition, we will remove all-
inclusive rate providers because their CCRs are not comparable to the
CCRs calculated for other IPPS hospitals.
Step 2: Calculate a CCR ``ceiling'' for the applicable fiscal year
with the following data: for each IPPS hospital that was not removed in
Step 1 (including non-DSH eligible hospitals), we use cost report data
to calculate a CCR by dividing the total costs on Worksheet C, Part I,
Line 202, Column 3 by the charges reported on Worksheet C, Part I, Line
202, Column 8. (Combining data from multiple cost reports from the same
fiscal year is not necessary, as the longer cost report will be
selected.) The ceiling is calculated as 3 standard deviations above the
national geometric mean CCR for the applicable fiscal year. This
approach is consistent with the methodology for calculating the CCR
ceiling used for high-cost outliers. Remove all hospitals that exceed
the ceiling so that these aberrant CCRs do not skew the calculation of
the statewide average CCR.
Step 3: Using the CCRs for the remaining hospitals in Step 2,
determine the urban and rural statewide average CCRs for the applicable
fiscal year for hospitals within each State (including non-DSH eligible
hospitals), weighted by the sum of total hospital discharges from
Worksheet S-3, Part I, Line 14, Column 15.
Step 4: Assign the appropriate statewide average CCR (urban or
rural) calculated in Step 3 to all hospitals, excluding all-inclusive
rate providers, with a CCR for the applicable fiscal year greater than
3 standard deviations above the national geometric mean for that fiscal
year (that is, the CCR ``ceiling''). For purposes of both the proposed
rule and this final rule, the statewide average CCR was applied to 8
hospitals' FY 2018 reports, of which 3 hospitals had FY 2018 Worksheet
S-10 data. The statewide average CCR was applied to 14 hospitals' FY
2019 reports, of which 6 hospitals had FY 2019 Worksheet S-10 data.
Step 5: For hospitals that did not report a CCR on Worksheet S-10,
Line 1, we assign them the statewide average CCR for the applicable
fiscal year as determined in step 3.
After completing the previously described steps, we re-calculate
the hospital's uncompensated care costs (Line 30) for the applicable
fiscal year using the trimmed CCR (the statewide average CCR (urban or
rural, as applicable)).
We did not receive any comments on the discussion of CCR trim
methodology. We are finalizing as proposed.
Modifications to the Uncompensated Care Data Trim Methodology
After applying the CCR trim methodology, there are rare situations
where a hospital has potentially aberrant uncompensated care data for a
fiscal year that are unrelated to its CCR. Therefore, in the FY 2023
IPPS LTCH/PPS proposed rule, we explained that under the trim
methodology for potentially aberrant UCC that was included as part of
the methodology for purposes of determining Factor 3 in the FY 2021
IPPS/LTCH PPS final rule (85 FR 58832), if the hospital's uncompensated
care costs for FY 2018 or FY 2019 are an extremely high ratio (greater
than 50 percent) of its total operating costs in the applicable fiscal
year, we will determine the ratio of uncompensated care costs to the
hospital's total operating costs from another available cost report,
and apply that ratio to the total operating expenses for the
potentially aberrant fiscal year to determine an adjusted amount of
uncompensated care costs for the applicable fiscal year. Specifically,
if a hospital's FY 2018 cost report is determined to include
potentially
[[Page 49044]]
aberrant data, data from its FY 2019 cost report will be used for the
ratio calculation. Thus, the hospital's uncompensated care costs for FY
2018 will be trimmed by multiplying its FY 2018 total operating costs
by the ratio of uncompensated care costs to total operating costs from
the hospital's FY 2019 cost report to calculate an estimate of the
hospital's uncompensated care costs for FY 2018 for purposes of
determining Factor 3 for FY 2023. Because we proposed to use multiple
years of cost reports in the Factor 3 calculation for FY 2023, we would
apply this same approach to address potentially aberrant data in the FY
2019 cost report, by trimming based on the hospital's FY 2020 cost
report.
In the FY 2023 IPPS/LTCH PPS proposed rule, we noted that we have
audited the FY 2018 and the FY 2019 Worksheet S-10 data for a number of
hospitals. Because the UCC data for these hospitals have been subject
to audit, we stated our belief that there is increased confidence that
if high uncompensated care costs are reported by these audited
hospitals, the information is accurate. Therefore, consistent with the
policy that was adopted in the FY 2021 IPPS/LTCH PPS final rule, we
stated that it would be unnecessary to apply the trim methodology for a
fiscal year for which a hospital's UCC data have been audited.
In addition to the UCC trim methodology, we stated that we would
continue to apply a trim specific to certain hospitals that do not have
audited FY 2018 Worksheet S-10 data and/or audited FY 2019 Worksheet S-
10 data. We noted that in rare cases, hospitals that are not currently
projected to be DSH eligible and that do not have audited Worksheet S-
10 data may have a potentially aberrant amount of insured patients'
charity care costs (line 23 column 2). Similar to the approach
initially adopted in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45245
and 45246), we proposed to continue to use a threshold of t3 standard
deviations from the mean ratio of insured patients' charity care costs
to total uncompensated care costs (line 23 column 2 divided by line 30)
and a dollar threshold that is the median total uncompensated care cost
reported on most recent audited cost reports for hospitals that were
projected to be DSH-eligible. We stated that we continue to believe
these thresholds are appropriate, in order to address potentially
aberrant data. However, we proposed to modify the calculation to
include Worksheet S-10 data from IHS/Tribal hospitals and Puerto Rico
hospitals consistent with our proposal to begin using Worksheet S-10
data to determine Factor 3 for these hospitals. We also proposed to
apply the same thresholds to identify potentially aberrant charity care
costs data for all cost reporting years that are used in determining
Factor 3. We noted that based on calculations from the FY 2019 reports,
the threshold amounts were similar to FY 2018 reports; therefore, we
explained that we believe it is reasonable to use the same thresholds
to identify aberrant data for both years. Thus, under the proposal, in
FY 2023 we would use the same thresholds to identify potentially
aberrant data for both FY 2018 and FY 2019 reports. In addition, we
proposed to apply the same threshold amounts originally calculated for
the FY 2018 reports to identify potentially aberrant data for
subsequent fiscal years in order to facilitate transparency and
predictability. Therefore, for FY 2023 and subsequent fiscal years, we
proposed that in the rare case that a hospital's insured patients'
charity care costs are greater than $7 million and the ratio of the
hospital's cost of insured patient charity care (line 23 column 2) to
total uncompensated care costs (line 30) is greater than 60 percent, we
would exclude the hospital from the prospective Factor 3 calculation.
We explained that this trim would only impact hospitals that are not
currently projected to be DSH-eligible; and therefore, are not part of
the calculation of the denominator of Factor 3, which includes only
uncompensated care costs for projected DSH-eligible hospitals.
Consistent with the approach adopted in the FY 2022 IPPS/LTCH PPS final
rule, if a hospital would be trimmed under both the UCC trim
methodology and this alternative trim, we would apply this trim in
place of the existing UCC trim methodology. We stated that we continue
to believe this alternative trim more appropriately addresses
potentially aberrant insured patient charity care costs compared to the
UCC trim methodology, because the UCC trim is based solely on the ratio
of total uncompensated care costs to total operating costs and does not
consider the level of insured patients' charity care costs.
In addition, we proposed to continue to apply the policy adopted in
the FY 2022 IPPS/LTCH PPS final rule, for the hospitals that would be
subject to this alternative trim and are ultimately determined to be
DSH-eligible at cost report settlement. We explained that if a hospital
subject to this trim is ultimately determined to be DSH-eligible at
cost report settlement, its uncompensated care payment should be
calculated only after the hospital's reporting of insured charity care
costs on its FY 2023 Worksheet S-10 has been reviewed. Accordingly, the
MAC would calculate a Factor 3 for the hospital only after reviewing
the uncompensated care information reported on Worksheet S-10 of the
hospital's FY 2023 cost report. Then we would calculate Factor 3 for a
hospital subject to this alternative trim using the same methodology
used to determine Factor 3 for new hospitals. Specifically, the
numerator would reflect the uncompensated care costs reported on the
hospital's FY 2023 cost report, while the denominator would reflect the
sum of the uncompensated care costs reported on Worksheet S-10 of the
FY 2019 cost reports of all DSH-eligible hospitals. In addition,
consistent with our proposed approach for new hospitals, we would apply
a scaling factor, as discussed previously, to the Factor 3 calculation
for these hospitals. We stated that we believe applying the scaling
factor is appropriate for purposes of calculating Factor 3 for all
hospitals, including new hospitals and hospitals that are treated as
new hospitals, in order to improve consistency and predictability
across all hospitals.
We did not receive any comments on the proposed modifications to
the uncompensated care data trim methodology. We are finalizing as
proposed.
Summary of Methodology
In summary, under the policies we are finalizing in this FY 2023
IPPS/LTCH PPS final rule, for FY 2023, we will compute Factor 3 for
each hospital using the following steps:
Step 1: Select the hospital's longest cost report from its Federal
fiscal year (FY) 2018 cost reports and the longest cost report from its
FY 2019 cost reports. (Alternatively, in the rare case when the
hospital has no cost report for a particular year because the cost
report for the previous Federal fiscal year spanned the more recent
Federal fiscal year, the previous Federal fiscal year cost report will
be used in this step. In the rare case, that using a previous Federal
fiscal year cost report results in a period without a report, we will
use the prior year report, if that cost report spanned the applicable
period. (For example, if a hospital does not have a FY 2019 cost report
because the hospital's FY 2018 cost report spanned the FY 2019 time
period, then we will use the FY 2018 cost report that spanned the FY
2019 time period for this step. Using the same example, where the
hospital's FY 2018 report is
[[Page 49045]]
used for the FY 2019 time period, then we will use the hospital's FY
2017 report if it spans some of the FY 2018 time period. In other
words, we will not use the same cost report for both the FY 2019 and
the FY 2018 time periods.) In general, we note that, for purposes of
the Factor 3 methodology, references to a fiscal year cost report are
to the cost report that spans the relevant Federal fiscal year period.
Step 2: Annualize the uncompensated care costs (UCC) from Worksheet
S-10 Line 30, if a cost report is more than or less than 12 months. (If
applicable, use the statewide average CCR (urban or rural) to calculate
uncompensated care costs.)
Step 3: Combine adjusted and/or annualized uncompensated care costs
for hospitals that merged using the merger policy.
Step 4: Calculate Factor 3 for all DSH eligible hospitals using
annualized uncompensated care costs (Worksheet S-10 Line 30) based on
FY 2018 cost report data and FY 2019 cost report data (from Step 1, 2
or 3). New hospitals and other hospitals that are treated as if they
are new hospitals for purposes of Factor 3 are excluded from this
calculation.
Step 5: Average the Factor 3 values from Step 4; that is, add the
Factor 3 values for FY 2018 and FY 2019 for each hospital, and divide
that amount by the number of cost reporting periods with data to
compute an average Factor 3 for the hospital. Multiply by a scaling
factor.
For FY 2024 and subsequent fiscal years, these steps will be
calculated using the most recent 3 years of audited cost reports. (For
example, in FY 2024, the FY 2018, FY 2019, and FY 2020 reports would be
used.)
In the FY 2023 IPPS/LTCH PPS proposed rule, we proposed to make a
conforming change to the existing regulation at Sec.
412.106(g)(1)(iii)(C)(8) and to add a new regulation at Sec.
412.106(g)(1)(iii)(C)(10) to reflect our proposal to calculate Factor 3
based on the most recent two years of audited data on uncompensated
care costs in FY 2023. We also proposed to add Sec.
412.106(g)(1)(iii)(C)(11) to reflect our proposal to calculate Factor 3
for FY 2024 and subsequent fiscal years based on a 3-year average of
the most recent available audited data on uncompensated care costs.
We did not receive any comments on these proposed changes to
regulations. We are finalizing the proposed changes with only minor
conforming changes for internal consistency.
(d) Per Discharge Amount of Interim Uncompensated Care Payments
Since FY 2014, we have made interim uncompensated care payments
during the fiscal year on a per discharge basis. We have used a 3-year
average of the number of discharges for a hospital to produce an
estimate of the amount of the hospital's uncompensated care payment per
discharge. Specifically, the hospital's total uncompensated care
payment amount for the applicable fiscal year, is divided by the
hospital's historical 3-year average of discharges computed using the
most recent available data to determine the uncompensated care payment
per discharge for that fiscal year.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45247 and 45248), we
modified this calculation for FY 2022 to be based on an average of FY
2018 and FY 2019 historical discharge data, rather than a 3-year
average that included data from FY 2018, FY 2019, and FY 2020. We
explained our belief that computing a 3-year average with the FY 2020
discharge data would underestimate discharges, due to the decrease in
discharges during the COVID-19 pandemic. For the same reason, we
proposed to modify this calculation for FY 2023 to be based on the
average of FY 2018, FY 2019, and FY 2021 historical discharge data,
rather than a 3-year average of the most recent 3 years of discharge
data from FY 2019, FY 2020, and FY 2021. We stated that computing a 3-
year average using the most recent 3 years would potentially
underestimate the number of discharges for FY 2023, due to the effects
of the COVID-19 pandemic in FY 2020, which was the first year of the
COVID-19 pandemic. Therefore, we explained our belief that the proposed
modification may result in a better estimate of the number of
discharges during FY 2023, for purposes of the interim uncompensated
care payment calculation. In addition, we noted that our proposal to
include discharge data from FY 2021 to compute this 3-year average was
consistent with the proposed use of FY 2021 Medicare claims in the IPPS
ratesetting, as discussed in section I.F. of the preamble of the FY
2023 IPPS/LTCH PPS proposed rule. Under this proposal, the resulting 3-
year average of the number of discharges would be used to calculate a
per discharge payment amount that will be used to make interim
uncompensated care payments to each projected DSH-eligible hospital
during FY 2023. We also explained that the interim uncompensated care
payments made to a hospital during the fiscal year will be reconciled
following the end of the year to ensure that the final payment amount
is consistent with the hospital's prospectively determined
uncompensated care payment for the FY 2023.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58833 and 58834), we
finalized a voluntary process through which a hospital may submit a
request to its MAC for a lower per discharge interim uncompensated care
payment amount, including a reduction to zero, once before the
beginning of the Federal fiscal year and/or once during the Federal
fiscal year. In conjunction with this request, the hospital must
provide supporting documentation demonstrating that there would likely
be a significant recoupment (for example, 10 percent or more of the
hospital's total uncompensated care payment or at least $100,000) at
cost report settlement if the per discharge amount is not lowered. For
example, a hospital might submit documentation showing a large
projected increase in discharges during the fiscal year to support
reduction of its per discharge uncompensated care payment amount. As
another example, a hospital might request that its per discharge
uncompensated care payment amount be reduced to zero midyear if the
hospital's interim uncompensated care payments during the year have
already surpassed the total uncompensated care payment calculated for
the hospital.
Under the policy we finalized in the FY 2021 IPPS/LTCH PPS final
rule, the hospital's MAC would evaluate these requests and the
supporting documentation before the beginning of the Federal fiscal
year and/or with midyear requests when the historical average number of
discharges is lower than the hospital's projected FY 2023 discharges.
If following review of the request and the supporting documentation,
the MAC agrees that there likely would be significant recoupment of the
hospital's interim Medicare uncompensated care payments at cost report
settlement, the only change that will be made is to lower the per
discharge amount either to the amount requested by the hospital or
another amount determined by the MAC to be appropriate to reduce the
likelihood of a substantial recoupment at cost report settlement. If
the MAC determines it would be appropriate to reduce the interim
Medicare uncompensated care payment per discharge amount, that updated
amount will be used for purposes of the outlier payment calculation for
the remainder of the Federal fiscal year. We refer readers to the
Addendum to this final
[[Page 49046]]
rule for a more detailed discussion of the steps for determining the
operating and capital Federal payment rate and the outlier payment
calculation. No change would be made to the total uncompensated care
payment amount determined for the hospital on the basis of its Factor
3. In other words, any change to the per discharge uncompensated care
payment amount will not change how the total uncompensated care payment
amount will be reconciled at cost report settlement.
Comment: A couple of commenters recommended that CMS use the
traditional payment reconciliation process to calculate final payments
for uncompensated care costs pursuant to section 1886(r)(2) of the Act.
These commenters did not object to CMS using prospective estimates,
derived from the best data available, to calculate interim payments for
uncompensated care costs. However, the commenters stated that interim
payments should be subject to later reconciliation based on estimates
derived from actual data from the federal fiscal year. These same
commenters also asserted that CMS has failed to provide a meaningful
opportunity to review and comment on the more recent data used in
developing the final rule before the agency publishes the final rule.
Response: Consistent with the position that we have taken in
rulemaking for previous years, we continue to believe that applying our
best estimates of the three factors used in the calculation of
uncompensated care payments to determine payments prospectively is most
conducive to administrative efficiency, finality, and predictability in
payments (78 FR 50628; 79 FR 50010; 80 FR 49518; 81 FR 56949; 82 FR
38195; 84 FR 42373; 85 FR 58833 and 86 FR 45246). We continue to
believe that, in affording the Secretary the discretion to estimate the
three factors used to determine uncompensated care payments and by
including a prohibition against administrative and judicial review of
those estimates in section 1886(r)(3) of the Act, Congress recognized
the importance of finality and predictability under a prospective
payment system. As a result, we do not agree with the commenters'
suggestion that we should establish a process for reconciling our
estimates of uncompensated care payments, which would be contrary to
the notion of a prospective payment system. Furthermore, we note that
this rulemaking has been conducted consistent with the requirements of
the Administrative Procedure Act and Title XVIII of the Act. Under the
Administrative Procedure Act, a proposed rule is required to include
either the terms or substance of the proposed rule or a description of
the subjects and issues involved. In this case, the FY 2023 IPPS/LTCH
PPS proposed rule included a detailed discussion of our proposed
methodology for calculating Factor 3 and the data that would be used.
We made public the best data available at the time of the proposed rule
in order to allow hospitals to understand the anticipated impact of the
proposed methodology and submit comments, and we have considered those
comments in determining our final policies for FY 2023.
(e) Process for Notifying CMS of Merger Updates and To Report Upload
Issues
As we have done for every proposed and final rule beginning in FY
2014, in conjunction with this final rule, we will publish on the CMS
website a table listing Factor 3 for all hospitals that we estimate
will receive empirically justified Medicare DSH payments in FY 2023
(that is, those hospitals that will receive interim uncompensated care
payments during the fiscal year), and for the remaining subsection (d)
hospitals and subsection (d) Puerto Rico hospitals that have the
potential of receiving an uncompensated care payment in the event that
they receive an empirically justified Medicare DSH payment for the
fiscal year as determined at cost report settlement. However, we note
that a Factor 3 will not be published for new hospitals and hospitals
that are subject to the alternative trim for hospitals with potentially
aberrant data that are not projected to be DSH-eligible.
We also will publish a supplemental data file containing a list of
the mergers that we are aware of and the computed uncompensated care
payment for each merged hospital. In the DSH uncompensated care
supplemental data file, we list new hospitals and the 10 hospitals that
would be subject to the alternative trim for hospitals with potentially
aberrant data that are not projected to be DSH-eligible, with a N/A in
the Factor 3 column.
Hospitals had 60 days from the date of public display of the FY
2023 IPPS/LTCH PPS proposed rule in the Federal Register to review the
table and supplemental data file published on the CMS website in
conjunction with the proposed rule and to notify CMS in writing of
issues related to mergers and/or to report potential upload
discrepancies due to MAC mishandling of Worksheet S-10 data during the
report submission process (for example, report not reflecting audit
results due to MAC mishandling or most recent report differs from
previously accepted amended report due to MAC mishandling). We stated
that comments raising issues or concerns that are specific to the
information included in the table and supplemental data file could be
submitted by email to the CMS inbox at [email protected]. We
indicated that we would address comments related to mergers and/or
reporting upload discrepancies submitted to the CMS DSH inbox as
appropriate in the table and the supplemental data file that we publish
on the CMS website in conjunction with the publication of this FY 2023
IPPS/LTCH PPS final rule. All other comments submitted in response to
our proposed policies for determining uncompensated care payments for
FY 2023 must have been submitted in one of the three ways found in the
ADDRESSES section of the proposed rule before the close of the comment
period in order to be assured consideration. In addition, we note that
the CMS DSH inbox is not intended for Worksheet S-10 audit process
related emails, which should be directed to the MACs.
For FY 2023, we again proposed that hospitals would have 15
business days from the date of public display of this FY 2023 IPPS/LTCH
PPS final rule in the Federal Register to review and submit comments on
the accuracy of the table and supplemental data file published in
conjunction with the final rule. Any changes to Factor 3 would be
posted on the CMS website and would be effective beginning October 1,
2022. We also explained that we continue to believe that hospitals have
sufficient opportunity during the comment period for the proposed rule
to provide information about recent and/or pending mergers and/or to
report upload discrepancies. Hospitals do not enter into mergers
without advanced planning. A hospital can inform CMS during the comment
period for the proposed rule regarding any merger activity not
reflected in supplemental file published in conjunction with the
proposed rule. As discussed in the proposed rule, we expected to use
data from the March 2022 HCRIS extract for the FY 2023 final rule,
which contributed to our increased confidence that hospitals would have
be able to comment on mergers and report any upload discrepancies
during the comment period for the FY 2023 IPPS/LTCH PPS proposed rule.
However, we noted that in the event that there were any remaining
merger updates and/or upload discrepancies after the final rule, the 15
business days from the date of
[[Page 49047]]
public display of the FY 2023 IPPS/LTCH PPS final rule deadline should
allow for the time necessary to prepare and make any corrections to
Factor 3 calculations before the beginning of the Federal fiscal year.
We did not receive comments on the notification process for mergers
or data upload issues. We are finalizing our proposal to afford
hospitals 15 business days from the public display of this FY 2023
IPPS/LTCH PPS final rule to submit via email any updated information on
mergers and/or to report upload discrepancies. We also note that the
historical FY 2018 and FY 2019 cost reports are publicly available on a
quarterly basis on the CMS website for analysis and additional review
of cost report data, separate from the supplemental data file published
with this final rule.
E. Supplemental Payment for Indian Health Service and Tribal Hospitals
and Puerto Rico Hospitals for FY 2023 and Subsequent Fiscal Years
In the IPPS/LTCH PPS rulemaking for several previous fiscal years,
Indian Health Service (IHS) and Tribal hospitals and hospitals located
in Puerto Rico have commented about the unique challenges they face
with respect to uncompensated care due to structural differences in
health care delivery and financing in these areas compared to the rest
of the country. In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR
28396), we referred readers to the FY 2022 IPPS/LTCH PPS final rule (86
FR 45242 and 45243) and the FY 2021 IPPS/LTCH PPS final rule (85 FR
58824 and 58825) for a discussion of these comments. We also explained
that we appreciated the concerns raised and the input offered by
commenters regarding the methodology for calculating uncompensated care
payments for IHS/Tribal hospitals and the Puerto Rico hospitals. After
taking into consideration stakeholders' longstanding concerns and their
input on potential approaches to address these concerns, we proposed to
establish a new permanent supplemental payment under the IPPS for IHS/
Tribal hospitals and hospitals located in Puerto Rico. As discussed in
greater detail in the proposed rule, we stated our belief that the
proposed new supplemental payment would mitigate the anticipated impact
on IHS/Tribal hospitals and hospitals located in Puerto Rico from our
proposal to discontinue the use of low-income insured days as a proxy
for their uncompensated care costs for purposes of determining Factor 3
of the uncompensated care payment methodology by providing for an
additional payment to these hospitals that would be determined based
upon the difference between the amount of the uncompensated care
payment determined for the hospital using Worksheet S-10 data and an
approximation of the amount the hospital would have received if we had
continued to use low-income insured days as a proxy for uncompensated
care.
As background, beginning in the FY 2018 IPPS/LTCH PPS final rule
when we first included Worksheet S-10 data in the calculation of Factor
3, and continuing through the FY 2022 IPPS/LTCH PPS final rule, we
relied on the authority under section 1886(r)(2)(C)(i) of the Act to
use alternative data that is a better proxy for the costs of hospitals
for treating the uninsured in order to determine Factor 3 for IHS/
Tribal and Puerto Rico hospitals using low-income insured days as a
proxy for uncompensated care costs. Since FY 2019, Factor 3 for these
hospitals has been determined using FY 2013 Medicaid days and the most
recent available data on SSI days. We believed this approach was
appropriate as the FY 2013 Medicaid days data reflect the most recent
available information regarding these hospitals' low-income insured
days before any expansion of Medicaid. In addition, because we
continued to use low-income insured patient days as a proxy for
uncompensated care for Puerto Rico hospitals and residents of Puerto
Rico are not eligible for SSI benefits, we continued to use a proxy for
SSI days for Puerto Rico hospitals consisting of 14 percent of the
hospital's Medicaid days, as initially adopted in the FY 2017 IPPS/LTCH
PPS final rule (81 FR 56953 through 56956). However, we recognized that
our proposal, which we are finalizing in this final rule, to
discontinue the use of low-income insured days as a proxy for
uncompensated care costs would result in a significant financial
disruption to the IHS/Tribal hospitals and hospitals located in Puerto
Rico. We explained that, for the vast majority of these hospitals, the
proposal to use uncompensated care data reported on Worksheet S-10 to
determine Factor 3 of the uncompensated care payment methodology would
be expected to result in an approximately 90 to 100 percent reduction
in uncompensated care payments for FY 2023 compared to FY 2022. We
referred readers to section I.H. of Appendix A of the proposed rule for
a discussion of the anticipated impact of the proposal to use
uncompensated care costs from Worksheet S-10 to determine uncompensated
care payments for IHS/Tribal hospitals and Puerto Rico hospitals and
the proposal to establish a new supplemental payment for these
hospitals.
In consideration of the unique circumstances faced by the hospitals
and the comments received from IHS/Tribal hospitals and Puerto Rico
hospitals in response to prior rulemaking, raising concerns regarding
financial stability in the event of a change in the data used to
determine Factor 3, we proposed to use our exceptions and adjustments
authority under section 1886(d)(5)(I) of the Act to establish a new
permanent supplemental payment under the IPPS for IHS/Tribal hospitals
and hospitals located in Puerto Rico, beginning in FY 2023. Section
1886(d)(5)(I) of the Act authorizes the Secretary to provide by
regulation for such other exceptions and adjustments to the payment
amounts under section 1886(d) of the Act as the Secretary deems
appropriate. We have determined, after taking into consideration
stakeholders' comments from prior rulemakings, that the supplemental
payment is necessary so as not to cause undue long-term financial
disruption to these hospitals as a result of our proposal to
discontinue the use of low-income insured days as a proxy for
uncompensated care in determining Factor 3 for IHS/Tribal hospitals and
Puerto Rico hospitals beginning in FY 2023. In the proposed rule, we
stated our belief that the proposed supplemental payment would help to
mitigate the anticipated impact of the proposed changes to the
uncompensated care payment methodology for these hospitals and
therefore prevent undue long-term financial disruption for these
providers.
We also stated that the proposed new supplemental payment would not
change in any way the DSH payment methodology under section
1886(d)(5)(F) of the Act or the uncompensated care payment methodology
under section 1886(r) of the Act. Therefore, the total uncompensated
care payment amount would not be affected by this proposal to establish
a supplemental payment for IHS/Tribal and hospitals located in Puerto
Rico nor would there be any impact on the amount of the uncompensated
care payment determined for each DSH-eligible hospital under Sec.
412.106(g)(1) of the regulations.
We proposed that for IHS and Tribal hospitals and hospitals located
in Puerto Rico for which Factor 3 of the uncompensated care payment
methodology was determined using the low-income insured days proxy in
FY
[[Page 49048]]
2022, we would calculate a supplemental payment as follows. We would
use the hospital's FY 2022 uncompensated care payment as the starting
point for this calculation. We explained that using the FY 2022
uncompensated care payment would be an appropriate starting point
because FY 2022 is the most recent year for which we used low-income
insured days data in the determination of uncompensated care payments
for IHS/Tribal hospitals and Puerto Rico hospitals and the purpose of
the proposed supplemental payment is to avoid undue long-term financial
disruption to these hospitals as a result of our proposal to
discontinue the use of low-income insured days as a proxy for
uncompensated care beginning in FY 2023. The base year amount would be
calculated as the hospital's FY 2022 uncompensated care payment
adjusted by one plus the percent change in the total uncompensated care
amount between the applicable year (for example, FY 2023 for purposes
of this rulemaking) and FY 2022, where the total uncompensated care
amount for a year is determined as the product of Factor 1 and Factor 2
for the applicable year. For example, if a hospital's FY 2022
uncompensated care payment was 1 million, and the percent change
between FY 2023 and FY 2022 total uncompensated care payments was
negative 9.1 percent, then the hospital's FY 2023 base year amount
would be 1 million * (1+(-0.091)), which is 909,000. For the hospitals
that were not projected to be DSH eligible in FY 2022, we proposed to
use the uncompensated care payment that the hospital would receive, if
the hospital were to be determined to be DSH eligible in FY 2022 at
cost report settlement. For purposes of the proposed rule, the percent
change between the proposed FY 2023 uncompensated care amount and final
FY 2022 uncompensated care amount was projected to be negative 9.1
percent. (This negative 9.1 percent change was calculated based on the
difference between the proposed FY 2023 uncompensated care amount of
approximately $6.537 billion and the final FY 2022 uncompensated care
amount of approximately $7.192 billion, divided by the final FY 2022
uncompensated care amount). Therefore, we proposed to calculate each
hospital's base year amount for FY 2023 by multiplying its FY 2022
uncompensated care amount by 0.909 (1-0.091). We note that in order to
determine the base year amount for a future fiscal year, the
calculation would be the hospital's FY2022 uncompensated care amount
multiplied by one plus the percent change in total uncompensated care
payments between FY 2022 and the applicable fiscal year. The hospital's
supplemental payment for a fiscal year would then be determined as the
difference between the hospital's base year amount and its
uncompensated care payment for the applicable fiscal year as determined
under Sec. 412.106(g). If the base year amount is equal to or lower
than the hospital's uncompensated care payment for the current fiscal
year, the hospital would not receive a supplemental payment because the
hospital would not be experiencing financial disruption in that year as
a result of the use of uncompensated care data from the Worksheet S-10
in determining Factor 3 of the uncompensated care payment methodology.
We proposed to align the eligibility and payment processes for the
new supplemental payment with the processes used to make uncompensated
care payments. Consistent with the process for determining eligibility
to receive interim uncompensated care payments adopted in the FY 2014
IPPS/LTCH final rule, for the supplemental payment, we proposed to base
eligibility to receive interim supplemental payments on a projection of
DSH eligibility for the applicable fiscal year. In addition, consistent
with the approach that is used to calculate interim uncompensated care
payments on a per discharge basis, for the supplemental payment, we
proposed to use an average of historical discharges to calculate a per
discharge amount for interim supplemental payments. We referred readers
to the FY 2014 IPPS/LTCH PPS final rule for additional background and
discussion of uncompensated care payment processes (78 FR 50643 through
50647). Consistent with our proposal to use 3 years of historical
discharges to determine interim uncompensated care payments for a
fiscal year, we proposed that the amount of a hospital's supplemental
payment calculated for a fiscal year would be divided by the hospital's
historical 3-year average of discharges computed using the most recent
available data to determine an estimated per discharge payment amount.
For FY 2023, we proposed to use FY 2018, FY 2019, and FY 2021
discharge data to determine a hospital's historical 3-year average of
discharges, because we continued to believe the FY 2020 discharge data
would underestimate discharges, due to the effects of the COVID-19
pandemic in FY 2020. In addition, consistent with the policy of
including per-discharge uncompensated care payment amounts in the
outlier calculation, which was initially adopted in the FY 2014 IPPS/
LTCH PPS final rule, we proposed to use our authority under section
1886(d)(5)(I) of the Act to include the per-discharge supplemental
payment in the outlier payment determination under section
1886(d)(5)(A) of the Act. We referred readers to the Addendum to the
proposed rule for further discussion of the outlier payment
calculation.
Consistent with the process used to reconcile interim uncompensated
care payments, we proposed that the MAC would reconcile the interim
supplemental payments at cost report settlement to ensure that the
hospital receives the full amount of the supplemental payment that was
determined prior to the start of the fiscal year. Consistent with the
process used for cost reporting periods that span multiple Federal
fiscal years, we proposed that a pro rata supplemental payment
calculation may be made if the hospital's cost reporting period differs
from the Federal fiscal year. Thus, the final supplemental payment
amounts that would be included on a cost report spanning two Federal
fiscal years would be the pro rata share of the supplemental payment
associated with each Federal fiscal year. This pro rata share would be
determined based on the proportion of the applicable Federal fiscal
year that is included in that cost reporting period. We referred
readers to the FY 2014 interim final rule for additional background and
discussion of the processes for determining pro rata uncompensated care
payments (78 FR 61191 through 61196).
We proposed that the MAC would make a final determination with
respect to a hospital's eligibility to receive the supplemental payment
for a fiscal year, in conjunction with its final determination of the
hospital's eligibility for DSH payments and uncompensated care payments
for that fiscal year. We noted that if a hospital is determined not to
be DSH eligible for a fiscal year then the hospital would not be
eligible to receive a supplemental payment for that fiscal year. In the
proposed rule, we stated our belief that linking eligibility for the
supplemental payment to eligibility for DSH payments and the
uncompensated care payment is appropriate because a hospital that is
not eligible to receive an uncompensated care payment for a fiscal year
would not experience any financial disruption due to the
discontinuation of the low-income insured days proxy and the use of
[[Page 49049]]
Worksheet S-10 data in determining Factor 3 for that fiscal year.
In addition, we proposed that IHS/Tribal hospitals and Puerto Rico
hospitals that do not have a FY 2022 Factor 3 amount determined under
Sec. 412.106(g)(1)(iii)(C)(9) using the low-income insured days proxy
or that are new hospitals that begin participating in the Medicare
program on or after October 1, 2022, would not be eligible to receive
the supplemental payment. We explained that these hospitals will not
experience any reduction to their uncompensated care payments due to
the proposed discontinuation of the low-income insured days proxy
because they are not currently receiving uncompensated care payments
determined using the proxy. We proposed to redesignate the existing
provision at Sec. 412.106(h) as Sec. 412.106(i) and to add a new
provision at Sec. 412.106(h) to reflect the methodology for
calculating the supplemental payment for FY 2023 and subsequent fiscal
years.
We sought comments on our proposal to establish this new
supplemental payment for IHS/Tribal hospitals and Puerto Rico
hospitals. As discussed in section IV.D.3. of this final rule, we also
solicited comments on alternatives both to our proposal to use data on
uncompensated care costs from the Worksheet S-10 to determine Factor 3
for IHS/Tribal hospitals and Puerto Rico hospitals and to the continued
use of low-income insured days as a proxy for the uncompensated care
costs of these hospitals. In addition, we sought comments on how to
best measure and define the uncompensated care costs associated with
these hospitals that might not otherwise be captured in Factor 3
calculations based on Worksheet S-10 data. Given the close
interrelationship between our proposed changes to the methodology for
determining Factor 3 of the uncompensated care payment methodology for
IHS/Tribal hospitals and Puerto Rico hospitals and the proposed new
supplemental payment for these hospitals, we discuss the comments
received on both proposals in this section of this final rule.
Comment: The majority of commenters expressed appreciation for CMS'
creativity in devising the proposed new supplemental payment to
mitigate the anticipated financial impact from the discontinuation of
low-income insured days as a proxy for uncompensated care costs for IHS
and Tribal hospitals and hospitals located in Puerto Rico. Some
commenters stated there are longstanding inequities in DSH and
uncompensated care calculations for Puerto Rico hospitals due to the
lack of an SSI benefit for residents of the U.S. territories. These
commenters also suggested an alternative methodology for calculating
the supplemental payment for hospitals in Puerto Rico.
Specifically, the commenters recommended that CMS calculate the
supplemental payment for Puerto Rico hospitals using a base year amount
determined from Medicaid days and an SSI days proxy of at least 40
percent but no less than 35 percent of Medicaid days, instead of the
current 14 percent. Commenters further suggested that CMS determine a
second empirical DSH eligibility threshold for hospitals in Puerto Rico
based on the suggested SSI days proxy of 40 percent of Medicaid days,
such that if the sum of the Medicaid fraction and the SSI days proxy
exceeds 15 percent, then the hospital would be eligible to receive
uncompensated care payments and the new supplemental payment. A
commenter, in support of this alternative methodology, noted that,
under the proposed supplemental payment methodology, Puerto Rico
hospitals would receive an 11.06 percent reduction in Medicare DSH
payments in FY 2023 as compared to FY 2022. The same commenter noted
that the reduction in DSH payments could also reduce Medicare Advantage
(MA) benchmarks for Puerto Rico in 2024 and, as a result, impact
approximately 630,000 Medicare beneficiaries enrolled in MA plans,
including 280,000 dual-eligible individuals.
Another commenter expressed support for the proposed
discontinuation of low-income insured days as a proxy for uncompensated
care costs for IHS and Tribal hospitals and hospitals located in Puerto
Rico. However, this commenter recommended that CMS reduce the size of
supplemental payments to hospitals in Puerto Rico to an empirically
justified level. This commenter noted that the continued use of
Medicaid days as a proxy for uncompensated care costs in Puerto Rico
has resulted in a substantial increase in uncompensated care payments.
Further, this commenter stated that maintaining the overall payments at
the proposed levels through the supplemental payment would create high
Medicare profit margins at Puerto Rico hospitals and distort the MA
benchmarks, as it would increase FFS spending by more than 25 percent
above what it would have been if Puerto Rico hospitals received
uncompensated care payments based only on their reported uncompensated
care costs. The commenter also opposed the disbursement of the
supplemental payments as an add-on payment to the IPPS payment rates
for hospitals in Puerto Rico and recommended that uncompensated care
payments not be factored into MA benchmarks.
A few commenters expressed support for the proposed supplemental
payment without suggesting enhancements to the policy. One of these
commenters emphasized the importance of implementing the supplemental
payment as a permanent policy.
A commenter opposed CMS' proposal to discontinue the calculation of
uncompensated care costs using low income insured days for hospitals in
Puerto Rico without a separate policy in place for receiving the
supplemental payment. Instead, the commenter suggested that CMS use a
phased approach such that the agency would continue to calculate
uncompensated care costs for hospitals in Puerto Rico using low income
insured days until a future rulemaking. The commenter further suggested
that CMS eventually phase in payments calculated using Worksheet S-10
along with the supplemental payment.
Another commenter specifically opposed the exclusion of new
hospitals in Puerto Rico from receiving the supplemental payment. The
same commenter noted that because hospitals newly established after
October 2013 did not have Medicaid days for the period before the
Affordable Care Act was implemented, the uncompensated care costs for
these hospitals are already calculated using Worksheet S-10 but with no
supplemental payments. The commenter also noted that because hospitals
established after October 2013 operate under the same conditions as
hospitals established before October 2013, these hospitals should
receive the proposed supplemental payments in a manner similar to those
hospitals for which we proposed to transition to the use of Worksheet
S-10 data to determine uncompensated care costs starting in FY 2023.
Finally, this commenter requested that CMS consider calculating
uncompensated care costs for an impacted Puerto Rico hospital
(established after 2013) for the period from FY 2020 through FY 2022
using Medicaid days and not Worksheet S-10 data.
Response: We appreciate this input from commenters regarding the
proposal to establish a new supplement payment for hospitals in Puerto
Rico and IHS and Tribal hospitals and the concerns raised regarding the
proposed changes to the data used to determine uncompensated care costs
for these hospitals. We continue to recognize the unique financial
circumstances and challenges
[[Page 49050]]
faced by Puerto Rico hospitals related to uncompensated care cost
reporting on Worksheet S-10. With regard to the recommendation to
calculate the supplemental payment using a base year amount determined
using Medicaid days and an SSI days proxy of at least 40 percent, we
note that since FY 2019, Factor 3 for hospitals in Puerto Rico has been
determined using FY 2013 Medicaid days and the most recent available
data on SSI days and because residents of Puerto Rico are not eligible
for SSI benefits, we continued to use a proxy for SSI days for Puerto
Rico hospitals consisting of 14 percent of the hospital's Medicaid
days, as initially adopted in the FY 2017 IPPS/LTCH PPS final rule (81
FR 56953 through 56956). We also note that we did not receive comments
expressing concerns regarding this policy when it was finalized for FY
2019. However, for the reasons explained in the FY 2023 IPPS/LTCH PPS
proposed rule (87 FR 28391), we have determined that data on low income
insured days is no longer a good proxy for the costs of hospitals in
treating the uninsured and that we can no longer conclude that
alternative data to the data on uncompensated care costs reported on
the Worksheet S-10 are available for Puerto Rico hospitals that are a
better proxy for the costs of these hospitals in treating the
uninsured.
With respect to the comment recommending that we adopt a second
eligibility threshold for empirically justified DSH payments based on
the suggested SSI days proxy of 40 percent of Medicaid days, we note
that in the FY 2023 IPPS/LTCH PPS proposed rule, we did not propose to
adopt a proxy for Puerto Rico hospitals' SSI days for purposes of
determining eligibility to receive DSH payments and calculating the
empirically justified Medicare DSH payment. Therefore, we consider this
comment to be outside the scope of the proposed rule. We note, however,
that while section 1886(r)(2)(C)(i) of the Act allows for the use of
alternative data as a proxy to determine the costs of subsection (d)
hospitals for treating the uninsured for purposes of determining
uncompensated care payments, section 1886(r)(1) of the Act requires the
Secretary to pay an empirically justified DSH payment that is equal to
25 percent of the amount of the Medicare DSH payment that would
otherwise be made under section 1886(d)(5)(F) of the Act to a
subsection (d) hospital. Section 1886(d)(5)(F)(vi) of the Act, which
prescribes the disproportionate patient percentage used to determine
empirically justified Medicare DSH payments, specifically refers to the
SSI days in the Medicare fraction and does not allow the use of
alternative data. Accordingly, we disagree with the commenter's
assertion that there is legal support for CMS to use a proxy for Puerto
Rico hospitals' SSI days in the calculation of the empirically
justified Medicare DSH payment.
Regarding the comment that hospitals in Puerto Rico hospitals will
receive an 11.06 percent reduction in Medicare DSH payments in FY 2023
as compared to FY 2022, we note that, under the policies we are
finalizing in this final rule, the combined amount of uncompensated
care payments and supplemental payments for FY 2023 will be less than
11.06 percent below the amount of uncompensated care payments for FY
2022. We refer readers to the discussion of the impact of our final
policies regarding Medicare uncompensated care payments and the new
supplemental payment in Section I.H. of Appendix A of this final rule.
In addition, we note that the base year amount used in calculating the
supplemental payment will change over time relative to the total
uncompensated care amount. Accordingly, for years in which there is an
increase in the total uncompensated care total amount, the hospital's
supplemental payment calculation would reflect a higher base year
amount, and for the years in which there is a decrease in the total
uncompensated care total amount, the hospital's supplemental payment
calculation would reflect a lower base year amount.
With regard to the comment that the supplemental payment would
impact the Medicare Advantage benchmarks, we believe the combined
amount of empirically justified DSH payments, uncompensated care
payments, and supplemental payments to IHS/Tribal hospitals and Puerto
Rico hospitals will be comparable to the amount these hospitals would
have received if CMS had continued to use the low-income days proxy to
determine Factor 3 of the uncompensated care payment methodology. As a
result, the new supplemental payments are expected to have no impact on
MA benchmarks in Puerto Rico. Given that the MA capitation calculations
are on a different timeline than the annual rulemaking for the IPPS
(that is, calendar year rather than Federal fiscal year), the 2024 MA
benchmarks would be the first time any effects would be reflected.
We disagree with the commenter who noted that there is no mechanism
in place for receiving the supplemental payment. We refer readers to
the FY 2014 IPPS/LTCH PPS proposed rule for additional background and
discussion of uncompensated care payment processes (78 FR 50643 through
50647). As discussed in the FY 2023 IPPS/LTCH PPS proposed rule, we
proposed to determine an estimated per discharge add-on payment amount
based on the amount of a hospital's supplemental payment calculated for
a fiscal year divided by the hospital's historical three-year average
of discharges, computed using the most recently available data.
Regarding the concerns raised with respect to our proposal that
hospitals in Puerto Rico established after October 2013 would be
ineligible to receive the supplemental payment, we note that, as
explained in the FY 2023 IPPS/LTCH PPS proposed rule, we proposed to
establish the supplemental payment to mitigate any long-term financial
disruption as a result of our proposal to discontinue the use of low-
income insured days as a proxy for uncompensated care costs in
determining Factor 3. Uncompensated care costs for Puerto Rico
hospitals established after October 2013 are already determined using
Worksheet S-10 data. As a result, these hospitals will not experience
any reduction to their uncompensated care payments due to the proposed
discontinuation of the low-income insured days proxy because they are
not currently receiving uncompensated care payments determined using
the proxy. Thus, we do not believe it is appropriate to modify the
proposed eligibility criteria for the supplemental payment to include
these hospitals at this time. However, we intend to monitor
uncompensated care payments to these hospitals and may revisit this
issue in future rulemaking.
Regarding the commenter that requested that CMS consider
calculating the uncompensated care costs for FY 2020 through FY 2022
for a Puerto Rico hospital (established after 2013) using Medicaid days
and not Worksheet S-10 data, we believe this comment is out of scope of
this rulemaking. We note that the policy for new hospitals in Puerto
Rico was initially adopted in the FY 2019 IPPS/LTCH PPS final rule, and
we did not propose any modifications to this policy in the FY 2023
IPPS/LTCH PPS proposed rule.
Comment: Commenters expressed support for CMS' proposal to
establish a new supplemental payment for IHS and Tribal hospitals to
mitigate the anticipated impact of the agency's proposal to discontinue
the use of low-income insured days as a proxy to calculate
uncompensated care payments for these hospitals. Commenters requested
that CMS confirm that the
[[Page 49051]]
supplemental payments would result in an equal or higher uncompensated
care payment amount than in prior years. Commenters also opposed the
exclusion of new IHS and Tribal hospitals from receiving the
supplemental payment, with another commenter suggesting that CMS
finalize the supplemental payment for existing IHS/Tribal hospitals as
an interim measure while the agency devises an alternate approach that
would be applicable to all IHS/Tribal hospitals. These commenters also
urged CMS to provide an option for hospitals to opt out of the new
supplemental payment methodology in the future years if they preferred
payment in a manner similar to non-Tribal hospitals.
Response: We appreciate the input from commenters on our proposal
to establish a new supplemental payment for IHS and Tribal hospitals.
We continue to recognize the unique nature of these hospitals and the
special circumstances they face.
Regarding commenters' request that CMS confirm that the proposed
supplemental payment will result in an overall payment amount that is
equal to or higher than the uncompensated care payments for prior years
determined using the low-income days proxy, we note that the base year
amount used to calculate a hospital's supplemental payment will change
over time relative to changes in the total uncompensated care amount.
For years in which there is an increase in the total uncompensated care
total amount, the hospital's supplemental payment calculation would use
a higher base year amount, and for the years in which there is a
decrease in the total uncompensated care total amount, the hospital's
supplemental payment calculation would use a lower base year amount.
Regarding the concerns raised by commenters with respect to our
proposal to limit the new supplemental payment to existing IHS/Tribal
hospitals that have a Factor 3 amount for FY 2022 determined using the
low-income insured days proxy, we note that, as explained in the FY
2023 IPPS/LTCH PPS proposed rule, we proposed to establish the
supplemental payment to mitigate any long-term financial disruption as
a result of our proposal to discontinue the use of low-income insured
days as a proxy for uncompensated care costs in determining Factor 3.
However, new IHS/Tribal hospitals for which uncompensated care costs
have not previously been determined using the low-income insured days
proxy will not experience any reduction to their uncompensated care
payments due to the proposed discontinuation of the proxy. Thus, we do
not believe it is appropriate to extend the supplemental payment to
include new IHS/Tribal hospitals at this time. However, we will monitor
uncompensated care payments to these hospitals and may revisit this
issue in future rulemaking.
In regard to an option for hospitals to opt out of the new
supplemental payment methodology in the future years, we believe that
no modification to our proposed methodology is necessary, because,
under the proposed supplemental payment methodology, which we are
finalizing in this final rule, an IHS/Tribal hospital or Puerto Rico
hospital will receive the full uncompensated care payment determined
using its Worksheet S-10 data. A hospital will only receive the
supplemental payment if it increases the overall amount payable to the
hospital, so there does not appear to be a clear reason for a hospital
to opt out of the supplemental payment.
After consideration of the comments received, we are finalizing
both our proposal to discontinue the use of the low-income insured days
proxy and to rely solely on Worksheet S-10 data to calculate Factor 3
of the uncompensated care payment methodology for IHS/Tribal hospitals
and Puerto Rico hospitals and our proposal to establish a new
supplemental payment for Puerto Rico hospitals and IHS/Tribal
hospitals, without modification. We are also finalizing the proposed
provision at Sec. 412.106(h) governing the new supplemental payment
without modification.
The percent change between the final FY 2023 uncompensated care
amount and final FY 2022 uncompensated care amount is negative 4.4
percent. (This negative 4.4 percent change is calculated based on the
difference between the final FY 2023 uncompensated care amount of
approximately $6.874 billion and the final FY 2022 uncompensated care
amount of approximately $7.192 billion, divided by the final FY 2022
uncompensated care amount). Therefore, consistent with the methodology
in Sec. 412.106(h)(3)(i), we will calculate each hospital's base year
amount for FY 2023 by multiplying its FY 2022 uncompensated care amount
by 0.956 (1-0.044).
F. Medicare Disproportionate Share Hospital (DSH) Payments: Counting
Days Associated With Section 1115 Demonstrations in the Medicaid
Fraction (Sec. 412.106)
In the FY 2023 IPPS/LTCH PPS proposed rule, we proposed revisions
to the regulation relating to the treatment of section 1115
demonstration days for purposes of the DSH adjustment (87 FR 28398
through 28402). The agency received numerous, detailed comments on this
proposal. We thank the commenters for their input on the proposal. Due
to the number and nature of the comments that we received on our
proposal, and after further consideration of the issue, we have
determined not to move forward with the current proposal. We expect to
revisit the treatment of section 1115 demonstration days for purposes
of the DSH adjustment in future rulemaking, and we encourage interested
parties to review any future proposal on this issue and to submit their
comments at that time.
V. Other Decisions and Changes to the IPPS for Operating Costs
A. Changes in the Inpatient Hospital Update for FY 2023 (Sec.
412.64(d))
1. FY 2023 Inpatient Hospital Update
In accordance with section 1886(b)(3)(B)(i) of the Act, each year
we update the national standardized amount for inpatient hospital
operating costs by a factor called the ``applicable percentage
increase.'' For FY 2023, we stated in the proposed rule that we are
setting the applicable percentage increase by applying the adjustments
listed in this section in the same sequence as we did for FY 2022. (We
note that section 1886(b)(3)(B)(xii) of the Act required an additional
reduction each year only for FYs 2010 through 2019.) Specifically,
consistent with section 1886(b)(3)(B) of the Act, as amended by
sections 3401(a) and 10319(a) of the Affordable Care Act, we stated
that we are setting the applicable percentage increase by applying the
following adjustments in the following sequence. The applicable
percentage increase under the IPPS for FY 2023 is equal to the rate-of-
increase in the hospital market basket for IPPS hospitals in all areas,
subject to all of the following:
A reduction of one-quarter of the applicable percentage
increase (prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase (with no
adjustments)) for hospitals that fail to submit quality information
under rules established by the Secretary in accordance with section
1886(b)(3)(B)(viii) of the Act.
A reduction of three-quarters of the applicable percentage
increase (prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase
[[Page 49052]]
(with no adjustments)) for hospitals not considered to be meaningful
EHR users in accordance with section 1886(b)(3)(B)(ix) of the Act.
An adjustment based on changes in economy-wide multifactor
productivity (MFP) (the productivity adjustment).
Section 1886(b)(3)(B)(xi) of the Act, as added by section 3401(a)
of the Affordable Care Act, states that application of the productivity
adjustment may result in the applicable percentage increase being less
than zero.
We note, in compliance with section 404 of the MMA, in the FY 2022
IPPS/LTCH PPS final rule (86 FR 45194 through 45204), we replaced the
2014-based IPPS operating and capital market baskets with the rebased
and revised 2018-based IPPS operating and capital market baskets
beginning in FY 2022.
We proposed to base the FY 2023 market basket update used to
determine the applicable percentage increase for the IPPS on IHS Global
Inc.'s (IGI's) fourth quarter 2021 forecast of the 2018-based IPPS
market basket rate-of-increase with historical data through third
quarter 2021, which was estimated to be 3.1 percent. We also proposed
that if more recent data subsequently became available (for example, a
more recent estimate of the market basket update), we would use such
data, if appropriate, to determine the FY 2023 market basket update in
the final rule.
Comment: Several commenters were concerned the proposed market
basket update was not accurately reflecting hospital input inflation
citing many examples including ongoing labor shortages, supply chain
disruptions, prices for medical equipment, and the impact of Ukraine/
Russia war. They urged CMS to adjust its market basket update
methodology for FY 2023 to adjust for more recent data and to further
adjust its estimate to appropriately capture significant inflationary
trends that will further fuel rising hospital operating costs but may
not yet be fully captured in IGI's updated market basket forecast in
the second quarter of 2022. Commenters requested CMS recognize that
hospital inflation will generally lag economy-wide inflation and that
the expectations for sustained inflation should be recognized in the
projection of the hospital market basket for FY 2023. Several
commenters stated the proposed market basket update is a time-lagged
estimate that uses historical data to forecast into the future. The
commenters stated that when historical data is no longer a good
predictor of future changes, the market basket becomes inadequate. A
commenter stated that the end of calendar year 2021 into calendar year
2022 should not be considered a steady-state economic environment that
is a continuance of past trends. A commenter encouraged CMS to err on
the side of steadily increasing inflation into 2023 rather than any
material deceleration assumption.
Other commenters urged CMS to rely on more recent forecasts to
determine the FY 2023 update. A commenter noted CBO May 2022 baseline
projections which had a market basket increase that is 1.1 percentage
points higher than the proposed FY 2023 IPPS market basket percentage
increase. Several commenters requested that CMS review other inflation
data sources such as the Consumer Price Index (CPI) and the core
Personal Consumption Expenditures deflator, and suggested that the
market basket increase at least match or exceed these rates of
increases.
Response: Section 1886(b)(3)(B)(iii) of the Act states the
Secretary shall update IPPS payments based on a market basket
percentage increase that reflects an index of appropriately weighted
indicators of changes in wages and prices that are representative of
the mix of goods and services included in such inpatient hospital
services. The 2018-based IPPS market basket is a fixed-weight,
Laspeyres-type price index that measures the change in price, over
time, of the same mix of goods and services purchased by hospitals in
the base period. The general inflation measures cited by the commenters
would not reflect this same mix of goods and services.
We agree with the commenters that recent higher inflationary trends
have impacted the outlook for price growth over the next several
quarters. At the time of the FY 2023 IPPS/LTCH PPS proposed rule, based
on IGI's fourth quarter 2021 forecast with historical data through
third quarter 2021, IGI forecasted the 2018-based IPPS market basket
update of 3.1 percent for FY 2023 reflecting forecasted compensation
prices of 3.8 percent (by comparison, compensation price growth in the
2018-based IPPS market basket averaged 2.2 percent from 2012-2021). As
stated previously, in the FY 2023 IPPS/LTCH PPS proposed rule, we
proposed that if more recent data became available, we would use such
data, if appropriate, to derive the final FY 2023 IPPS market basket
update for the final rule. For this final rule, we now have an updated
forecast of the price proxies underlying the market basket that
incorporates more recent historical data and reflects a revised outlook
regarding the U.S. economy (including the more recent historical CPI
growth, impacts of the Russia/Ukraine war, current expectations
regarding changes to Federal Reserve interest rates, and tight labor
markets). Based on IGI's second quarter 2022 forecast with historical
data through first quarter 2022, we are projecting a FY 2023 IPPS
market basket update of 4.1 percent (reflecting forecasted compensation
price growth of 4.8 percent) and productivity adjustment of 0.3
percentage point. Therefore, as discussed further in this section and
after consideration of the comments received, for FY 2023, the final
applicable percentage increase for a hospital that submitted quality
data and is a meaningful EHR user is 3.8 percent (4.1 percent less 0.3
percentage point), compared to the 2.7 percent that was proposed. We
note that the final FY 2023 IPPS market basket growth rate of 4.1
percent would be the highest market basket update implemented in an
IPPS final rule going back to FY 1998.
Comment: Several commenters suggested that CMS use alternative
sources of data that they stated better reflect input price inflation
to calculate the FY 2023 market basket update. A commenter stated that
in absence of such data, CMS is urged to consider an alternative
approach to better align the market basket updates with increases in
the costs needed to care for Medicare beneficiaries. Several commenters
encouraged CMS to implement a higher market basket update than
proposed, reflecting alternative sources of cost data such as the
Medicare cost reports. A commenter requested that CMS provide a market
basket update of at least 5 percent.
Several commenters proposed that CMS apply a market basket increase
of approximately 8 percent representing estimated trends in allowable
Medicare costs per risk-adjusted discharge from the Medicare cost
reports from FY 2019 to FY 2020. To support this method, commenters
provided the language in the IPPS statute and stated that they believe
that Medicare cost report data meets the statutory requirement as these
data capture all allowable costs, including personnel costs and
excluding non-operating costs that comprise routine, ancillary, and
special care unit inpatient hospital services. The commenter stated
that given that these data comprise all the costs--on a volume and
risk-adjusted basis--necessary to deliver hospital care it represents
``appropriately weighted indicators of changes in wages and prices
which are representative of the mix of good and services . . .''
necessary to provide inpatient hospital care to Medicare beneficiaries.
Commenters stated their belief that Medicare cost report data are a
more
[[Page 49053]]
accurate projection of the cost inflation anticipated by hospitals
during FY 2023 than the forecast IGI data used in the proposed rule.
The commenters further noted that changes in volume and intensity are
accounted for in the market basket update when CMS rebases or revises
it, which they stated is infrequent, typically occurring once every
four years. They believe their proposed methodology of using Medicare
cost report data would fully account for changes in volume and acuity
annually, thus resulting in a more accurate proxy.
Another commenter analyzed Medicare cost report data and found that
compensation costs increased by more than the IPPS market basket
updates of 3.0 percent and 2.4 percent for FYs 2020 and 2021,
respectively. The commenter recommended that CMS adjust the IGI
compensation price indices and the overall inpatient price indices
based on the percent change in compensation costs as derived from the
Medicare cost reports.
A commenter recommended that CMS use its exceptions and adjustments
authority to substitute Premier Inc. data for the IGI forecast to
provide hospitals with an increased payment update in FY 2023 to
accurately reflect labor costs. Additionally, the commenter recommended
that CMS' Office of the Actuary reevaluate the data sources that it
uses for calculating labor costs and consider adopting new or
supplemental data sources in future rulemaking that more accurately
reflect the cost of labor, such as more real time data from the
hospital community. While the commenter stated that they were unable to
forecast a market basket update for FY 2023, they noted the substantial
impact a 10 percent increase in the labor components would have on the
historical market basket for FY 2021, increasing the estimate by
several percentage points under this hypothetical scenario.
Response: We believe the 2018-based IPPS market basket increase
adequately reflects the average change in the price of goods and
services hospitals purchase in order to provide IPPS medical services,
and is technically appropriate to use as the market basket percentage
increase in accordance with section 1886(b)(3)(B)(iii). As described in
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through 45213), the
IPPS market basket is a fixed-weight, Laspeyres-type index that
measures price changes over time and would not reflect increases in
costs associated with changes in the volume or intensity of input goods
and services. As such, the IPPS market basket increase would reflect
the prospective price pressures described by the commenters as
increasing during a high inflation period (such as faster wage price
growth or higher energy prices), but would inherently not reflect other
factors that might increase the level of costs, such as the quantity of
labor used or any shifts between contract and staff nurses (which would
be reflected in the Medicare cost report data). We note that cost
changes (that is, the product of price and quantities) would only be
captured in the market basket weights when the index is rebased and the
base year is updated to a more recent time period.
We disagree with the commenters that costs as reported on the
Medicare cost report are suitable for determining the trend in
compensation prices for the market basket update. Section
1886(b)(3)(B)(iii) of the Act states the Secretary shall estimate a
market basket percentage increase based on an index of appropriately
weighted indicators of changes in wages and prices which are
representative of the mix of goods and services included in such
inpatient hospital services. While the current IPPS market basket
percentage increase captures price changes associated with the goods
and services hospitals purchase in providing care, the Medicare cost
report data also reflects factors that are beyond those that impact
wage or price growth. For instance, overall costs as reported by
hospitals would also reflect changes in the mix of inputs used to
provide services; since 2020, observed IPPS case-mix (and associated
higher payments to hospitals) has increased faster than in prior years
and would likely reflect the use of more skilled care needed to provide
these services.
Regarding commenters' request that CMS consider other methods and
data sources to calculate the final rule market basket update, we
believe the 2018-based IPPS market basket continues to appropriately
reflect IPPS cost structures and we believe the price proxies used
(such as those from BLS that reflect wage and benefit price growth) are
an appropriate representation of price changes for the inputs used by
hospitals in providing services. We further note that we did not
propose to use other methods or data sources to calculate the final
market basket update for FY 2023. Consistent with our proposal, we have
used more recent historical data and an updated forecast (that reflects
a revised inflationary outlook) to calculate a final IPPS market basket
percentage increase for FY 2023 of 4.1 percent, which is one percentage
point higher than the proposed market basket percentage increase of 3.1
percent set forth in the FY 2023 IPPS/LTCH PPS proposed rule.
Comment: Several commenters also expressed concerns regarding the
use of BLS' Employment Cost Index (ECI), which accounts for 53 percent
of the market basket, stating it did not accurately reflect hospitals'
compensation costs after the labor market changes triggered by the PHE.
A commenter stated that this claim can be evidenced by comparing growth
in labor costs from the Medicare cost report data to the ECI growth.
The commenters also state that hospitals have faced a shortage of local
labor as the PHE has progressed and have had to increasingly turn to
contract labor, particularly for the nursing professions, which in turn
has contributed to increased compensation costs. The commenters noted
that CMS's proposed market basket update reflected a 3.8 percent
increase in compensation, which they believe does not accurately
reflect changes in current labor costs that they believe are not
transitory.
Commenters noted that the ECI does not capture inflation in
contract labor compensation while the hospital market basket does
include contract labor costs when calculating the compensation cost
weights and stated that including the contract labor costs along with
other compensation costs assumes contract labor compensation growth
will grow at the same rate as non-contract labor compensation. The
commenters stated that this assumption is not supported by evidence
citing published studies. Commenters also noted analysis by Premier
Inc., which showed faster hourly labor rates than the ECI for FY 2021.
Response: As previously discussed, section 1886(b)(3)(B)(iii) of
the Act states the Secretary shall estimate a market basket percentage
increase based on an index of appropriately weighted indicators of
changes in wages and prices which are representative of the mix of
goods and services included in such inpatient hospital services. The
2018-based IPPS market basket is a fixed-weight, Laspeyres-type price
index that measures the change in price, over time, of the same mix of
goods and services purchased in the base period. Any changes in the
quantity or mix of goods and services (that is, intensity) purchased
over time relative to a base period are not measured. This type of IPPS
market basket has been in place since the implementation of the IPPS as
well as used for other CMS market baskets.
For the compensation cost weight in the 2018-based IPPS market
basket (which includes salaried and contract
[[Page 49054]]
labor employees), we use the ECI for wages and salaries and benefits
for all civilian hospital workers to proxy the price increases of labor
for IPPS hospitals. The ECI (published by the BLS) measures the change
in the hourly labor cost to employers, independent of the influence of
employment shifts among occupations and industry categories. We note
that the Medicare cost report data shows contract labor hours account
for about 3 percent of total compensation hours (reflecting employed
and contract labor staff) for IPPS hospitals in 2020. Data through 2021
are incomplete at this time. Therefore, while we acknowledge that the
ECI measures only reflect price changes for employed staff, we believe
that the ECI for hospital workers is accurately reflecting the price
change associated with the labor used to provide hospital care (as
employed workers' hours account for 97 percent of hospital compensation
hours) and appropriately does not reflect other factors that might
affect labor costs. Therefore, we believe it continues to be an
appropriate measure to use in the IPPS market basket. We also note that
based on IGI's second quarter 2022 forecast with historical data
through first quarter 2022, compensation price growth (using the ECIs)
for FY 2023 is now projected to be 4.8 percent, which is 1.0 percentage
point higher than projected price growth at the time of the FY 2023
IPPS/LTCH PPS proposed rule (3.8 percent).
Comment: A commenter encouraged CMS to consider whether additional
changes are needed regarding the rebasing and revising of the market
basket, given data from 2018 was relied upon in the FY 2022 IPPS/LTCH
PPS final rule to determine the appropriate mix of goods and services,
which may have been impacted by COVID-19. For example, they stated that
during the pandemic there has been increased use of personal protective
equipment, yet this utilization would not be captured in the market
basket, which was rebased and revised in the FY 2022 IPPS/LTCH PPS
final rule.
Response: As described previously, the IPPS market basket measures
price changes (including changes in the prices for wages and salaries)
over time and would not reflect increases in costs associated with
changes in the volume or intensity of input goods and services until
the market basket is rebased. The IPPS market basket was last rebased
in the FY 2022 IPPS/LTCH PPS final rule using 2018 Medicare cost
reports (86 FR 45194 through 45207), the most recent year of complete
data available at the time of the rebasing. We note that we did not
propose to rebase the IPPS market basket in the FY 2023 IPPS/LTCH PPS
proposed rule. However, we did review more recent Medicare cost report
data available for IPPS hospitals submitted as of March 2022, which
includes data for 2019-2020. The Medicare cost report data (which does
not allow us to separately identify costs for-PPE) showed slight
decreases in the compensation cost weight in 2019 and 2020 resulting in
a compensation cost weight that is roughly 1 percentage point less than
the 2018-based IPPS market basket cost weight. Data through 2021 are
incomplete at this time. The data also showed slight increases over the
2018 to 2020 time period in the pharmaceuticals cost weight and home
office cost weight of about 0.3 percentage point each. Based on this
preliminary analysis, the impact on the cost weights through 2020 are
minimal and it is unclear whether these trends (particularly the
compensation cost weight) through 2020 are reflective of sustained
shifts in the cost structure for hospitals or whether they were
temporary as a result of the PHE. Therefore, we continue to believe it
is premature at this time to use more recent Medicare cost report data
to derive a rebased and revised IPPS market basket. We will continue to
monitor these data and any changes to the IPPS market basket will be
proposed in future rulemaking.
Comment: Several commenters expressed concerns about the market
basket update calculations. Commenters stated that CMS calculates the
percent change by dividing the average input price indices in the most
recent four quarters by the average input price index in the previous
four quarters as derived from the most recently available IGI forecast.
However, the commenter stated that CMS does not consider the difference
between the base year estimates (from the time when prior year payment
rates are finalized) and updated estimates of the base year indices
since the prior year's market basket update calculation. Therefore,
they stated this current update method does not account for substantial
forecast errors driven by an unusually fast acceleration of the
inflation rate such as occurred in FY 2021. They urge CMS to leverage
its exceptions and adjustments authority under section 1886(d)(5)(I)(i)
of the Act to modify its methodology for FY 2023 to account for the
substantial forecast error in FYs 2021 and 2022. A commenter added that
it believes the understatement of the hospital market basket for FY
2021 and FY 2022 and potentially FY 2023 as well is such an occasion
for using the exceptions and adjustments authority. The commenter
stated that Premier data collected directly from hospitals is showing a
10 percent increase in 2022 to date for hospital compensation (67.6
percent of the market basket) compared to the 3.8 percent being
forecasted by IGI. The commenter recommended CMS make a one-time only
forecast error correction on the FY 2021 and FY 2022 market basket of a
combined 1.9 percentage points for FY 2023 using the exceptions and
adjustments authority. The commenter also recommended that CMS use its
exceptions and adjustments authority to substitute Premier data for the
IGI forecast to provide hospitals with an increased payment update in
FY 2023 to accurately reflect labor costs.
A commenter urged CMS to consider a one-time adjustment to ensure
that the FY 2023 rate increase is applied to a base rate that more
accurately incorporates actual inflation during the pandemic. The
commenter cited the unprecedented nature of the pandemic and its
extraordinary impact on hospital costs alongside record inflation for
the basis of this one-time adjustment.
Response: Section 1886(b)(3)(B) of the Act sets forth the update to
the standardized amounts based on the applicable percentage increase.
Although the statute does not include a forecast error adjustment,
commenters requested that CMS use its exceptions and adjustments
authority under section 1886(d)(5)(I)(i) of the Act to modify its
methodology to account for the forecast error in FYs 2021 and 2022. We
note that we did not propose to use our authority under section
1886(d)(5)(I)(i) of the Act to apply a forecast correction in updating
the IPPS rates for FY 2023. While there is no precedent to adjust for
market basket forecast error in the IPPS operating payment update, the
forecast error for a market basket update is equal to the actual market
basket increase for a given year less the forecasted market basket
increase. Due to the uncertainty regarding future price trends,
forecast errors can be both positive and negative. For example, the FY
2020 IPPS forecast error was -1.0 percentage point, and the FY 2021
IPPS forecast error was +0.7 percentage point; FY 2022 historical data
are not yet available to calculate a forecast error for FY 2022. As we
have discussed in past rulemaking, we believe that an important goal of
a PPS is predictability. For these reasons, we do not believe it is
appropriate to include adjustments to the market basket update for
future years based on the difference between the actual and forecasted
market basket increase in prior years. With regard to the comment
[[Page 49055]]
recommending the use of the Premier data, we refer to our response to
this comment as previously discussed earlier in this section, regarding
why we believe the 2018-based IPPS market basket increase adequately
reflects the average change in the price of goods and services
hospitals purchase in order to provide IPPS medical services, and is
technically appropriate to use as the market basket percentage increase
in accordance with section 1886(b)(3)(B)(iii).
We thank the commenters for their comments. After consideration of
the comments received and consistent with our proposal, we are
finalizing to use more recent data to determine the FY 2023 market
basket update for the final rule. Specifically, based on more recent
data available, we determined final applicable percentage increases to
the standardized amount for FY 2023, as specified in the table that
appears later in this section.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through
51692), we finalized our methodology for calculating and applying the
productivity adjustment. As we explained in that rule, section
1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the
Affordable Care Act, defines this productivity adjustment as equal to
the 10-year moving average of changes in annual economy-wide, private
nonfarm business MFP (as projected by the Secretary for the 10-year
period ending with the applicable fiscal year, year, cost reporting
period, or other annual period). The U.S. Department of Labor's Bureau
of Labor Statistics (BLS) publishes the official measures of private
nonfarm business productivity for the U.S. 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
(MFP) 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) is now published by BLS as private
nonfarm business total factor productivity. However, as mentioned, the
data and methods are unchanged. Please see 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, we
note that beginning with the FY 2022 IPPS/LTCH PPS final rule, we refer
to this adjustment as the productivity adjustment rather than the MFP
adjustment to more closely track the statutory language in section
1886(b)(3)(B)(xi)(II) of the Act. We note that the adjustment continues
to rely on the same underlying data and methodology.
For FY 2023, we proposed a productivity adjustment of 0.4 percent.
Similar to the proposed market basket update, for the proposed rule,
the estimate of the proposed FY 2023 productivity adjustment was based
on IGI's fourth quarter 2021 forecast. As noted previously, we proposed
that if more recent data subsequently became available, we would use
such data, if appropriate, to determine the FY 2023 productivity
adjustment for the final rule.
Comment: Several commenters requested that CMS use its ``special
exceptions and adjustments'' authority under section 1886(d)(5)(I)(i)
of the Act to eliminate the productivity adjustment for FY 2023. A
commenter requested that CMS work with Congress to permanently
eliminate the productivity adjustment to the annual hospital payment
updates. Another commenter stated that, if CMS does not use more recent
figures from BLS on economy-wide non-farm total factor productivity
when determining the adjustment to the IPPS market basket update for FY
2023, then the highly unusual circumstances of the COVID-19 pandemic
are sufficient reason for the Secretary to invoke section
1886(d)(5)(I)(i) ``exceptions and adjustments'' authority to provide a
one-time adjustment that offsets application of the otherwise
applicable productivity adjustment for FY 2023.
A commenter requested that CMS use its ``exceptions and
adjustments'' authority under section 1886(d)(5)(I)(i) of the Act to
remove the productivity adjustment for any fiscal year that was covered
under PHE determination (for example, 2020, 2021, and 2022) from the
calculation of market basket update for FY 2023 and any year
thereafter.
A commenter recommended that CMS withhold the proposed -0.4 percent
productivity adjustment until a federal fiscal year in which hospitals
are not operating under the public health emergency (PHE).
Response: While we appreciate the commenters' concerns, section
1886(b)(3)(B)(xi)(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 IPPS market basket update when determining the
applicable percentage increase. Section 1886(d)(5)(I)(i) of the Act
authorizes the Secretary to provide by regulation for such other
exceptions and adjustments to the payment amounts under section 1886(d)
of the Act as the Secretary deems appropriate.
We further note that we did not propose to use our authority under
section 1886(d)(5)(I)(i) of the Act in the FY 2023 IPPS/LTCH PPS
proposed rule to offset the productivity adjustment for FY 2023. Based
on the updated forecast for this final rule, and as discussed
elsewhere, we are projecting a FY 2023 IPPS market basket update of 4.1
percent and a productivity adjustment of 0.3 percentage point for this
final rule, as compared to the proposed market basket update of 3.1
percent and proposed productivity adjustment of 0.4 percentage point
set forth in the proposed rule. Additionally, we note Congress has
provided other funding to providers as a result of the COVID-19 PHE.
Specifically, the CARES Act provided additional payments for cases of
COVID-19 under the IPPS and also created the Provider Relief Fund to
reimburse providers, including IPPS providers, for increased expenses
or lost revenue attributable to COVID-19.
We thank the commenters for their comments. However, as previously
noted, section 1886(b)(3)(B)(xi)(II) of the Act, as added by section
3401(a) of the Affordable Care Act, requires a productivity adjustment
to the IPPS market basket update when determining the applicable
percentage increase. Consistent with our proposal, we are using more
recent data to determine the FY 2023 productivity adjustment for the
final rule. Specifically, based on IGI's second quarter 2022 forecast,
we are projecting a FY 2023 IPPS market basket update of 4.1 percent
and productivity adjustment of 0.3 percentage point. Therefore, as
discussed further in this section and after consideration of the
comments received, for FY 2023, the final IPPS applicable percentage
increase for a hospital that submitted quality data and is a meaningful
EHR user is 3.8 percent (4.1 percent less 0.3 percentage point).
Comment: Several commenters expressed concerns about the
productivity adjustment. A commenter stated that the measure of
productivity used by CMS is intended to ensure payments more accurately
reflect the true cost of providing patient care and effectively assumes
the hospital field can mirror productivity gains across the
[[Page 49056]]
private nonfarm business sector. Several commenters stated that this
has not been their experience during the pandemic. Commenters also
stated that even before the pandemic, CMS Office of the Actuary
questioned the wisdom of the underlying assumption in their analysis
that compares private non-farm total factor productivity growth measure
and a hospital-specific measure (https://www.cms.gov/files/document/productivity-memo.pdf). Commenters also stated that the latest data
indicates a decrease in productivity, not gains, citing the latest BLS
release of labor productivity data. Commenters had strong concerns
about the proposed productivity adjustment given the extreme and
uncertain circumstances in which their hospitals and health systems are
currently operating. Several commenters requested CMS use the latest
BLS data when determining the productivity adjustment for FY 2023.
Response: Section 1886(b)(3)(B)(xi)(II) of the Act requires the
productivity adjustment be equal to the 10-year moving average of
changes in annual economy-wide private nonfarm business total factor
productivity (as projected by the Secretary for the 10-year period
ending with the applicable fiscal year, year, cost reporting period, or
other annual period). For the FY 2023 IPPS/LTCH PPS proposed rule,
based on IGI's fourth quarter 2021 forecast, the productivity
adjustment was projected to be 0.4 percentage point for FY 2023. For
this final rule, based on IGI's second quarter 2022 forecast, we are
updating the productivity adjustment to reflect more recent historical
data as published by BLS as well as a revised economic outlook for FY
2022 and FY 2023. Using this more recent forecast, the FY 2023
productivity adjustment based on the 10-year moving average growth in
economy-wide total factor productivity for the period ending FY 2023 is
currently estimated to be 0.3 percent.
We thank the commenters for their comments. After consideration of
the comments received and consistent with our proposal, we are
finalizing as proposed to use more recent data to determine the FY 2023
productivity adjustment for the final rule.
Based on more recent data available for this FY 2023 IPPS/LTCH PPS
final rule (that is, IGI's second quarter 2022 forecast of the 2018-
based IPPS market basket rate-of-increase with historical data through
the first quarter of 2022), we estimate that the FY 2023 market basket
update used to determine the applicable percentage increase for the
IPPS is 4.1 percent. Based on more recent data available for this FY
2023 IPPS/LTCH PPS final rule (that is, IGI's second quarter 2022
forecast of the productivity adjustment), the current estimate of the
productivity adjustment for FY 2023 is 0.3 percentage point.
As previously discussed, based on the more recent data available,
for this final rule, we have determined four final applicable
percentage increases to the standardized amount for FY 2023. For FY
2023, depending on whether a hospital submits quality data under the
rules established in accordance with section 1886(b)(3)(B)(viii) of the
Act (hereafter referred to as a hospital that submits quality data) and
is a meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act
(hereafter referred to as a hospital that is a meaningful EHR user),
there are four possible applicable percentage increases that can be
applied to the standardized amount, as specified in this table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.126
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42344), we revised
our regulations at 42 CFR 412.64(d) to reflect the current law for the
update for FY 2020 and subsequent fiscal years. Specifically, in
accordance with section 1886(b)(3)(B) of the Act, we added paragraph
(d)(1)(viii) to Sec. 412.64 to set forth the applicable percentage
increase to the operating standardized amount for FY 2020 and
subsequent fiscal years as the percentage increase in the market basket
index, subject to the reductions specified under Sec. 412.64(d)(2) for
a hospital that does not submit quality data and Sec. 412.64(d)(3) for
a hospital that is not a meaningful EHR user, less a productivity
adjustment. (As previously noted, section 1886(b)(3)(B)(xii) of the Act
required an additional reduction each year only for FYs 2010 through
2019.)
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase to the hospital-specific rates for SCHs equals the
applicable percentage increase set forth in section 1886(b)(3)(B)(i) of
the Act (that is, the same update factor as for all other hospitals
subject to the IPPS). Therefore, the update to the hospital-specific
rates for SCHs also is subject to section 1886(b)(3)(B)(i) of the Act,
as amended by sections 3401(a) and 10319(a) of the Affordable Care Act.
Under current law, the MDH program is effective for discharges on
or before September 30, 2022, as discussed in the FY 2019 IPPS/LTCH PPS
final rule (83 FR 41429 through 41430). Therefore, under current law,
the MDH program will expire at the end of FY 2022. We
[[Page 49057]]
refer readers to section V.D. of the preamble of this final rule for
further discussion of the expiration of the MDH program.
For FY 2023, we proposed the following updates to the hospital-
specific rates applicable to SCHs: a proposed update of 2.7 percent for
a hospital that submits quality data and is a meaningful EHR user; a
proposed update of 0.375 percent for a hospital that submits quality
data and is not a meaningful EHR user; a proposed update of 1.925
percent for a hospital that fails to submit quality data and is a
meaningful EHR user; and a proposed update of -0.4 percent for a
hospital that fails to submit quality data and is not an meaningful EHR
user. We proposed that if more recent data subsequently became
available (for example, a more recent estimate of the market basket
update and the productivity adjustment), we would use such data, if
appropriate, to determine the update in the final rule.
We did not receive any public comments on our proposed updates to
hospital-specific rates applicable to SCHs. The general comments we
received on the proposed FY 2023 update (including the proposed market
basket update and productivity adjustment) are discussed earlier in
this section. For FY 2023, we are finalizing the proposal to determine
the update to the hospital specific rates for SCHs in this final rule
using the more recent available data, as previously discussed.
For this final rule, based on more recent available data, we are
finalizing the following updates to the hospital specific rates
applicable to SCHs: An update of 3.8 percent for a hospital that
submits quality data and is a meaningful EHR user; an update of 0.725
percent for a hospital that submits quality data and is not a
meaningful EHR user; an update of 2.775 percent for a hospital that
fails to submit quality data and is a meaningful EHR user; and an
update of -0.3 percent for a hospital that fails to submit quality data
and is not a meaningful EHR user.
2. FY 2023 Puerto Rico Hospital Update
Section 602 of Public Law 114-113 amended section 1886(n)(6)(B) of
the Act to specify that subsection (d) Puerto Rico hospitals are
eligible for incentive payments for the meaningful use of certified EHR
technology, effective beginning FY 2016. In addition, section
1886(n)(6)(B) of the Act was amended to specify that the adjustments to
the applicable percentage increase under section 1886(b)(3)(B)(ix) of
the Act apply to subsection (d) Puerto Rico hospitals that are not
meaningful EHR users, effective beginning FY 2022. Accordingly, for FY
2022, section 1886(b)(3)(B)(ix) of the Act in conjunction with section
602(d) of Public Law 114-113 requires that any subsection (d) Puerto
Rico hospital that is not a meaningful EHR user as defined in section
1886(n)(3) of the Act and not subject to an exception under section
1886(b)(3)(B)(ix) of the Act will have ``three-quarters'' of the
applicable percentage increase (prior to the application of other
statutory adjustments), or three-quarters of the applicable market
basket rate-of-increase, reduced by 33\1/3\ percent. The reduction to
three-quarters of the applicable percentage increase for subsection (d)
Puerto Rico hospitals that are not meaningful EHR users increases to
66\2/3\ percent for FY 2023, and, for FY 2024 and subsequent fiscal
years, to 100 percent. (We note that section 1886(b)(3)(B)(viii) of the
Act, which specifies the adjustment to the applicable percentage
increase for ``subsection (d)'' hospitals that do not submit quality
data under the rules established by the Secretary, is not applicable to
hospitals located in Puerto Rico.) The regulations at 42 CFR
412.64(d)(3)(ii) reflect the current law for the update for subsection
(d) Puerto Rico hospitals for FY 2022 and subsequent fiscal years. In
the FY 2019 IPPS/LTCH PPS final rule, we finalized the payment
reductions (83 FR 41674).
For FY 2023, consistent with section 1886(b)(3)(B) of the Act, as
amended by section 602 of Public Law 114-113, we are setting the
applicable percentage increase for Puerto Rico hospitals by applying
the following adjustments in the following sequence. Specifically, the
applicable percentage increase under the IPPS for Puerto Rico hospitals
will be equal to the rate of-increase in the hospital market basket for
IPPS hospitals in all areas, subject to a 66\2/3\ percent reduction to
three-fourths of the applicable percentage increase (prior to the
application of other statutory adjustments; also referred to as the
market basket update or rate-of-increase (with no adjustments)) for
Puerto Rico hospitals not considered to be meaningful EHR users in
accordance with section 1886(b)(3)(B)(ix) of the Act, and then subject
to the productivity adjustment at section 1886(b)(3)(B)(xi) of the Act.
As noted previously, section 1886(b)(3)(B)(xi) of the Act states that
application of the productivity adjustment may result in the applicable
percentage increase being less than zero.
Based on IGI's fourth quarter 2021 forecast of the 2018-based IPPS
market basket update with historical data through third quarter 2021,
in the FY 2023 IPPS/LTCH PPS proposed rule, in accordance with section
1886(b)(3)(B) of the Act, as discussed previously, for Puerto Rico
hospitals we proposed a market basket update of 3.1 percent and a
productivity adjustment of 0.4 percent. Therefore, for FY 2023,
depending on whether a Puerto Rico hospital is a meaningful EHR user,
we stated there would be two possible proposed applicable percentage
increases that could be applied to the standardized amount. Based on
these data, we determined the following proposed applicable percentage
increases to the standardized amount for FY 2023 for Puerto Rico
hospitals:
For a Puerto Rico hospital that is a meaningful EHR user,
we proposed an applicable percentage increase to the FY 2023 operating
standardized amount of 2.7 percent (that is, the FY 2023 estimate of
the proposed market basket rate-of-increase of 3.1 percent less an
adjustment of 0.4 percentage point for the proposed productivity
adjustment).
For a Puerto Rico hospital that is not a meaningful EHR
user, we proposed an applicable percentage increase to the operating
standardized amount of 1.15 percent (that is, the FY 2023 estimate of
the proposed market basket rate-of-increase of 3.1 percent, less an
adjustment of 1.55 percentage point (the proposed market basket rate-
of-increase of 3.1 percent x 0.75 x (\2/3\) for failure to be a
meaningful EHR user), and less an adjustment of 0.4 percentage point
for the proposed productivity adjustment).
We did not receive any public comments on our proposed updates to
the standardized amount for FY 2023 for Puerto Rico hospitals. The
general comments we received on the proposed FY 2023 update (including
the proposed market basket update and productivity adjustment) are
discussed in greater detail earlier in this section. For FY 2023, we
are finalizing the proposal to determine the update to the standardized
amount for FY 2023 for Puerto Rico hospitals in this final rule using
the more recent available data, as previously discussed.
As previously discussed in section V.A.1, based on more recent data
available for this final rule (that is, IGI's second quarter 2022
forecast of the 2018-based IPPS market basket rate-of-increase with
historical data through the first quarter of 2022), we estimate that
the FY 2023 market basket update used to determine the applicable
percentage increase for the IPPS is 4.1 percent and the productivity
adjustment is 0.3 percent. For FY 2023, depending on whether a Puerto
Rico hospital is a meaningful EHR user, there are two
[[Page 49058]]
possible applicable percentage increases that can be applied to the
standardized amount. Based on these data, accordance with section
1886(b)(3)(B) of the Act, we determined the following applicable
percentage increases to the standardized amount for FY 2023 for Puerto
Rico hospitals:
For a Puerto Rico hospital that is a meaningful EHR user,
an applicable percentage increase to the FY 2023 operating standardized
amount of 3.8 percent (that is, the FY 2023 estimate of the market
basket rate-of-increase of 4.1 percent less an adjustment of 0.3
percentage point for the productivity adjustment).
For a Puerto Rico hospital that is not a meaningful EHR
user, an applicable percentage increase to the operating standardized
amount of 1.75 percent (that is, the FY 2023 estimate of the market
basket rate-of-increase of 4.1 percent, less an adjustment of 2.05
percentage point (the market basket rate-of-increase of 4.1 percent x
0.75 x (\2/3\) for failure to be a meaningful EHR user), and less an
adjustment of 0.3 percentage point for the productivity adjustment).
[GRAPHIC] [TIFF OMITTED] TR10AU22.127
B. Rural Referral Centers (RRCs) Annual Updates to Case-Mix Index (CMI)
and Discharge Criteria (Sec. 412.96)
Under the authority of section 1886(d)(5)(C)(i) of the Act, the
regulations at Sec. 412.96 set forth the criteria that a hospital must
meet in order to qualify under the IPPS as a rural referral center
(RRC). RRCs receive special treatment under both the DSH payment
adjustment and the criteria for geographic reclassification.
Section 402 of Public Law 108-173 raised the DSH payment adjustment
for RRCs such that they are not subject to the 12-percent cap on DSH
payments that is applicable to other rural hospitals. RRCs also are not
subject to the proximity criteria when applying for geographic
reclassification. In addition, they do not have to meet the requirement
that a hospital's average hourly wage must exceed, by a certain
percentage, the average hourly wage of the labor market area in which
the hospital is located.
Section 4202(b) of Public Law 105-33 states, in part, that any
hospital classified as an RRC by the Secretary for FY 1991 shall be
classified as such an RRC for FY 1998 and each subsequent fiscal year.
In the August 29, 1997, IPPS final rule with comment period (62 FR
45999), we reinstated RRC status for all hospitals that lost that
status due to triennial review or MGCRB reclassification. However, we
did not reinstate the status of hospitals that lost RRC status because
they were now urban for all purposes because of the OMB designation of
their geographic area as urban. Subsequently, in the August 1, 2000
IPPS final rule (65 FR 47089), we indicated that we were revisiting
that decision. Specifically, we stated that we would permit hospitals
that previously qualified as an RRC and lost their status due to OMB
redesignation of the county in which they are located from rural to
urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC
status must satisfy all of the other applicable criteria. We use the
definitions of ``urban'' and ``rural'' specified in subpart D of 42 CFR
part 412. One of the criteria under which a hospital may qualify as an
RRC is to have 275 or more beds available for use (Sec.
412.96(b)(1)(ii)). A rural hospital that does not meet the bed size
requirement can qualify as an RRC if the hospital meets two mandatory
prerequisites (a minimum case-mix index (CMI) and a minimum number of
discharges), and at least one of three optional criteria (relating to
specialty composition of medical staff, source of inpatients, or
referral volume). (We refer readers to Sec. 412.96(c)(1) through (5)
and the September 30, 1988, Federal Register (53 FR 38513) for
additional discussion.) With respect to the two mandatory
prerequisites, a hospital may be classified as an RRC if--
The hospital's CMI is at least equal to the lower of the
median CMI for urban hospitals in its census region, excluding
hospitals with approved teaching programs, or the median CMI for all
urban hospitals nationally; and
The hospital's number of discharges is at least 5,000 per
year, or, if fewer, the median number of discharges for urban hospitals
in the census region in which the hospital is located. The number of
discharges criterion for an osteopathic hospital is at least 3,000
discharges per year, as specified in section 1886(d)(5)(C)(i) of the
Act.
In the FY 2022 final rule (86 FR 45217), in light of the COVID-19
PHE, we amended the regulations at Sec. 412.96(h)(1) to provide for
the use of the best available data rather than the latest available
data in calculating the national and regional CMI criteria. We also
amended the regulations at Sec. 412.96(c)(1) to indicate that the
individual hospital's CMI value for discharges during the same Federal
fiscal year used to compute the national and regional CMI values is
used for purposes of determining whether a hospital qualifies for RRC
classification. We also amended the regulations Sec. 412.96(i)(1) and
(2), which describe the methodology for calculating the number of
discharges criteria, to provide for the use of the best available data
rather than the latest available or most recent data when calculating
the regional discharges for RRC classification.
1. Case-Mix Index (CMI)
Section 412.96(c)(1) provides that CMS establish updated national
and
[[Page 49059]]
regional CMI values in each year's annual notice of prospective payment
rates for purposes of determining RRC status. The methodology we used
to determine the national and regional CMI values is set forth in the
regulations at Sec. 412.96(c)(1)(ii). The national median CMI value
for FY 2023 is based on the CMI values of all urban hospitals
nationwide, and the regional median CMI values for FY 2023 are based on
the CMI values of all urban hospitals within each census region,
excluding those hospitals with approved teaching programs (that is,
those hospitals that train residents in an approved GME program as
provided in Sec. 413.75). For the proposed rule, these values were
based on discharges occurring during FY 2021 (October 1, 2020 through
September 30, 2021), and include bills posted to CMS' records through
December 2021. We believe that this is the best available data for use
in calculating the national and regional median CMI values and is
consistent with our finalized proposal to use the FY 2021 MedPAR claims
data for FY 2023 ratesetting. We refer the reader to section I.F. of
the preamble of this final rule for a complete discussion regarding our
proposal and finalized policy to use the latest available data (that
is, the FY 2021 MedPAR data) as the best available data for purposes of
this FY 2023 rulemaking.
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28404), we
proposed that, in addition to meeting other criteria, if rural
hospitals with fewer than 275 beds are to qualify for initial RRC
status for cost reporting periods beginning on or after October 1,
2022, they must have a CMI value for FY 2021 that is at least--
1.8251 (national--all urban); or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located.
The proposed median CMI values by region were set forth in a table
in the proposed rule (87 FR 28405). We stated in the proposed rule that
we intended to update the proposed CMI values in the FY 2023 final rule
to reflect the updated FY 2021 MedPAR file, which will contain data
from additional bills received through March 2022.
Comment: Commenters supported our proposal to use FY 2021 data to
calculate the national and regional median CMI values for FY 2023.
Response: We appreciate the commenters' support.
Therefore, based on the best available data (FY 2021 bills received
through March 2022), in addition to meeting other criteria, if rural
hospitals with fewer than 275 beds are to qualify for initial RRC
status for cost reporting periods beginning on or after October 1,
2022, they must have a CMI value for FY 2021 that is at least:
1.8262 (national--all urban); or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located.
The final CMI values by region are set forth in the following
table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.128
A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its MAC. Data are
available on the Provider Statistical and Reimbursement (PS&R) System.
In keeping with our policy on discharges, the CMI values are computed
based on all Medicare patient discharges subject to the IPPS MS-DRG-
based payment.
3. Discharges
Section 412.96(c)(2)(i) provides that CMS set forth the national
and regional numbers of discharges criteria in each year's annual
notice of prospective payment rates for purposes of determining RRC
status. As specified in section 1886(d)(5)(C)(ii) of the Act, the
national standard is set at 5,000 discharges. In the FY 2023 IPPS/LTCH
PPS proposed rule (87 FR 28406), for FY 2023, we proposed to update the
regional standards based on discharges for urban hospitals' cost
reporting periods that began during FY 2020 (that is, October 1, 2019
through September 30, 2020). We believe that this is the best available
data for use in calculating the median number of discharges by region
and is consistent with our finalized data proposal to use cost report
data from cost reporting periods beginning during FY 2020 for FY 2023
ratesetting. We refer the reader to section I.F. of the preamble of
this final rule for a complete discussion regarding our proposal and
finalized policy to use the latest available data (that is, cost
reports beginning during FY 2020) as the best available data for
purposes of this FY 2023 rulemaking.
In the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28405), we
proposed that, in addition to meeting other criteria, a hospital, if it
is to qualify for initial RRC status for cost reporting periods
beginning on or after October 1, 2022, must have, as the number of
discharges for its cost reporting period that began during FY 2020, at
least--
5,000 (3,000 for an osteopathic hospital); or
If less, the median number of discharges for urban
hospitals in the census region in which the hospital is located. (We
refer readers to the table set forth in the FY 2023 IPPS/LTCH PPS
proposed rule at 87 FR 28406). In the
[[Page 49060]]
proposed rule, we stated that we intended to update to update these
numbers in the FY 2023 final rule based on the latest available cost
report data.
Comment: Commenters supported our proposal to use FY 2020 data to
calculate median number of discharges by region for FY 2023.
Response: We appreciate the commenters' support.
Therefore, based on the best available discharge data at this time,
that is, for cost reporting periods that began during FY 2020, the
final median number of discharges for urban hospitals by census region
are set forth in the following table.
[GRAPHIC] [TIFF OMITTED] TR10AU22.129
We note that because the median number of discharges for hospitals
in each census region is greater than the national standard of 5,000
discharges, under this final rule, 5,000 discharges is the minimum
criterion for all hospitals, except for osteopathic hospitals for which
the minimum criterion is 3,000 discharges.
C. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Expiration of Temporary Changes to Low-Volume Hospital Payment
Policy
As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41398
through 41399), section 50204 of the Bipartisan Budget Act of 2018
(Pub. L. 115-123) modified the definition of a low-volume hospital and
the methodology for calculating the payment adjustment for low-volume
hospitals under section 1886(d)(12) of the Act for FYs 2019 through
2022. Beginning with FY 2023, the low-volume hospital qualifying
criteria and payment adjustment will revert to the statutory
requirements that were in effect prior to FY 2011, and the preexisting
low-volume hospital payment adjustment methodology and qualifying
criteria, as implemented in FY 2005 and discussed later in this section
of this final rule, will resume. (For additional information on the
temporary changes to the low-volume hospital payment policy, we refer
readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41398 through
41401). We also note, in that same final rule, we amended the
regulations at 42 CFR 412.101 to reflect the provisions of section
50204 of the Bipartisan Budget Act of 2018.) We discuss the payment
policies for FY 2023 in section V.C.3. of the preamble of this final
rule.
2. Background
Section 1886(d)(12) of the Act provides for an additional payment
to each qualifying low-volume hospital under the IPPS beginning in FY
2005. The additional payment adjustment to a low-volume hospital
provided for under section 1886(d)(12) of the Act is in addition to any
payment calculated under section 1886 of the Act. Therefore, the
additional payment adjustment is based on the per discharge amount paid
to the qualifying hospital under section 1886 of the Act. In other
words, the low-volume hospital payment adjustment is based on total per
discharge payments made under section 1886 of the Act, including
capital, DSH, IME, and outlier payments. For SCHs and MDHs, the low-
volume hospital payment adjustment is based in part on either the
Federal rate or the hospital-specific rate, whichever results in a
greater operating IPPS payment.
As discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45219
through 45221), section 50204 of the Bipartisan Budget Act of 2018
(Pub. L. 115-123) modified the definition of a low-volume hospital and
the methodology for calculating the payment adjustment for low-volume
hospitals for FYs 2019 through 2022. Specifically, the qualifying
criteria for low-volume hospitals under section 1886(d)(12)(C)(i) of
the Act were amended to specify that, for FYs 2019 through 2022, a
subsection (d) hospital qualifies as a low-volume hospital if it is
more than 15 road miles from another subsection (d) hospital and has
less than 3,800 total discharges during the fiscal year. Section
1886(d)(12)(D) of the Act was also amended to provide that, for
discharges occurring in FYs 2019 through 2022, the Secretary determines
the applicable percentage increase using a continuous, linear sliding
scale ranging from an additional 25 percent payment adjustment for low-
volume hospitals with 500 or fewer discharges to a zero percent
additional payment for low-volume hospitals with more than 3,800
discharges in the fiscal year. Consistent with the requirements of
section 1886(d)(12)(C)(ii) of the Act, the term ``discharge'' for
purposes of these provisions refers to total discharges, regardless of
payer (that is, Medicare and non-Medicare discharges).
Beginning with FY 2023, the low-volume hospital qualifying criteria
and payment adjustment will revert to the statutory requirements that
were in effect prior to FY 2011. Section 1886(d)(12)(C)(i) of the Act
defines a low-volume hospital, for FYs 2005 through 2010 and FY 2023
and subsequent years, as a subsection (d) hospital that the Secretary
determines is located more than 25 road miles from another subsection
(d) hospital and that has less than 800 discharges during the fiscal
year. Section 1886(d)(12)(C)(ii) of the Act further stipulates that the
term ``discharge'' means an inpatient acute care discharge of an
individual, regardless of whether the individual is entitled to
benefits under Medicare Part A (except with respect to FYs 2011 through
2018). Therefore, for FYs 2005 through 2010 and FY 2019 and subsequent
years, the term ``discharge'' refers to total discharges, regardless of
payer (that is, Medicare and non-Medicare discharges), and as such the
[[Page 49061]]
term discharge continues to refer to total discharges for FY 2023 and
subsequent years. Furthermore, section 1886(d)(12)(B) of the Act
requires, for discharges occurring in FYs 2005 through 2010 and FY 2023
and subsequent years, that the Secretary determine an applicable
percentage increase for these low-volume hospitals based on the
``empirical relationship'' between the standardized cost-per-case for
such hospitals and the total number of discharges of such hospitals and
the amount of the additional incremental costs (if any) that are
associated with such number of discharges. The statute thus mandates
that the Secretary develop an empirically justifiable adjustment based
on the relationship between costs and discharges for these low-volume
hospitals. Section 1886(d)(12)(B)(iii) of the Act limits the applicable
percentage increase adjustment to no more than 25 percent.
Based on an analysis we conducted for the FY 2005 IPPS final rule
(69 FR 49099 through 49102), a 25-percent low-volume adjustment to all
qualifying hospitals with less than 200 discharges was found to be most
consistent with the statutory requirement to provide relief to low-
volume hospitals where there is empirical evidence that higher
incremental costs are associated with low numbers of total discharges.
In the FY 2006 IPPS final rule (70 FR 47432 through 47434), we stated
that multivariate analyses supported the existing low-volume adjustment
implemented in FY 2005. Accordingly, under the existing regulations, in
order for a hospital to continue to qualify as a low-volume hospital on
or after October 1, 2022, it must have fewer than 200 total discharges
during the fiscal year and be located more than 25 road miles from the
nearest ``subsection (d)'' hospital (see Sec. 412.101(b)(2)(i)). (For
additional information on the low-volume hospital payment adjustment
prior to FY 2018, we refer readers to the FY 2017 IPPS/LTCH PPS final
rule (81 FR 56941 through 56943). For additional information on the
low-volume hospital payment adjustment for FY 2018, we refer readers to
the FY 2018 IPPS notice (CMS-1677-N) that appeared in the April 26,
2018, Federal Register (83 FR 18301 through 18308). For additional
information on the low-volume hospital payment adjustment for FY 2019
through FY 2022, we refer readers to the FY 2019 IPPS/LTCH PPS final
rule (83 FR 41398 through 41399).)
3. Payment Adjustment for FY 2023 and Subsequent Fiscal Years
In accordance with section 1886(d)(12) of the Act, beginning with
FY 2023, the low-volume hospital definition and payment adjustment
methodology will revert back to the statutory requirements that were in
effect prior to the amendments made by the Affordable Care Act and
subsequent legislation. Therefore, effective for FY 2023 and subsequent
years, under current policy at Sec. 412.101(b), in order to qualify as
a low-volume hospital, a subsection (d) hospital must be more than 25
road miles from another subsection (d) hospital and have less than 200
discharges (that is, less than 200 discharges total, including both
Medicare and non-Medicare discharges) during the fiscal year. For FY
2023 and subsequent years, the statute specifies that a low-volume
hospital must have less than 800 discharges during the fiscal year.
However, as required by section 1886(d)(12)(B)(i) of the Act and as
discussed earlier, the Secretary has developed an empirically
justifiable payment adjustment based on the relationship, for IPPS
hospitals with less than 800 discharges, between the additional
incremental costs (if any) that are associated with a particular number
of discharges. Based on an analysis we conducted for the FY 2005 IPPS
final rule (69 FR 49099 through 49102), a 25-percent low-volume
adjustment to all qualifying hospitals with less than 200 discharges
was found to be most consistent with the statutory requirement to
provide relief for low-volume hospitals where there is empirical
evidence that higher incremental costs are associated with low numbers
of total discharges. (Under the policy we established in that same
final rule, hospitals with between 200 and 799 discharges do not
receive a low-volume hospital adjustment.)
For FYs 2005 through 2010 and FY 2018 and subsequent years, the
discharge determination is made based on the hospital's number of total
discharges, that is, Medicare and non-Medicare discharges. The
hospital's most recently submitted cost report is used to determine if
the hospital meets the discharge criterion to receive the low-volume
payment adjustment in the current year (Sec. 412.101(b)(2)(i)). We use
cost report data to determine if a hospital meets the discharge
criterion because this is the best available data source that includes
information on both Medicare and non-Medicare discharges. We note that,
for FYs 2011 through 2018, we used the most recently available MedPAR
data to determine the hospital's Medicare discharges because only
Medicare discharges were used to determine if a hospital met the
discharge criterion for those years.
In addition to the discharge criterion, a hospital must also meet
the mileage criterion to qualify for the low-volume payment adjustment.
As specified by section 1886(d)(12)(C)(i) of the Act, a low-volume
hospital must be more than 25 road miles (or 15 road miles for FYs 2011
through 2022) from another subsection (d) hospital. Accordingly, for FY
2023 and for subsequent fiscal years, in addition to the discharge
criterion, the eligibility for the low-volume payment adjustment is
also dependent upon the hospital meeting the mileage criterion at Sec.
412.101(b)(2)(i), which specifies that a hospital must be located more
than 25 road miles from the nearest subsection (d) hospital, consistent
with section 1886(d)(12)(C)(i) of the Act. We define, at Sec.
412.101(a), the term ``road miles'' to mean ``miles'' as defined at
Sec. 412.92(c)(1) (75 FR 50238 through 50275 and 50414).
Comment: Several commenters opposed the change to the low-volume
hospital policy in FY 2023. Many of those commenters stated that they
are concerned about the financial impact resulting from the decrease in
payments due to the expiration of the temporary changes to the low-
volume hospital payment policy. Some commenters requested that CMS use
its authority to extend the use of the modified definition of a low-
volume hospital and the methodology for calculating the payment
adjustment for low-volume hospitals. Some commenters stated their
belief that CMS has the authority to not allow the temporary changes to
expire. A commenter requested CMS use its discretion under the
Emergency Pandemic Declarations to extend the low-volume hospital
payment policy.
Response: We appreciate the commenters' sharing their concerns
regarding the financial impact resulting from the expiration of the
temporary changes to the low-volume hospital payment policy. As
previously discussed, section 1886(d)(12) of the Act sets forth the
applicable low-volume hospital policy beginning FY 2023. In response to
the comment that requested the temporary changes to the low-volume
hospital policy be extended using the discretion under the Emergency
Pandemic Declarations, we believe the commenter is referring to the use
of waivers under Section 1135 of the Act. While this provision
authorizes certain Medicare (and other) program requirements and
conditions of participation to be waived during certain emergencies,
this authority cannot be used to waive provisions of payment.
Comment: Several commenters support legislative action through the
[[Page 49062]]
Rural Hospital Support Act (H.R. 1887/S. 4009) to extend or make
permanent the modifications to the low-volume hospital payment policy
enacted by section 50204 of the Bipartisan Budget Act of 2018. Many
commenters urged CMS to collaborate with Congress to extend or make
permanent the modifications to the low-volume hospital payment policy.
Other commenters stated that it is not the intent of Congress for the
low-volume hospital payment policy to revert back to the historical
statutory requirements. Some of these commenters believe that CMS is
ignoring the congressional intent of this policy and denying a group of
IPPS providers low-volume hospital payments with the reversion to the
policy that was originally established for FY 2005. These commenters
requested expanding eligibility for the discharge criteria to match the
statutory requirement to include IPPS providers with 200-799
discharges. These commenters did not provide any data analysis in
support of their comments to expand the low-volume hospital adjustment
to qualifying hospitals that have more than 200 and less than 800 total
discharges. A commenter requested that CMS update its regression
analysis. The commenter stated that empirical justification used by CMS
to determine the discharge criteria of less than 200 discharges is
dated and that no rationale to support the ongoing validity of the
previous analysis was provided in the proposed rule. The commenter also
noted that even if the low-volume hospital discharge criteria were
expanded to less than 800 total discharges, there would still only be a
small number of hospitals to qualify for low-volume payment adjustment.
Response: We appreciate the commenters sharing their support for
legislative action. We disagree that is contrary to the congressional
intent for the low-volume hospital policy to revert back to the policy
established under the original historical statutory requirements. As
noted earlier in the preamble of this final rule and as discussed in
response to public comments in the FY 2013 IPPS/LTCH PPS final rule (77
FR 53408 through 53409), the FY 2014 IPPS/LTCH PPS final rule (78 50612
through 50613), and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38184
through 38189) to implement the original low-volume hospital payment
adjustment provision, and as mandated by statute, we developed an
empirically justified adjustment based on the relationship between
costs and total discharges of hospitals with less than 800 total
(Medicare and non-Medicare) discharges. Specifically, we performed
several regression analyses to evaluate the relationship between
hospitals' costs per case and discharges, and found that an adjustment
for hospitals with less than 200 total discharges is most consistent
with the statutory requirement to provide for additional payments to
low-volume hospitals where there is empirical evidence that higher
incremental costs are associated with lower numbers of discharges (69
FR 49101 through 49102). Based on these analyses, we established a low-
volume hospital policy under which qualifying hospitals with less than
200 total discharges receive a payment adjustment of an additional 25
percent. (Section 1886(d)(12)(B)(iii) of the Act limits the applicable
percentage increase adjustment to no more than 25 percent.) In the
future, we may reevaluate the low-volume hospital adjustment policy;
that is, the definition of a low-volume hospital and the payment
adjustment. However, we are not aware of any analysis or empirical
evidence that would support expanding the originally established low-
volume hospital adjustment policy and we did not make any proposals
regarding the low-volume hospital payment adjustment for FY 2023. For
these reasons, we are not making any changes to the low-volume hospital
payment adjustment policy in this final rule.
Comment: Some commenters urged CMS to expedite any changes to the
definition of a low-volume hospital and the methodology for calculating
the payment adjustment for low-volume hospitals, should Congress extend
the current policy. They requested that low-volume hospital payments be
restored quickly so that impacted providers are able to continue to
provide quality care.
Response: We appreciate the commenters' request and, as in the
past, we will make every effort to implement any extension of the low-
volume payment policy as expeditiously as possible.
Comment: A commenter questioned how a hospital would qualify for
low-volume payments while also adhering to the inpatient hospitals
Conditions of Participation (CoP) since only hospitals with less than
200 total discharges would be eligible for the low-volume hospital
adjustment beginning in FY 2023. The commenter argues that IPPS
hospitals cannot adhere to the average daily census (ADC) and average
length of stay (ALOS) thresholds in the discussion of the factors for
state agencies to consider when certifying a facility as an inpatient
hospital in the State Operations Manual (SOM).\214\ Specifically, the
commenter cites ``the ALOS of two midnights'' benchmark and the
expectation ``to maintain an average daily census (ADC) of two
patients.''
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\214\ https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-17-44-Revised-102717.pdf.
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Response: While we appreciate the commenter's concern regarding
compliance with the COPs and hospitals' certification as an inpatient
hospital, it is not clear to us why a low-volume hospital payment
adjustment criterion of less than 200 discharges would prevent a
hospital from meeting ``the ADC and ALOS thresholds required for
maintaining its certification and status as an inpatient facility.''
The low-volume payment adjustment provides an additional payment to
hospitals that meet the low-volume hospital qualifying criteria and
does not directly impact a hospital's ADC or ALOS. We also note that
CMS considers multiple factors when determining certification for
inpatient hospitals. ADC and ALOS are factors in determining a
hospital's eligibility for specialized payment categories. Hospitals
are not required to have any specific number of inpatients for
certification. A hospital's ability to adhere to the inpatient hospital
CoPs is not relevant to the reversion to the low-volume hospital
payment requirements that were in effect prior to FY 2011.
After consideration of the public comments we received, we are
finalizing our proposals, without modification. Consistent with current
law, effective beginning FY 2023, the low-volume hospital definition
and payment adjustment methodology will revert back to the policy
established under statutory requirements that were in effect prior to
the amendments made by the Affordable Care Act and extended through
subsequent legislation (most recently the Bipartisan Budget Act of
2018).
4. Process for Requesting and Obtaining the Low-Volume Hospital Payment
Adjustment
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414) and subsequent rulemaking, most recently in the FY 2022
IPPS/LTCH PPS final rule (86 FR 45219 through 45221), we discussed the
process for requesting and obtaining the low-volume hospital payment
adjustment.
Under this previously established process, a hospital makes a
written
[[Page 49063]]
request for the low-volume payment adjustment under Sec. 412.101 to
its MAC. This request must contain sufficient documentation to
establish that the hospital meets the applicable mileage and discharge
criteria. The MAC will determine if the hospital qualifies as a low-
volume hospital by reviewing the data the hospital submits with its
request for low-volume hospital status in addition to other available
data. Under this approach, a hospital will know in advance whether or
not it will receive a payment adjustment under the low-volume hospital
policy. The MAC and CMS may review available data such as the number of
discharges, in addition to the data the hospital submits with its
request for low-volume hospital status, to determine whether or not the
hospital meets the qualifying criteria. (For additional information on
our existing process for requesting the low-volume hospital payment
adjustment, we refer readers to the FY 2019 IPPS/LTCH PPS final rule
(83 FR 41399 through 41401).)
As explained earlier, for FY 2019 and subsequent fiscal years, the
discharge determination is made based on the hospital's number of total
discharges, that is, Medicare and non-Medicare discharges, as was the
case for FYs 2005 through 2010. Under Sec. 412.101(b)(2)(i) and (iii),
a hospital's most recently submitted cost report is used to determine
if the hospital meets the discharge criterion to receive the low-volume
payment adjustment in the current year. As discussed in the FY 2019
IPPS/LTCH PPS final rule (83 FR 41399 and 41400), we use cost report
data to determine if a hospital meets the discharge criterion because
this is the best available data source that includes information on
both Medicare and non-Medicare discharges. (For FYs 2011 through 2018,
the most recently available MedPAR data were used to determine the
hospital's Medicare discharges because non-Medicare discharges were not
used to determine if a hospital met the discharge criterion for those
years.) Therefore, a hospital must refer to its most recently submitted
cost report for total discharges (Medicare and non-Medicare) to decide
whether or not to apply for low-volume hospital status for a particular
fiscal year.
As also discussed in the FY 2019 IPPS/LTCH PPS final rule, in
addition to the discharge criterion, for FY 2019 and for subsequent
fiscal years, eligibility for the low-volume hospital payment
adjustment is also dependent upon the hospital meeting the applicable
mileage criterion specified in Sec. 412.101(b)(2)(i) or (iii) for the
fiscal year. Specifically, to meet the mileage criterion to qualify for
the low-volume hospital payment adjustment for FY 2023, a hospital must
be located more than 25 road miles from the nearest subsection (d)
hospital. (We define in Sec. 412.101(a) the term ``road miles'' to
mean ``miles'' as defined in Sec. 412.92(c)(1) (75 FR 50238 through
50275 and 50414).) For establishing that the hospital meets the mileage
criterion, the use of a web-based mapping tool as part of the
documentation is acceptable. The MAC will determine if the information
submitted by the hospital, such as the name and street address of the
nearest hospitals, location on a map, and distance from the hospital
requesting low-volume hospital status, is sufficient to document that
it meets the mileage criterion. If not, the MAC will follow up with the
hospital to obtain additional necessary information to determine
whether or not the hospital meets the applicable mileage criterion.
In accordance with our previously established process, a hospital
must make a written request for low-volume hospital status that is
received by its MAC by September 1 immediately preceding the start of
the Federal fiscal year for which the hospital is applying for low-
volume hospital status in order for the applicable low-volume hospital
payment adjustment to be applied to payments for its discharges for the
fiscal year beginning on or after October 1 immediately following the
request (that is, the start of the Federal fiscal year). For a hospital
whose request for low volume hospital status is received after
September 1, if the MAC determines the hospital meets the criteria to
qualify as a low-volume hospital, the MAC will apply the applicable
low-volume hospital payment adjustment to determine payment for the
hospital's discharges for the fiscal year, effective prospectively
within 30 days of the date of the MAC's low-volume status
determination.
Consistent with this previously established process, for FY 2023,
we proposed that a hospital must submit a written request for low-
volume hospital status to its MAC that includes sufficient
documentation to establish that the hospital meets the applicable
mileage and discharge criteria (as described earlier). Specifically,
for FY 2023, a hospital must make a written request for low-volume
hospital status that is received by its MAC no later than September 1,
2022, in order for the 25-percent, low-volume, add-on payment
adjustment to be applied to payments for its discharges beginning on or
after October 1, 2022. If a hospital's written request for low-volume
hospital status for FY 2023 is received after September 1, 2022, and if
the MAC determines the hospital meets the criteria to qualify as a low-
volume hospital, the MAC would apply the low-volume hospital payment
adjustment to determine the payment for the hospital's FY 2023
discharges, effective prospectively within 30 days of the date of the
MAC's low-volume hospital status determination.
Under this process, a hospital that qualified for the low-volume
hospital payment adjustment for FY 2022 may continue to receive a low-
volume hospital payment adjustment for FY 2023 without reapplying if it
meets both the discharge criterion and the mileage criterion applicable
for FY 2023. As discussed previously, for FY 2023 the discharge and the
mileage criteria are reverting to the statutory requirements that were
in effect prior to FY 2011, and to the preexisting low-volume hospital
qualifying criteria, as implemented in FY 2005 and specified in the
existing regulations at Sec. 412.101(b)(2)(i). As in previous years,
we proposed that such a hospital must send written verification that is
received by its MAC no later than September 1, 2022, stating that it
meets the mileage criterion applicable for FY 2023 (that is, is located
more than 25 road miles from the nearest ``subsection (d)'' hospital).
For FY 2023, we further proposed that this written verification must
also state, based upon the most recently submitted cost report, that
the hospital meets the discharge criterion applicable for FY 2023 (that
is, less than 200 discharges total, including both Medicare and non-
Medicare discharges). If a hospital's request for low-volume hospital
status for FY 2023 is received after September 1, 2022, and if the MAC
determines the hospital meets the criteria to qualify as a low-volume
hospital, the MAC will apply the 25-percent, low-volume, add-on payment
adjustment to determine the payment for the hospital's FY 2023
discharges, effective prospectively within 30 days of the date of the
MAC's low-volume hospital status determination.
We received no comments on our proposed process for requesting and
obtaining the low-volume hospital payment adjustment for FY 2023 and
therefore are finalizing this proposal without modification.
We note, in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41398
through 41401 and 41702), in accordance with the provisions of section
50204 of the Bipartisan Budget Act of 2018, for FY 2023 and subsequent
fiscal years, we made conforming changes to the regulations at 42 CFR
412.101 to reflect that the low-volume payment adjustment policy in
effect for these
[[Page 49064]]
years is the same low-volume hospital payment adjustment policy in
effect for FYs 2005 through 2010. Under these revisions, beginning with
FY 2023, consistent with current law, the low-volume hospital
qualifying criteria and payment adjustment methodology will return to
the criteria and methodology that were in effect prior to the
amendments made by the Affordable Care Act (that is, the low-volume
hospital payment policy in effect for FYs 2005 through 2010).
Therefore, no further revisions to the policy or to the regulations at
Sec. 412.101 are required to conform them to the statutory requirement
that the low-volume hospital policy in effect prior to the Affordable
Care Act will again be in effect for FY 2023 and subsequent years.
D. Changes in the Medicare-Dependent, Small Rural Hospital (MDH)
Program (Sec. 412.108)
1. Background for the MDH Program
Section 1886(d)(5)(G) of the Act provides special payment
protections, under the IPPS, to a Medicare-dependent, small rural
hospital (MDH). (For additional information on the MDH program and the
payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684).) As discussed in section V.B.
of the preamble of this final rule, the MDH program provisions at
section 1886(d)(5)(G) of the Act will expire at the end of FY 2022.
Beginning with discharges occurring on or after October 1, 2022, all
hospitals that previously qualified for MDH status will be paid based
on the Federal rate.
Since the extension of the MDH program through FY 2012 provided by
section 3124 of the Affordable Care Act, the MDH program had been
extended by subsequent legislation as follows: section 606 of the ATRA
(Pub. L. 112- 240) extended the MDH program through FY 2013 (that is,
for discharges occurring before October 1, 2013). Section 1106 of the
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) extended the MDH
program through the first half of FY 2014 (that is, for discharges
occurring before April 1, 2014). Section 106 of the PAMA (Pub. L. 113-
93) extended the MDH program through the first half of FY 2015 (that
is, for discharges occurring before April 1, 2015). Section 205 of the
MACRA (Pub. L. 114-10) extended the MDH program through FY 2017 (that
is, for discharges occurring before October 1, 2017). Section 50205 of
the Bipartisan Budget Act (Pub. L. 115- 123) extended the MDH program
through FY 2022 (that is for discharges occurring before October 1,
2022). For additional information on the extensions of the MDH program
after FY 2012, we refer readers to the following Federal Register
documents:
The FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through
53405 and 53413 through 53414).
The FY 2013 IPPS notice (78 FR 14689).
The FY 2014 IPPS/LTCH PPS final rule (78 FR 50647 through
50649).
The FY 2014 interim final rule with comment period (79 FR
15025 through 15027).
The FY 2014 notice (79 FR 34446 through 34449).
The FY 2015 IPPS/LTCH PPS final rule (79 FR 50022 through
50024).
The August 2015 interim final rule with comment period (80
FR 49596).
The FY 2017 IPPS/LTCH PPS final rule (81 FR 57054 through
57057).
The FY 2018 notice (83 FR 18303 through 18305).
The FY 2019 IPPS/LTCH PPS final rule (83 FR 41429).
2. Expiration of the MDH Program
Because section 50205 of the Bipartisan Budget Act extended the MDH
program through FY 2022 only, beginning October 1, 2022, the MDH
program will no longer be in effect. Because the MDH program is not
authorized by statute beyond September 30, 2022, beginning October 1,
2022, all hospitals that previously qualified for MDH status under
section 1886(d)(5)(G) of the Act will no longer have MDH status and
will be paid based on the IPPS Federal rate.
When the MDH program was set to expire at the end of FY 2012, in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405), we
revised our sole community hospital (SCH) policies to allow MDHs to
apply for SCH status in advance of the expiration of the MDH program
and be paid as such under certain conditions. We codified these changes
in the regulations at Sec. 412.92(b)(2)(i) and (v). Specifically, the
existing regulations at Sec. 412.92(b)(2)(v) allow for an effective
date of an approval of SCH status that is the day following the
expiration date of the MDH program. We note that these same conditions
apply to MDHs that intend to apply for SCH status with the expiration
of the MDH program on September 30, 2022. Therefore, in order for an
MDH to receive SCH status effective October 1, 2022, the MDH must apply
for SCH status at least 30 days before the expiration of the MDH
program; that is, the MDH must apply for SCH status by September 1,
2022. The MDH also must request that, if approved as an SCH, the SCH
status be effective with the expiration of the MDH program; that is,
the MDH must request that the SCH status, if approved, be effective
October 1, 2022, immediately after its MDH status expires with the
expiration of the MDH program on September 30, 2022. We emphasize that
an MDH that applies for SCH status in anticipation of the expiration of
the MDH program would not qualify for the October 1, 2022, effective
date for SCH status if it does not apply by the September 1, 2022,
deadline. If the MDH does not apply by the September 1, 2022, deadline,
the hospital would instead be subject to the usual effective date for
SCH classification; that is, as of the date the MAC receives the
complete application as specified at Sec. 412.92(b)(2)(i).
We note that the regulations governing the MDH program are found at
Sec. 412.108 and the MDH program is also cited in the general payment
rules in the regulations at Sec. 412.90. As stated earlier, under
current law, the MDH program will expire at the end of FY 2022, which
is already reflected in Sec. Sec. 412.108 and 412.90(j). As such, we
did not propose specific amendments to the regulations at Sec. 412.108
or Sec. 412.90 to reflect the expiration of the MDH program. However,
we proposed that if the MDH program were to be extended by law, similar
to how it was extended through FY 2013, by the ATRA (Pub. L. 112-240);
through March 31, 2014, by the Pathway for SGR Reform Act of 2013 (Pub.
L. 113-167); through March 31, 2015, by the PAMA (Pub. L. 113-93);
through FY 2017, by the MACRA (Pub. L. 114-10); and most recently
through FY 2022, by the Bipartisan Budget Act of 2018 (Pub. L. 115-
123), we would make conforming changes to the regulations governing the
MDH program at Sec. 412.108(a)(1) and (c)(2)(iii) and the general
payment rules at Sec. 412.90(j) to reflect such an extension of the
MDH program. We stated that these conforming changes would only be made
if the MDH program were to be extended by statute beyond September 30,
2022. As of the time of the development of this final rule, there has
been no change in law to extend the MDH program beyond FY 2022.
Therefore, in this final rule, we are not making any additional changes
to the regulations governing the MDH program at Sec. 412.108 or the
general payment rules at Sec. 412.90.
Comment: Many commenters expressed support for extending the MDH
program or making the MDH program permanent and noted that they would
continue supporting congressional efforts to protect the MDH program.
Some commenters also
[[Page 49065]]
expressed support for an additional base year for calculating MDH
payments. A commenter urged CMS to remove the MDH program expiration
proposal from the final rule. Several state hospital associations
expressed their concern that hospitals in their states would experience
significant payment decreases as a result of the expiration of the MDH
program. A few commenters urged for action to be taken to ensure that
the MDH program is extended, while other commenters urged CMS to
explore alternatives and make immediate adjustments within its
authority to provide relief and mitigate negative impacts to rural
hospitals should Congress not act.
Response: While we appreciate the commenters' concerns about the
expiration of the MDH program and the financial impact to affected
providers if the MDH program is not extended beyond FY 2022, CMS does
not have the authority under current law to extend the MDH program
beyond the September 30, 2022 statutory expiration date. Similarly,
Section 1886(b)(3)(D) of the Act specifies the applicable base years or
``target amounts'' for hospitals classified as MDHs. These comments are
similar to comments we received previously, prior to the statutory
extension of the MDH program for FY 2018 through FY 2022 provided by
subsequent legislation, and discussed in the FY 2018 IPPS/LTCH PPS
final rule (82 FR 38220 through 38221). In response to the comment
urging CMS to explore other relief options should Congress not act, we
will consider this for future rulemaking and explore potential ways to
provide support to this subset of rural providers.
Comment: Several commenters expressed support for CMS' policy that
allows MDHs to apply for SCH status in advance of the expiration of the
MDH program and be paid as such under certain conditions. Some
commenters also requested that CMS also provide former MDHs with the
ability to rescind their newly acquired SCH status and reinstate their
MDH status in a seamless manner, if a retroactive extension to the MDH
program is made.
Response: We appreciate the commenters' support of our policy
allowing MDHs to apply for SCH status in advance of the expiration of
the MDH program and to be paid as such under certain conditions and
allow for a seamless transition from MDH classification to SCH
classification. In response to the suggestion that CMS provide former
MDHs with ability to rescind their newly acquired SCH status and
reinstate their MDH status in a seamless manner if a retroactive
extension to the MDH program is made, we understand the desire on the
part of hospitals for certainty in the face of MDH program expiration
and will consider for future rulemaking any potential mechanisms to
further streamline such transitions in connection with legislative
extensions of the MDH program. We note that under the current
regulations at Sec. 412.108(b)(4), the effective date for MDH
classification is as of the date the MAC receives the complete
application. A MDH that applied for and was classified as an SCH in
advance of the MDH expiration per the regulations at Sec.
412.92(b)(2)(v) could request a cancellation of its SCH status and
simultaneously re-apply for MDH status if the MDH program were to be
extended, and the MDH classification would be effective as of the date
that the MAC receives the complete application. This would allow a
former MDH to maintain special payment status as an SCH and then as an
MDH generally without interruption in the event the MDH program is
extended.
Comment: Commenters urged CMS to expedite restoration of MDH
status, should Congress act to extend these programs, stating that past
retroactive restorations have seen delays that caused significant cash
flow problems to affected hospitals. They requested that CMS move
expeditiously to restore payments so that these rural facilities are
able to continue to provide quality care to their communities and that
CMS clarify how it might handle program extensions, should Congress
enact legislation to extend them.
Response: We appreciate the commenters' sharing their concerns
relating to a retroactive restoration of the MDH program. As with past
extensions, CMS will evaluate enacted legislation to determine the most
appropriate approach to implement changes to the law, including
instructions to the MACs to reinstate MDH status to eligible hospitals.
As in the past, we will make every effort to implement any extension of
the MDH program as expeditiously as possible.
In summary, under current law, beginning October 1, 2022, all
hospitals that previously qualified for MDH status will no longer have
MDH status.
E. Indirect Medical Education (IME) Payment Adjustment Factor (Sec.
412.105)
Under the IPPS, an additional payment amount is made to hospitals
with residents in an approved graduate medical education (GME) program
in order to reflect the higher indirect patient care costs of teaching
hospitals relative to nonteaching hospitals. The payment amount is
determined by use of a statutorily specified adjustment factor. The
regulations regarding the calculation of this additional payment, known
as the IME adjustment, are located at Sec. 412.105. We refer readers
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full
discussion of the IME adjustment and IME adjustment factor. Section
1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges
occurring during FY 2008 and fiscal years thereafter, the IME formula
multiplier is 1.35.
Accordingly, for discharges occurring during FY 2023, the formula
multiplier is 1.35. We estimate that application of this formula
multiplier for the FY 2023 IME adjustment will result in an increase in
IPPS payment of 5.5 percent for every approximately 10 percent increase
in the hospital's resident-to-bed ratio.
We did not receive any comments regarding the IME adjustment
factor, which, as noted earlier, is statutorily required. Accordingly,
for discharges occurring during FY 2023, the IME formula multiplier is
1.35.
F. Payment for Indirect and Direct Graduate Medical Education Costs
(Sec. Sec. 412.105 and 413.75 Through 413.83)
1. Background
Section 1886(h) of the Act, as added by section 9202 of the
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L.
99-272) and as currently implemented in the regulations at 42 CFR
413.75 through 413.83, establishes a methodology for determining
payments to hospitals for the direct costs of approved graduate medical
education (GME) programs. Section 1886(h)(2) of the Act sets forth a
methodology for the determination of a hospital-specific base-period
per resident amount (PRA) that is calculated by dividing a hospital's
allowable direct costs of GME in a base period by its number of full-
time equivalent (FTE) residents in the base period. The base period is,
for most hospitals, the hospital's cost reporting period beginning in
FY 1984 (that is, October 1, 1983 through September 30, 1984). The base
year PRA is updated annually for inflation. In general, Medicare direct
GME payments are calculated by multiplying the hospital's updated PRA
by the weighted number of FTE residents working in all areas of the
hospital complex (and at nonprovider sites, when applicable), and the
hospital's Medicare share of total inpatient days.
Section 1886(d)(5)(B) of the Act provides for a payment adjustment
[[Page 49066]]
known as the indirect medical education (IME) adjustment under the IPPS
for hospitals that have residents in an approved GME program, in order
to account for the higher indirect patient care costs of teaching
hospitals relative to nonteaching hospitals. The regulations regarding
the calculation of this additional payment are located at 42 CFR
412.105. The hospital's IME adjustment applied to the DRG payments is
calculated based on the ratio of the hospital's number of FTE residents
training in either the inpatient or outpatient departments of the IPPS
hospital (and, for discharges occurring on or after October 1, 1997, at
non-provider sites, when applicable) to the number of inpatient
hospital beds.
The calculation of both direct GME payments and the IME payment
adjustment is affected by the number of FTE residents that a hospital
is allowed to count. Generally, the greater the number of FTE residents
a hospital counts, the greater the amount of Medicare direct GME and
IME payments the hospital will receive. In an attempt to end the
implicit incentive for hospitals to increase the number of FTE
residents, Congress, through the Balanced Budget Act of 1997 (Pub. L.
105-33), established a limit on the number of allopathic and
osteopathic residents that a hospital could include in its FTE resident
count for direct GME and IME payment purposes. Under section
1886(h)(4)(F) of the Act, for cost reporting periods beginning on or
after October 1, 1997, a hospital's unweighted FTE count of residents
for purposes of direct GME may not exceed the hospital's unweighted FTE
count for direct GME in its most recent cost reporting period ending on
or before December 31, 1996. Under section 1886(d)(5)(B)(v) of the Act,
a similar limit based on the FTE count for IME during that cost
reporting period is applied, effective for discharges occurring on or
after October 1, 1997. Dental and podiatric residents are not included
in this statutorily mandated cap.
As mentioned previously, Medicare direct GME payments are
calculated by multiplying the hospital's updated PRA by the weighted
number of FTE residents working in all areas of the hospital complex
(and at nonprovider sites, when applicable), and the hospital's
Medicare share of total inpatient days. Section 1886(h)(4) of the Act
specifies the methodology for determining the amount of FTE residents
to be included in a hospital's direct GME payment formula. That is, the
number of FTE residents training at a hospital (or in non-provider
sites as applicable) would not necessarily equal the sum of those FTE
residents used in the hospital's direct GME payment formula, since
certain rules and factors are applied to adjust the count of FTE
residents for direct GME payment purposes. First, section 1886(h)(4)(C)
of the Act requires that a ``weighting factor'' of either 1.0 or 0.5 be
applied to each FTE resident, as follows: In calculating the number of
FTE residents in an approved residency program on or after July 1,
1987, for a resident who is not in the resident's initial residency
period, the weighting factor is 0.50. Section 1886(h)(5)(F) of the Act
defines the term ``initial residency period'' as the ``period of board
eligibility,'' with certain exceptions. Finally, section 1886(h)(4)(G)
of the Act states that the term ``period of board eligibility'' means,
for a resident, the minimum number of years of formal training
necessary to satisfy the requirements for initial board eligibility in
the particular specialty for which the resident is training. The direct
GME calculation and our policy on applying the weighting factors to
each FTE resident based on the FTE resident's status within or beyond
the initial residency period (IRP) was established in the September 29,
1989, Federal Register (54 FR 40287, 40292, 40305 and 40306), and
implemented in the regulations at 42 CFR 413.86(f) (now 42 CFR
413.79(a) and (b)).
Thus, the FTE count used in the direct GME payment formula must be
a weighted FTE count when a hospital is training residents beyond their
IRPs. However, the direct GME FTE cap is an unweighted number. That is,
under section 1886(h)(4)(F) of the Act, for cost reporting periods
beginning on or after October 1, 1997, a hospital's unweighted FTE
count of residents for purposes of direct GME may not exceed the
hospital's unweighted FTE count for direct GME in its most recent cost
reporting period ending on or before December 31, 1996 (that is the
hospital's unweighted 1996 FTE cap or FTE cap). Regulations regarding
the FTE caps and unweighted FTE counts were first published in the
August 29, 1997, Federal Register (62 FR 45966). To address situations
where a hospital's weighted FTE count exceeds its unweighted 1996 FTE
cap, we established a policy effective for cost reporting periods
beginning on or after October 1, 1997, to bring the weighted FTE count
within the unweighted FTE cap using the following ratio on the Medicare
cost report: ((1996 unweighted FTE cap/current year unweighted FTE
count) x (current year total weighted FTE count)) (see 62 FR 46005 and
63 FR 26,330 (May 12, 1998)). In the August 1, 2001, Federal Register
(66 FR 39893 through 39896), we modified this ratio effective for cost
reporting periods beginning on or after October 1, 2001, to separately
account for a hospital's current year weighted primary care and
obstetrics/gynecology (OB/GYN) FTE count and primary care and OB/GYN
PRA, and current year weighted other FTE count and other PRA, as
follows: (FTE cap/unweighted total FTEs in the cost reporting period) x
(weighted primary care and OB/GYN FTEs in the cost reporting period)
plus (FTE cap/unweighted total FTEs in the cost reporting period) x
(weighted nonprimary care FTEs in the cost reporting period). The sum
of the products is the current year allowable weighted FTE count. In
addition, effective for cost reporting periods beginning on or after
October 1, 2001, the direct GME payment is calculated using two
separate rolling averages, one for primary care and OB/GYN FTE
residents, and one for nonprimary care FTE residents. These
calculations were implemented at 42 CFR 413.86(g)(4) and (5)
respectively, currently 42 CFR 413.79(c)(2)(iii) and (d)(3).
2. Milton S. Hershey Medical Center, et al. v. Becerra Litigation
On May 17, 2021, the U.S. District Court for the District of
Columbia ruled against CMS's method of calculating direct GME payments
to teaching hospitals when those hospitals' weighted FTE counts exceed
their direct GME FTE cap. In Milton S. Hershey Medical Center, et al.
v. Becerra (Slip. Op., 2021 WL 1966572, May 17, 2021), the court
ordered CMS to recalculate reimbursement owed, holding that CMS's
regulation impermissibly modified the statutory weighting factors
discussed previously. The plaintiffs in these consolidated cases
alleged that as far back as 2005, the proportional reduction that CMS
applied to the weighted FTE count when the weighted FTE count exceeded
the FTE cap conflicted with the Medicare statute, and it was an
arbitrary and capricious exercise of agency discretion under the
Administrative Procedure Act. The Court held that the proportional
reduction methodology improperly modified the weighting factors
statutorily assigned to residents and fellows. The court ordered CMS to
pay the plaintiffs according to a more favorable method.
For example, a hospital has a direct GME cap of 100, trains 90 FTE
residents weighted at 1.0 and 10 FTE fellows weighted at 0.5, for a
total unweighted
[[Page 49067]]
count of 100, and a total weighted FTE count of 95. Under current
methodology, the proportional reduction is: (100 cap/100 current year
unweighted count) x 95 (current year weighted count) = 95.
If that hospital adds 10 more fellows and exceeds the cap with an
unweighted total of 110 (90 residents and 20 fellows), its weighted FTE
count of 100 is reduced as follows: (100 cap/110 current year
unweighted count) x 100 (current year weighted count) = 90.91.
The plaintiffs stated that CMS's proportional reduction method
unlawfully reduced the weighting factor of 0.5 to an amount less than
that, thereby reducing the capped weighted FTE amount (100 reduced to
90.91 in the example) to which they were entitled for direct GME
payment purposes. The court granted the plaintiffs' motion for summary
judgment, denied defendant's, and remanded to the Agency so that it
could recalculate plaintiffs' reimbursement payments consistent with
the court's opinion. The court held that CMS's proportional reduction
methodology, enacted at 42 CFR 413.79(c)(2)(iii), was inconsistent with
the statutory weighting factors. In response to the court's decision,
in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28410 through 28412),
we proposed to implement a modified policy applicable to all teaching
hospitals, effective as of October 1, 2001, which would replace the
existing policy at 42 CFR 413.79(c)(2)(iii). While the proportional
reduction method struck down in Hershey was first effective for cost
reports beginning on or after October 1, 1997, we are unaware of any
open or reopenable NPRs for the 1997-2001 period where the proportional
reduction method caused a provider's payments to be lower than they
would be under our proposed new policy, but we welcomed comments
alerting us of such NPRs. The proportional reduction method was amended
to its present form effective for cost reporting periods beginning on
or after October 2001. (See current 42 CFR 413.79(c)(2)(ii) and (iii).)
Therefore, we proposed to modify the policy embodied in 42 CFR
413.79(c)(2)(iii), which the Court found in Hershey was inconsistent
with the statute.
The Court's decision in Hershey held that our prior rule governing
``computation of the approved number of full-time equivalent residents
in an approved medical residency training program'' (Sec. 1886(h)(4)
of the Act) was inconsistent with the statute. That statute further
requires us to ``establish rules consistent with this paragraph'' for
the computation of FTEs. Following our review of the district court's
reasoning in Hershey and the statute, we concluded that our existing
formula for computing the number of FTEs was inconsistent with the
statutory requirements. It is also our view that the combination of the
statutory requirement to ``establish rules'' and the Hershey court's
conclusion that our existing rules are inconsistent with statutory
requirements necessitates a new rulemaking. We further note that the
Hershey decision does not mandate an alternative payment method, and we
do not believe that the decision--or our independent conclusion that
the formula should be modified--forecloses alternatives to the
calculation method we finalize here. In the FY 2023 IPPS/LTCH PPS
proposed rule (87 FR 28411), we stated our belief that, in order to
comply with the statutory requirement to make rules governing the
computation of FTEs, it is necessary to engage in a retroactive
rulemaking to modify the statutorily-required rule effective for cost
reporting periods beginning on or after October 1, 2001. While Hershey
itself does not mandate this conclusion, we believe it would be
inconsistent with the statute to calculate past payments for open cost
reports based on a rule inconsistent with the law, particularly where a
court ordered us to recalculate payments to plaintiffs. Doing so via
notice-and-comment rulemaking is in the public interest because it will
permit interested stakeholders to comment on the proposed approach,
allow the agency to have the benefit of those comments in the
development of a final rule, and calculate payments for past open cost
years in a transparent, consistent, and efficient manner. This is
particularly true in this situation, where the existing policy was
promulgated via an interim final rule with comment period, and the
agency received no comments on the policy the court found unlawful.
In the proposed rule, we noted that because we proposed to
establish this policy retroactively, it would cover cost reporting
periods for which many NPRs have already been settled. Consistent with
Sec. 405.1885(c)(2), any final rule retroactively adopting the
proposed new policy would not be the basis for reopening final settled
NPRs.
After reviewing the statutory language regarding the direct GME FTE
cap and the court's reasoning, we decided to propose a modified policy
to be applied for cost reporting periods beginning on October 1, 2001,
as described previously. The proposed modified policy would address
situations for applying the FTE cap when a hospital's weighted FTE
count was greater than its FTE cap, but would not reduce the weighting
factor of residents that are beyond their IRP by an amount less than
0.5. Section 1886(h)(4)(F) of the Act states that for purposes of a
cost reporting period beginning on or after October 1, 1997, the total
number of FTE residents before application of weighting factors may not
exceed the number of such FTEs for the hospital's most recent cost
reporting period ending on or before December 31, 1996. Under current
policy, we interpreted this to mean that only a hospital's unweighted
(before application of weighting factors) allopathic and osteopathic
FTE count was compared to its FTE cap, and if the unweighted allopathic
and osteopathic FTE count exceeded the FTE cap, then the proportional
reduction is made to the weighted FTE counts. Under this modified
proposed policy, in the instance where a hospital's unweighted
allopathic and osteopathic FTE count exceeds its FTE cap, we proposed
to add a step to also compare the total weighted allopathic and
osteopathic FTE count to the FTE cap. If the total weighted allopathic
and osteopathic FTE count is equal to or less than the FTE cap, then no
adjustments would be made to the respective primary care & OB/GYN
weighted FTE counts or the other weighted FTE counts. If the total
weighted allopathic and osteopathic FTE count exceeds the FTE cap, then
we would adjust the respective primary care & OB/GYN weighted FTE
counts or the other weighted FTE counts to make the total weighted FTE
count equal the FTE cap, as follows:
((primary care & OB/GYN weighted FTEs/total weighted FTEs) x FTE cap))
+ ((other weighted FTEs/total weighted FTEs) x FTE cap)).
The sum would be the current year total allowable weighted FTE
count, which would be reported on Worksheet E-4, line 9, column 3.
More specific to the Medicare cost report, we proposed to revise
the instructions to Worksheet E-4, line 9 to state: If line 6 is less
than or equal to line 5, enter the amounts from line 8, columns 1 and
2, in columns 1 and 2, of this line. Otherwise, if the total weighted
FTE count from line 8, column 3 is greater than the amount on line 5,
then enter in column 1 the result of ((primary care & OBGYN weighted
FTEs/total weighted FTEs) x FTE cap)). Enter in column 2 the result of
((other weighted FTEs/total weighted FTEs) x FTE cap)). Enter in column
3 the sum of
((primary care & OBGYN weighted FTEs/total weighted FTEs) x FTE
[[Page 49068]]
cap)) + ((other weighted FTEs/total weighted FTEs) x FTE cap)).
Example : [Note--see the comments and responses later in this
section for a revised version of this Example 1] Hospital with an FTE
cap of 100 trains 120 FTEs with a weight of 1.0, and 105 FTEs with a
weight of 0.5, consisting of 70 weighted primary care & OBGYN FTEs and
35 weighted other FTEs. Since the total weighted count of 105
(Worksheet E-4, line 8, column 3) exceeds the FTE cap of 100 (Worksheet
E-4, line 5), the Hospital reports the following adjusted weighted FTE
counts on Worksheet E-4:
Line 9, column 1: ((70 weighted primary care & OBGYN FTEs/105 total
weighted FTEs) x 100 cap)) = 66.67.
Line 9, column 2: ((35 weighted other FTEs/105 total weighted FTEs)
x 100 cap)) = 33.33.
Line 9, column 3: 66.67 FTEs + 33.33 FTEs = 100.
Example 2: Hospital with an FTE cap of 100 trains 102 unweighted
FTEs, equating to 96 weighted FTEs. This 96-weighted count consists of
30 weighted primary care & OBGYN FTEs, and 66 weighted other FTEs.
Since the total weighted count of 96 (Worksheet E-4, line 8, column 3)
is less than the FTE cap of 100 (Worksheet E-4, line 5), then no
further adjustment is needed; enter the amounts from line 8, columns 1
and 2, in columns 1 and 2, of line 9.
Example 3: Hospital with a cap of 100 FTEs trains 90 FTEs with a
weight of 1.0, and 20 FTEs with a weight of 0.5. Since the total
weighted count is 100 (90 + (20 x 0.5)), then no further adjustment is
needed. Enter the amounts from line 8, columns 1 and 2, in columns 1
and 2 of line 9.
Comment: We received many comments supporting our proposed revision
to the weighted count methodology and to the Medicare cost reporting
instructions. Commenters urged CMS to finalize the proposed revision,
asserting it is required by the law and the court's order, and to
recalculate payments immediately, as over a year has passed since the
court order.
Response: We appreciate the commenters' support, and upon issuance
of this final rule, we will work with the MACs and other impacted
parties to recalculate and issue adjusted payments as soon as possible.
Comment: Many commenters urged CMS to abandon the proposal to use
retroactive rulemaking as the means of complying with the decision of
the Hershey court. These commenters stated that retroactive rulemaking
is strongly disfavored under the Medicare statute and permitted only
under limited circumstances as specified in section 1871(e)(1)(A) of
the Act, namely, when it is either necessary to comply with statutory
requirements (Sec. 1871(e)(1)(A)(i)) of the Act); or when failure to
apply the change retroactively would be contrary to the public interest
(Sec. 1871(e)(1)(A)(ii) of the Act). Commenters asserted that neither
of these exceptions applies in the present case.
With respect to the exception at section 1871(e)(1)(A)(i) of the
Act, commenters stated that retroactive rulemaking is not necessary for
CMS to comply with statutory requirements. Commenters said that the
Medicare statute is unambiguous with respect to the weighting of
residents and fellows, and that the proposed revision to the
methodology is the only way for CMS to comply with the statutory
directive and the Hershey decision, neither of which requires any
interpretation by the agency. Commenters also stated that the exception
at section 1871(e)(1)(A)(ii) does not apply, since it does not serve
the public interest for CMS to engage in retroactive rulemaking and to
entertain public comments on actions that the agency is required to
take under a legally binding court order. According to a commenter,
engaging in retroactive rulemaking in this instance implicitly
contradicts the court's decision, while others expressed concern that
it would create a precedent whereby CMS might invoke public interest in
receiving comments as a justification for virtually any retroactive
rule change. Commenters also stated that it is not necessary for CMS to
engage in retroactive rulemaking to benefit from public comments,
pointing out that in the past the agency has made retroactive policy
changes via program instruction and only submitted the policies to
public comment for purposes of prospective application.
Commenters also rejected the argument that retroactive rulemaking
in this instance is necessary to comply with the Supreme Court's ruling
in Azar v. Allina Health Services. Commenters observed that the Allina
ruling established the need for notice-and-comment rulemaking to change
a substantive legal standard governing payment where the agency engages
in ``gap-filling'' an ambiguous statute. However, as previously stated,
commenters believed that the statute is unambiguous with regard to the
weighting of residents and fellows, and that therefore there are no
gaps for the agency to fill. In other words, as stated by a commenter,
the proposed policy is already dictated by the statute as explained in
Hershey, and there is no room for CMS to substantively change the
policy enacted by Congress.
Furthermore, commenters disagreed with CMS's position, as
originally stated in the FY 2023 IPPS/LTCH proposed rule, that
retroactive rulemaking is necessary in the wake of the Hershey ruling
since the Secretary ``has no promulgated rule governing'' direct GME
payments to teaching hospitals over the cap for cost reporting periods
beginning on or after October 1, 2001 (87 FR 28411). A number of
commenters stated that the Hershey court did not leave CMS with a
regulatory void to fill, but merely ruled ``that the regulation is
unlawful as applied to the Plaintiffs''; even if the court had vacated
the existing regulation, these commenters asserted that notice-and-
comment rulemaking would not be required or appropriate to acquiesce to
the vacatur. By contrast, another commenter stated that the existing
regulation is a ``legal nullity'' in light of the Hershey decision, but
nevertheless stated that the statutory payment directive requires no
substantive change in policy and can be properly effectuated without
rulemaking.
Citing a number of examples, commenters observed that historically,
both before and after Allina, CMS has implemented policy changes to
resolve appeals or comply with court decisions without engaging in
retroactive rulemaking, and invoked its retroactive rulemaking
authority only under particular circumstances, such as in response to a
natural disaster or when a rule is published after a statute's
effective date. Only more recently, according to commenters, has CMS
inappropriately begun to engage in retroactive rulemaking in response
to litigation. Rather than engage in retroactive rulemaking to comply
with the Hershey decision, commenters urged CMS to make the change in
regulation prospectively and to employ other appropriate means, such as
program instruction to the MACs or settlement with hospitals, to
implement the proposed correction for past years.
While urging CMS to abandon retroactive rulemaking as the means of
complying with the Hershey decision, commenters stated that, if CMS
does engage in retroactive rulemaking, it should specify exactly which
hospitals and past cost reporting periods will be eligible for relief
under the revised policy. In particular, commenters pointed out that
CMS proposed that ``certain other providers'' will be eligible for
relief in addition to the plaintiffs in Hershey, but the preamble does
not make it clear who those
[[Page 49069]]
providers will be. These commenters stated that CMS should reopen all
cost reports within the three-year reopening period and recalculate
direct GME payments consistent with the statute. At a minimum, however,
the ``certain other providers'' should include any provider that, if
applicable, has an appeal pending with the Provider Reimbursement
Review Board or in federal court on the same issue as Hershey. In
addition, if CMS does not reopen all cost reports that are within the
three-year reopening period, it should nonetheless apply the
methodology any time a cost report is reopened and the direct GME
payment is altered. Other commenters likewise stated that hospitals
should be permitted to reopen their cost reports for the purpose of
recalculating their direct GME payments according to the revised
weighting methodology, and that CMS should not finalize any ongoing
cost report audits until the final rule has been issued.
Some commenters expressed concern that CMS's proposal to extend
relief to only certain providers is inconsistent with concept of
retroactive rulemaking. Another commenter objected to CMS's statement
that under 42 CFR 405.1885(c)(2), any final rule retroactively adopting
the proposed new policy would not be the basis for reopening final
settled NPRs (87 FR 28411). This commenter asserted that Sec.
405.1885(c)(2) does not apply to retroactive rulemaking, and that CMS's
proposal has ``no real retroactive effect'' if it does not serve as the
basis for reopening settled cost reports. Another commenter similarly
recommended that CMS make the new policy ``fully retroactive'' so that
even final settled NPRs subject to reopening may be reopened for the
purpose of applying the revised methodology. This commenter stated that
withholding relief from certain providers would be arbitrary and
capricious and result in CMS not fully complying with the statute.
Response: We appreciate the comments regarding our proposal to
implement the court's decision in Hershey retroactively, but for the
reasons that follow (as well as those stated in the proposed rule), we
are finalizing our policy as proposed, retroactive to 2001.
We agree with commenters who objected to our statement that there
is ``no promulgated rule governing'' direct GME payments to over-the-
cap hospitals. The Hershey court did not vacate the rule. We further
agree that the Hershey decision itself does not require us to engage in
retroactive rulemaking. However, the statute at issue states that
``[t]he Secretary shall establish rules consistent with this paragraph
for the computation of the number of full-time equivalent residents in
an approved medical residency training program.'' Section1886(h)(4)(A)
of the Act (emphasis added). And the Hershey court did say that the
rules at issue were not consistent with the statute. Following our
review of the Hershey court's reasoning and the statutory requirements,
we decided that our method for computing FTEs was not consistent with
statutory requirements. We therefore conclude that our existing rule,
which does not comply with the statute, should be modified
retroactively such that our FTE computation rules are consistent with
the statute and payments, including payments for open cost years in
past, are calculated pursuant to regulation.
Several commenters state that no rule is necessary because of an
express statutory mandate that fellows be counted as 0.5 FTE. We
disagree, for two reasons. First, there are two express statutory
mandates in the section cited by commenters: that the Secretary
promulgate rules, and that those rules weight fellows at 0.5 FTE (see
sections 1886(h)(4)(A) and 1886(h)(4)(C)(iv) of the Act). In other
words, the statutory language cited by commenters describes the content
of the rules the Secretary is required to promulgate, rather than
setting an independent statutory benchmark. Second, we disagree with
the commenters' position that the rule we proposed was the only
possible way to compute FTE counts in light of Hershey. Section
1886(h)(4)(C) is not the only relevant statutory provision governing
the content of the rule; section 1886(h)(4)(F)(i) of the Act requires
the rules to cap the number of unweighted residents based on a
hospital's FY 1996 FTE count. In Hershey itself, the court did not
mandate a particular method of calculation or require CMS to adopt the
plaintiffs' proposed calculation method. We believe that there is more
than one way to comply with the statutory requirements and the court's
order. Our decision in this rule does not mean that all other
alternatives were foreclosed by the Hershey decision. The Hershey court
decision held that the prior regulation governing FTE counting for
over-the-cap hospitals was unlawful. It did not mandate any particular
alternative approach. We further disagree with commenters to the extent
they suggest that we compute FTE counts without a rule in place for
doing so. As discussed elsewhere, the statute at issue requires the
Secretary to establish a rule.
Even if the Hershey decision did mandate a single method of
computing FTE counts, it was silent on how to incorporate that
computation into the three-year rolling average. Without a rule for
determining the inputs to the three-year-rolling average, which we
proposed and are now finalizing, it is impossible to calculate a given
provider's dollar reimbursement. Therefore, even if we agreed with
commenters that the Hershey decision provided sufficient guidance for
computing FTE counts and that no further rulemaking on that issue is
required, we would nonetheless consider it necessary to undergo
rulemaking to implement our response to the decision, that is, use its
requirements to develop a method for calculating reimbursement. For
these reasons, we disagree with commenters who believe that notice-and-
comment rulemaking is unnecessary to implement the Hershey decision,
including for past cost years.
We appreciate the comments about retroactive rulemaking here being
inconsistent with CMS's historical practice. Many of the examples
raised by commenters do not involve judicial decisions calling into
question agency rules, which is a key factor here, as we noted in the
proposed rule. The governing statute requires the Secretary to
promulgate rules governing reimbursement that are consistent with
statutory requirements, and the court's decision in Hershey concluded
that our existing rule was not consistent with those requirements. We
do not believe that using retroactive rulemaking in this instance is
inconsistent with our past practice.
We acknowledge that our statutory authority to engage in
retroactive rulemaking is limited by section 1871(e)(1)(A) of the Act.
As previously discussed, we believe that the explicit statutory
requirement that the Secretary promulgate a rule governing GME
reimbursement renders retroactive application here ``necessary to
comply with statutory requirements.'' 1871(e)(1)(A)(i). If we
promulgated this rule prospectively only, a necessary result would be
that some hospitals would receive GME reimbursement based on a
computation of FTE equivalents that was not established by rule. We
emphasize again that the rule at issue in Hershey and the rule we
promulgate here are not merely statutory gap-fillers. The statute
affirmatively requires us to promulgate a rule.
[[Page 49070]]
In the alternative, and even if it were permissible to compute the
number of FTEs without a rule governing the methodology for doing so,
we believe that retroactive rulemaking here is in the public interest
(section 1871(e)(1)(A)(ii) of the Act). In response to comments, we
want to make clear that we believe that public notice-and-comment will
benefit the rulemaking process generally. As we noted in the preamble,
there was limited public comment on the key provisions of the original
rulemaking that the Hershey court found inconsistent with statutory
requirements. And we acknowledge--and we do not believe that commenters
disagree--that it is necessary to recalculate past payments in light of
the Hershey decision. The public interest will be served by having past
payments calculated in the same way as future payments, and given our
view that it is necessary to engage in notice-and-comment rulemaking to
implement the Hershey decision, we believe it is sensible and efficient
to calculate past payments based on a formula promulgated with the
benefit of notice-and-comment rulemaking. We do not mean to imply that
the public interest requires consistency between past payments and
future payments in all conceivable situations. However, where--as
here-- payment was set by a regulation that a court held inconsistent
with substantive statutory requirements and the agency engages in new
notice-and-comment rulemaking to implement that judicial ruling, there
is a public benefit in having past payments calculated via the same
method as future payments. This is particularly true where the statute
at issue requires that payments be calculated pursuant to a rule. We
therefore believe that this is a case where the public interest in
having a rule applicable to all payments, both past and future,
justifies retroactive rulemaking. It would be contrary to the public
interest for plaintiffs in Hershey and other judicial challenges to
have their payments calculated by a different methodology (whether more
or less generous than the methodology established by regulation) than
other providers that are otherwise similarly situated. Retroactive
rulemaking in this situation, benefits the public interest by achieving
parity in payment among similarly situated hospitals.
We also believe that the public interest is served by having
payments for past open cost years calculated in a transparent,
efficient, and not administratively burdensome fashion, an interest
that is served by promulgating a rule (following notice-and-comment)
that applies to those cost years. This rule will allow us to calculate
payments to hospitals with open cost reports based on a universal and
transparent formula, and it will allow many hospitals (and MACs) to
avoid the administrative expense of calculating payments based on a
formula that the agency has concluded should not be applied. The public
interest is further served by reducing the need for hospitals to file
administrative appeals in order to obtain the benefit of the new
payment formula.
We appreciate comments regarding the applicability of 42 CFR
405.1885(c)(2) to this rule. We disagree that 405.1885(c)(2) does not
apply to retroactive rules. The text of the regulation does not support
that proposed carve-out. The rule we proposed--and finalize here--is a
``change of legal interpretation or policy by CMS in a regulation . . .
made in response to judicial precedent,'' and thus it is ``not a basis
for reopening a CMS or contractor determination.'' Some commenters
urged us to apply 42 CFR 405.1885(c)(1) to direct contractors to reopen
cost reports, but we note that paragraph (c)(1) allows CMS to do so
(``CMS may direct a contractor . . . to reopen and revise'') subject to
the prohibited reopening's in paragraph (c)(2). We disagree that this
rule will have no ``real retroactive effect,'' as a number of hospitals
will receive increased reimbursement for past cost reporting years.
We further disagree that it is arbitrary and capricious to apply
405.1885(c)(2) here. This is not the first time that we have made a
policy change that could potentially affect closed cost reports, and we
have previously declined to direct reopening of closed cost reports
consistent with the policy favoring finality embedded in
405.1885(c)(2). For example, we permitted qualifying hospitals to
request application of a policy change made in the FY 2020 IPPS rule to
FYs 2011 through 2017, ``subject to the reopening rules at 42 CFR
405.1885.'' (84 FR 42349) We believe that the policy we finalize here
is consistent with our past practice and our general approach toward
finality.
Comment: Many commenters appreciated that CMS proposed that ``If
the number of FTE residents weighted in accordance with paragraph (b)
of this section does not exceed [the FTE cap], then the allowable
weighted FTE count is the actual weighted FTE count.'' However, some
commenters pointed out that CMS's proposed change to the instructions
for line 9 of Worksheet E-4 does not contain language reflecting this
scenario and requested that CMS add a third sentence to the proposed
changes to the instructions for line 9. The sentence should state as
follows: ``If the total weighted FTE count from line 8, column 3 is
less than or equal to the amount on line 5, then enter the amounts from
line 8, columns 1 and 2, in columns 1 and 2 of this line.''
Response: We agree with the commenters' request and will revise the
proposed instructions to Worksheet E-4, line 9 to address the
commenters' request. However, since we are adding the sentence
requested by the commenters, then we are removing the following: ``If
line 6 is less than or equal to line 5, enter the amounts from line 8,
columns 1 and 2, in columns 1 and 2, of this line.'' This latter
sentence is not necessary, since if line 6 is less than or equal to
line 5, then by default line 8, column 3 will also be less than or
equal to line 5. We are revising the instructions to Worksheet E-4,
line 9 to state: If the total weighted FTE count from line 8, column 3
is less than or equal to the amount on line 5, then enter the amounts
from line 8, columns 1 and 2, in columns 1 and 2 of this line (emphasis
added). Otherwise, if the total weighted FTE count from line 8, column
3 is greater than the amount on line 5, then enter in column 1 the
result of ((primary care & OBGYN weighted FTEs/total weighted FTEs) x
FTE cap)). Enter in column 2 the result of ((other weighted FTEs/total
weighted FTEs) x FTE cap)). Enter in column 3 the sum of columns 1 and
2.
Under section 1886(h)(4)(G)(i) and 42 CFR 413.79(d)(3), a
hospital's weighted FTE count for payment purposes is the 3-year
average of its current year weighted FTEs, prior year weighted FTEs,
and penultimate year FTEs (for primary care & OBGYN FTEs and other FTEs
respectively). Effective for cost reporting periods beginning on or
after October 1, 2001, we proposed to implement this modified
methodology for the purpose of determining the prior year weighted FTE
count on line 12 of Worksheet E-4, and for the purpose of determining
the penultimate year's weighted FTE count on line 13 of Worksheet E-4,
even though the prior and penultimate years' FTE counts would be from
cost reporting periods prior to October 1, 2001. In this manner, the
modified methodology would be fully applied to determining the direct
GME payment for cost reporting periods beginning on or after October 1,
2001.
Therefore, we proposed to modify the cost report instructions on
Worksheet E-4, lines 12 and 13, respectively to state that effective
for cost reporting periods beginning on or after October 1, 2001, if
subject to the cap in the prior
[[Page 49071]]
year or penultimate year respectively, if the prior/penultimate year
total weighted FTE count from line 8, column 3 is greater than the
amount on line 5 from the prior/penultimate year, then enter in column
1 the result of ((primary care & OBGYN weighted FTEs/total weighted
FTEs) x FTE cap)). Enter in column 2 the result of ((other weighted
FTEs/total weighted FTEs) x FTE cap)) plus the amount on line 10,
column 2. These instructions do not in any way modify or reopen final-
settled prior and penultimate year NPRs.
Comment: Some commenters supported CMS's proposal to update the
cost report instructions for lines 12 and 13 of Worksheet E-4 to ensure
that the weighted resident FTE counts from the prior and penultimate
years will be updated to reflect the new direct GME payment formula.
However, the commenters pointed out that the proposed language for
lines 12 and 13 does not specify how to calculate the weighted FTE
count for the prior and/or penultimate years when the unweighted FTE
count from those years exceeds the FTE cap, but the weighted FTE count
from those years does not, and requested that CMS add a sentence to the
instructions for lines 12 and 13 stating: ``If the prior/penultimate
year total weighted FTE count from line 8, column 3 is less than or
equal to line 5 from the prior/penultimate year, then enter the amounts
from line 8, columns 1 and 2, in columns 1 and 2 of this line.''
Response: We agree with the commenters' request and are revising
the instructions on Worksheet E-4 lines 12 and 13 to state: Effective
for cost reporting periods beginning on or after October 1, 2001, if
the prior/penultimate year total weighted FTE count from line 8, column
3 is less than or equal to line 5 from the prior/penultimate year, then
enter the amounts from line 8, columns 1 and 2, in columns 1 and 2 of
this line (emphasis added). If subject to the cap in the prior year or
penultimate year respectively, if the prior/penultimate year total
weighted FTE count from line 8, column 3 is greater than the amount on
line 5 from the prior/penultimate year, then enter in column 1 the
result of ((primary care & OBGYN weighted FTEs/total weighted FTEs) x
FTE cap)). Enter in column 2 the result of ((other weighted FTEs/total
weighted FTEs) x FTE cap)) plus the amount on line 10, column 2.
Comment: Several commenters observed that CMS should have also
proposed to apply the revised direct GME weighting methodology to the
so-called ``section 422 MMA (Medicare Modernization Act) cap slots'' as
well. Specifically, many teaching hospitals received additional FTE
caps following a redistribution of unused FTE cap slots mandated by
section 422 of the MMA. Similar to the fellowship penalty, CMS applies
a proportional methodology when determining payment for section 422 cap
FTEs. The commenters suggested that CMS calculate the ``Section 422
Allowable Direct GME FTE Resident Count'' on Worksheet E-4, line 22 as
follows:
If the weighted FTEs on line 8 are less than or equal to
the adjusted FTE cap on line 5, the hospital would have entered the
weighted FTEs from line 8 on line 9. In this instance, the additional
section 422 cap slots are unnecessary, and the hospital would enter
zero on line 22.
If the weighted FTEs on line 8 are greater than the
adjusted FTE cap on line 5, the hospital would have entered the
adjusted FTE cap on line 9. In this instance, the hospital would
subtract line 9 from line 8 and proceed as follows:
[cir] If line 9 minus line 8 equals or exceeds the ``Section 422
Direct GME FTE Cap'' on line 20, then the hospital would enter the
amount from line 20 on line 22.
[cir] If line 9 minus line 8 is less than line 20, the hospital
would enter line 9 minus line 8 on line 20.
Response: We agree with the commenters' observation that the
revised methodology should apply to the MMA section 422 FTE cap, as the
mathematical cap concept is the same for the 422 FTE cap as it is for
the regular FTE cap. Accordingly, for portions of cost reporting
periods beginning on or after July 1, 2005, the effective date of
section 422 under 42 CFR 413.79(c)(4), we will revise Worksheet E-4,
line 22, as follows:
For portions of cost reporting periods beginning on or after July
1, 2005, if the weighted FTE count on line 8 is less than or equal to
the adjusted FTE cap on line 5, the hospital would have entered the
weighted FTEs from line 8 on line 9. In this instance, the additional
Sec. 422 cap slots are unnecessary; do not complete lines 22 through
24. If the weighted FTE count on line 8 is greater than the adjusted
FTE cap on line 5, the hospital would have entered the adjusted FTE cap
on line 9. In this instance, subtract line 9 from line 8. If line 9
minus line 8 equals or exceeds the ``Section 422 Direct GME FTE Cap''
on line 20, then enter the amount from line 20 on line 22. If line 9
minus line 8 is less than line 20, enter line 9 minus line 8 on line
22. (We note the commenters indicated ``enter line 9 minus line 8 on
line 20,'' but we believe they meant to say ``on line 22'').
We proposed to amend the regulations text at 42 CFR
413.79(c)(2)(iii) to state that, effective for cost reporting periods
beginning on or after October 1, 2001, if the hospital's unweighted
number of FTE residents exceeds the limit described in this section of
the final rule, and the number of weighted FTE residents in accordance
with Sec. 413.79(b) also exceeds that limit, the respective primary
care and obstetrics and gynecology weighted FTE counts and other
weighted FTE counts are adjusted to make the total weighted FTE count
equal the limit. If the number of FTE residents weighted in accordance
with Sec. 413.79(b) does not exceed that limit, then the allowable
weighted FTE count is the actual weighted FTE count.
Comment: A commenter requested that CMS make conforming changes to
the three-year rolling average regulation at. Sec. 413.79(d)(3) to
clarify that the weighted FTE counts for the ``preceding two cost
reporting periods'' must be calculated in accordance with the revised
payment formula at Sec. 413.79(c)(2)(iii).
Response: We agree to add a parenthetical to the regulations at
Sec. 413.79(d)(3) to state, ``For cost reporting periods beginning on
or after October 1, 2001, the hospital's weighted FTE counts for the
preceding two cost reporting periods are calculated in accordance with
the payment formula at 42 CFR 413.79(c)(2)(iii)).''
Comment: A commenter stated they would like to see the three-year
rolling average eliminated retroactive to October 1, 2001, as it would
delay implementation of CMS's proposed payment formula.
Response: Under section 1886(h)(4)(G)(i) and 42 CFR 413.79(d)(3), a
hospital's weighted FTE count for payment purposes is the 3-year
average of its current year weighted FTEs, prior year weighted FTEs,
and penultimate year weighted FTEs (for primary care & OBGYN FTEs and
other FTEs respectively). Our proposed interpretation of section
1886(h)(4)(F) of the Act regarding application of weighting factors
does not change this portion of the statute regarding application of
the 3-year rolling average. Therefore, we are not adopting the
commenter's request to eliminate application of the rolling average
under our proposed payment formula.
Comment: Some commenters requested that CMS correct or clarify
certain misstatements in the FY 2023 IPPS/LTCH PPS proposed rule
regarding the Hershey case. First, CMS should be clearer about the
position of the Hershey
[[Page 49072]]
plaintiffs. CMS described the position of the Hershey plaintiffs as
follows: ``The plaintiffs in these consolidated cases alleged that as
far back as 2005, the proportional reduction that CMS applied to the
weighted FTE count when the weighted FTE count exceeded the FTE cap
conflicted with the Medicare statute'' (87 FR 28410). According to the
commenters, this is an incomplete description of the plaintiffs'
position. The commenters stated that CMS's proportional reduction also
impermissibly reduces the weighted FTE count when the weighted FTE
count is less than unweighted FTE cap.
Second, the commenters believed that ``Example 1'' in the preamble
is misstated. In that example, a ``Hospital with an FTE cap of 100
trains 120 FTEs with a weight of 1.0 and 105 FTEs with a weight of 0.5,
consisting of 70 weighted primary care & OBGYN FTEs and 35 weighted
other FTEs'' (87 FR 28411). The ``total weighted count'' is ``105.''
The commenters noted that if the hospital trained 120 FTEs with a
weight of 1.0 and 105 FTEs with a weight of 0.5, its unweighted FTE
count would be 225 (120 + 105), and its weighted FTE count would be
172.5 ((120 x 1.0) + (105 x 0.5)), not 105. The commenters believed
that CMS intended this example to say that the hospital had an
unweighted FTE count of 120 and a weighted FTE count of 105. The 105
weighted FTEs would consist of 90 FTEs weighted at 1.0 and 30 FTEs
weighted at 0.5.
Response: Regarding the first point about not fully capturing
Plaintiffs' position, we acknowledge the commenters' assertion that the
plaintiffs in Hershey argued that CMS's proportional reduction
impermissibly reduced the weighted FTE count when the weighted FTE
count was less than unweighted FTE cap.
Regarding the second point that the commenters believe that Example
1 is misstated, we acknowledge the confusing wording, and we are
providing a corrected Example 1 as follows:
Example 1 Revised: Hospital with an FTE cap of 100 trains 120
unweighted FTEs, consisting of 105 weighted FTEs (90 FTEs weighted at
1.0 and 30 FTEs weighted at 0.5 = 105 weighted FTEs). The 105 weighted
FTEs further consists of 70 weighted primary care & OBGYN FTEs and 35
weighted other FTEs. Since the total weighted count of 105 (Worksheet
E-4, line 8, column 3) exceeds the FTE cap of 100 (Worksheet E-4, line
5), the Hospital reports the following adjusted weighted FTE counts on
Worksheet E-4:
Line 9, column 1: ((70 weighted primary care & OBGYN FTEs/105 total
weighted FTEs) x 100 cap)) = 66.67.
Line 9, column 2: ((35 weighted other FTEs/105 total weighted FTEs)
x 100 cap)) = 33.33.
Line 9, column 3: 66.67 FTEs + 33.33 FTEs = 100.
Comment: A commenter requested clarification on the implications of
the Medicare direct GME formula change for hospitals that participate
in the Children's Hospitals Graduate Medical Education (CHGME) program
administered by HRSA.
Response: Since the CHGME program is administered by HRSA and not
by CMS, we defer to HRSA to determine the implications of CMS's change
to the Medicare direct GME payment formula.
After consideration of comments received, we are finalizing our
proposed policy and regulations text at 42 CFR 413.79(c)(2)(iii) to
state that, effective for cost reporting periods beginning on or after
October 1, 2001, if the hospital's unweighted number of FTE residents
exceeds the limit described in this section of the final rule, and the
number of weighted FTE residents in accordance with Sec. 413.79(b)
also exceeds that limit, the respective primary care and obstetrics and
gynecology weighted FTE counts and other weighted FTE counts are
adjusted to make the total weighted FTE count equal the limit. If the
number of FTE residents weighted in accordance with Sec. 413.79(b)
does not exceed that limit, then the allowable weighted FTE count is
the actual weighted FTE count. In response to comments, we are also
making a conforming change to the regulations text at 42 CFR
413.79(d)(3) regarding application to the 3-year rolling average to
state that for cost reporting periods beginning on or after October 1,
2001, the hospital's weighted FTE counts for the preceding two cost
reporting periods are calculated in accordance with the payment formula
at Sec. 413.79(c)(2)(iii). In addition, in response to comments, we
are applying the new payment methodology to the MMA section 422 FTE
cap.
3. Reasonable Cost Payment for Nursing and Allied Health Education
Programs
a. General
Under section 1861(v) of the Act, Medicare has historically paid
providers for Medicare's share of the costs that providers incur in
connection with approved educational activities. Approved nursing and
allied health (NAH) education programs are those that are, in part,
operated by a provider, and meet State licensure requirements, or are
recognized by a national accrediting body. The costs of these programs
are excluded from the definition of inpatient hospital operating costs
and are not included in the calculation of payment rates for hospitals
or hospital units paid under the IPPS, IRF PPS, or IPF PPS, and are
excluded from the rate-of-increase ceiling for certain facilities not
paid on a PPS. These costs are separately identified and ``passed
through'' (that is, paid separately on a reasonable cost basis).
Existing regulations on NAH education program costs are located at
Sec. 413.85. The most recent rulemakings on these regulations were in
the January 12, 2001 final rule (66 FR 3358 through 3374), and in the
August 1, 2003, final rule (68 FR 45423 and 45434).
b. Medicare+Choice Nursing and Allied Health Education Payments
Section 541 of the Balanced Budget Refinement Act (BBRA) of 1999
provides for additional payments to hospitals for costs of nursing and
allied health education associated with services to Medicare+Choice
(now called Medicare Advantage (MA)) enrollees. Hospitals that operate
approved nursing or allied health education programs and receive
Medicare reasonable cost reimbursement for these programs would receive
additional payments from MA organizations. Section 541 of the BBRA
limits total spending under the provision to no more than $60 million
in any calendar year (CY). (In this document, we refer to the total
amount of $60 million or less as the payment ``pool''.) Section 541 of
the BBRA also provides that direct graduate medical education (GME)
payments for Medicare+Choice utilization are reduced to the extent that
these additional payments are made for nursing and allied health
education programs. This provision was effective for portions of cost
reporting periods occurring in a CY, on or after January 1, 2000.
Section 512 of the Benefits Improvement and Protection Act (BIPA)
of 2000 changed the formula for determining the additional amounts to
be paid to hospitals for MA nursing and allied health costs. Under
section 541 of the BBRA, the additional payment amount was determined
based on the proportion of each individual hospital's nursing and
allied health education payment to total nursing and allied health
education payments made to all hospitals. However, this formula did not
account for a hospital's specific MA utilization. Section 512 of the
BIPA revised this payment formula to specifically account for each
hospital's
[[Page 49073]]
MA utilization. This provision was effective for portions of cost
reporting periods occurring in a calendar year, beginning with CY 2001,
and was implemented in the August 1, 2001 IPPS final rule (66 FR 39909
and 39910).
The regulations at 42 CFR 413.87 codified both statutory
provisions. We first implemented the BBRA NAH MA provision in the
August 1, 2000 IPPS interim final rule with comment period (IFC) (65 FR
47036 through 47039). In that IFC, we outlined the qualifying
conditions for a hospital to receive the NAH MA payment, how we would
calculate the NAH MA payment pool, and how a qualifying hospital would
calculate its ``share'' of payment from that pool. Determining a
hospital's NAH MA payment essentially involves applying a ratio of the
hospital-specific NAH Part A payments, total inpatient days, and MA
inpatient days, to national totals of those same amounts, from cost
reporting periods ending in the fiscal year that is 2 years prior to
the current calendar year. The formula is as follows:
(((Hospital NAH pass-through payment/Hospital Part A Inpatient Days) *
Hospital MA Inpatient Days)/((National NAH pass-through payment/
National Part A Inpatient Days) * National MA Inpatient Days)) *
Current Year Payment Pool.
With regard to determining the total national amounts for NAH pass-
through payment, Part A inpatient days, and MA inpatient days, we note
that section 1886(l) of the Act, as added by section 541 of the BBRA,
gives the Secretary the discretion to ``estimate'' the national
components of the formula noted previously. For example, section
1886(l)(2)(A) of the Act states that the Secretary would estimate the
ratio of payments for all hospitals for portions of cost reporting
periods occurring in the year under subsection 1886(h)(3)(D) to total
direct GME payments estimated for the same portions of periods under
subsection 1886(h)(3) of the Act. Accordingly, we made the following
statements in the August 1, 2000 IFC:
Each year, we would determine and publish in a final rule
and a final rule the total amount of nursing and allied health
education payments made across all hospitals during the fiscal year
that is 2 years prior to the current calendar year (65 FR 47038). We
would use the best available cost reporting data for the applicable
hospitals from the Hospital Cost Report Information System (HCRIS) for
cost reporting periods in the fiscal year that is 2 years prior to the
current calendar year (65 FR 47038).
To calculate the pool, in accordance with section 1886(l)
of the Act, we would ``estimate'' a total amount for each calendar
year, not to exceed $60 million (65 FR 47038).
To calculate the proportional reduction to Medicare+Choice
(now MA) Direct GME payments, we stated that the percentage is
estimated by calculating the ratio of the Medicare+Choice nursing and
allied health payment ``pool'' for the current calendar year to the
projected total Medicare+Choice direct GME payments made across all
hospitals for the current calendar year. We stated that the projections
of Medicare+Choice direct GME and Part A direct GME are based on the
best available cost report data from the HCRIS (for example, for
calendar year 2000, the projections are based on the best available
cost report data from HCRIS 1998), and these payment amounts were
increased using the increases allowed by section 1886(h) of the Act for
these services (using the percentage applicable for the current
calendar year for Medicare+Choice direct GME and the Consumer Price
Index (CPI) increases for Part A direct GME). We also stated that we
would publish the applicable percentage reduction each year in the IPPS
proposed and final rules (65 FR 47038).
Thus, in the August 1, 2000, IFC, we described our policy regarding
the timing and source of the national data components for the NAH MA
add-on payment and the percent reduction to the direct GME MA payments,
and we stated that we would publish the rates for each calendar year in
the IPPS proposed and final rules. While the rates for CY 2000 were
published in the August 1, 2000, IFC (see 65 FR 47038 and 47039), the
rates for subsequent CYs were only issued through Change Requests (CRs)
(CR 2692, CR 11642, CR 12407). After recent issuance of the CY 2019
rates in CR 12407 on August 19, 2021, we reviewed our update
procedures, and were reminded that the August 1, 2000 IFC states that
we would publish the NAH MA rates and direct GME percent reduction
every year in the IPPS rules. Accordingly, for CY 2020 and forward, the
NAH MA add-on rates will be proposed and included in the IPPS proposed
and final rules, and we are also reiterating the data sources we would
use.
In the FY 2023 IPPS/LTCH PPS proposed rule, we proposed the NAH MA
add-on rates as well as the direct GME MA percent reductions for CYs
2020 and 2021. We proposed to issue the rates for CYs 2020 and 2021
because we believe we have sufficient HCRIS data to develop the rates
for these years, and these rate years are most needed to ensure
accurate and timely cost report settlements of cost reports with
portions overlapping with CYs 2020 and 2021. We expect to propose to
issue the rates for CY 2022 in the FY 2024 IPPS/LTCH PPS proposed rule,
and the rates for CY 2023 in the FY 2025 IPPS/LTCH PPS proposed rule,
and so forth.
Consistent with the use of HCRIS data for past calendar years, for
CY 2020, we proposed to use data from cost reports ending in FY 2018
HCRIS (the fiscal year that is 2 years prior to CY 2020) to compile
these national amounts: NAH pass-through payment, Part A Inpatient
Days, MA Inpatient Days. We proposed to use data from cost reports
ending in FY 2019 HCRIS (the fiscal year that is 2 years prior to CY
2021) to compile the same national amounts for CY 2021.
For the proposed rule, we accessed the HCRIS data from the fourth
quarterly HCRIS update of 2021. However, to calculate the ``pool'' and
the direct GME MA percent reduction, we ``project'' Part A direct GME
payments and MA direct GME payments for the current calendar years,
which in this final rule, are CYs 2020 and 2021, based on the ``best
available cost report data from the HCRIS'' (65 FR 47038). Next,
consistent with the method we described previously from the August 1,
2000 IFC, we increased these payment amounts from midpoint to midpoint
of the appropriate calendar year using the increases allowed by section
1886(h) of the Act for these services (using the percentage applicable
for the current calendar year for MA direct GME, and the Consumer Price
Index-Urban (CPI-U) increases for Part A direct GME. For CY 2020, the
direct GME projections are based on FY 2019 HCRIS. For CY 2021, the
direct GME projections are based on FY 2019 HCRIS. For CYs 2020 and
2021, the proposed national rates and percentages, and their data
sources are set forth in this table. We stated in the proposed rule
that we intend to update these numbers in the FY 2023 final rule based
on the latest available cost report data.
[[Page 49074]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.130
We did not propose any changes to the regulations text at 42 CFR
413.87, as our proposal to include the nursing and allied health MA
rates in the IPPS rulemaking was consistent with current regulations.
Comment: A commenter requested clarification on the calculation of
the direct GME MA percent reduction and questioned if it is separate
from the allocation of funds used for the NAH pass-through payment.
Response: We appreciate the commenter's request for clarification.
As explained previously in the background section, under sections 541
of the BBRA and 512 of BIPA, hospitals that operate approved nursing or
allied health education programs and receive Medicare reasonable cost
reimbursement for these programs would receive additional payments for
services associated with MA enrollees. Section 541 of the BBRA limits
total spending under the provision to no more than $60 million in any
calendar year (CY). Section 541 of the BBRA also provides for estimated
reductions in direct GME MA payments, which are to equal the estimated
total additional MA NAH payments. Thus, nationally, the estimated
reductions to direct GME MA payments would not be more than $60 million
in any CY. However, on a hospital-specific basis, the direct GME MA
percent reduction is not necessarily tied to receipt of the MA NAH add-
on payment. That is, hospitals that are both teaching hospitals
receiving direct GME payments and that operate approved NAH programs
may be affected by both aspects of these laws; such hospitals may
receive both a payment for MA NAH, while also receiving a reduced
direct GME MA payment. Hospitals that only operate NAH programs may
only receive the MA NAH payment; conversely, teaching hospitals with no
approved NAH programs would only receive the reduced direct GME MA
payment.
We received numerous comments regarding various aspects of the MA
NAH add-on and the direct GME MA percent reduction, expressing
opposition to reconciliation of overpayments, voicing concerns
regarding reimbursement that does not adequately reflect current costs
and nursing and healthcare workforce shortages, and opposing reductions
to direct GME payments to fund NAH programs. While concerns expressed
in these comments may be important, we did not specifically make
proposals related to those concerns. These comments are out of scope,
and therefore, we are not responding to them at this time.
For this final rule, consistent with the use of HCRIS data for past
calendar years, for CY 2020, we use data from cost reports ending in FY
2018 HCRIS (the fiscal year that is 2 years prior to CY 2020) to
compile these national amounts: NAH pass-through payment, Part A
Inpatient Days, MA Inpatient Days. We use data from cost reports ending
in FY 2019 HCRIS (the fiscal year that is 2 years prior to CY 2021) to
compile the same national amounts for CY 2021. For this final rule, we
accessed the HCRIS data from the first quarterly HCRIS update of 2022.
However, to calculate the ``pool'' and the direct GME MA percent
reduction, we ``project'' Part A direct GME payments and MA direct GME
payments for the current calendar years, which in this final rule, are
CYs 2020 and 2021 as the best available cost report data. Next,
consistent with the method we described previously from the August 1,
2000 IFC, we increased these payment amounts from midpoint to midpoint
of the appropriate calendar year using the increases allowed by section
1886(h) of the Act for these services (using the percentage applicable
for the current calendar year for MA direct GME, and the Consumer Price
Index-Urban (CPI-U) increases for Part A direct GME. For CY 2020, the
direct GME projections are based on FY 2019 HCRIS. For CY 2021, the
direct GME projections are based on FY 2019 HCRIS. For CYs 2020 and
2021, the final national rates and percentages, and their data sources
are set forth in this table.
[[Page 49075]]
[GRAPHIC] [TIFF OMITTED] TR10AU22.131
In summary, after consideration of the public comments received, we
are finalizing our proposal to use NAH MA add-on rates as well as the
direct GME MA percent reductions for CYs 2020 and 2021, based on
sufficient HCRIS data to develop the rates for these years. We expect
to propose to issue the rates for CY 2022 in the FY 2024 IPPS/LTCH PPS
proposed rule, and the rates for CY 2023 in the FY 2025 IPPS/LTCH PPS
proposed rule, and so forth.
4. Allowance of Medicare GME Affiliation Agreements Within Certain
Rural Track FTE Limitations
Sections 1886(h)(4)(F) and 1886(d)(5)(B)(v) of the Act established
limits on the number of allopathic and osteopathic residents that
hospitals may count for purposes of calculating direct GME payments and
the IME adjustment, respectively, thereby establishing hospital-
specific direct GME and IME full-time equivalent (FTE) resident caps.
However, under the authority granted by section 1886(h)(4)(H)(ii) of
the Act, the Secretary may issue rules to allow institutions that are
members of the same affiliated group to apply their direct GME and IME
FTE resident caps on an aggregate basis through a Medicare GME
affiliation agreement. The Secretary's regulations permit hospitals,
through a Medicare GME affiliation agreement, to increase or decrease
their IME and direct GME FTE resident caps to reflect the rotation of
residents among affiliated hospitals for agreed-upon academic years.
Consistent with the broad authority conferred by the statute, we
established criteria for defining an ``affiliated group'' and an
``affiliation agreement'' in both the August 29, 1997, final rule (62
FR 45966, 46006) and the May 12, 1998, final rule (63 FR 26318). In the
August 1, 2002, IPPS final rule (67 FR 50069), we amended our
regulations to require that each Medicare GME affiliation agreement
must have a shared rotational arrangement. The term ``Medicare GME
affiliation agreement'' is defined at 42 CFR 413.75(b) as a written,
signed, and dated agreement by responsible representatives of each
respective hospital in a Medicare GME affiliated group, as defined in
Sec. 413.75(b), that specifies--
The term of the Medicare GME affiliation agreement (which,
at a minimum is 1 year), beginning on July 1 of a year;
Each participating hospital's direct and indirect GME FTE
caps in effect prior to the Medicare GME affiliation;
The total adjustment to each hospital's FTE caps in each
year that the Medicare GME affiliation agreement is in effect, for both
direct GME and IME, that reflects a positive adjustment to one
hospital's direct and indirect FTE caps that is offset by a negative
adjustment to the other hospital's (or hospitals') direct and indirect
FTE caps of at least the same amount;
The adjustment to each participating hospital's FTE counts
resulting from the FTE resident's (or residents') participation in a
shared rotational arrangement at each hospital participating in the
Medicare GME affiliated group for each year the Medicare GME
affiliation agreement is in effect. This adjustment to each
participating hospital's FTE count is also reflected in the total
adjustment to each hospital's FTE caps (in accordance with in
accordance with paragraph (3) of this definition); and
The names of the participating hospitals and their
Medicare provider numbers.
We also define the term ``Shared Rotational Arrangement'' in that
section of our rules as a residency training program under which a
resident(s) participates in training at two or more hospitals in that
program.
To encourage the training of residents in rural areas, section
407(c) of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement
Act of 1999 (Pub. L. 106-113) (BBRA) amended section 1886(h)(4)(H) of
the Act to add a provision (subsection (iv)) stating that, in the case
of a hospital that is not located in a rural area (an urban hospital)
that establishes separately accredited approved medical residency
training programs (or rural tracks) in a rural area, or has an
accredited training program with an integrated rural track, the
Secretary shall adjust the urban hospital's cap on the number of FTE
residents under section 1886(h)(4)(F) of the Act, in an appropriate
manner in order to encourage training of physicians in rural areas.
Historically, the Accreditation Council for Graduate Medical Education
(ACGME) has separately accredited family medicine programs in the ``1-2
format'' (meaning, residents in the 1-2 format receive their first year
experience at a core family medicine program, and their second and
third year experiences at another site, which may or may not be rural).
Section 407(c) of Public Law 106-113 was effective for direct GME
payments to hospitals for cost reporting periods beginning on or after
April 1, 2000, and for IME payments applicable to discharges occurring
on or after April 1, 2000. We refer readers to the August 1, 2000,
interim final rule with comment period (65 FR 47025, 47033 through
47037) and the FY 2002 IPPS final rule (66 FR 39828, 39902 through
39909) where we implemented section 407(c) of Public Law 106-113. The
regulations for establishing rural track FTE limitations are located at
42 CFR 413.79(k) for direct GME and at 42 CFR 412.105(f)(1)(x) for IME.
(We note that additional legislative and regulatory changes were made
to Rural Track Programs in the December 27, 2021 final rule, 86 FR
73445.)
When we first implemented the rural track regulations in the August
1, 2000 IFC, we specified that the caps associated with rural tracks
are separate and distinct from a hospital's general FTE caps.
Specifically, we defined Rural track FTE limitation at 42 CFR 413.75(b)
as the maximum number of residents training in a rural track residency
program that an urban hospital may include in its FTE count and that is
in
[[Page 49076]]
addition to the number of FTE residents already included in the
hospital's FTE cap (emphasis added). As a result, the rural track FTE
limitations are not part of the regular FTE caps that hospitals may
aggregate in Medicare GME affiliation agreements.
The rural track FTE limitations are calculated in the same manner
as the adjustments to any allowable new program, in accordance with 42
CFR 413.79(e)(1). That is, at the end of the 5-year cap building window
for the rural track program, the urban hospital's and rural hospital
respective IME and direct GME rural track FTE limitations are
calculated as the product of three factors (limited to the number of
accredited slots for each program):
The highest total number of FTE residents trained in any
program year during the fifth year of the first new program's existence
at all of the hospitals to which the residents in the program rotate.
The number of years in which residents are expected to
complete the program, based on the minimum accredited length for each
type of program.
The ratio of the number of FTE residents in the new
program that trained at the hospital over the entire 5-year period to
the total number of FTE residents that trained at all hospitals over
the entire 5-year period.
Thus, while the calculated rural track FTE limitations calculated
at the end of the 5-year window may reflect the division of the
rotations between the urban and rural hospitals over the 5 initial
years of the program, the future rotations amounts may change somewhat
(albeit adhering to greater than 50 percent of the duration of the
training occurring in the rural hospital/rural area). As rotations
shift to meet patient care needs, the respective rural track FTE
limitations may not quite match the amount of FTEs actually training in
the urban and rural hospitals. There has been request that the same
flexibility with cap sharing afforded to teaching hospitals to share
general FTE cap slots via Medicare GME affiliation agreements also be
afforded to urban and rural teaching hospitals that together train
residents in a rural track program. This flexibility would allow the
urban and rural hospitals to share their rural track FTE limitations in
a manner that best matches the rotations occurring in the urban and
rural hospitals. Stakeholders representing urban-rural training
partnerships specifically raised this request with regard to separately
accredited 1-2 family medicine programs that have existed for a number
of years, and either already have established their rural track FTE
limitations, or have just recently reached or will reach the end of
their 5-year cap building windows.
We have considered this request and agree it would be equitable to
allow an urban and rural hospital jointly training residents in a 1-2
separately accredited family medicine program to aggregate their
respective IME and direct GME rural track FTE limitations and enter
into a ``Rural Track Medicare GME Affiliation Agreement'' to share
those cap slots, and facilitate the cross-training of residents. We
proposed to allow urban and rural hospitals that participate in the
same separately accredited 1-2 family medicine rural track program and
have rural track FTE limitations to enter into ``Rural Track Medicare
GME Affiliation Agreements.'' We proposed that programs that are not
separately accredited in the 1-2 format and are not in family medicine
would not be permitted to enter into ``Rural Track Medicare GME
Affiliation Agreements'' under this proposal. These Rural Track
Medicare GME Affiliation Agreements, which we proposed to define in
this final rule, will be structured similarly to regular Medicare GME
affiliation agreements, but we proposed two distinct requirements.
First, in an effort to ensure that regular FTE caps and FTE
residents in non-rural track programs are not commingled with the rural
track FTE residents, and that rural track FTE limitations are not being
used to provide additional cap slots for non-rural track FTE residents,
we proposed that the responsible representatives of each urban and
rural hospital entering into the Rural Track Medicare GME Affiliation
Agreement must attest in that written agreement that each participating
hospital's FTE counts and rural track FTE limitations in the agreement
do not reflect FTE residents nor FTE caps associated with programs
other than the rural track program. We noted this attestation is
important for both the urban and rural hospital, as both urban and
rural hospitals may have regular FTE caps that could be part of regular
Medicare GME affiliation agreements (see 42 CFR 413.79(e)(1)(iv) and
(v) and 413.79(f)). Second, we proposed to only allow urban and rural
hospitals to participate in Rural Track Medicare GME Affiliated Groups
if they are separately accredited 1-2 family medicine programs that
have rural track FTE limitations in place prior to October 1, 2022. We
proposed to choose these criteria and this date of October 1, 2022, as
the date by which eligible hospitals must have rural track FTE
limitations in place because the effective date of section 127 of the
Consolidated Appropriations Act (CAA) is cost reporting periods
beginning on or after October 1, 2022, and we proposed to limit this
proposal to only rural track FTE limitations established under the BBRA
of 1999 that are unaffected by section 127 of the CAA. In this final
rule, we are distinguishing between rural track programs with rural
track FTE limitations associated with the BBRA of 1999 in effect prior
to October 1, 2022, and Rural Track Programs (RTPs, defined at 42 CFR
413.75(b)) started or expanded to new participating sites under the
authority of section 127 of the CAA. We explain this distinction later
in this section of the final rule.
First, we refer readers to the December 27, 2021, final rule (86 FR
73445) for details about section 127 of the CAA. Generally, that
provision removes the requirement that rural track programs be
separately accredited, places in statute (previously in regulation) the
requirement that rural track residents must spend greater than 50
percent of their training time in a rural area, and allows urban and
rural hospitals to receive adjustments to their rural track FTE
limitations for adding new rural training sites to an existing rural
track program. In that December 27, 2021, final rule, we addressed a
comment (86 FR 73456) that requested whether multiple rural hospital
training sites added under the new section 127 authority may share
their rural track FTE limitations via a Medicare GME affiliation
agreement. We responded that effective October 1, 2022, we are not
permitting the formation of Medicare GME affiliated groups for the
purpose of aggregating and cross-training RTP FTE limitations. First,
we explained that we believe Medicare GME affiliated groups for RTPs
would be premature, as only starting October 1, 2022, would hospitals
have the first opportunity to add additional participating sites.
Subsequently, there would be the 5-year cap building period in which
Medicare GME affiliations are not permitted, even under existing
Medicare GME affiliation agreement rules (42 CFR 413.79(f)). Second, we
stated that before we create Medicare GME affiliation agreements unique
to RTPs, we believe it would be best to first modify the Medicare cost
report form to add spaces for the hospitals to indicate the number of
any additional RTP FTEs, and the caps applicable to those FTEs. We also
stated that we wish to assess flexibility within a hospital's own total
RTP FTE limitation, before sharing those slots with other hospitals. We
would need to be vigilant to ensure
[[Page 49077]]
that the RTP FTE limitations are not comingled with regular FTE cap
adjustments currently used in Medicare GME affiliation agreements.
Therefore, we concluded with our belief that it is best to reassess
allowing Medicare GME affiliation agreements for RTP FTE limitations at
some point in the future. For these same reasons, at this time, we
believe it is appropriate to only propose to allow rural track Medicare
GME affiliation agreements with urban and rural hospitals that have a
rural track FTE limitation in place prior to October 1, 2022. We will
assess allowing these agreements with RTP FTE limitations established
after October 1, 2022, in the future.
We proposed the following new definitions and requirements at 42
CFR 413.75(b):
``Rural track Medicare GME affiliated group'' is an urban
hospital and a rural hospital that participates in a rural track
program defined in 42 CFR 413.75(b), and that have rural track FTE
limitations in effect prior to October 1, 2022, and that comply with 42
CFR 413.79(f)(1) through (6) for Medicare GME affiliated groups.
``Rural track Medicare GME affiliation agreement'' is a
written, signed, and dated agreement by responsible representatives of
each respective hospital in a rural track Medicare GME affiliated
group, as defined in 42 CFR 413.75(b), that specifies--
++ A statement attesting that each participating hospital's FTE
counts and rural track FTE limitations in the agreement do not reflect
FTE residents nor FTE caps associated with programs other than the
rural track program.
++ The term of the rural track Medicare GME affiliation agreement
(which, at a minimum is 1 year), beginning on July 1 of a year;
++ Each participating hospital's direct and indirect GME rural
track FTE limitations in effect prior to the rural track Medicare GME
affiliation;
++ The total adjustment to each hospital's rural track FTE
limitations in each year that the rural track Medicare GME affiliation
agreement is in effect, for both direct GME and IME, that reflects a
positive adjustment to one hospital's direct and indirect rural track
FTE limitations that is offset by a negative adjustment to the other
hospital's (or hospitals') direct and indirect rural track FTE
limitations of at least the same amount;
++ The adjustment to each participating hospital's FTE counts
resulting from the FTE resident's (or residents') participation in a
shared rotational arrangement at each hospital participating in the
rural track Medicare GME affiliated group for each year the Medicare
GME affiliation agreement is in effect. This adjustment to each
participating hospital's FTE count is also reflected in the total
adjustment to each hospital's rural track FTE limitations (in
accordance with paragraph (iii) of the definition (regarding the total
adjustment to each hospital's rural track FTE limitations previously
noted)); and
++ The names of the participating hospitals and their Medicare
provider numbers.
In addition, we proposed to require that no later than July 1 of
the residency year during which the rural track Medicare GME
affiliation agreement will be in effect, the urban and rural hospital
must submit the signed agreement to the CMS contractor or MAC servicing
the hospital and send a copy to the CMS Central Office. The hospitals
may submit amendments to the adjustments to their respective rural
track FTE limitations to the MAC with a copy to CMS by June 30 of the
residency year that the agreement is in effect. We proposed that
eligible urban and rural hospitals may enter into rural track Medicare
GME affiliation agreements effective with the July 1, 2023, academic
year.
With regard to how the rural track Medicare GME affiliation
adjustments would be reported on the Medicare cost report, first, for
background, we noted in the proposed rule that on the previous Medicare
cost report CMS-Form-2552-96, the rural track FTE limitation was
combined, together with the ``cap'' add-on for new (non-rural track)
programs on Worksheet E, Part A, line 3.05, and on Worksheet E-3, Part
IV, line 3.02. On the current cost report CMS-Form-2552-10, the rural
track FTE limitation is, likewise, combined together with the ``cap''
add-on for new (non-rural track) programs on Worksheet E, Part A, line
6, and on Worksheet E-4, line 2. We stated in the proposed rule that
going forward, we intend to add lines to the cost report to accommodate
separate reporting of urban or rural hospital rural track FTE
limitations, and the positive or negative adjustments made to the rural
track FTE limitations, including those applicable to the affiliated
agreements.
In summary, we proposed to allow urban and rural hospitals that
participate in the same separately accredited 1-2 family medicine rural
track program and have rural track FTE limitations to enter into
``Rural Track Medicare GME Affiliation Agreements''. We proposed that
programs that are not separately accredited in the 1-2 format and are
not in family medicine would not be permitted to enter into ``Rural
Track Medicare GME Affiliation Agreements'' under this proposal. We
proposed to add new definitions at 42 CFR 413.75(b) of rural track
Medicare GME affiliated group and rural track Medicare GME affiliation
agreement. We also proposed to require that the responsible
representatives of each urban and rural hospital entering into the
rural track Medicare GME affiliation agreement must attest in that
agreement that each participating hospital's FTE counts and rural track
FTE limitations in the agreement do not reflect FTE residents nor FTE
caps associated with programs other than the rural track program. In
addition, we proposed to only allow urban and rural hospitals to
participate in rural track Medicare GME affiliated groups if they have
rural track FTE limitations in place prior to October 1, 2022. We
proposed that eligible urban and rural hospitals may enter into rural
track Medicare GME affiliation agreements effective with the July 1,
2023, academic year.
Comment: The majority of commenters strongly supported CMS's
proposal to enable rural training flexibilities through Medicare GME
affiliation agreements between urban and rural hospitals that have
rural track programs. Some commenters ``applauded'' CMS for its
attention to rural GME training, and appreciated additional options for
cap flexibilities afforded to rural hospitals. A commenter stated that
the proposal will assist urban hospitals in providing flexibilities
needed to address disparities affected by geography and other social
determinants of care. Some commenters stated that the proposal will
help provide care to Medicare beneficiaries and may create interest for
future physicians to practice in rural settings. Many commenters who
supported the proposal also added that CMS should engage in future
rulemaking that will allow any RTP, not just those separately
accredited in family medicine that were established prior to October 1,
2022, to also engage in affiliation agreements following the conclusion
of the cap-building period.
Response: We thank the commenters for their feedback and support.
As we stated in the proposed rule, we proposed to only allow urban and
rural hospitals to participate in Rural Track Medicare GME Affiliated
Groups if they are separately accredited 1-2 family medicine programs
that have rural track FTE limitations in place prior to October 1,
2022. We stated that we are distinguishing between rural track programs
with rural track FTE
[[Page 49078]]
limitations associated with the BBRA of 1999 in effect prior to October
1, 2022, and Rural Track Programs (RTPs, defined at 42 CFR 413.75(b))
started or expanded to new participating sites under the authority of
section 127 of the CAA effective on or after October 1, 2022. We
explained that we are not permitting the formation of Medicare GME
affiliated groups for the purpose of aggregating and cross-training RTP
FTE limitations effective on or after October 1, 2022, because we
believe Medicare GME affiliated groups for RTPs would be premature, as
only starting October 1, 2022, would hospitals have the first
opportunity to add additional participating sites. Subsequently, there
would be the 5-year cap building period in which Medicare GME
affiliations would not be permitted, even under existing Medicare GME
affiliation agreement rules (42 CFR 413.79(f)). In addition, we stated
that before we created Medicare GME affiliation agreements unique to
RTPs, we believe it would be best to first modify the Medicare cost
report form to add spaces for the hospitals to indicate the number of
any additional RTP FTEs, and the caps applicable to those FTEs. We also
stated that we wished to assess flexibility within a hospital's own
total RTP FTE limitation, before sharing those slots with other
hospitals. We would need to be vigilant to ensure that the RTP FTE
limitations were not comingled with regular FTE cap adjustments
currently used in Medicare GME affiliation agreements. We concluded
with our belief that it would be best to reassess allowing Medicare GME
affiliation agreements for RTP FTE limitations at some point in the
future. For these same reasons, at this time, we believe it is
appropriate to only propose to allow rural track Medicare GME
affiliation agreements with urban and rural hospitals that have a
separately accredited rural track program and rural track FTE
limitation in place prior to October 1, 2022. We will assess allowing
these agreements with RTP FTE limitations established after October 1,
2022, in the future.
Comment: A commenter representing a group of organizations opposed
CMS's proposal to allow Medicare GME affiliation agreements for rural
track programs with FTE limitations prior to October 1, 2022, and did
not believe the use of affiliation agreements resolves concerns over
the inequity of the current method for determining a cap to be applied
to rural track programs. The commenter was concerned that the proposal
establishes additional barriers to many programs. The commenter
believed that the proposal is too narrow, limited only to family
medicine training, and only to separately accredited training tracks
established prior to the CAA 2021. Specifically, the commenter observed
that currently, CMS counts the time residents spend training at the
rural site, across five years, and the time spent in the urban setting,
and then counts the highest number (in any program year) during the
fifth year of the cap-setting window across all participating
hospitals. Because a rural track program typically has its residents
train in the urban hospital in year one, rather than in the rural
setting, the urban hospital gets more than its fair share of the cap,
and the rural site gets less than the actual number of FTEs training in
that site. When apportioned this way, rural sites are disadvantaged
compared to urban hospital sites. The commenter noted that a mechanism
already exists for Medicare affiliated groups to aggregate caps other
than ``rural FTE limitations,'' and stated that they ``are aware of
multiple occasions where such aggregation has occurred between urban
and rural hospitals, always to the disadvantage of the rural hospital
that has, for example, been acquired by the larger urban health system.
It seems unlikely that urban hospitals would give up ``rural FTE
limitation'' slots to benefit a participating rural hospital's cap . .
.'' The commenter stated that CMS has the authority to make changes to
the calculation of rural cap limitations as section 127 of the CAA
states that the Secretary shall ``adjust in an appropriate manner the
limitation under subparagraph (F) for such hospital and each such
hospital located in a rural area that participates in such a training''
(emphasis added). As such, beginning with cost reporting periods on or
after October 1, 2022, CMS is not restricted to only sharing positions
through an affiliation agreement but should set appropriate caps
associated with these training programs for the future, rather than
institute affiliation agreements. This commenter and another commenter
recommended that the solution is to count the highest year, rather than
using all five years when determining the ratio for cap apportionment.
Response: We appreciate the concerns raised by the commenter and
acknowledge the commenter's unique perspective on rural GME training.
We certainly want to initiate a payment mechanism that is inherently
equitable, and believe that a policy that we finalize should encourage,
rather than hinder, GME training in rural areas. However, we note that
the vast majority of commenters, including others with close ties to
rural GME training, have submitted comments in support of our proposal,
generally stating that this proposal will facilitate training in rural
settings.
With regard to the commenter's point that CMS's current methodology
of looking at all 5 years to apportion FTE caps disadvantages the rural
hospital in a RTP because the method gives more than the fair share of
FTE cap to the urban hospital, we acknowledge that there might be other
mathematical apportionment methods that, if tailor-made for RTPs, would
result in higher caps for the rural hospital. However, we note that
this current mathematical apportionment in the regulations at 42 CFR
413.79(e)(1) and (3) was first implemented for all hospitals in the
August 1, 2012 LTCH PPS/IPPS final rule (77 FR 53416 through 53424).
Then in the August 22, 2016 LTCH PPS/IPPS final rule, we adopted this
same cap apportionment methodology for rural track FTE limitations (81
FR 57026 through 57031), without any objection from commenters. Thus,
we have established a single, national policy for calculating FTE caps
for new programs and RTPs, and we have not proposed a change to this
national method in the proposed rule. While a ``one-size-fits-all''
method may not be optimal in all situations, we do not believe it is
advisable to alter the cap calculation for RTPs at this time. With the
advent of CAA section 127, and the expectation that RTPs will develop
not only in 3-year family medicine programs, but also in many other
specialties of differing lengths, it is not the right time to establish
an RTP cap calculation method, before we even understand what the RTP
landscape will be like over the next 5 or more years. At this point,
allowing Medicare GME affiliation agreements between the urban and
rural hospitals participating in the same RTP may be the better
solution, as it would allow the hospitals to customize their individual
caps, rather than CMS instituting yet another national cap calculation
methodology. Furthermore, because the majority of commenters supported
our proposal to allow Rural Track Medicare GME Affiliation Agreements,
we believe it is fair and appropriate to finalize our policy as
proposed. In the December 27, 2021 final rule (86 FR 73456), and as
reiterated in the proposed rule and in response to other comments in
this final rule, we already stated that we expect to reassess allowing
Medicare GME affiliation agreements for RTP FTE
[[Page 49079]]
limitations established after October 1, 2022 at some point in the
future. For these same reasons, and in conjunction with observing what
we hope will be robust growth and development of RTPs in many
specialties, not just family medicine, we are open to reassessing at
the appropriate time the viability of Rural Track Medicare GME
Affiliation Agreements for appropriate payment for urban and rural
hospitals participating in RTPs.
Comment: Another commenter who supported our proposal added that
they believe CMS's concerns about hospitals taking advantage of
affiliated agreements and comingled caps are misguided, and that
placing this limitation on affiliated agreements within RTPs is
inappropriate. The commenter asserted that urban and rural hospitals
participating in any RTP program for the benefit of rural communities
should be permitted this flexibility, as it would promote the adoption
of the model partnerships.
Response: As we stated in the proposed rule, when we first
implemented the rural track regulations in the August 1, 2000 IFC, we
specified that the caps associated with rural tracks are separate and
distinct from a hospital's general FTE caps. Specifically, we defined
the ``rural track FTE limitation'' at 42 CFR 413.75(b) as the maximum
number of residents training in a rural track residency program that an
urban hospital may include in its FTE count and that is in addition to
the number of FTE residents already included in the hospital's FTE cap
(emphasis added). As a result, the rural track FTE limitations are not
part of the regular FTE caps that hospitals may aggregate in Medicare
GME affiliation agreements. In the proposed rule, we proposed that the
responsible representatives of each urban and rural hospital entering
into the Rural Track Medicare GME Affiliation Agreement attest in that
written agreement that each participating hospital's FTE counts and
rural track FTE limitations in the agreement do not reflect FTE
residents nor FTE caps associated with programs other than the rural
track program. We noted this attestation is important for both the
urban and rural hospital, as both urban and rural hospitals may have
regular FTE caps that could be part of regular Medicare GME affiliation
agreements (see 42 CFR 413.79(e)(1)(iv) and (v) and 413.79(f)).
Accordingly, as long as it is possible for a hospital to have both
regular FTE caps and rural track FTE limitations, we believe it is
appropriate to have mechanisms in place to ensure those caps are not
inadvertently comingled. We do not believe these mechanisms limit the
flexibility of rural hospitals seeking to create model partnerships, as
the commenter asserts.
Comment: A commenter offered one minor suggestion on language used
to describe the programs encompassed in the proposal to allow Medicare
GME affiliation agreements within certain rural track FTE limitations.
The commenter offered these suggestions in the interest of accurate
references to ACGME terminology and processes. The commenter suggested
eliminating use of the outdated term ``1-2'' when referring to
separately accredited family medicine programs. CMS could instead
consider phrasing such as ``separately accredited family medicine
programs with caps in place as of October 1, 2022.''
Response: We appreciate the commenter's suggestion, and in this
final rule, we are finalizing our policy with respect to ``separately
accredited family medicine programs with rural track FTE limitations in
place as of October 1, 2022.''
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to allow urban and rural
hospitals that participate in the same separately accredited family
medicine RTP and have rural track FTE limitations to enter into ``Rural
Track Medicare GME Affiliation Agreements''.
We are finalizing the following new definitions at 42 CFR 413.75(b)
and requirements:
Rural track Medicare GME affiliated group is an urban
hospital and a rural hospital that participates in a rural track
program defined in 42 CFR 413.75(b), and that have rural track FTE
limitations in effect prior to October 1, 2022, and that comply with 42
CFR 413.79(f)(1) through (6) for Medicare GME affiliated groups.
Rural track Medicare GME affiliation agreement is a
written, signed, and dated agreement by responsible representatives of
each respective hospital in a rural track Medicare GME affiliated
group, as defined in 42 CFR 413.75(b), that specifies--
++ A statement attesting that each participating hospital's FTE
counts and rural track FTE limitations in the agreement do not reflect
FTE residents nor FTE caps associated with programs other than the
rural track program.
++ The term of the rural track Medicare GME affiliation agreement
(which, at a minimum is 1 year), beginning on July 1 of a year;
++ Each participating hospital's direct and indirect GME rural
track FTE limitations in effect prior to the rural track Medicare GME
affiliation;
++ The total adjustment to each hospital's rural track FTE
limitations in each year that the rural track Medicare GME affiliation
agreement is in effect, for both direct GME and IME, that reflects a
positive adjustment to one hospital's direct and indirect rural track
FTE limitations that is offset by a negative adjustment to the other
hospital's (or hospitals') direct and indirect rural track FTE
limitations of at least the same amount;
++ The adjustment to each participating hospital's FTE counts
resulting from the FTE resident's (or residents') participation in a
shared rotational arrangement at each hospital participating in the
rural track Medicare GME affiliated group for each year the Medicare
GME affiliation agreement is in effect. This adjustment to each
participating hospital's FTE count is also reflected in the total
adjustment to each hospital's rural track FTE limitations (in
accordance with paragraph (iii)); and
++ The names of the participating hospitals and their Medicare
provider numbers.
In addition, we are requiring that no later than July 1 of the
residency year during which the rural track Medicare GME affiliation
agreement will be in effect, the urban and rural hospital must submit
the signed agreement to the CMS contractor or MAC servicing the
hospital and send a copy to the CMS Central Office. The hospitals may
submit amendments to the adjustments to their respective rural track
FTE limitations to the MAC with a copy to CMS by June 30 of the
residency year that the agreement is in effect. Eligible urban and
rural hospitals may enter into rural track Medicare GME affiliation
agreements effective with the July 1, 2023, academic year.
With regard to how the rural track Medicare GME affiliation
adjustments would be reported on the Medicare cost report, first, for
background, we note that on the previous Medicare cost report CMS-Form-
2552-96, the rural track FTE limitation was combined, together with the
``cap'' add-on for new (non-rural track) programs on Worksheet E, Part
A, line 3.05, and on Worksheet E-3, Part IV, line 3.02. On the current
cost report CMS-Form-2552-10, the rural track FTE limitation is,
likewise, combined together with the ``cap'' add-on for new (non-rural
track) programs on Worksheet E, Part A, line 6, and on Worksheet E-4,
line 2. Going forward, we intend to add lines to the cost report to
accommodate separate reporting of urban or rural hospital rural
[[Page 49080]]
track FTE limitations, and the positive or negative adjustments made to
the rural track FTE limitations, including those applicable to the
affiliated agreements.
G. Payment Adjustment for Certain Clinical Trial and Expanded Access
Use Immunotherapy Cases (Sec. Sec. 412.85 and 412.312)
Effective for FY 2021, we created MS-DRG 018 for cases that include
procedures describing CAR T-cell therapies, which were reported using
ICD-10-PCS procedure codes XW033C3 or XW043C3 (85 FR 58599 through
58600). Effective for FY 2022, we revised MS-DRG 018 to include cases
that report the procedure codes for CAR T-cell and non-CAR T-cell
therapies and other immunotherapies (86 FR 44798 through 448106). We
refer the reader to section II.D.17. of the preamble of this final rule
for discussion of the agenda items for the March 8-9, 2022 ICD-10
Coordination and Maintenance Committee meeting relating to new
procedure codes to describe the administration of a CAR T-cell or
another type of gene or cellular therapy product, as well as our
established process for determining the MS-DRG assignment for codes
approved at the March meeting.
Effective for FY 2021, we modified our relative weight methodology
for MS-DRG 018 in order to develop a relative weight that is reflective
of the typical costs of providing CAR T-cell therapies relative to
other IPPS services. Specifically, under our finalized policy we do not
include claims determined to be clinical trial claims that group to MS-
DRG 018 when calculating the average cost for MS-DRG 018 that is used
to calculate the relative weight for this MS-DRG, with the additional
refinements that: (a) when the CAR T-cell therapy product is purchased
in the usual manner, but the case involves a clinical trial of a
different product, the claim will be included when calculating the
average cost for MS DRG 018 to the extent such claims can be identified
in the historical data; and (b) when there is expanded access use of
immunotherapy, these cases will not be included when calculating the
average cost for MS-DRG 018 to the extent such claims can be identified
in the historical data (85 FR 58600). The term ``expanded access''
(sometimes called ``compassionate use'') is a potential pathway for a
patient with an immediately life-threatening condition or serious
disease or condition to gain access to an investigational medical
product (drug, biologic, or medical device) for treatment outside of
clinical trials when no comparable or satisfactory alternative therapy
options are available.\215\
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\215\ https://www.fda.gov/news-events/expanded-access/expanded-access-keywords-definitions-and-resources.
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Effective FY 2021, we also finalized an adjustment to the payment
amount for applicable clinical trial and expanded access immunotherapy
cases that group to MS-DRG 018 using the same methodology that we used
to adjust the case count for purposes of the relative weight
calculations (85 FR 58842 through 58844). (As previously noted,
effective beginning FY 2022, we revised MS-DRG 018 to include cases
that report the procedure codes for CAR T-cell and non-CAR T-cell
therapies and other immunotherapies (86 FR 44798 through 448106).)
Specifically, under our finalized policy we apply a payment adjustment
to claims that group to MS-DRG 018 and include ICD-10-CM diagnosis code
Z00.6, with the modification that when the CAR T-cell, non-CAR T-cell,
or other immunotherapy product is purchased in the usual manner, but
the case involves a clinical trial of a different product, the payment
adjustment will not be applied in calculating the payment for the case.
We also finalized that when there is expanded access use of
immunotherapy, the payment adjustment will be applied in calculating
the payment for the case. This payment adjustment is codified at 42 CFR
412.85 (for operating IPPS payments) and 42 CFR 412.312 (for capital
IPPS payments), for claims appropriately containing Z00.6, as described
previously, and reflects that the adjustment is also applied for cases
involving expanded access use immunotherapy, and that the payment
adjustment only applies to applicable clinical trial cases; that is,
the adjustment is not applicable to cases where the CAR T-cell, non-CAR
T-cell, or other immunotherapy product is purchased in the usual
manner, but the case involves a clinical trial of a different product.
The regulations at 42 CFR 412.85(c) also specify that the adjustment
factor will reflect the average cost for cases to be assigned to MS-DRG
018 that involve expanded access use of immunotherapy or are part of an
applicable clinical trial to the average cost for cases to be assigned
to MS-DRG 018 that do not involve expanded access use of immunotherapy
and are not part of a clinical trial (85 FR 58844).
For FY 2023, we proposed to continue to apply an adjustment to the
payment amount for expanded access use of immunotherapy and applicable
clinical trial cases that would group to MS-DRG 018 using the same
methodology adopted in the FY 2021 IPPS/LTCH PPS final rule (85 FR
58842), which is the same methodology we proposed to use to adjust the
case count for purposes of the relative weight calculations:
Calculate the average cost for cases to be assigned to MS-
DRG 018 that contain ICD-10-CM diagnosis code Z00.6 or contain
standardized drug charges of less than $373,000.
Calculate the average cost for all other cases to be
assigned to MS-DRG 018.